Path Home Shows 2017 Show Archive March 2017 Show 1711 Paul Pierson - Learn from the Past

Paul Pierson - Learn from the Past

A mixed economy, combining market and government contributions, will bring societal success, says political scientist Paul Pierson.
Paul Pierson - Learn from the Past

Paul Pierson - Learn from the Past

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Show 1711: Paul Pierson - Learn from the Past
Air Date: March 12, 2017



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.”