In my quest to bring more varied thought to campus, I thought it would be awesome to reach out to George Mason University economics professor Tyler Cowen. Cowen runs the most widely-read economics blog, has allowed anyone free access to an economics education and is constantly winning awards for his brilliance.
I’ve been a huge fan of Tyler’s work ever since I was in high school, his free courses being largely what inspired my interest in economics. I’m incredibly grateful he accepted this interview request, and I’m glad to share it with you. If you’d like an audio version of this interview, it is available to listen to here.
This interview has been edited for clarity.
What do you think makes you so effective at knowing what people are becoming brilliant in the future? Tell me about your Emergent Ventures and how it has worked so far.
Emergent Ventures is a new philanthropic venture of its own, and it is based on the idea that awards for talented people can be handed out at very, very low overhead, not on a basis of consensus and with a single individual decision maker. In this case, that person is me. One reason Emergent Ventures has worked well so far is that our applicant pool is quite high [in] quality. I don’t credit my own decision making for that at all. It’s a little hard to learn about the ways you learn about it. Maybe you know something about it. Maybe someone knows marginal revolution. I think that is selecting for pretty well-informed, curious and ambitious people. I would credit that more than any special touch of my own. But I would say when I select people, I look for energy level, persistence, curiosity and some level of caring or authenticity.
Two follow-up questions: First, you noticed Knausgard before he had any Amazon reviews; why do you seem to do this on a regular basis? Second, is something like emergent ventures scalable?
Your question about Knausgard and also Elena Ferrante, those are now two famous writers, who I praised many years back, before they were famous. They each published one or two early books. I think what I’m doing there is taking in more information than most people. I read very quickly, and I devote much of my time to reading and following things, so I think I end up having good picks for those reasons. Again, maybe some of it is better judgement, but just the sheer brute force, I’m going to sample more information, and it’s going to help selection quite a bit.
Is Emergent Ventures scalable? Absolutely. Obviously, there is a limit to how much one person can handle, but one person can pick other people who run their own versions of Emergent Ventures. Or I think people not at all affiliated with me can do this on their own. There are actually a number of people in the works who are going to do this. So, it will be scaled, right? We’ll see how well our picks do, but absolutely, it will be scaled.
Thanks for a great answer! GMU is commonly referred to as “Blog University,” is that stereotype accurate?
I don’t think so. I’ve forgotten how many people are in the department, but it’s well over 30. The number of people who blog accurately is around five. The blogs we have are well known, and I think they’re well known because they’re good. One of them is run by me and Alex. We’re not “Blog University,” we’re an economics department. Tenure is based mostly on research and teaching, and to some degree, university service. I’ve never known for blogging to count positively towards a person’s tenure, and I think our department is working fine the way it is.
Your department is a little eclectic compared to other academic departments. It seems to be a lot more “free market” than average. My question is, what are the pros and cons of being in a department like yours?
I would describe the nature of our department somewhat differently. I think what unifies us is an interest in fundamental questions, and curiosity, and a belief that your research is not just a professional thing you do to get tenure, but instead is central to the core of your being. That said, I would agree we’re more “free market” than the average department. But we have plenty of people who, I’m not sure I’m the one who should describe them, but they don’t agree with me or Alex, or Bryan Caplan. We’re much more intellectually diverse than any other department I know in a whole bunch of ways, especially in terms of where people fall on the political spectrum.
Interesting. Why’d you start ventures like “Conversations with Tyler?”
“Conversations with Tyler” started by accident. One day I was thinking, “Gee, it would be great to have Peter Thiel come in and speak at George Mason University.” Before Peter was as well known, I thought it would be great to show everyone how smart Peter is. Now, there’s many ways that you can see that, but back then there wasn’t much faith in him. I invited Peter, and I was quite surprised he’d come. Obviously, he is quite a busy person, and he came, and we recorded it and we put it online. So, it served the initial purpose. GMU people came to an event. I thought, “Why not do another?” Peter was right of center, so I thought our next person would be left of center. So, I invited Jeff Sachs. I was surprised, but Jeff Sachs said yes. Then, my assistant at the time, Julie Burden, who was our events person said, “We should do this thing and call it “Conversations with Tyler,” and I said, “OK. That sounds like a good idea.” Then, it happened. It was accidental, and certainly not plotted out by me.
I was going to ask you about your desired impact of “Conversations with Tyler,” but you’ve already alluded to how it was somewhat surprising. Instead, can you tell me a little about how “Conversations with Tyler” compares to “Marginal Revolution University,” broadly? Do they have same general mission, or is there something a little bit distinct about them?
Marginal Revolution University, for those of you who don’t know, is an extensive series of online videos about economics. A lot of it is at the principles level, and there are no ads, no fees, no charges, no strings attached, so to speak. We have exercises and feedback; you can structure it as a course. The main goal there is to reach people who want to learn economics, are smart, but starting from a not-enormous knowledge base. That said, we do have some advanced videos for people who know more, but the core mission is to teach basic economics.
“Conversations with Tyler,” a lot of it is not about economics. I did an interview with Richard Brum, maybe America’s greatest ornithologist. We ended up talking about signaling models — that’s economics. My personal mission in “Conversations with Tyler” is to learn more from these people. These are literally the people I want to speak to, and I get to do it. That’s my mission and I’m happy. Does it in other ways enlighten and entertain people? Probably, otherwise they wouldn’t listen. But I’m very happy with the selfish account of it. It’s good for me. To be clear, I’m not paid to do either one of these, I just think they’re important to me.
Moving on from “Marginal Revolution,” what do you think economics teaches too much of? What should economics focus on more at the university level?
Which level are you speaking of, like a principles class, a Ph.D. program or what?
I’m referring to more undergraduate, but if you’d like to talk about graduate, I’d also be interested.
At the undergraduate level, I think the most important thing — obviously you should teach the material — but is to communicate the instructor’s passion for economics. That will inspire people. I know for sure many classes do this, but I also know for sure many classes don’t. So, that’s what I would like to see every class do. In terms of the material, I want to see more coverage of public choice and political economy. People should have a sense of how government works and not just markets. Again, many people do this now, I’m not saying they don’t, but I’d like to see more of it.
At the Ph.D. level, I worry young budding economists are overspecializing and we’re creating too many arduous steps to becoming economists. There’s a pre-doc and a post-doc. What used to be four years is now six years. The entry barriers are getting higher, and I think that’s a bad thing. I don’t know how to undo that, but if I could wave my magic wand to undo it, I would.
On that note, you mentioned an interest in progress studies. Is that a potential solution to the problem? Moving a little away from the formal mathematical models toward a bigger questions thing?
I think every graduate student in economics, or public policy for that matter, should study the industrial revolution, the East Asian economic miracles and what I call the economics of science. To me, those are the fundamental events and topics in our world. The economics of science barely exists, and it should be at least 10% of the entire profession. Right now, I don’t think it’s even 1%. I would like to see that happen.
In terms of a reform, I don’t think we currently have the infrastructure to make it happen. I’m personally interested in trying to get people interested in building that into the profession. So, all those topics related to economic growth and innovation. If you ask people, they’ll tell you it’s important, saying, “Look at the great work being done now.” But, in terms of the truly major priorities, I think we’re failing badly.
What sort of books would you recommend to somebody interested in topic areas like the economics of science?
If it’s the industrial revolution, I would start with Joel Mokyr as a possibility. Economics of science, I’d recommend Arthur Diamond as a person to start with. But again, there’s remarkably little. The East Asian economic miracles, Joe Studwell’s book “How Asia Works” is a good place to start. But I think there’s not any single work that can really encompass the import of these topic areas.
Let’s move a little bit towards the books you’ve written; I spent the weekend reading three or four of them. In “Love Letter to Big Business,” you argue a couple shocking ideas: businesses lie less than the average person, they provide better working environments and CEO pay is mostly merit based. Why’d you decide to write this book, and what would you like people to take away from it?
I decided to write the book because I saw, going back four or five years ago, the public discourse on big business was becoming much worse — much more hostile to big business. People were forgetting basic truths of economics. I think they were pretty well known and widely accepted less than twenty years ago. Public discourse is flying off the rails. So, I view my book as a contrarian book that shouldn’t be contrarian.
I think the experience of the pandemic postdates the book. As shown, I was pretty correct about Zoom, which we’re speaking over Zoom now, and Amazon. A lot of big businesses did remarkably well keeping things going. Overall, they performed better than either our governments or even just individual citizens. Obviously, Moderna and Pfizer got us the vaccines with the help of Operation Warp Speed and government. Nonetheless, pretty amazing, and you have to credit big business for that. Moderna was not a big business until the vaccine, but now it is. To me, that’s great.
Do you think there were some pros in the handling of the pandemic in terms of decentralization? Or do you think, overall, it was an especially bad case of institutional delay or rot?
If you’re talking about the United States, I think we probably had no choice but to have decentralization. We just don’t have the federal structure for a country this large that could have done better than what we did. With that said, I think decentralization turned out to be problematic in key ways. The number of states dabbling and obsessing with bad science, or expressing complicated but excessively negative attitudes towards vaccinations, or leaning into outright denialism was worrisome. Then, you have a bunch of states, like notably California, that have been too risk averse, and not knowing when to move on, and restart their economies at full speed. I couldn’t tell you it was a great performance. I’m not sure what the relevant alternative is. I think it would have been better education, the public health community more on the ball, more responsible leadership from our new president across the pandemic and so on.
If you look at the countries that did best, some people say it was Denmark, you can debate that. But Denmark is obviously a small country. Some think Singapore did well, but again, quite a small country. Larger countries had bigger problems.
Do you think that’s an argument for decentralization broadly because small states tend to perform well? Or do you think that’s an argument that people who’ve been through a lot of these things before — I believe Singapore had the SARS virus — which effect played the bigger role in containing this virus?
Some of it was just luck. — when you were able to shut down? Some of it was skill, but also an element of luck. I don’t think you can just have small states. I think if you took the twenty best governed countries, a lot of them would be small states. But small states are vulnerable and ultimately, they rely on big states. The big state they rely on most is our United States of America, which is extremely big and powerful, and is a bully and does rotten things abroad. But it does in fact help secure Singapore, Canada, Denmark, and many other places. So, there’s some kind of dialectical balance between big and small states, and you hope they complement each other.
During a pandemic, a large national unit is not obviously where you want to be, but it has other advantages. When borders are closed, and I’m in the U.S.A, I’m not bored. I’ve got fifty states. Living in Denmark, worse yet, Singapore, which is the size of my Fairfax County. You’re stuck. The larger units did have some advantages. You could pick which part of the U.S. you wanted to live in. If you had the means to do so and you were risk-averse, well, move to Vermont. I know people who did this. If you want everything to be open, move to Florida. It’s an offsetting advantage. It doesn’t offset our large number of deaths, but it is an advantage. If you’re in New Zealand, [lockdown is] the policy you get.
How do you think states should balance civil liberties and large-scale disasters? Especially because politicians selfishly use this. I’m thinking of Conor Friedersdorf’s article on how Australia traded away too much freedom. Is there a correct method for figuring this out?
I don’t know if there’s a method and I’m not sure there’s a clear right answer. I think during a pandemic you do need to suspend some civil liberties in those cases. But I would agree that Australia and New Zealand went way too far. Most of all, they were sluggish about taking the actions that would allow them to liberalize, like buying vaccines early on. I think we needed a lockdown in those first three or four weeks. But we needed that lockdown because we didn’t prepare in January . Many people, myself included, were saying repeatedly, “We need to prepare now so we don’t have to lockdown.” And no one listened. So, in that sense, we shouldn’t have done the lockdowns, what we needed was advance preparation.
I think after that, there were many activities we were far too slow to liberalize. Most important of those has been K-12 schooling. This whole “you can’t walk on the beach, you have to wear a mask when you’re solo jogging,” that’s just crazy. There are not even any practical gains from it. If anything, you push people indoors and make things slightly more dangerous. So, I don’t know of any country that got this stuff right.
It sounds to me like you think our political institutions have largely failed us during this pandemic. Has this been a trend throughout other recent events? I know we’ve been seeing notable failures like the Afghanistan war. Are our political institutions broadly failing us? If so, why? If not, why not?
That’s a difficult big question to answer. I think certainly the war in Afghanistan went very badly. But, if you look at most of the federal budget — Social security, Medicare, Medicaid, interest on the debt — I’m not saying I agree with all the structures of those programs. Just on a daily basis, they operate. Medicare does reimburse doctors. They have billing codes. I’m not saying you have to like how it is. You wouldn’t say it is failing in the sense of the CDC, the FDA, or the running of Afghanistan were failing. So, I think it’s a complex picture. Our government is very bad at doing new things. One thing I think it’s pretty good at is cutting checks and sending around money, when you don’t ask too much of it. It does not have a lot of operational capacities in the way that a lot of East Asian states do. Those are governments that are used to doing very concrete, particular things, like Singapore, South Korea, for example. So, it’s a complicated picture.
You need to know what your government is OK at, what it’s been good at [and] what it’s terrible at. I think at the margins, we need to be much better at fast responses to problems. We’ve had this lucky lull for a few decades of relatively few domestic emergencies. With climate change and more pandemics, that probably will not continue.
It sounds like you’re talking a little bit more about state capacity. Can you tell me a little more about state-capacity libertarianism? How does it differ from other types of liberal or libertarian thought?
I wrote this blog post on Jan. 1, 2020, called “What Libertarianism Is and What It Will Be.” I put forward this notion of state capacity libertarianism, which I view as a strong state, but the goal of the strong state is to protect and extend your capitalism. Not to do a lot of things that today’s advocates of big government or a strong state might favor.
So, I don’t think the idea is at all original. I called it state capacity libertarianism as kind of a personal joke. I was sitting there giggling, like, let’s call it a phrase someone will never use again. It’s oxymoronic, awkward, too many syllables, it violates nearly every marketing rule. The phrase has really stuck but I think it’s the correct view. You need some government, but you need to be very modest about what that government can do. If that government cannot perform its basic functions, you are in a great deal of trouble. That’s the core idea, not at all original to me. Maybe I rephrased it or shuffled the pieces around. But to me, it’s just common sense if you believe in capitalism and markets and a broadly democratic society with the constitution.
Since we’re on the topic of state capacity libertarianism, what sort of political issues do you think are really underrated but important? What issues should be talked about a lot less?
I think what’s way important, going back to my earlier comment about economics, is science policy. Science drives innovation. Innovation drives growth. Growth drives human well-being. No one debates science policy very much. It should be one of the main things we’re trying to improve, and it’s not. That’s by far my number one pick.
What do we talk about too much? I would say most of what you see on Twitter. We talk about individuals too much, and the status of individuals, and particular politicians. A kind of emotive, effective polarization. Higher status, lower status, what do you think of this person? Even a lot of policy talk has degenerated. There are a number of Biden bills pending that spends trillions of dollars. Whatever you think of those bills, people are arguing about AOC’s “Tax the Rich” dress. That to me summarizes everything that’s screwed up about us right now.
Of course. So, you argue that the Great Stagnation is coming to an end. Why do you think that? Tell me more.
The Great Stagnation is a hypothesis that technological progress has slowed down. When I first presented this view, it was seen as very radical. I think by now, it’s become the mainstream view. You see this in the subsequent productivity statistics which are much lower than they had been in the immediate post-World War II era. But, if you look at the mRNA vaccines and how they’ve driven both economic recovery and saving human lives, I think you’d have to say, at least for now, that the Great Stagnation is over. We’ve had a big breakthrough. It worked; it was awesome. It’s going to save a lot around the whole world as well. It’s not a guarantee that we’ll continue with innovation. But, when you look at the biomedical space, I see so much being done that I think is going to work relatively soon. I would give a 70% chance that the Great Stagnation is over. I wouldn’t use the word permanently, but for the foreseeable future. We’re going to knock back sickle cell anemia, malaria, dengue, possibly even diabetes with some new results. Those are like major breakthroughs. I think they’re not quite 30 years off. They’re not quite a year or two off, but I think a lot of them are well within the next 10 years?
Tell me about the healthcare trap. Is that something that will continue to matter? Do other parts of our somewhat socialized economy have similar problems?
You called it the healthcare trap?
Is that the wrong term?
Depends on what you mean. I think it’s natural and good for a wealthy economy to spend more and more on healthcare. I don’t think the U.S. is doing that very wisely or cost-effectively, but I agree with Vogel, Becker and others who thought that the more material stuff you have, what you just want to do is stay healthy. I would spend more on healthcare if I could, but I don’t have enough things wrong with me yet. But I’d love to give up some money and purchase some more years and better health. In that sense, I don’t think it’s a trap. But, when you look at the actual incentives we create, just simple questions. You want a procedure done; can you find the price? This is a nightmare. We’ve even passed laws that hospitals need to make their prices public. They don’t do it. We don’t penalize them — obviously a mess. We’re spending too much for what we’re getting, but we should be spending more.
I noticed a bit of tension in Big Business. In Big Business, you argue for the relative success and importance of financial institutions as major drivers of economic growth. But, in the Great Stagnation, you seem to argue that there’s something insidious about the amount we spend on this. Can you elaborate a little bit?
I’d have to go back and look at exactly what I said in Great Stagnation. My current view and my view when I wrote Big Business, is that the financial sector is fairly underrated as a whole. It’s what allocates capital to pending innovations. America is is the best the world has even though we’ve had a productivity slowdown. Some significant parts of that are zero-sum, but those zero-sum parts don’t actually consume as many resources as you might think. So, you know, I’m pretty positive on the U.S. financial sector. It’s not always a popular opinion post-2008. Whenever finance gets whacked and hit badly, you fall into a recession or depression. That’s the kind of proof that it’s doing something important.
My final question is you reference Heinrich’s work in Big Business. Why is the market the cause, rather than the effect of pro-social norms?
I think it’s both the cause and the effect. I don’t think we have a good macro-level structural model of how the pieces fit together. But, I very much view markets as endogenous and I view that as part of state capacity libertarianism that you don’t take the existence of the market for granted. It needs some politics to support it. That said, a trusting politics needs some market relations to support it. It’s a bit of an “all good things come together” story. I’m not sure how we’ll ever understand, causally, how one piece links to the next.