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Oklahoma Horizon TV Show 1711

How big -- or small -- should our government be? This week on “Oklahoma Horizon,” we hear from both sides of the political debate.
Oklahoma Horizon TV Show 1711

Oklahoma Horizon TV Show 1711

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Show Details

Show 1711: Oklahoma Horizon TV
Air Date: March 12, 2017

 

Transcript

Rob McClendon: Here is what is coming up on your “Horizon.” Well, there’s no shortage of people who rail against big government. Conservatives say it’s inefficient, free market economists say it stifles growth, and libertarians, well, they just say get out of my life. But just how small should government be? That is a question we ask today of two noted authors, one an economist, the other a political scientist, who come at their answers from very different perspectives. Stay with us for “Oklahoma Horizon.”

Female Announcer: “Oklahoma Horizon” is made possible by CareerTech – a job for every Oklahoman and a workforce for every company -- with additional support from the Oklahoma Department of Agriculture, Food and Forestry.

Rob McClendon: Hello, everyone. Thanks for joining us here on “Horizon.” I’m Rob McClendon. Well, for more than a generation small government has been a rallying cry for both conservatives and progressives alike. Ronald Regan campaigned on it, but so did Bill Clinton. And while it is been a focus of most every political campaign in my memory, the debate over small versus big government is nothing new. Meet John Maynard Keynes and Friedrich Hayek, both influential economists with very distinct and opposing ideas about the appropriate role of government in our economy. For much of the 20th century, developed countries in times of crisis followed the Keynesian model of borrowing money to inject into the economy to create jobs – so called Big Government. But as the century rolled on, free market capitalism began to take hold – the more hands-off approach of Friedrich Hayek, that less government intervention meant more economic freedom, well, it began to grow in favor. And the very subjective term of small government became a common theme in most every political stump speech. And no one probably explains this any better than my first guest. Russ Roberts is a research fellow at Stanford University’s Hoover Institution and is well known for communicating economics to noneconomists as host of the “EconTalk” podcast, where he talks with everyone from Nobel Laureate Milton Friedman to pop star Ke$ha.

Russ Roberts: I actually love economics, and I think most people who take economics in college tend to believe that it’s the field that’s good in theory but doesn’t work in practice. And I think it’s actually the opposite. I think it has an incredible useful lens for looking at the world and organizing your thinking. And I think the way it’s usually taught, at least in colleges, in a very mathematical way is very dry, very high brow. And I think the basic insets of economics are actually much more understandable and much more useful in everyday life.

Rob: Especially when you teach economics the way Roberts does.

[Rap Song: Going back and forth for a century. I want to steer markets, I want them set free.]

Rob: In 2010, Roberts collaborated with TV producer John Papola to create a song about the contrasting economic stimulus views of early 20th century economists John Maynard Keynes and Friedrich Hayek.

Roberts: Unfortunately, people ask economics to do things it’s not very good at, like tell us what interest rates are going to be in three months or whether the economy is going to recover after this injection of fiscal policy. But the fundamentals of economics, the ideas of how markets work, the role of incentives, the idea of what’s called opportunity costs, those are incredibly useful for how do you lead your life and what goes on around you and how you see how the world works. And I’m try to convey some of that poetry in what I do.

[Rap Song: Let’s listen to the great Keynes and Hayek going down.]

Rob: And people are listening and watching. YouTube views are now approaching 6 million. So Roberts and Papola produced a second economics rap video called “The Fight of the Century” that is also going viral.

[Rap Song: I ponder is who plans for whom. Do I plan for myself or leave it to you. I want plans by the many, not by the few. Let’s not repeat what created our troubles. I want real growth not a series of bubbles. Stop bailing out losers, let prices work. If we don’t try to steer them they won’t go berserk. Come on are you kidding? Don’t Wall Street gyrations challenge the world view of self-regulation? Even you must admit that lesson we’ve learned is more oversight is needed or else we’ll get burned. Oversight? The government’s long been in bed with those Wall Street execs and the firms that they’ve bled. Capitalism is about profit and loss. You bail out the losers there is no end to the cost. The lesson I’ve learned is how little we know. The world is complex, not some circular flow. The economy is not a class you master in college, to think otherwise is the pretense of knowledge. The situation we choose, what got em up for more took down, the fight continues, Kaynes and Hayek second round. It’s time to weigh in, more fun the type of funds that growl. Let’s listen to the great Keynes and Hayek going down.]

Rob: Now, when we return, my conversation with economist, author, podcast host and rap video producer Russ Roberts.

Female Announcer: You are watching “Oklahoma Horizon” with Rob McClendon – weekly insight into your changing world.

Rob McClendon: Well, Russ Roberts visited the state courtesy of the 1889 Institute, a nonprofit based on the principles of limited government and free enterprise. And I spoke with him before his talk to OSU students.

Rob: Is the most free market politician, do they tend to become ar-Keynesian more controlled economy once elected and in office?

Russ Roberts: I love it when somebody says, “Well, if you were president what would you do?” And I say, “Well, if I were president,” as an economist, and I would say, “Well, if I were president, I wouldn’t be an economist anymore, I’d be president.” And I’d be subject to the same political forces that they’re subject to, which is helping the people who helped them get elected, helping people they think will help them get elected down the road. So naturally they tend to often sacrifice their principles whether they come from the left or the right, whether they’re free market or interventionists. And once they get in office -- for example, someone like Ronald Reagan was a great believer in free trade, did a lot of protectionist things that weren’t free trade oriented once he was president. He talked a great game, but when push came to shove he often would favor, say, the U.S. car industry over Japanese imports. So it’s very challenging to be immune from those temptations. And, of course, there’s always a story to tell. Oh, yeah, well, that was different, that was a special case. But somebody like Alan Greenspan is an incredible example. People think he’s a libertarian, a total free marketer and Iran devotee. Well, he did like Iran when he was younger. But when he was head of the central bank, he mainly did things that helped banks. Not coincidentally, because they are the people who kept him, tragically, I think, kept him in power. So when it came time to decide between his principles and the banks, he always chose the banks. To take an example, he was in favor of bailing out Mexico, which was really, in the late 1990s, that was really a bailout of the banks that had invested in Mexico and were going to lose their shirts. They should have lost their shirts. They made a bad investment. But Alan Greenspan said, you know, we have to protect Mexico, and there’ll be too much chaos. So suddenly he wasn’t a free marketer, just in that case. But anytime he had a decision like that, he often would choose intervention even though he was a so-called free marketer.

Rob: Let us talk a little bit about the market force that led up to the recession that began in 2008. There’s that feeling that sometimes there wasn’t enough regulation in place. And that’s the reason why we fell into that recession, because of the collapse of the banks.

Roberts: Yeah, a lot of people say we deregulated through, we repealed Glass-Steagall, things that separated banks, investment banks from regular banks. And there’s some truth to that. Unfortunately I think the bigger mistake we made is that we, it’s not that we took our hands off the industry, it’s that we also put our hands on and the way we put our hands on led them to be very inprudent with other people’s money. So for example, going back to 1984, Continental, Illinois, a bank was bailed out. Their creditors were all taken care of, and we did see a series of those kind of decisions that the federal government made over the time period between ’84 and 2008, which led some people to believe that if they made a bad investment they’d get their money back anyway. That made people less careful with how they spent their money. So my problem with the way we regulate Wall Street -- you’ve got a choice. I love a free market system, but that means, when they make a bad investment, they lose their money like the rest of us do as individuals. I make a bad investment, I buy a stock that goes broke, I lose my money. I don’t go to the government and say, “Hey, can I get my money, can I have a do-over?” But for some reason, and we understand the political incentives, when the banks made a mistake, we said, oh, yeah, we’re going to give you a do-over. We’re going to get your money back. We’re going to make sure creditors get a hundred cents on the dollar. So what that did over that time period is that reduced the willingness of people to be prudent. It encouraged them to be risky. When you subsidize risk-taking, guess what? You get more of it. So capitalism should be a profit and loss system. But when you have what we have now, which is closer to socialism for banks, that’s nuts. So either make them, either nationalize them, make it utilities, which I’m against, but don’t pretend you have a free market if everyone’s willing to make a bad choice you bail them out. Because that’s the worst of all possible worlds. That encourages them to be reckless with my money as a taxpayer ultimately on the line. And I think that’s the biggest mistake we made. We have crony capitalism for that industry instead of the real thing. And that’s, it’s a terrible thing.

Rob: Do you believe that free market economy, a free market economy, could actually work in practice and not just in principle?

Roberts: Well, I think it would work in practice. I think in practice it works in a lot of areas where we let it work. There’s some sectors that of course we regulate heavily, subsidize heavily, manipulate heavily, those would be sectors like education, like health, energy to some extent. Other sectors we don’t do anything for, they’re on their own, they work pretty well. I’m not an anarchist, I don’t think you should have no government. Obviously you want government to be a system of courts and contracts. We have a wonderful culture in the United States which we’re blessed with of risk taking, encouraging people to trust one another, which makes our economy better than it otherwise would be, it’s a phenomenal thing. But where do we need government to have a heavy hand is the question? And my answer to that usually is not very many places. I think the system works pretty well when you leave it alone.

Female Announcer: Still to come on “Oklahoma Horizon,” the author of “American Amnesia,” but first, how small is small government?

Rob McClendon: Well, Russ Roberts is most definitely a free market economist even in areas that traditionally have been the role of government, and I asked him about the future of education.

Russ Roberts: There is two types of reason, two reasons we go to college, right? One is to learn stuff, and the other is to get certified as smart enough to have gone through college. And we now live in a world where a huge portion of the stuff we learn in college can be gained at zero cost to yourself, on the web, in podcasts, in MOOCs online, courses online. It’s an incredible world, incredible time to be curious. The problem is that sometimes that’s not enough, they also need to certify that they’ve mastered those subjects. The fact that I’ve sat in on those classes, I’ve watched the videos, maybe didn’t quite get it, right? So the question is can we develop ways to certify people for, to certify people that they understood the material. My preference would be that you find ways to do that. Because what that will mean is that the best teachers will make an enormous sum of money and will teach tens of thousands of students instead of now where they make a lot of money but still not as much as they would in that world, but they still, they do OK, but they only teach a few thousand students. And then mediocre and poor teachers are teaching lots of students too. Now, that’s the biggest problem, again, in the K-12. You’re in a 10th-grade algebra class, and you’ve got a bad algebra teacher? Can’t get a refund; you’re stuck. Wouldn’t it be great if a school that can’t find a great algebra teacher let you learn algebra online? Now, we haven’t solved that problem yet. It’s brand new. There are a lot of advantages to face-to-face learning that happen. One of them is testing, which we just talked about. But the other is, there’s something special about face-to-face. It’s not the same when you do it over a screen, it’s not the same when you do it with tens of thousands of people. You lose something there. Is what you lose outweighed by the fact that a tremendous teacher is the one making the video that you’re watching? And we’re going to see how that plays out. But it's got a lot of potential.

Rob: When you look out over the grand landscape of the economy, the world economy, still U.S. output is so much greater than anyone else. How do you feel going forward over the next, arbitrary number, 20 years, about where our economy is heading on the path that it’s currently on?

Roberts: Well, we live in a very competitive world obviously. And that’s a good thing overall. I’m thrilled that China’s growing. That’s good for America. It’s good for China, right? They count, I care, I’m glad that there are fewer people starving to death around the world compared to 20 years ago. It’s been an incredible change in how the poorest people live. There’s still, tragically, about a billion people living in desperate poverty, and we struggle to find ways to help them. But I think it’s a great thing that everybody, that on average people have gotten a lot richer in the last 20 years. Is that going to continue outside the United States and inside the United states? It’s hard to say. Most of the big changes have occurred in China and India. Are those sustainable? Hard to know. Are we going to continue to be the great innovators we have been? And is our standard of living going to continue to grow? And I’m hopeful. We have certain advantages that are going to persist. One is, we have a great culture, we have a great social system of trust, we have a great social system of risk taking. We honor people who fail, we don’t stigmatize them, which means that if you start a company and you go broke, you get another chance and you get to use what you learned from going broke to maybe do better the next time, and that’s fantastic. So we have an entrepreneurial culture that is really unparalleled. There is no other place in the world that has this level of innovation at that level of activity of start-ups, of venture capital, that’s not going to go away unless we mess it up, I don’t think we will. The real question is that why can’t we extend that a little more widely to the rest of the economy, a competitive environment where people who are successful do really well, and people who fail, fail. That’s what I think is the key to our success as an economy. And to the extent we embrace picking winners and losers, to the extent we embrace subsidizing people that have special privileges and power, we move away from that, and we, I think, hamper our ability to encourage prosperity here.

Rob: What do you want to get across to anyone that might be sitting out in this audience, maybe watching your videos online, what do you want to get across to them when it comes to being economically successful?

Roberts: I think I’d say, the most important thing is to remember that money isn’t everything. We’re blessed to live in a very wealthy society, we’re blessed to live in an incredible cornucopia of material well-being for most Americans. We are richer, even the poorest American today is richer than 99 percent of anyone who has ever lived in history, and is richer than most people around the world today. So we’re very lucky that we don’t have to worry a lot about starvation and depravation of the kind that is unfortunately still elsewhere. So we have that privilege, and that gives us the chance to not just do the thing that’s more materially successful. So when I give people, if somebody cares to ask me advice like you have, I always tell students, don’t take, for your first job, don’t take the job that pays the most money. Now, if you’re lucky, that’s the best job to take, but it’s not by itself the rule. Take the job that where you learned the most. Take the job that’s most rewarding. Take the job that’s most fulfilling. Take the job that takes the skills that you love using and puts them to work. Maybe that job, isn’t going to pay the most, but you’ll still have a good life, and you’ll be thrilled with what you do with your day-to-day work on the job every moment kind of existence. And I think money is very seductive, and the first great economist, Adam Smith, understood that wealth was good, but as a goal in and of itself, it wasn’t so good, it could be destructive and to remember that there are other things that matter, like family and values and virtue. And so don’t just do stuff that makes you rich, because that won’t make you so happy. If it saved your family from starvation, yeah, take, go for the money, but we live, we’re lucky enough where we can do the things that we find satisfying as well, and those count, and I always remind people to take those into account.

Rob: Russ Roberts, thank you so much.

Roberts: My pleasure. Thank you.

Female Announcer: “Horizon” is at your fingertips – join us on Facebook, Twitter and YouTube to catch the segments you may have missed and our latest new content as it happens.

Rob McClendon: Well, in our march to smaller government, are we forgetting to dance with the one who brought us here? My next guest says all we need to do is look back to the 20th century, when the United States, like other healthy democracies, developed a mixed economy that channeled the spirit of capitalism into strong growth and healthy social development. Paul Pierson is a professor of political science at the University of California Berkeley and co-author of “American Amnesia: How the War on Government Made Us Forget What Made America Prosper.” And I visited with him at the Oklahoma Policy Institute’s Legislative Outlook Conference.

Rob: So, Paul, what is a mixed economy?

Paul Pierson: So a mixed economy is, it’s a capitalist economy, it’s a market-based economy. But it’s one where people have grown to recognize that you actually need government to be doing a fair number of things, either that markets aren’t going to be able to do on their own and they need a little bit of help or maybe they’re actually going to produce some results that you’re going to worry about, like pollution. So government plays a really important role within that broader economy.

Rob: Now, in your book, “American Amnesia,” you point to the 20th century as a really a golden era for, really, mankind.

Pierson: Yes, it was. I mean there was more human progress in the 20th century than in all human history before that. If you look at income growth, life expectancy, education. You know the average life expectancy in most countries including the U.S. was in the 40s prior to the 20th century. So there’s a transformation. Even though we’d had an industrial economy for a while, we’d had markets, we’d had capitalism, it was really the development of this mixed economy that changed things.

Rob: How do we do it?

Pierson: Well, trial and error, right? So some of it is just learning. You face problems, you deal with them. So at the beginning of the 20th century, there’s a huge problem with infant mortality. As cities started to develop, in New York three out of every 10 kids didn’t make it to their first birthday. And so you learned that you have to develop a public health system. You know, you learn that you need to have clean water and clean milk, and you need to have regulations to do that. So there’s trial and error, there’s education, and there were political fights over this just as there always have been. Any time you want to change things people have to push politically to make that happen.

Rob: What was the role of free markets within this time?

Pierson: Well, so markets are critical, they’re our foundation for economic growth because they do create all sorts of incentives and signals that encourage people to work hard, to innovate, to save in many cases. And they, people use markets essentially to send messages to each other about things that are valued, things that people will be rewarded for doing. So it’s a fundamental tool. But it’s a tool that works best when it’s used in combination with some oversight, some regulation. And you know there is some crucial things like parts of your infrastructure, getting people educated, basic scientific research that markets often won’t produce or won’t produce enough of because the private people who are making those investments or deciding whether to spend money on something, they can’t capture all the return themselves.

Rob: What was the role of government in these boon years?

Pierson: So it’s, there’s so many dimensions of it, it’s hard to just list a few but I start out mentioning public health, education, scientific research, regulation of, for the environment, is an important example. Also, opening doors to our opportunity. You know the beginning of the 20th century and actually you know well into the second half of the 20th century, opportunities for women and for minorities to participate fully in the economy were limited, you know, by law in many cases, by private discrimination and others. And government in the, you know, beginning in the 1950s and then increasingly after the 1960s did a lot to open doors and bring more people into the economy.

Rob: Can we recreate the 20th century success in the 21st century?

Pierson: Well, that is, I think that is the big question. And we can’t do it by going back. We’re not going to recreate the economy of the 1950s, and it wouldn’t be desirable if we could. We’re a wealthier country now than we were then. So I think what we want to do is to take the lessons from the 20th century and apply them to the 21st century. And to me the lesson is that a mixed economy works, that it’s always going to be a matter of trial and error and that there are going to be mistakes and you’re going to need to make some corrections. But that you need to combine all that markets offer with the important contributions that government can offer to make a society’s success. And the exact formula for that is going to be different in the 21st century than it was in the 20th.

Rob: And why is that? Because of technology?

Pierson: The world has changed, and so technology has changed. The economy is more global, we’re more interdependent, we’re a more urban society, which also makes us more interdependent and makes a lot of these things more complex. So developments of knowledge, which I think have always been central to economic development, are even more central now than they were in the 20th century. So really encouraging the quality of education in the society, higher education, basic research that allows companies to thrive and to innovate and introduce new products and refine those products, those have all got to be part of the formula for the 21st century.

Rob: All right, thank you so much. Now, Paul Pierson is a political scientist, the co-author of “American Amnesia.”

Female Announcer: Want to see more stories like this? All our segments are streaming on our YouTube channel at OklahomaHorizonTV.

Rob McClendon: Next time on “Oklahoma Horizon,” we look at how skills training could break the cycle of crime and punishment before it ever begins.

We’re trying to change these guys’ lives. We’re trying to make them better men, prepare them for real-world situations, prepare them to get a job, prepare them to re-enter society and be productive.

Rob: Reducing incarceration with a good job, on Oklahoma’s show for the heartland, “Oklahoma Horizon.”

Rob McClendon: Well, that is gonna wrap us up for today’s broadcast, but you can find us online all the time at okhorizon.com. I’m Rob McClendon. We leave you with a little more economic rap, courtesy of our friends at Econ Stories.

[Rap Song].

Hayek: The vials are twisting – just mirrors of smoke. We need stable rules and real market prices – so prosperity emerges and cut short the crisis. Give us a chance so we can discover the most valuable ways to serve one another.

Chairman: The situation we choose will bottom up or more top down. The fight continues. Keynes and Hayek second round. It’s time to weigh in – more from the top or from the ground. Let’s listen to the greats, Keynes and Hayek throwing down. Throwing down. Throwing down. Which way should we choose? Morel bottom up or more top down? The fight continues. Keynes and Hayek second round. It’s time to weigh in – more from the top or from the ground. Let’s listen to the greats, Keynes and Hayek throwing down. Throwing down. Throwing down.

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