Conversations with Tyler - Russ Roberts on Life as an Economics Educator

Episode Date: June 5, 2019

What are the virtues of forgiveness? Are we subject to being manipulated by data? Why do people struggle with prayer? What really motivates us? How has the volunteer army system changed the incentives for war? These are just some of the questions that keep Russ Roberts going as he constantly analyzes the world and revisits his own biases through thirteen years of conversations on EconTalk. Russ made his way to the Mercatus studio to talk with Tyler about these ideas and more. The pair examines where classical liberalism has gone wrong, if dropping out of college is overrated, and what people are missing from the Bible. Tyler questions Russ on Hayek, behavioral economics, and his favorite EconTalk conversation. Ever the host, Russ also throws in a couple questions to Tyler. Read a full transcript enhanced with helpful links. Recorded May 7th, 2019 Other ways to connect Follow us on Twitter and Instagram Follow Tyler on Twitter  Follow Russ on Twitter Email us: [e-mail] Subscribe at our newsletter page to have the latest Conversations with Tyler news sent straight to your inbox. 

Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at Mercadis.org. And for more conversations, including videos, transcripts, and upcoming dates, visit Conversationswithtyler.com. Today I'm very honored to be here with Russ Roberts. Russ is an old friend of mine, a former colleague. He is one of the world's leading economic educators, if not the leading.

He is currently a research fellow at Stanford University's Hoover Institution. Russ runs a very famous podcast, Econ Talk. He is the godfather of economics podcasting. He has produced some amazing rap videos written numerous significant books, including several novels, outlining economic concepts, and has done much, much more. Welcome, Russ. It's great to be here, Tyler. Can we just go home now?

I don't think that's the high point for me, that introduction. I appreciate that. Now, you've argued in the past that the actual increase in living standards over, say, the last 50 years, it might be greater than what we're measuring, or at least greater than what many people claim is the case. If that's true and growth is so strong, is there actually any case left for fiscal conservatism? Because if the growth rate of the economy is higher than the government's borrowing rate, which is the case even under the pessimistic numbers, why do we need to worry about budget deficits? I wouldn't say that's the most important thing to worry about. You're right. I do think that the worry du jour thing that I think is the sort of mainstream, everyone knows worry, is that a rising tide no longer lifts all boats. And I think that's absolutely wrong.

I think a rising tide has definitely lifted most boats widely across the income distribution and that the belief that is otherwise is the result of a selective use of certain kinds of data that are imperfect. But then if it's really true that are, well, let me say two things, actually. One is that my optimism, my cheery view of growth in the past isn't just that we've mismeasured inflation. It's that we've mismeasured the gains to the average American because of changes in household structure, for example, which I think is probably the most important fact. Just take a simple example. Everyone's married and all houses. households have two people in, whether they're both earners or not. But that makes it easiest

just assume they're both working. And now of a sudden you increase the divorce rate or lower the marriage rate, two things that have actually happened in America dramatically over the last 40 years, especially among low education individuals, people who didn't finish high school or have finished high school but didn't graduate college. You start adding additional households in the left-hand tail of the distribution. That alone is going a disproportionate share because of that difference in the marriage and divorce rate. That's going to pull the median down as I show that the median has moved to the left. And I think that failure to recognize that is an extraordinary failure on the part of our profession that so many studies have been done

on quintiles and medians. Now, you should use the median relative to the average because the median takes outliers, the high right-hand tail. Good idea. But then you still have this other problem that people don't acknowledge or seem to pay attention to, which is that your analysis is now going to be distorted by changes in household structure. So my first claim is that... Yeah, but say that's all true. Can the government just spend a lot more money in borrow and will just grow out of the debt? Not much crowding out.

Well, it depends what the government spends the money on. I've always felt that the real cost isn't the interest payments, but the activity of the government. If the government just transfers, which is, I think, probably not so distortionary relative to doing stuff. Maybe that's okay, but I think government does a lot of stuff. that means lower consumption for the rest of us, except the people who are the beneficiaries. Government, if they don't spend the money wisely, if they dig holes and fill them back in, I don't think that's a good idea. So I don't think the proper tax that the government is taking on the private sector is the amount it spends, not what it borrows or what it taxes.

So we have two ways to finance government taxes today and taxes tomorrow. And the mix is not as important to me as how what we do with the money that government actually spends. unless, of course, we go to the point of bankruptcy, which case, you know, that's a whole different story. And I think it's bizarre to pick on our profession again. It's bizarre how many economists are willing to say it doesn't matter. It doesn't make sense to me. If government spending had to be increased by, say, 20 percent, what would you spend the

money on? Do I still beat my wife? What kind of a question is that? Tyler, I don't understand that. If it had to be. It had to be. And they call you in. Ross, how should we spend the money?

We know you think this is a terrible idea. But we want to minimize, we want to get the biggest bang for buck. One thing I would do is I'd cede some prizes and fund some prizes for breakthroughs and technology. I think that would be a good use of the money relative to some alternatives. I try to think of some ways to get better outcomes in education using that money rather than just say increasing expenditure across the board and try to find some ways to incentivize schools to get that money, not by scores, say, on tests, but by other methods. What else would I spend it on? Well, other than infrastructure, of course, which were woefully inadequate.

I don't know if you know it, but, you know, American Society of Engineers gave us, like, I think, a D. A D minus, I think. A D minus? Well, yeah, they would. So, you know, there are some things that infrastructure we could improve, of course. Whether they're best done at the federal level would be a different question. I don't think that's the case generally. Are there ways to use incentives to lower the rate of suicide, which is today a rising epidemic? Or is that a hopeless battle?

I'm going to pick on your question if I could. I think the natural impulse of many economists is to look at a symptom of a problem and figure out a way to play with that. So, for example, some workers don't have enough skills. They don't get enough education. So they have a low market wage. So how do we fix that? Well, we either pass a law that says they have to earn a certain amount or we give them a subsidy to that. We don't spend as much time, I believe, thinking about how would we improve the education? and the skill set. People worry about that. But that's not necessarily the central worry. And I think it should be the central worry. As you know, there's a number of people talking now about the failure of SSRIs, the drugs that try to fight depression to be effective. And recent article, recent book, I think, and people writing about that book, I think the author's Anne Harrison, you know, are making the point that in the old days, psychiatrists had this model that mental illness was, a chemical imbalance. And this drug, this psychiatric attempt to fix it, repairs the imbalance. It turns out it's not true. We don't have any clinical measures of imbalance that are responsible for mental illness. Some of the drugs might work. There's a debate about how effective they are, of course, but they're definitely not doing what they claim to do. And when you ask psychiatrists, what about that claim that things were out of balance? They say, oh, just a

metaphor. So suicide is a symptom of something horrible, something very, very wrong with people's lives. And as you said, you called it an epidemic. I looked at the data recently. It's hard to believe the increase over a very short period of time. Often that's due to a change in the way data is collected or a change in the way data is collected across states, the different states reporting in different ways. The fact that it's going to up nationwide, if it's really true and it's not a data compositional issue, it is quite striking. It should be almost all we're talking about, trying to figure out why that is. What are the characteristics of the – and I think it's most – I think the rate's quite growing quite rapidly among younger people. That's correct. And that's deeply disturbing. Now, some people have pointed out that a, you know, a TV show may have stimulated some

imitative behavior. Yeah, I think it's 13 reasons. why that that was, you know, a show that encouraged kids to think it's okay. I don't know. We don't know. But wouldn't you kind of want to pay attention to that before you said, let's try to alter this symptom. So I'd want to go to the core if I could. If I couldn't, maybe it'd be worthwhile to subsidize. So what would you do? What would be an idea of a subsidy for suicide? If you don't kill yourself, we'll give you money. If you do kill yourself, we'll burn down your parents out. No, that won't work. That could go the other way. That could be a moral hazard problem. What would be the, what kind of what do you have in mind? Maybe lowering the sanctions for getting mental health care. So right now there's some stigma. Oh, stigma. So culturally, that's a good idea. I like that. We reduced it a lot in the last 50 years. You could argue we haven't reduced it as far as it could be reduced. We've done a lot to try to convince people it's an illness rather than a lack of mental fortitude or whatever. A lot of mental issues have been put into the box of illness. It's still a pretty big problem. And I'd also argue, I don't think we were that good at altering culture in knowable ways. So I like the idea of it. Interesting.

Which book by Hayek has influenced you the most? That would be the fatal conceit. It's certainly not the road to serfdom, which is the book that everyone tells me they've read or that they plan to read. And I say, don't read it. It's really slow going. It's not that interesting. The style is even more turgid than some of Hayek's other work. Actually, I tell people to read his essays.

I think the right book to read as individualism and economic order is the best place to get acquainted with Hayek. But for me, the fatal conceit is an incredible book. I think it's 108 pages in the edition I usually look at, or maybe 118. It's a very short book. So you think, well, that's accessible. You give it to people. I used to give it away a lot because I loved it. And nobody read it.

They read a few pages. The reason is that every page is a little bit dense. it's all interesting. But if you don't, if you're not really interested in it, it's pretty slow going. But I do love that book, and I would say it's by far the most influential Hayek book I've read. There's somewhat of a historic. By the way, some people said he didn't write it, I should add, of course. Bill Bartley had some role, but it sounds like Hayek to me.

Yeah, some of it, yeah. I like the idea of it being Hayek. There's a somewhat historicist argument in that book, that successful society somehow of higher population. I'm not even sure how Hayek states it or what he meant, but can you attach any credence to that at all? No, I don't. And I also, when I read it, I don't know, 20 years or so, 15 years or so ago, I read it quite late and was totally taken by it. But at the time, I was uneasy with, I think it's in there and it's a number of other books that, you know, successful societies will thrive in competition with other sides, whether it's in population or other measures. There's a lot of ruin in a nation, as Adam Smith said, there's plenty of wiggle room for countries to fail horribly and still, quote, do better than their neighbors. So I don't know. That argument of cultural competition seems a bit overconfident. Which part of behavioral economics has turned out to be the most interesting?

It's funny. I'm not a big fan of behavioral economics as a piece of economics formal academic discipline. I'm a big fan of it as a way to think about life. And it seems a bit strange to make that division perhaps. I feel like a lot of the behavioral economists play gotcha. people aren't rational. No kidding. You know, there's this view that somehow our models, whether that's our, mine and yours, or mine and somebody else's, or mainstream economics, or so-called price theory, microeconomics, they rely on perfect competition, rational consumers. And since those things don't hold, we can ignore all the conclusions. And I will say that one of the things that I loved when I came to George Mason in 2003 was how happy. people were to take a piece of behavioral economics and say, well, you know, in this area, people want maybe to work as rationally as in other areas, and therefore I could assume

this, that and the other, as opposed to, like, wearing it as a religion in a form of clothing that you always head on. I also feel like much of the behavioral economics field has been damaged by the replication crisis in psychology. Now, I would think that way because I'm not as big a fan of behavioral economics as some people are. And when I claim that people will offer something and say, well, but this finding still holds up, doesn't it? And I'll think, yeah, sometimes in a laboratory, in certain situations, with a large enough sample, maybe. So I think for me, it's more of a perspective than a discipline. In many ways, I think its promise has been disappointing, right? To gore neoclassical economics by proving that people aren't totally rational,

seems like a very unexciting finding. But it is greeted with great glee in some circles. As a Hayekian, how can we do science better? I think that's a trick question. Hayek, of course, was concerned with scientism, the illusion that what we're doing was scientific. I'm a big fan of the pretense of knowledge as Nobel Prize, except in speech.

But not in the social sciences, actual hard science. How can we, as a society, have a higher rate of scientific advance? You get to change things. Well, I'll cheat for a minute and say what all change is for people to be more willing to accept the possibility that they're wrong, which is not a policy lever that we actually have control of. You know, I'm a big fan of Richard Feynman's quote. The first thing is not to fool yourself and you were the easiest person to fool. We romanticize science a great deal, and I think we romanticize the objectivity of academics and scientific researchers. they have their own pet theories, their own fads, their own reputations.

It's very hard to do science. It's very hard to do good science. So if you ask me what policy lever I choose, it's not obvious to me. I will say that I'm not happy with the patent situation and particularly in the case of pharmaceuticals. I think there was some research there. One thing alarms me in the pharmaceutical business right now, I think, is that the return to certain research and development is too high. The patent system, I think, and the restrictions on generics have made research in pharmaceuticals less productive than it would otherwise be. That would be one thing I would encourage changing the patent landscape.

I'm a big fan as I think you are of prizes to solve problems. There's a wonderful website called Innocentive that just puts up prizes, 10,000, 25,000. I saw 100,000. I don't know if that's the top or whether there are probably some that are bigger. We're creative people from outside the field that's usually being looked at, come up with, creative ideas. Other than that, I'm not sure what we can do. I think else comes to my mind. What would you do, Tyler? To encourage science. Our scientific institutions are too bureaucratic. They fund too many older scientists. They have too many layers of bureaucracy. I would unpack some of those

and start all over again and have mandates about funding riskier ideas, younger principal investigators. Perhaps unlike you, I think government funding of science on average works, though I don't think we're doing it especially well right now. IP, I have mixed feelings on. Some areas I think it should be tighter or others looser. But I'm not sure that's the main problem. It's the number of yeses you need to get something done that I tend to focus on as the main barrier. Yeah.

Well, let me respond to the point about government. Obviously, well-run government science is fabulous. The problem is it's not so well-run, and we could talk about if we could actually make it better, would it be worthwhile to spend even more money than we do now? And the answer, of course, is probably, but it's really hard to do. As you say, it's too bureaucratic. Well, there's a reason for that. It's done through the government. There's a certain way that you rise to the top of that hand out the money game. There's a certain set of reputations. They're not big on risk-taking. But it seems to me it was once better and something has changed. And it may be there's never a way back. But it seems some government institutions can refresh themselves over time. Don't you think they get more sclerotic as time passes? So one way to think about how to improve that is to sunset them, right? Just say, we're going to start from scratch, which is hard to do. I'm not sure how that would be done and what would you change. To me, it's like the public school system. Certain habits have become ingrained in our educational philosophy. There's a lot of safety and lack of risk taking, obviously, for good reasons on the part of the people involved. But I'd like to fund more risk takers, more outside the box. And, of course, one way to argue for that is to let foundations and philanthropic organizations do that. And they are. Obviously, there's a lot of R&D going on in America right now that's

funded not by the government, not by corporations, but by foundations, which is encouraging. They too become sclerotic, of course, after a while, which is a whole. They're sometimes the worst offenders, I think. Yeah. Well, it's very hard to, in my experience, it's very hard. As much as I like the nonprofit world as an alternative to government and business. In my experience, they often tend toward mission creep to expand budget rather than to achieve what was their original goal and what the problem they were trying to solve. And that's a tragedy.

It's evidently a very human tragedy. It's very hard to avoid that. So I think that's a very good reason for philanthropists to sunset their foundations and have them die after a certain amount of time. Here's a reader question. In which areas are you more pro-regulation? than the average American. And they mean government regulation. Then the average American? Yes.

I can't think of any. Can you help me out there, Tyler? Well, I'm not sure I know all of your views. What would you guess? What would be? Give me some things to think about there. In general, I think government should be smaller and regulation should be smaller. Let me give you a trick answer then. I'll let you feed me some. Many people believe that the financial crisis was caused by deregulation. And I think that's a misreading of the evidence. It's true that some pieces of the financial sector were deregulated, but government intervention in the financial sector was quite significant in the advance of the crisis.

In particular, the bailouts that we did have passed failed financial institutions, I think encouraged lenders to be more careless with how they lent their money, both mainly to other institutions, not so much to people out in the world like you and me. So deregulation is a little bit tricky. So I wanted to get that in. I'm not sure how that pertains to the question. It does probably in some way. So give me something I should be more regulatory about. Baseball? Baseball, of course.

I would say animal welfare. Government should have a larger role. But also what counts as a tax-exempt institution? I would prefer our government be stricter. Oh, I mean, with you there. Well, that's more regulation. Kind of, I guess. Kind of.

Yeah, kind of. Higher capital requirements. Standards. Okay. I'm okay with that. Yeah, that would probably be, that's a good one. If we can't have, I prefer a laissez-faire world for banks or less. If we can't credibly promise not to bail out banks, we then, if that's the case, we live in a world where banks get to keep their profits and put their losses on taxpayers, bad world. So a more regulated world would be better than the world we live in. Not as good as my ideal world, though, but there's a case where I would be in favor, like you just said, more capital requirements. You're on a roll. See what else you can come up with? Spending more money for tax enforcement, especially on the wealthy. It seems- You can spend a dollar and bring in several times that.

I don't think rich people cheat on their taxes, do you? She's the tricky word, but I think we could spend more money and it would more than pay for itself. That's probably true. So we're actually big fans of government regulation today. Yeah, we've really expanded the tent here. Podcasting. Yeah. What's the largest change of heart you've had as the result of an econ talk?

of an econ talk podcast conversation? I don't think it's any one talk. What I have found extraordinary about interviewing somebody once a week for now 13 years is exposed as you do an enormously wider range of ideas and insights than I would normally have been exposed to. I assume that's true for you too, which means that in, I don't know, 10 or 12 years, you're going to be even smarter than you are now, which is very cool. But what I realized, and it doesn't, it's not a lightning bolt, it's just over time. I realized at some point that my views had changed on a bunch of things.

And if I had to say why, it's because I've talked to a lot of people and read a lot of books. And early on in eCon, not early on, but at some point in Econ talk, I realized I wanted to be open about my biases. And I discovered that by being open about my biases, I had to confront them a little bit. because here I am saying them out loud. And I realized, well, gee, do I really believe this now? It was something I believed to say a long time ago. And so as a result of the accumulation of those conversations, my views on a number of things, I think, have changed quite dramatically. And what's the net shift there?

How would you characterize it, other than more diverse? I'm less in love with economic theory than I was when I was 26 years old, fresh out of grad school. I used to believe that, you know, it's embarrassing to admit this, and I hear people claim it, and I think it was true of me, that I actually thought my models describe the world as opposed to gave me insight into the world. I actually thought this is the way the world works. And of course, sometimes it does. But the relentless application of price theory to the world, which is the way I was trained at the University of Chicago proudly, which has helped me understand lots of things I wouldn't otherwise understand. I think. a little too overconfident. And so I'm much more open to imperfect aspects of economic theory. I've become disenchanted with economics in general in the following sense. We have this idea, which is a very strange idea when you go deeply into it, which is we teach our students. I stopped doing it in undergraduate, but we most people still do and certainly in graduate school. We teach there's something called utility theory. And the real reason I think we developed utility theory in economics at the end of the 19th century, early part of the 20th century, was to explain why people buy what they buy. We're trying to generate demand curves and explain why when a price of some good goes up, you buy more of a different type of good.

We call that a substitute. There might be you buy less of it. We call that a compliment. And so we were very focused on what I would call commercial behavior, what people do with their money. And that somehow we made a leap from that. bizarre narrow, made a bizarre leap from that narrow focus arguing that we have something to say about people's well-being. And you think about how strange that is?

Now, if I said to you, does what people buy contribute to their well-being? Of course it does. And we want to buy things that add more to our well-being than things that had less. We all understand. That's reasonable. Most people would agree with that. Would you then jump to the fact to the conclusion that what people consume determines how happy they are?

Now, that would be ludicrous. Adam Smith understood that in 1759, that that isn't the case. And say, and if you asked economists, is that true? Of course not. No, and I mean utility. I mean everything. I mean the non-monetary aspects of a job, for example, and the non-monetary aspects of the steak you cook at night for the romantic dinner. It's the romance. It's more important than the consumption of the steak. Of course. We all know that. And yet somehow we've become the arbiters of how policy translates into well-being. And I find that. really deeply disturbing. When I was younger, it's like the fish and water, even though I was in that water, it was just the world I lived in. But now I look at it and I think, you know, I look at the things that I think are important in America today that we ignore as economists. Tribalism, the feeling of belonging, the importance of community, conversation right now that we're having, you and I across the table, and you're actually paying attention for a minute there instead of look at your question. It's hard being the host of a podcast, folks. I know how it works. And those things are what really make our hearts sing. Pride, dignity, respect. They're cliches, but they're not in our models. So then you say, well, yeah, they're working in the background or we're holding them constant or they're not important for the question I'm looking at. But then we get to something like universal basic income where we say, okay, we're worried, say, because of, say, autonomous vehicles or artificial intelligence that people aren't going to be able to find work. But that's okay.

Let's give a check. Like, who would say, oh, that's a good idea? That's a good substitute for a feeling of pride and agency and responsibility and dignity that a job well done provides. We'd say, well, that's absurd. And yet people on the left and the right have adopted the economist's view that says there's a function that translates stuff to well-being. And I think that's just grotesque. So where we're talking about things I've changed on, that'd be a big one. Obviously, I've become much less enamored. My listeners know, I've become much less enamored of statistical modeling. which, you know, again, when I was younger, I thought, well, just the truth. Now, it's true that the other side has their statistical models. Those are the bad models. Mine are the good ones. I have the good studies on my side. And I've, you know, I've come to reject that view. I don't think, I don't think anyone are very good. And more importantly, I don't think the reasons we hold the views we hold are due to the empirical results that we find from our models. It's true. Some people change their minds based on scientific evidence or studies. But in general, it's not really what happens. much. And so it's deeply disturbing to me that our field has become so focused on advanced forms of econometrics as a way of understanding how the world works and to alter policy. I don't think we have enough skin in the game to do that. I don't think we understand the relationships and causal connections as well as we think we do. What's your all-time favorite econ talk episode? I have a couple. Christopher Hitchens on Orwell was a thrill. I did that face-to-face.

He is one of the great talkers of our age, incredibly articulate. Richard Epstein with a British accent. You know, Richard Epstein, I remember I interviewed him. I think it was on property rights. I either had done two that day or I was just tired. I thought, I'm just going to let him go. In the first, I think, nine minutes, he rills out a perfect set of paragraphs that could be an essay on property rights. Interviewing Milton Friedman was a thrill.

One of my all-time favorites was the guy who does the potato. for Northern California. O'Donohos' his last name. Great episode where I learned a lot about industrial production and Frito Lay strategies. He does Frito Lay Potato Ships for Northern California. He was in charge of it. I'll see any others that jumped to mind. It was a fun to interview Mark Halper, my favorite novelist, living novelist.

That was just a thrill. Interviewing Bill James, who taught me to love statistics and data and baseball is an incredible thrill. And to get him to say that we... He said something like, we know one thousandth of what we could know, even though baseball is a very narrow, in baseball, which is a very narrow controlled environment. And, you know, I get a lot of flack for interviewing Nassim Taleb because he's online persona seems to be different from mine. As well, I'll say it judiciously. I've learned an immense amount from him. We had a great interview with him.

I interviewed him a number of times where I said things to him, repeating what he had said. He agreed. That's what he had said. Later, I realized, I don't think that's quite what he said, and I realized he'd says something quite a bit deeper. And I've just found that, I found that, I find that really, that really fun. A few questions related to religion, but feel free to pass, of course. How do you, as a podcaster, economist, and education specialist, read the Bible differently? I could say as an economist, there's a lot of fun things in the Bible that are that tells things about incentives and behavior in ancient times. That's an untapped area, I think. There's a paper two or three there. Of course, a number of great economists have written either on the Bible or the Talmud, Robert Oman, most notably. You know, there's a classic problem in, I want to say, Leviticus, where if your ox, gores, a neighbor's ox, or gors a person. person, if it gores within your area versus a public area. Yeah, that's an exodus. It's an exodus. After the commandments are issued, and they're then elaborated. Yeah, when I read that, oh, yeah, actually it's in, yeah, it is. It's right after the giving of the Ten Commandments. I think it's in Mishpatim is the section in the Jewish calendar. But I look at that as a Kosian, and I look at how there's some aspects of the rewards and

punishments in that area that are a little bit puzzling, and I think Coase helps me understand that. It's a little easier to enforce some of those restrictions and punishments from having understood Coes, and most rabbis don't read Coase, so that's helpful, I think. Other than that, not sure what else would come to mind. But that's tort law, basically, is what those, you know, those restrictions are, those commandments are about tort law. Epstein and Koster in the book of Exodus, I would say. Can one find classical liberalism in the Hebrew Bible? Yoram Hazzoni would say you could. I don't know if you've read the philosophy of Hebrew scripture. It's an extraordinary, interesting, totally different take on the Old Testament. There's classical liberalism in a sense, you know, there's some obvious places. There's classical liberalism. You have to be careful. You know, the devil can quote scripture. There's a lot of things in the Bible that you can take a different direction. If you wanted to read it through classical liberalize, you would look at the decentralized nature of welfare.

So, for example, a farmer is not to cut the corners of the farmer's field, to leave them for the poor. If things fall that you're loading under your truck, you have to leave those for the poor. Then, of course, but there is a minimum expected 10% tithe to go toward communal institutions and to the poor as well. So big negative thoughts on monarchy in the Bible and centralized power generally. But I think you have to be careful when you look at Jewish law and in particular Talmudic law, you know, it's written for a community structure where people know each other, interact with each other in repeated ways. So when we look at, say, the restriction on charging interest, which is clearly a restriction, to me, it's clearly a restriction to get you to be a more humane. person to your neighbor, as your neighbor gets more distant, it's harder and harder to feel that. And so the rabbis found ways around that restriction because people were giving less.

Here's the economist reading the Bible and the Talmud. People weren't as eager to lend out money as they could be. And so there were ways to get around some of the interest restrictions or the restrictions of the Jubilee year. Every 50 years, all debts are eliminated. and changes in land ownership. So it's a, you know, I think there's a lot of decentralized aspects to the Bible, but, you know, a lot of people read it a different way. What are non-religious people missing in general?

Well, we live in a very interesting time. I think it's increasingly hard for a highly educated person to believe in God. It's a cliche that with the Enlightenment, a lot of people lost faith. They replaced that faith with a belief in science and the belief of human kind's ability to manipulate the world in godly ways. And yet, religion has not died. I think David Foster Wallace says it best. Everyone worships. So we as human beings like things that are larger than ourselves.

We like belonging to causes that are more than just our daily lives. His advice is to pick one of the bigger, actually any actual religion, than say, beauty or money or famed. He says, if you worship those, you'll find yourself deeply disappointed as you get older. Anna Smith would, I think, say the same thing in the theory of world sentiments. So when I ask what – we ask, what are people missing? For me, a lot of religious belief in the modern age is two things. It's an ability to embrace some – a little bit of agnosticism, a little bit of intellectual humility to say, I don't fully understand. As a believer, I don't fully, it's not easy to fully embrace a belief in God in today's age. And that makes most people uncomfortable. They tend to either be fundamentalism is very attractive and then there's nothing. So those two extremes are very attractive. The in between, which says, you know, I'm not sure there's a God, but I want to use religion as a way to express my sense of awe and wonder being a human being alive in an extraordinary universe. That's a tough cell. That, I think, is the easiest sell to a thoughtful person in many ways.

And it's a little bit like, for me, in my experience, having an ear for music. Some people don't have an ear for music. It doesn't speak to them or for art or for bitter beer. It just doesn't appeal to them. It doesn't make their neurons fire in a particular way. And I think religion may be like that as well. I think there's some people who are very prone to it who find either transcendence or belief easier to embrace than for others. And so I would never say someone's missing something by not being

religious, not leading a religious life. I will say that in my case, religion is a lot like marriage. And I say this as someone who is very happily married now for almost 30 years. We're doing this front of a live audience, wild applause. If you ever mentioned how long you've been married, if it's more than a year, people applaud because it's such an achievement, I guess. They don't realize it could be my wife's achievement, not mine. But at any rate, any one day, you might wish it were otherwise. You know, any one day as a religious Jew, there are days I wish I could have shrimp. There are days I wish I could watch the game on Saturday morning, Saturday afternoon, on TV.

There are times I wish I didn't feel different. But over a lifetime, it's a very powerful enricher of the texture of everyday life. And I would say that's true marriage and religion. Any one day, you might sometimes think it's a hard deal. Most days it's good or great. And then more importantly, over a longer period of time, it's deeply satisfying. And I think in today's world, those two institutions are struggling because for whatever reason, people are more interested in today. You know, if I say to you, forego this pleasure today and you'll have great pleasure tomorrow, that's a tough sell in today's world.

It's like saying, in my case, you know, I don't look at my cell phone for 25 hours over the Jewish Sabbath. What? It's crazy because on any non-Sabbat day, I look at my phone compulsively. Really? Why would you give that up? How can you give that up? And yet, it's been a good trade for me. So that's all I can say. I can't say whether it's good for other people. You know, a lot of people, I think, find the Sabbath idea very appealing. But if you don't believe in God, it's really hard to keep it with any regularity. So I think, again, I would emphasize you don't have to embrace fundamentalism to have a taste of the transcendent in your life. And I think it's an important part of being a human being. I recently read a book on neuroscience by Robert Burton. You know, I think there are three ways that we stimulate our human. our brain's love of the transcendent. Psychedelics, mushrooms in LSD, direct brain stimulation.

You can give someone an out-of-body feeling of being part of something enormous, I think, through a brain stimulus, according to Burton, and religion. And the value of religion is it's better than a knife, and it's probably better than mushrooms, at least if you're worried about some of the side effects. But I just think it's part of being human. And if you struggle to make that leap of faith, which I think everyone should struggle, you don't have to make the leap of faith. You could just say, I'm open to the possibility that the reason there's something rather than nothing is because some force started it. And then you need to choose a religion, which, you know, you need an institutional framework for experiencing that. And it's, that's, you know, works for me. It might now work for you.

Let's try some overrated versus underrated. Saul Bello. so overrated for me. It's interesting you picked him. Just talking to my dad loves Saul Bella. My dad was a big influence on my reading habits when I was younger, less so when I get older. Like my dad could never get into John Updike. I love John Updike stories. He's like, you know, he's like, O'Henry van. That's a cheap shot to some extent. I like O'Henry, too. But my dad loves Saul Bella. To my mind, he's not a great writer in the sense of, of, he's not a poetic, elegant writer of sentences. Nothing. He's not a poetic, elegant writer of sentences. Nothing. He's not. He's not a poetic, elegant writer of sentences. happens in his stories. He just follows around somebody who's a lot like him and writes down what they say in his interactions. So I've always found him very disappointing. I've read probably, I don't know, three or four of his novels trying to like him. Can't do it. The Sabermatrix Revolution in Baseball, overrated or underrated? I think it's still underrated. It's kind of amazing how far it's come. A sociologist, maybe it's already been done, but a sociologist that study how that world changed and how it has changed sports writing, sports reporting, sports com. commentary, and yet it's so hard for people to accept things that disagree with what they see with their own eyes and that OPS adjust that is commonly used now is an extraordinary thing, an incredible achievement of Bill James and the others, John Thorne and Pete Palmer, the three people I associate with this revolution. And it's, of course, spread to other sports. It continues to spread the application of analytical technique. So in that sense, it's underrated in that I think there's still some really bad sports commentary. it's overrated in that it's part of a revolution that I'm deeply worried about, big data as part of that, that everything can be reduced to measurement. We can measure everything important. And if we can't, we will. And eventually everything will be quantified and we'll get better lives as a result.

And I think that's a misreading of the human experience. And I'm not an optimist on that. Penn Station in New York City, overrated or underrated. Oh, boy, that's a tough call. You've been there, right? Way too many times I've stood under those. It used to be an enormously large thing that had the arrivals and departures and I thought was going to crash and kill people. And what I find remarkable about that space is how uncomfortable it is, that there's no place to sit down except the accella waiting room, which I've had the privilege of being in maybe three times, that these people are standing around, often holding their bags on the shoulder, getting ready to race to a gate so they can get a seat that they already have reserved.

and I do it. I'm ashamed of it. It's so strange. And it's ugly. It's ugly on the outside. It's ugly on the inside. But most people know it. So it could be underrated. I don't think there's anybody who loves it.

I enjoy it. I wouldn't say I love it. You like it? By the way, if you pay them, they will let you board first. I don't do this. But there is an implicit markets and everything going on here. A bribe. Yes.

And that's interesting. To the station, the person who's sort of standing there. That's right. If you just say, oh, I need some extra help, could you help me out here something? They'll bring you down early. Oh, well, yeah, that's the, what do they call? Anyway, they have a name. Bribe is the name.

No, no, no, no. I'm talking about the people, but I'm thinking it's there, what if you don't have any luggage, I guess you could still do it, couldn't you? Yeah, I need some extra help. Where is it, sir? It's imaginary. It's virtual. Let's go.

Here's a 20. Dropping out of college, underrated or overrated. Another tough one. that's a great example of where I think people misunderstand the heterogeneity of the people who make that choice. I normally would say it's greatly underrated. I think finishing is over, dropping out is underrated. Finishing is overrated. I think you and I have both written that I'll ask you, how many books, what's the ratio of books that you finish relative to the books you start?

Well, eventually it will be all of them, right? My latest book, whatever that is, I haven't finished. But don't you pick up some books and don't finish. Oh, reading books. I thought you meant writing them. Let me say that. Maybe I finish one out. It's too good.

Leave it. Maybe I finish one out of ten. I don't know. Right. One out of ten. So when I was younger, I found it deeply disturbing not to finish a book I started. It's an interesting rule, right, that says finish every book you start. If you have that rule, you will pick more judiciously, ideally, and be a little more careful.

But that was my rule. And I also had a rule not to write in my books because I found that. to be sacrilegious in some sense to deface the book. So when I finished, and I never opened it all the way. So when I finished a book in my youth, it looked brand new, but I had read it. I've changed all those things. I'm now, I write in my books. I don't finish lots of books. And so quitting is a good strategy if you know when to do it. Quitting school, or I would even say not attending in the first place is underrated, except that for a lot of people who don't finish, they don't do very well. You know, I don't think the people, I don't think the average is a good predictor for necessarily

what's going to happen to you, Tyler. Tyler, you could have not finished. And I wonder what Tyler would have happened to Tyler. My favorite example, this outlier, of course, by definition, is Kevin Kelly. Kevin Kelly, who's just a wonderful writer and on technology and many, many other things. And a brilliant photographer, by the way, also, I don't think he ever went to college. So most of our learning takes place elsewhere. But for some people, it's good.

What's the most underrated part of the Hebrew Bible? Well, that's an easy one. He said after a long pause of about a minute and a half, that would be the book of Esther. The book of Esther comes across as a clown show. A crazy king listens to his crazy anti-Semitic advisor, wants to kill all the Jews. the queen who's a secret Jew, a morano in the court of Ahashvaros, entraps Haman, the advisor of the king, and gets him killed and saves the Jews. And Achshveros has written as sort of a buffoon who's somehow manipulated by this wicked advisor.

And there's some moments in it, but a little more careful reading, I think gives you a different impression. Yoram Hazzoni wrote a wonderful book on it called The Dawn, which I think has now been reissued under a different title, but it takes it more seriously. So I think it's very underrated. A few questions about Adam Smith, if I may. Sure, one of my best friends. He's written extensively on Smith. Does his notion of the impartial spectator beg the question?

Because impartial by what standard? So doesn't he need some external standard of ethics, which in fact he doesn't have? Yeah, that's bothered me, actually. It's a great, I think a great insight. When I think of Smith's impartial spectator, which is this idea that it's his, it's Smith's attempt to understand why we do anything for other people besides ourselves, which he argues that we have perched on our shoulder or within our breast, an observer, someone that we use or invoke to think about how that person would judge us. And of course, that person is going to be a lot

like our friends. And our friends are a lot like the circle and society and culture we come from And what is honorable and kind and thoughtful in one circle will not be so in another. There's no honor among thieves. The same goes, so the thieves have a different kind of impartial spectator who would judge them harshly for keeping a bargain deal that they'd made with someone. So I think that's correct. And I think Smith's own society of Hume and others is a pretty unusual one on so many, so many crowds. So I think it's a good point. So I do think it's culturally subjective. And at the same time, I think it understands something deeply about the way we behave in the world, which is that we look to how our friends judge us and how people who are not our friends judge us, the people in our casual circle who might observe our behavior. And I think it's incredibly useful either as a way of understanding what people do or if you want to improve your own behavior to think about how you should behave if someone was watching all the time. time. In your own reading of Smith, does the pursuit of approbation, in fact, make us happy? And if not, why do we do it? If you praise them too much, you don't make them happier?

Well, I don't think it's so much the ratchet effect, and I don't, I have a different knit to pick about the approbation issue and the love we have for the respective or circle of friends or associates or acquaintances, which is, I think Smith's trying to say something quite subtle, or at least I hope he is. I claimed he was. I don't know if it's really accurate or not, because I think it's hard to. to know. But what really motivates us? Is it really, do I really want Tyler to think I gave a great interview? Is that why I'm trying hard right now? Because I would like your approbation. I'd like your to say, oh, great job afterward. And I suspect you'll say that. Yeah, I suspect you'll say that regardless, because it's the polite thing to say. But let's say I don't care about what you think. I'm independent. I'm not going to be motivated by that. That's rather consequentialist, isn't it? It certainly suggests a lack of integrity on my part that I need your Todd repraise, Tyler, to really make me do a good job here. So I think there's a tension there.

I think about this a lot with Steve Jobs. You know, Steve Jobs claimed he didn't care what people thought of him, and he acted that way a lot. He went barefoot to the office when he was young. He was cruel. He was incredibly demanding and didn't care whether he was loved by his employees. and I think he would have said he was oblivious to the praise of others. And yet he wanted to put a dent in the universe. He wanted somebody's praise. I'm not sure whose. But my point is that – that's an aside.

But my point is that I think – you can read Smith – and I think this would be wrong, but you can read Smith as saying people are dishonest. They're not true to themselves. They dissemble because they want the praise of other people. And I think that's wrong way to think about it as a human being. Again, I don't know what Smith really thought. But for me is when I think about how pleasant it is when someone says something nice about me, I try to discount it. I try not to use that as a motivator for me.

I don't want to use that as a motivator. I want to do it for its own sake, the right thing, whatever it is. And I know I'm prone to manipulation through praise, as I think many of us are as human beings. So there's a certain, there's a tension that Smith doesn't write about so much that, you know, I think it's not easily resolved. Given that the latter sections of wealth of nations seem to be arguing that the division of labor can in fact work out for both education and protection, was the ultimate point of the whole book, Wealth of Nations in a way to respond actually to Plato and Socrates? Is that the right way to read Wealth of Nations? Because they said what? Well, you need the Guardian's education has to be centralized.

There's the danger of a decline of martial virtue. But for Smith, you have firearms, which gives you a standing army, and that's favorable to liberty, because you don't now have to worry about being taken over by, you know, the ruder peoples, as he called them. And that therefore, division of labor and capitalist wealth was just fine for education and protection. And therefore, Plato slash Socrates, they were wrong. When you say, but division labor, though, you mean more decentralized solutions or not? But also literally the division of violence. labor, right? Which is a theme in the Greeks, and it's a huge theme in Adam Smith. So it's partly

commercial society, but just the notion that you have a separate set of people who protect the republic, a class, right? Separate set of people who are teachers, for profit, of course, in Smith, which is taking the side of the sophists, right? Yeah, that's an interesting point. I don't know much Plato and Aristotle, as you might tell for my question, but the part I do understand is, I've Start, you know, Cain said we're the, what does he say about the babbling of madmen? I should know the quote by heart. Do you know it by heart? No, but I know the quote. Right. That were all the slaves of someone or other. People defunct ideas. And you think, ah, that's something an academic would say to justify him to feel good about himself, because his ideas will be defunct down the road. But I am struck by how the hand of Plato and Aristotle reaches across so many things, certainly modern religion. Certainly our love of mathematics as a perfect source, you know, Benchioramazone again, I think it makes the point that, you know, there's no circle in the real world. The circle is a concept, and yet the idea that it's out there, this human creation, a mathematical definition, is a very powerful, I think, influence on our thinking still. Maybe we're hardwired to think that way. I don't know.

So to come back to your question, I think it's a really interesting question in modern America. there are parts of America that have a respect for, say, military culture that's very scarce, right? There aren't a lot of places that have respect for military culture. But the South mainly, right? Yep, it's the South. The coasts, much less so. And part of me wants to say, yeah, you don't really want to romanticize the Army. That's a bad thing.

But we're blessed to live in a time where our enemies are very far away. And if they were closer, maybe that's a really useful thing. And in the meantime, someone has to serve, right? The pay alone is not going to do it. Yeah, probably not. We could make it higher. But I think you could get enough people in there eventually, but maybe our political process wouldn't like that higher pay. The interesting question, I'm going to ask you a question, Tyler.

Sure. Do you think the volunteer army has reduced or increased the willingness of the president to use the army as a – to get into more wars? Do you think it reduces the chance of war or increases the chance of war? Depends what you mean by war. If you mean any conflict at all, I think it increases the chance of a lot of small-scale activity. A lot of it is led by drones. And there may be ground troops as support, but casualties remain really quite low. It's what we've seen in the world.

But if there were a truly major nation-threatening war, I actually think it might be easier to go to war with the draft army. Well, you mean we'd be more likely to intervene. That's correct. So I think it's just, I think there's attention there that most economists who, like you and I were, I don't know about you, I shouldn't say you, but certainly I was a very strong proponent of the volunteer army and I used to quote Milton Friedman all the time when he testified it allegedly, would you want a, when he was advocating for a volunteer army that would be paid to come to serve rather than drafted. And I said, you'd want to be defended by an army

of mercenaries? And he brilliantly responded better than an army of slaves where he forced people to serve. And I was found that compelling, given my libertarian youth. But the argument And in behalf of that, of why that was actually a good thing besides philosophically was, well, if we had to pay soldiers instead of forcing them to serve and paying them a pittance, the budgetary costs of enlarging the army would start to bite. And that would discourage a large army. And I think that's just, I don't think I'm not sure that's true. And then the argument was, well, you know, because on the flip side, excuse me, on the other side is that if the average American doesn't have to serve, which they don't anymore, then it's cheaper to go to war. So, I don't know, I think that tension's ignored by most of my friends who favor a volunteer army. Yes, I agree with that.

Three simple questions to close. Super simple. Oh, yeah. Liar, liar pants on fire. Just a guess. If you were to pick a deceased person from the past, but not going before the 20th century, to have on Econ Talk to interview, who would it be? I really would have liked to have interviewed Robert Nozuk. That would have been really fun.

You know, Robert Nozic wrote Anarchy State in Utopia, which, which was one of my favorite books when I was 22 years old. An extraordinary book loved it. And he was an intellectual hero of mine. And in his later years, he became disenchanted evidently with classical liberalism and a small government or at least some former libertarianism. And I'd love to know why. I'd love to ask him about that.

Maybe he's written about it. I haven't read it. But it's not been an obvious one. Hayek is an obvious one, although he's hard to understand. His German accent's pretty thick. So you'd be the best guess. Same from Hayek when you asked him questions. I met Hayek.

I knew Nozick. Yeah. I would go further back. I mean, I would pick Keynes without a doubt, I think. That doesn't excite me. I don't have much romance for Keynes, although he's articulate and witty, and that would be fun. I think for a minute anybody else. But we know enough people who knew Hayek and Nozik.

We can, in essence, reproduce what it would have been like. Whereas Keynes, right, we are quite in the dark in some ways. That's true. I guess I'd like to interview my old philosophy professor Robert Smyth who taught me about pragmatism and I didn't really understand it until I got to be old enough that he wasn't alive anymore. I'd love to chat with him. I chatted with him once. He taught a great class on the philosophy of pragmatism. I think I took three classes from him. And later in my life, I was probably 50 or so. I realized a lot of Hayek is echoing this view that reasons over. rated, which is one way to summarize pragmatism in a sentence. And I tracked him down and I called him and he said, I said, do you read Hayek? Have you ever read Hayek? Of course.

Yeah, because I'm an idiot. Yeah, of course he's read Hayek. So that was lovely, but I'd love to talk to him some more. I miss him. So it's an interesting thing when someone who has an intellectual influence over you that you don't realize until years later. I just think about it for another. Can we take another 15? I would think about that's a good question.

Give me some more candidates. Well, they're political leaders. They would not be my picks, but they're plausible for many philosophers in the earlier part of the 20th century. Great scientists, Einstein, right? You'd have a lot of downloads for him. I would. Yeah, exactly. That's a good line.

Norman Borlaug, the people behind the Haber-Busch process, fertilizer, right? People in technology. Not so interesting to me. I'd like to think about somebody like, oh, here's a fun one. I'd like to interview Eric Hoffer. You ever read Eric Koppel? Sure, true believer. Yeah.

Great book. And the ordeal of change. He's a great writer. And a working class writer. Right. And an interesting human being, I would suspect. I don't know if he'd be a good interview. Anybody else?

I think composers, conductors, would be very interesting. Oh, yeah, actually the Gershwins. If I could get the Gershwins on to talk about collaboration. And, well, actually, you know, Rogers and Hart would be good. Otto Klempuror. Cole Porter would be fun. I tried Stephen Spielberg, didn't not get him for econ talk, but he responded to me because I had a mutual friend who'd said it was, at least the contact. I don't know.

In a sentence, where has classical liberalism gone wrong? It's ironic. I'm going to cheat and answer to a few sentences. Our age right now, this may change, but our age right now is obsessed with inequality. And it disturbs me deeply that inequality is conflated with poverty. They're not the same thing. A lot of people blame the condition of the poor on inequality, as if the world is a zero-sum game. If you press the person who says, oh, of course, I don't mean that.

But I think there's an implicit idea that the inequality comes at the expense of the poor. I don't think that's the – there are cases where that's true, of course, where rent-seeking and other privileges that people have taken from the government, from government power have allowed them to impoverish others. But most people who are poor are poor because they do not have the tools, the skills to contribute in the modern economy. They have circumstances that keep them from rising. And I've been deeply saddened by the failure of people on so-called our side, the people who believe in smaller government, to think it all about that, to think it all about human flourishing by the people who are struggling. And I think that has been a terrible mistake. At the same time, we failed to make the case for freedom. And to the extent that even saying that seems foolish, I'm going to, it's not literally true,

but the last prominent politician, I think, who made the case for liberty and freedom in and of itself was Maggie Thatcher. Reagan, to some extent also, but Maggie Thatcher did it relentlessly. And that's so out of fashion in our times. We've become so consequentialist. The idea that liberty is a principle worth defending in and of itself is really, really difficult. And I find it strange that people tie small government to the Republican Party. The Republican Party doesn't make the case for liberty. It loves to spend – Republican politicians love to spend money.

I like to say that the only difference from – well, both Republicans and Democrats like to spend money on their friends. They just have different friends, except they have one friend in common, which is the financial sector. So they both coddle the financial sector because that's where the money is. And so we don't have a political home for our ideas. And I think the intellectual home has failed badly for our inability to make the case either for liberty in and of itself and for the – to understand how and why people who are being left behind. by our economy and what policies might help them. And I think that's an utter failure of our side. And it's just a tragedy. And last question. What is your next book or project?

So I have three things I'm working on. I'm working on a video series on data and thinking about numbers that actually the latest episode comes out today. But in terms of books, so that project is an ongoing project. But in terms of books, I think I'm writing a book on data and our need for certainty and our challenge of interpreting numbers authentically and correctly. I think it's really hard for us to consume numbers. We tend to see them as facts. They're not facts. Some of them are.

Most of them aren't. And we're prone to manipulation, I think, from the use of numbers. It causes, I think, to look under the lamp post, which is, I think, a huge failing where the light is rather than maybe out in the dark a little bit. We need to edge out into the dark where the numbers aren't. So that's one book I'm trying to start, trying to read a book on prayer for people who struggle with prayer. And I think most people do, at least the ones I know. And then I'd like to write a book on forgiveness and the virtues of forgiveness, which is totally alien to me. Totally, if you had said to me five years ago, you're going to write a book on forgiveness, I would have said,

forgiveness is a really mixed bag. You know, sometimes you should bear a grudge. I've changed my mind on that and I want to see if I can make the case for forgiving yourself and forgiving others more readily and how that might actually work rather than it's a great cliche. It's a great, you know, cliche.

You need to forgive yourself so you can forgive others. But most of us struggle to do that, I think, and I'm not sure the connection is not so obvious. So, you know, same thing, you need to love yourself before you can love others. That seems counterintuitive to me. So those kind of interpersonal human aspects of life, I think we're fascinating.

And maybe I can say something about it. Russ Roberts, thank you very much. Thanks, Tyler. 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.