[Applause] [Music] [Applause] [Music] conversations with Tyler is produced by the mercada center at George Mason University Bridging the Gap between academic ideas and real world problems learn more at arcades.in conversations withth tyler.com [Music] today on the podcast we're going to have Brink Lindsay and Steven Tellis and they have together co-authored a new book The captured economy how the powerful enrich
themselves slow down growth and increase inequality what happens in this book is that you have a liberal and a Libertarian come together in fact together they've helped produce something called libertarianism and try to show or set out a series of policy changes we could make that would both boost the rate of economic growth and give us a more equal Society so I think this is one of the most important books of the year but the
podcast today we're going to do a little differently rather than talk to the two of them together we're going to do them sequentially so first will be Steven Talis second will be Brink Lindsay and I'm actually even going to ask them some of the exact same questions or at least parallel questions so you can compare the different answers because again part of the interesting feature of this book is that it is a co-authored product from
people of two different points of view so to introduce Steve he is a professor at John's Hopkins University in the department of political science and he is also a senior fellow at Theus Canan Institute welcome Steve thank you very much we just dive in with questions first question if we think about inequality in America today how much of it is due to bad policy as opposed to people not having the right skills or
they're being some kind of cognitive or human capital Gap so I hate to disappoint you but I don't think there's any way to measure that uh we dug around to try TR to figure out for good aggregate ways to measure the extent of rent seeking and its interaction with skills and the extent of the market uh and we weren't able to find them in some sense also measuring rent seeking may be simply analytically impossible we
certainly tried to to figure out how you would do it part of it is rent seeking is to some degree a judgmental category rather than one that's uh easily measured by some neutral measure um so I think the main thing you can say is we have evidence in the book that it's substantial we have some evidence that the distribution of rent seeking is changing but being able to come up with any uh good aggregate measure of how it
compares to other causes of inequality impossible which is not a very desirable or satisfactory answer but that's about the best answer you can give we have this thing in public Choice economics I'm sure you know it it's sometimes called the tullk Paradox so Gordon tullk my former colleague he set out to measure how much was spent on Lobby relative to how much is handed out by government and toic at least thought
that the amount spent on lobbying is actually remarkably low it may appear large if you're sitting in Arlington Virginia but relative to GDP it's pretty tiny and the amount of resources controlled by government is is pretty
significant so how is it that you think about the tulic Paradox at least on the surface some kind of rent-seeking costs would seem to be low right so as I understand the tulic Paradox it's that essentially the amount of lobbying
should approach the overall amount of rent right that is the um the amount that everyone expends trying to capture whatever rents there are should go up to that up to that level and then the Paradox is why doesn't it one is that can be a institutionally established equilibrium right that is in the the tullk model there's no institutions right whereas we have a very substantial um separation of powers that tends to
lock in the status quo and reduce therefore the incentives for investing in lobbying um you also have um severe limits on the political agenda right which again means there's only so many things that you can uh debate simultaneously that creates a very substantial protection for the status quo so in that sense if you're given that a huge amount of lobbying is designed simply to keep political actors from doing anything right from Simply
Having them take a walk and not um challenge the existing status quo both institutions and the institutional factor of limited agendas limited agenda space uh would suggest that they don't need to invest all that that that energy in uh at least protecting their existing rents it would all go into to expanding the ones they don't have let me play devil's advocate for a moment and try to defend crony capitalism say you look at
the last 50 years and you ask yourself what are the two greatest growth Miracles that that have been seen on planet Earth maybe the two greatest ever it seems plausible candidates would be one China and two South Korea and they're about the most crony capitalistic societies you could imagine so if someone says well there's two kinds of crony capitalism under one kind the incentives are for the cronies to
invest in infrastructure and human capital and then it does just fine and then there's other kinds of crony capitalism that stifle investment in education and infrastructure but maybe the key is education and infrastructure and we just need a better crony capitalism of the sort that say South Korea and to some extent China have had what's your reaction well so first of all the politics of rent and the economics of rent operates uh we think
very differently whether you're at the sort of uh the growth the outer edge of growth like the United States or Germany or Britain and very different if you're in a developing country that is developing countries first of all right have have a lot of catch-up growth that they can do and if they you know then that since they have a potential for 10 11 12% growth if some of that substantial amount of that gets filtered
off into payoffs and uh lobbying or whatever that's not a big deal uh they've got in some sense more room to do that also there's some political science that suggest uh at least at that level of development some level of cronyism might actually facilitate growth in the way that it wouldn't necessarily in an advanced economy so I wouldn't assume that you can uh you can look at the two sides as being parallel in that sense
if we look at the federal budget and the tax system that accompanies it that's relatively easy to measure do you see the net impact of our tax and budgetary decisions as being Progressive or regressive for one thing so the book is all about the regulatory system right um and I I note that by saying that one argument we make and this relates to an article I wrote called cracy which is that it's really these other parts other
ways the government influences the economy other than directly through taxing and spending that are most likely to have these anti-growth incumbent protecting kind of qualities that is the more Salient the more visible the policy instrument is the more easy it is to capture for the purposes of upward redistribution so given that a substantial amount of our uh spending is entitlements and they um you know we
have difference of opinion I think those are basically Progressive on net given the uh the inflow and and outflow uh in them and that our tax system if anything may be too Progressive that is it's it's too Progressive to raise the amount of Revenue that we need for the amount of state that we want I think our tax and benefit system which could be doing better or at least doing better than our Regulatory and litigation systems what
if there's a potential default hypothesis that policy just doesn't change the distribution of wealth very much so the tax and fiscal side that makes things somewhat more Progressive the regulatory side as you argue convincingly in the book that's regressive and inefficient and in part we let the regulatory side get away with that because on the fiscal side we adjust and maybe policy as a whole just doesn't change the overall broad
features of the distribution of wealth something a bit like paro's old law and maybe it's just much harder to change the distribution of wealth than we think because rent seeking is another activity and the forces that are good at that are good at other things and is government when it comes to distribution actually ultimately may be a wash yes or no so there's two things wrong with that one is the argument from prao you make
doesn't have a mechanism that is it might accidentally be the case that the two sides would equilibrate that doesn't mean that there's but that your argument assumes there's a mechanism con connecting them somehow although it's unspecified exactly what that mechanism is but think lobbying is another sector so if we add on like the ski Weare sector to the economy that won't change the distribution of wealth much because
people who are good at building software May are also on average good at building ski Weare so lobbying is just another sector and the mechanism is adding on more sectors won't change distribution much right well just to go to the other side though um a I do think that there's substantial evidence in the book that the um uh that the policy regime has in fact redistributed upward um or it's created protection if you look at
Finance adjusting for the tax and side because I don't a I don't think the tax and fiscal side I think the tax and fiscal side has been more or less neutral um over the last 30 or 40 years I think especially if you include state and local taxes which are tend to be much more regressive than federal taxes that pushes even more in the you know in the other direction but I think certainly there's evidence in our book
that both the finance and the IP regime have led to very substantial upward distribution and and have in fact changed the distribution of uh income in the economy so a I would question your assumption that well everything's been
basically been a wash over the last 50 years I think even including both the tax and benefit system and the regulatory system there there's pretty substantial evidence of the polisher regime has redistributed upward as you
probably know Walter shidell has a fairly new book out it's called the Great leveler and he argues another version of the default hypothesis that inequality tends to stick and you have egalitarian big egalitarian changes essentially only through war and widespread destruction what's your opinion so like a lot of those theories there's not enough cases to be able to uh support an adequate theory that is uh
again especially when you're doing long-term historical institutional kind of claims like the one you just provided for me how do we even know right um that is just because we've had a couple of cases uh in the past the aftermath of World War II certainly in most advanced industrial countries was very powerfully redistributive but you know lots of things have changed right we don't simply see eternal recurrence uh in
politics we also have secular change and I think those secular changes seem to have have made it much harder for people at the bottom of the income uh Spectrum to organize and have made the much easier the transaction costs have gone down lots of other things have gone down to make it easier for those at the top to organize so and I think also the effect of mass mobilization seems to be a lot lower in advanced industrial
countries partially because states have figured out how to deal with things like riots and uh Urban disturbances um that at one point in time would have produced uh a substantial policy response and now seem to been producing a lot less are high levels of executive compensation part of the problem there you probably would get a different answer between me and that's why I so you're just trying to you're again we we originally had the
idea that this uh this podcast was going to be called prisoners dilemma I have some suspicion that there is um it's not one of the cases in our book precisely because uh we didn't uh agree and also neither one of us felt sufficiently competent to have an expert uh opinion on it I do think there's some evidence from variation in um executive compensation across in advanced industrial countries um which varies with different ways of actually
governing executive compensation that it plays a role you know executives are a very large part of the 1% and their compensation does seem to have gone up at a period in which it's not that clear that productivity of these firms in general is gone up so my prior is it probably does have something um to do with it but also that you can explain an enormous amount of this problem without looking at executive compensation which
is the place most people generally look first what does Brink Lindsay eat for breakfast well one thing I know is that Brink Lindsay eats breakfast very late in the day um whenever I try and schedule a meeting with Brink I always suggest 8 in the morning because I have children and so I'm up at quter to 7 so bring May or not may not break eat breakfast but eats a lot later than I do what's the most important idea in the
book that you understand better than he does I think the well so we there is a division of labor here uh Brink did a lot more work on the cases um than I did although we talked about them all and I did a lot more work on the uh political analysis we draw a lot on great really simal article um by Rick Hall at University of Michigan called uh lobbying is legislative subsidy and I think that idea is dramatically under a
appreciated the idea that what lobbyists are essentially doing is providing information that uh information is scarce um it uh is a source of power and one one thing that we add is if the state isn't providing information itself it essentially has to get it from outside uh and when it get it to from outside it Imports the overall um inequality in information gathering and processing that's in civil society and
that can be a very strong uh source of inequality in policy outcomes I think Brink understands that but this is my wheelhouse um so I think probably if you were if you're were going to push me I'd say I understood it better than he did is higher education part of the problem and if so who should pay for it yes and who should pay for it so for thing we have to say what what does it mean that it's uh that it's part of the problem um
certainly universities uh even in the classic economic definition of rent are beneficial series of rent right um reputation right a huge amount of what makes one University different than another is the fact that they have
reputations right those matter to employers they matter to parents and uh they matter to alumni self- reproducing elites with a lot of waste put into signaling right so right but they but the point is they can take that they can
take that rent right in part by getting large contributions from alumni and distribute it within the university however they uh want the control of anybody except the the Insiders over it I think one thing you actually found is universities have been um taking a huge amount of that that rent and actually pretty get into Administration over the last 20 30 years my colleague in the uh wi ofite College in the department uh in
political science has written a large long book basically looking at the explosion of uh academic Administration I think when universities were extracting rent and putting it into research there was an argument that that was generally a socially productive equilibrium but now that they're putting an into to Administration which has a lot very complicated explanation from that I think that uh that rent extraction is
certainly not been producing any spillover effects for society here's a question from a reader I'll just read this out word for word if the government is tilting the economy in favor of large corporations versus small businesses certainly that's bad for growth but doesn't it increase equality bigger companies pay higher salaries and almost certainly more uniform ones and on the capital income side anyone dot dot dot
can invest more easily in the larger company your reaction uh so first of all the argument is in our book is not primarily although it certainly can be a side effect in some areas that it increases industrial concentration some of the policies we look in the book actually reduce artificially uh industrial concentration that is a lot of Professional Licensing and protection regimes actually have the effect of being anti-c consolidation right so up
omist want regulation that uh that protects them as sole Proprietors rather than employers the same is true for dentists doctors Undertakers you could go through the list quite uh extensively so in that sense I question the the original Assumption of the question that uh that all of this is really about industrial concentration but the other thing is a lot of the firms that um that are benefiting massively from some of
the rents we're talking about actually have very few employees right so even if they have a uh a relatively uh larger bottom in the incomes that they pay uh employees that doesn't necessarily affect the overall distribution of uh income very much there's a famous paper by Bill nordhouse you probably know it and in that piece he argues that for innovators only about 2% of the value of their Innovations is captured by them
the rest goes to society if that's true admittedly and if but is there really a good net estimate and I mean net all factors considered showing that IP law really is too tough at current margins or is it the case that we actually don't
know so I think we don't know that's certainly closer you asked me before what was closer to Brink Lindsay's wheelhouse and that's I'll I'll I'll give him I'll give him the answer to that one why didn't you do better in
high school I was never a good the kind of person who was good at doing everything right so high school uh and essentially all of every everything from elementary school all the way through High School loads very heavily on people who are all-rounders so my wife who grew up in Britain is a wonderful allrounder right she loved doing everything in school she loved school she loved the social environment of school and whereas
I hated it I hated the social environment of school I lived in a kind of isolated suburb in outside of DC that I didn't like I wanted to be in a city I wanted to do what I what I what I wanted to do right and high school is all basically a huge institution designed to keep you from doing what you want to do right so I went to college and I immediately thrived I did even better in grad school where I could do even less
of what I did want to do so again I'm the kind of person who's good at who's good at doing what he wants to do and what was it you finally learned that made your career click and take off you're a famous person we all read and talk about your books there's a big pile of them here I I I've read them all I recommend them all on American conservatism a book called prison break a book on the history of the welfare
state a great book on the rise of the conservative legal movement so what what went right for you well I think one thing that I learned is um that in Academia there's sort of two strategies you can have like Academia how you get to Academia you're a failure in high school volunteer this information to me as a failure in high school and here you are so how how did I how did they get from being a failure in high school to
being a uh a semif famous uh Professor I think one thing I learned is I'm good at listening that is I'm very bad at a number of things right um but I'm very good at not forcing what people say into my existing mental categories right um and a lot of the work I did I think the best work I've done the book I would use as an example of that is the rise of the conservative legal movement a lot of that was based on listening to people
who who lots of people on my side the liberal side generally thought uh wouldn't talk to you right whenever I was telling people I was writing this book on the conservative legal movement I told them I got access to the internal papers of the Olan foundation and the federal society and they asked me how did you do that like I had to break in in the middle of the night and I said well I asked right and it turns out lots
of people want to tell their stories but they want to tell them to people who they think are trustworthy right and not trustworthy doesn't mean that they're on their side right but people who are going to take respectfully what they have to say so I think I learned the thing I that would allow me to be successful was one talking across ideological or other boundaries uh and that was still that that's still
possible and I think it's still it's Les less possible than it used to be but it's still possible we wrote this book in part to prove that it's possible to other people right and so I think that trick right of maintaining that in the polarized age is one of the things that helped me be successful now your dissertation I believe it was at UVA on W for that became a book and in that book I think in the introduction you mentioned that you had three
conservatives on your dissertation committee yet you would not yourself be considered a conservative what is it that so early on made you weird in that way how did that come to pass well I guess I think I always was attracted to things I didn't agree with right I remember um you know people have often have an experience in college where they first pick up or high school where they first pick up IR Rand and they're think
oh this is this is it I fig I figured it out right I first uh picked up iron Rand and thought it was um was awful but wanted to know why and wanted to argue with it so I was I was attracted to people who were you know had these ideas and I wanted to have it out and I wanted to figure it out rather than just dismiss ideas like that and so I think that's one of the reasons I was attracted to going to a graduate program
where I would study with conservatives and I figured you know I already know a lot about liberals thing and that's why I've spent most of my time listening to conservatives I disproportionately the my media diet is uh from conservatives because I feel like I can write all the liberal op-eds I want so I don't really need to consume that and you have this maybe contrarian isn't the right word but I'll use that word as a fill in
contrarian streak in all spheres of life so the music you listen to the foods you eat uh the ski lodges you decide to visit when you have vacation or is it really just in your a political philosophical thought no I mean I think that it's probably one of the features of how I think um that I'm always worried about whether I'm making decisions simply because I have a mental structure that has told me that that's
what's preferable or desirable or reinforcing right so in my teaching I spend an overwhelming amount of time talking about confirmation bias um and I think that actually influences how I think uh ignor ordinary life I'm always looking for the kind of Arbitrage opportunity and whether it's ideas or food or anything else and that's partially also about what are the areas where I'm not getting as much uh out of life because I'm going to where my
comfort zone is what's the biggest intellectual hole in conservative law and economics I think probably the biggest intellectual hole is comparative that is when I think about what economic ideas mattered a lot to me right one of them was was reading Robert Wade's governing the market um years and years ago back in uh in graduate school and thinking really systematically about how different political systems can generate
different often um desirable uh economic equilibria right that is South Korea has a set of you know as you talking about you know governing rules and laws that have some you know substantial rent for insiders but that also turned out in that particular setting to produce lots of economic uh returns I would recommend that for Argentina and so the the idea that there's a universal set of laws or rules um that are the market optimal
ones I think is a problematic one I think thinking more systematically about why different economic laws regulations and Customs uh appear to work and produce economic surplus in different places would probably be the my my the one I'd volunteer on that answer are you ready for a quick bout of overrated versus underrated uh I don't think I have a choice so I'm I'm I'm I'm ready for lack of consent you're free to pass
on any of these Charles Murray's book losing ground on the welfare state does it help the poor substantively overrated in that it I think it was wrong and I don't think it was a very good piece of scholarship I should also say it's in some sense underrated that it had a huge effect on me because like like on Rand it forced me to actually go and find a lot better scholarship to try and argue against it the pivon and cloward semi-
Marxist idea that the welfare state is actually there to control the poor I think it's always been underrated but it's one of those ideas that keeps coming up from the grave every time you think you've got it buried the coast theorem probably still underrated the influence of the Federalist Society not whether one agrees or disagrees but how strong their influence has been on the world I think it's overrated on the
choice of federal judges and it's underrated on the overall infrastructure of conservative law your book Prison Break which I'm very much a fan of uh what percentage of the current population in American jail should not be there that is a question you can't answer on its own I think I think you in your moral I I I think I think I think with a different set of parole and probation institutions you could probably get it down below 50% so you
more than half of them could be released in a way that would be acceptable if you if you could if you could create the complimentary institutions to do right what's the biggest thing quote unquote the left could learn from conservative libertarian law and economics again I think the the focus on rent seeking I think uh people on the left tend to focus a lot on what government can do to solve problems not enough on what
government uh where government actually produces it so in that sense I think the left needs a more vigorously anti-statist agenda to go with its statist agenda and that's even true in areas like Finance or taxation um it needs to have a balance between those two sides and historically in lots of periods in in the history the left had a more vigorous anti-statist component and need to get more of it pled ocracy you
have famous piece on this concept which I take to be the notion there's so much gridlock that we still have to try to get some things done but we do it in such convoluted roundabout ways that everything is just a cludge of unwieldy pieces fit together barely working and policy just Creeks along in a highly ineffective way in your view how long can this go on for could we just sail along with cludge ocracy for 70 more
years or is there some kind of break point where at all snaps I think I'm so I actually say theories in which uh things build up and then snap under or overrated I think there's very rare that's a functionalist kind of theory and generally I tend to be suspicious of those I think countries can slowly go into Decline and I think they can go into decline you know I mean Argentina was once a very wealthy and um and
prosperous country and it just kept not actually getting it stuffed together over time so I think there's probably some evidence that you could actually you could keep you could keep going in this direction for quite some time if you're willing to accept gradual economic political mediocrity overrated or underrated the British system of government overrated why so I think one thing that we tend to overestimate about Britain or sorry
underestimate about uh Britain is the fact that uh there's very large barriers to entry to the agenda right um so the problem with the United States right is you can get lots of things on the agenda but there's all these things that keep it from uh from getting all the way to passage but uh if you want to do something creative there's lots of little holes uh places where you can start you can start in States you can
start in one branch of government you can start in the bureaucracy you can start in the courts Britain has a much more compressed system of agenda setting and that dramatically in reduces the overall creativity of the system although it does mean that when you actually get uh a desire for Action you can produce it now that can also produce disasters like the pole tax um so in that sense I think our political system
is also at least at its best is more deliberate uh it's a lot easier to do really big stupid things um at least through legislation uh than it is um in the uh in the British system than it is in the American system you're a political scientist is there a region in the world today you would like to see become politically independent that is not currently politically independent well that the a region of the United
States no of the world you could say Catalonia you could say Scotland you could say Hawaii so I Maryland so I have a bias uh uh against secession but that's because I am a temperamental conservative and I am sort of Obsessed by unintended consequences unpredictable consequences I can't think of a huge number of secessions that I think were fabulous successes I think secession is one of those ideas that always sounds
awesome in theory um and rarely uh turns out to be very effective in practice last question what's your favorite TV show and why Bo Jack Horseman I think Bo Jack Horseman uh surprisingly what's actually surprised me is it's the most visually concentrated program I've ever watched it's one of the few programs I've ever watched that you actually have to watch with your finger on the pause button to go back because every screen
has some joke that's sort of hidden in some corner of the screen and the fact they created this entire world where humans and animals are seamlessly interacting in a kind of shallow Hollywood the right explain is it well what's the implicit theory of governance in this show which I've never seen by the way the implicit theory of governance I think the implicit theory of governance is it turn is it seems to be there's an gargantuan Surplus in
Hollywood so no matter how dissolute everybody is the animals and the and the humans are they still seem to be be producing a net gain Steve Talis it's been a pleasure and we'll be right back in just a second with Brink Lindsay thank you Steve and now we turn to Brink Lindsay another of the authors of the captured economy how the powerful enrich themselves slow down growth and increase inequality and Brink is vice president
and director of the open Society project at the ncan center so my first question Brink I also asked Steve this but when we look at income inequality in America today how much of it is due to bad policy versus being due to some kind of skills gap or cognitive gap or otherwise human capital deficiency and how do we know I don't think we can quantify it I would say a significant chunk of high-end inequality uh that is the
percentage of total income that's accounted for by the top 1% of earners is due to bad policy some significant chunk it's non-trivial so that if all of these policies uh that currently artificially inflate topend incomes were reformed uh the percentage of total income going to the top 1% would be significantly lower than it is today but more specificity than that I don't think it's within the realm of social science
to offer a cred ible answer uh and I would say uh that there that this is on top of underlying significant trends that would be delivering a more unequal distribution of income even if policies were perfect so let me ask you about the Gordon tulk Paradox which I'm sure you know of but tulk pointed out that government seems to hand out so many goodies and yet the amount of resources spent on lobbying although it doesn't
seem that way here in Arlington it's actually quite small relative to GDP doesn't that imply that rent-seeking costs are low and thus the share of rent income going to the top 1% is going to be low as well it's an interesting puzzle I don't think anyone has completely satisfactorily uh solved it but I don't think that's the only way to answer uh the question that is yes you could infer from that that there shouldn't be much rent-seeking if the if
the amount of money spent on it is so relatively trivial but if we look at the distortions in the economy we see massive ones uh and those are in some cases uh artifacts of policy that had Insider influence all over them I say the facts deepen tulk's Paradox rather than resolving it in the favor of R seeing not being a problem let me play devil's advocate for a moment and try to defend crony capitalism so if I ask what
are the two greatest growth miracles in the last 50 years of History it seems plausible candidates would be South Korea and China and both of those places there crony capitalism run a muck so maybe isn't the distinction between forms of crony capitalism that encourage infrastructure and education and those work out fine and forms of crony capitalism that thwart infrastructure and education but crony capitalism
itself really isn't so bad at all maybe at some margins we even should have more of it because it helps get things done gets us out of theocracy as your friend Steve would say so I I agree that there are different kinds of corruption and there there's sort of growth enabling corruption in less developed countries and growth stifling corruption uh but the two examples you picked are very different from our present case these
are both examples of countries that took off from poverty and took advantage of opportunities for catch-up growth precisely because they were so backward and impoverished they had a lot of AR artificially accelerated or because they were so poor in backward they had a lot of uh catch-up growth that they could grow faster than rich countries that must slog along uh expanding the technological Frontier rather than
borrowing good ideas from abroad and implementing them at home so I think generally uh institutional quality in less developed countries can be appreciably lower than in rich countries it takes uh less high quality institutions to catch up than it does to uh to blaze trails at the technological Frontier so as countries get richer the stakes for policy makers keep getting higher they have to up their game continually or they will uh run into the
growth slump that so many formerly rapidly growing less developed countries have run into Singapore is higher per capita income than the United States so arguably we need to catch up to them maybe a dose of crony capitalism is exactly what we need to put that extra zing in our step uh I I wouldn't uh I wouldn't count characterize Singapore as crony capitalism I would characterize it as interventionist uh but with an incredibly high quality
civil service that that is focused laser-like on the public interest rather than on what some money bags has paid them to think uh so I would not think of Singapore as exemplifying the possibilities of crony capitalism the effects of the federal budget spending and tax side they're relatively easy to measure on net you see those effects as being Progressive or regressive effects of federal what we tax and what we spend
at the federal level is is that Progressive or regressive on net on net Progressive then why is the regulatory sector as you argue in the book so regressive it's both Congress and the President right yes uh well it's it's a very interesting question uh I think Insider influence and shenanigans flourish in the shadows flourish in obscurity and Regulatory policym relative to uh fiscal policym I think is
much less transparent much more obscure much more Arcane much more difficult for anybody to know what's going on uh at least in terms of sort of big ticket you know how big the budget is how big the deficit is what the top rate is these are numbers that people can uh that are publicly available that uh that people can argue about trying to quantify anything about regulation is devilishly difficult and you immediately have to
get into the weeds of this regulation or that regulation so I think it's much harder to police Insider abuses in the regulatory sphere than it is in the F fiscal sphere well if the fiscal side is on net uh somewhat Progressive and the regulatory side is regressive what do you think of the null hypothesis that simply government as a whole in terms of aggregate patterns doesn't change the distribution of wealth very much period
I think that's an interesting conjecture I don't know the empirics to uh to uh resolve it one way or another whether government is net neutral let's say that that conjecture turns out to be correct it doesn't mean it's correct right it it could be that policy should be net Progressive in which case net neutrality is off as you probably know Walter shid he has a fairly new book out called the Great leveler and He suggests that once
you get inequality it's baked in those are the people they have the money they sort of control the state and you never ever get rid of it unless you have a major war or some other Act of Epic destruction agree or not I have not read his book I think is is there hope it's the general question right yeah so uh I am generally dubious of big monocausal historical explanations that the fix is in and we're just riding along and
there's nothing we can do about it so just temperamentally and and philosophically I I uh I'm not going to be I'm not going to guide my life by fatalistic historical narratives so I think uh there is something we can do about because there's plenty of things we can do to make them better and we're physically able to do them so there are things we can do about them whether we will succeed or not is a different question entirely are high levels of
executive compensation also part of the problem and yes I did ask Steve this too I don't know I don't think so um I can be convinced otherwise but but I have not been convinced otherwise to date it is possible that managers colluding with boards who are on top managers are on each other's boards there's some kind of collusion going on you scratch my back I scratch yours and that top managers uh pillage shareholders it's possible that
could be the case that seems to me to be damaging shareholders rather than the common good I don't see any evidence that American corporations are more poorly run than other corporations because they pay their Executives too much likewise if I look at privately corporations versus publicly held corporations the privately held seem to be paying similarly exorbitant sums to CEOs so to me it looks like this is
being driven by the enormous Stakes uh that that are in play uh there difference between a successful CEO and a failure of a CEO or can be gigantic in terms of Market valuation nobody knows what's going to work and what's not but the stakes are big so it seems worth making a big bet on the right person it's higher education part of the problem and if so who should pay for it higher education is it part of the
problem self-perpetuating system of Elites it's fairly closed it appears a lot of wasteful resources invested in the signaling top universities way back when are still the top universities today doesn't feel like creative destruction so education as it exists is absolutely a replicator of social stratification it is not a disruptor of social stratification one can imagine one can see uh episodes in the past where education has been a real
transmission belt of op Mobility red the semi-private part yes is it a market problem is it something we should fix by regulation what do we actually need to do so it's not making this spiral of self-perpetuating income inequality worse I'm not sure I buy into your premise no that's fine the challenge it so I in general my sense is that we are pushing far too many people into college uh that is that we currently have a kind
of two trck human capital development system so track one is complete a four-year degree at a university and enter the meritocracy track two is your failure this seems to me to be a terrible way to go about things that we have tried to shoehorn more and more people into the four-year College model even though it NE doesn't necessarily suit what they need to improve on or what businesses or employers need from
them but we have not uh come up with any kind of improved way of developing skills for at the primary secondary level and postsecondary level for people who do not seem to be cut out for four-year colleges so we're cramming more and more people into system that I don't think is necessarily doing them lots of favors um and spending lots and lots of money on it so in that sense this over dependence on higher education
uh is uh and is a diversion of resources and a Mis diversion of of human Talent into into the sort of wrong training in so far as the economy has grown more complex and it needs more highly skilled symbolic analysts uh to uh coordinate uh the complex processes of a modern economy then you would would expect to see more and more people going to things like four-year colleges and uh and that's what we've seen so the basic
Trend I think is appropriate functional what is not appropriate or functional is the failure of a of a parallel human capital development program for uh for the non-managers nonprofessionals and the overemphasis on putting everybody into the college model what does Steve Talis eat per breakfast I have no idea what's the most important idea in the book that you understand better than he does HM give me a few seconds on that
one that's that would be an easier question I guess to answer at the beginning of the process but we've had kind of a mind meld over the past couple of years of working on this so H I'm stumped well you can bring it up a later if you wish here's a question from a reader I'll just quote this exactly does their study of power and inequality give them any insights into some of the current issues around gender inequality
especially thinking about how low numbers of women in corporate boardrooms CEO and other high level corporate positions lawyers judges professors Etc your take how does gender inequality feed into the rise of regressive rent seeking I don't I don't see an obvious connection uh so we we did not write a book about everything we wrote a book about one thing I don't see the connection between gender inequality and
rent seeking but surely there are groups that will try to entrench themselves if you're a beneficiary of statistical discrimination as many men are in some situations women are regulations can strengthen that or they can weaken that
and you would expect the same rent seeking mechanisms you outline in your book actually to take the form of altering gender balance in the workplace and family law and yeah so one can see the whole sort of uh second wave
feminist movement you know since the 60s as an anti-rent seeking movement that uh that white men were accumulating a lot of rinse because of the way Society was structured that they were the bread winner and there was a sexual division of labor and they received higher pay than they would have otherwise because they were assed to be the bread winner and women were dis were sort of were kept out of the workforce in in direct
competition with men in many roles so the last half century has been a an ongoing anti-rent seeking campaign uh and the dissipation of those rents uh especially by less skilled white men has been a cause of a great deal of unst and frustration and uh and political acting out uh in recent years as you probably know there's a famous piece by Nord house that shows that from a given Innovation on average only about 2% of
the value of that Innovation is captured by the innovator if that's true and you may choose to challenge it but how could we know that in terms of a net estimate for intellectual property how could we know that right now IP law is too tough it seems to me it could just as likely be too easy so Nord House's estimate shows us that the basic premise of Ip law that unless you can really appropriate gain from appropriate
something like the The Lion Share of the gains from your invention you're not going to do it and it's clear that almost never happens that uh that Innovation is occurring all the time when the innovators are capturing only a a tiny fraction of the gains so the fundamental fear that undergirds IP that unless we give people strong ownership and ideas they're not going to come up with anything I think is is is
fundamentally bellied by uh by the Nord house estimate so but at the margin so to me that puts that puts the IP status quo Defenders very much on the defensive because it suggests that the problem they're trying to solve is a nonpr but think of it as at the margin so if they're getting 2% now well we could change the law give them 3% they'd be getting 50% more Society wouldn't really lose that much Surplus in percentage
terms we might have 50% more effort say put into Innovation and almost as much social surplus wouldn't that be obviously a good thing so in the non-tech world at least we should make patent strong longer not weaker we can reason from the armchair uh or we can go out and like look at data uh and people have tried to go out and look at data and it's hard to do and it's very difficult to show any benefits from the current patent system it's not
impossible uh there are cases where it looks like it's accelerated uh technological progress It's looks like it's uh it's affected the sort of direction of innovation more towards innovations that that can't be preserved by Trade Secrets given uh how Universal patent law is now and how long it's been around uh the actual empirical basis for uh having this affirmative policy is uh is shockingly weak in general my
predisposition is don't make laws uh unless you've got a really good reason for doing something and we don't really have a very good reason uh yet for having patents or copyright laws if the purpose is to encourage Innovation let's take the notion of libertarianism which you've been one of the leading thinkers and writers behind a blend of what you might call Modern liberal views and libertarian views but you put them
together it's called libertarianism if we decided that regulatory reform were simply impossible maybe a good wonderful idea but there were simply too many regulations and there was no mechanism we had access to that could get rid of them all in in a way that would really cut down on the stock would libertarianism then simply collapse into mainstream liberalism or is it still something quite different and distinct I
think it still could collapse I excuse me I think it still could survive maybe all right the way I think of the liberal Arian idea especially for those of us who come to it as ex as former Libertarians or as quasi Libertarians as
opposed to Steve Who Came From Another Direction but uh from my own perspective it's I still retain the Lively libertarian sense of how government can go wrong and so I am alert to more so than the typical liberal issues of
agency capture and sort of Corruption of policy also to unintended consequences and particularly interaction effects that produce clle ocracy uh so I I I think a a general concern with hygiene of the liberal State and a
sense that things are not all well and that things get rotten very quickly and unless you try very hard to push back things get rotten very badly that would be a distinctive liberal Teran attitude even if we didn't talk about regulation
are you up for a bow of overrated versus underrated sure sure now you've worked as a trade lawyer for almost a decade it's your original background if I understand correctly yeah uh so take NAFTA overrated or underrated overrated as as something gigantically important and worth all the passion that we expend over it uh it was a minor from the US perspective at least it was a very minor adjustment in US law us tariffs versus
against Mexican Goods at the time NAFTA was implemented were an average of 2% so we just didn't change our policy very much at all it was more important for Mexico uh but for us it just wasn't that big of a deal so if NAFTA collapses or is taken away by Trump well that may forget about aggregate income but just the distribution of income will that be more or less egalitarian if NAFTA collapses not sure if NAFTA collapses I
think that's very bad for the overall economy it would cause all kinds of disruptions in the short to medium term and in general bad Economic Times are worse off or worse for those at the bottom so I think on the whole kind of nistic economic disruption of pulling out of NAFTA would be worse on people at the bottom because that's that's what bad times usually do Southern Thailand what about southern Thailand overrated
or underrated ah uh the beaches are wonderful but uh I am that's not an answer either but I'm a I'm a partisan of the northeast of Thailand that's where my wife is from that is not the touristy part but it is to me the part that seems most purely and purely and platonically tie and if I could go only one place in the Northeast where should that be H I'm not sure that I would go there sort of with a guide book in mind
and things to check off uh so it's uh there for the brinkin Z Tha experience right the heart and soul of Thailand where is it so uh I the my wife's home town is a lovely little town of 100,000 royette which is the Tie word for 101 um and uh 100,000 people 300 miles from Bangkok maybe 30 40 50 years ago a radically different place from where it is today but today you go there and like you're shocked at how a small town in
rural Thailand actually has lots of 21st century conveniences and yet the spirit culture there is still less touched by the hustle bustle Gogo M and and sort of lack of politeness and charm uh that westernization tends to bring the Thai movie Uncle Boon me who can recall his past lives which I have not read seen oh you must see it one of my favorite movies nuclear weapons you grew up with a fallout shelter in your backyard right
so you thought about it then yes I did 8-year-old rink Lindsay did he think nukes were over or underrated I don't know how to I don't know how to put it into that prism um so overrated as uh as you know usable underrated as a peacekeeper although perhaps maybe maybe maybe we have actually uh been because we haven't had a nuclear war yet between two nuclear Powers we think that there is something sort of uniquely uh
stabilizing about uh about having nuclear weapons that it produces this mad uh scenario where it chasons and disciplines policy makers that could be the case uh although uh reasoning from you know 70 years uh seems to get ahead of yourself but there's a disarmament movement right or we should all get rid of nukes do you root for it would you send it money would you embrace it as part of the libertarian cannon in
international Affairs generally uh I've been I have been badly wrong on issues in the past uh and that has led me to not rational irrationality but a sense of my own rational ignorance so I don't have very strong opinions about things I that I've been bad about in the past and and acknowledge I'm not an expert about in general because of my rational ignorance I'm a conservative about International Affairs I don't want to
see any big sudden movements this way or that doing things a little bit at a time and seeing how it goes seems to me the most prudent path when you don't know what you're doing uh so any Grand schemes to completely eliminate nuclear weapons uh I think is uh is too far Robert nosic overrated or underrated one very particular kind of libertarianism Robert nosik author of Anarchy state in Utopia overrated Robert nosik the full
UA underrated he was arguably one of the first Libertarians right indeed who is your favorite political thinker or philosopher who would not be considered conservative or libertarian you can't say Steve Talis either living or forever any favorite I'm very fond of Mill does that count he's a he's a he's a liberal not a Libertarian he's too he's too too libertarian KO people don't like him very much at all so I was brought up not
to like him doesn't count someone who is really on the other side of what you think Mill is a Libertarian arguably all right I've never read anything that conveys the the intense raw creative power of capitalism that matches the first few pages of the Communist Manifesto okay uh so uh I find reading marks uh bracing and interesting even when he's Prof even when he's profoundly wrong uh he's he's often framing questions in very
interesting ways so I I have gotten uh a good deal out of him and taken Concepts from him and turned them in ways that he would have thought horrible but useful for me final question what's your favorite TV show and why favorite TV show of all time uh is uh is Star Trek uh which one the original the Star Trek Star Trek yes the St and why it's very liberal uh it's a hopeful future uh technology is making people's lives
better people are getting along across uh racial uh country of origin lines even across uh planet of origin lines I think it's that fundamental optimism that hooked me uh and that is uh it's very easy in Washington to find earnestness and optimism sort of uh go uh but uh cynicism and worldliness and nothing can ever get done and things are always going to get worse those are those are the stock worldly smart
positions uh but I like a little bit of uh a little bit of Ernest clunky optimism and so I'll go with Gene rotenberry and Star Trek and with that thank you very much Frank Lindsay [Music] pleasure thanks for listening to conversations with Tyler you can subscribe to the podcast in iTunes Stitcher or your favorite podcast app and if you like this podcast please consider rating it on iTunes and leaving a review this helps other people find the show