Econtalk Archives, 2009

Clifford Winston of the Brookings Institution talks about the ideas in his book, Market Failure vs. Government Failure, with EconTalk host Russ Roberts. Winston summarizes a large literature on antitrust, safety regulation and environmental regulation. He finds that government regulation often fails to meet its objectives. While markets are imperfect, so is government. Winston argues that idealized theories of government intervention based on textbook theories of market failure are not the way regulation turns out in practice. He argues that special interest politics explains much of the disappointing outcomes of government regulation.

James Hamilton of the University of California, San Diego, and blogger at EconBrowser talks with EconTalk host Russ Roberts about the rising levels of the national debt and the growing Federal budget deficit. What is the possibility of an actual default, or an implicit default where the government prints money to meet its obligations and causes inflation? What might signal an impending default? And what is the long-range forecast for the U.S. government's obligations? Later in the conversation, the subject turns to oil prices, an area of Hamilton's research. Hamilton explores the causes of the increasing price of oil over the last decade and the implications for the economy.

Arnold Kling of EconLog and the author (with Nick Schulz) of From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and the Lasting Triumph over Scarcity talks about the book with EconTalk host Russ Roberts. Kling discusses how modern economists think about growth in both developed and undeveloped countries and contrasts those ideas with earlier views in economics. The focus of the modern understanding is on ideas and the ability of ideas to improve technology, leading to prosperity. Unlike physical capital, ideas can be enjoyed by many people at once, explaining why past models that ignored ideas and focused on physical capital failed to account for the observed magnitude of economic development. Kling also discusses the success of China and India.

Megan McArdle, who writes the blog Asymmetrical Information at The Atlantic, talks with EconTalk host Russ Roberts about debt and the challenge of self-restraint. She discusses her recent Atlantic article on her experience at a Dave Ramsey personal finance seminar, how it affected her life, and the psychology of self-restraint. The conversation concludes with a discussion of debt and savings during the Great Depression and the current national debt of the United States.

Peter Boettke of George Mason University and author of Challenging Institutional Analysis and Development: The Bloomington School (co-authored with Paul Dragos Aligica), talks with EconTalk host Russ Roberts about the Bloomington School--the political economy of Elinor Ostrom (2009 Nobel Laureate in Economics), Vincent Ostrom, and their students and colleagues at Indiana University. The discussion begins with the empirical approach of Elinor Ostrom and others who have studied the myriad of ways that actual communities have avoided the tragedy of commons. Boettke emphasizes the distinction between privatization vs. informal norms and cultural rules that prevent overuse. The conversation also looks at urban development and the benefits and costs of multiple municipalities vs. a single, large city. Throughout, Boettke embeds the conversation in the Ostroms' interest in how the citizenry can be self-governing and the challenges of implementing local knowledge.

Carmen Reinhart of the University of Maryland talks with EconTalk host Russ Roberts about the ideas in her book This Time is Different: Eight Centuries of Financial Folly (co-authored with Kenneth Rogoff). They discuss the role of capital inflows in financial crises, the challenges of learning the right lessons, and what is generally true about financial crises over time and place. Reinhart applies these observations to the current crisis, discusses the possibility of the U.S. defaulting on its sovereign debt, and discusses the possibility of financial reforms that might make a difference.

Richard Posner, federal judge and prolific author, discusses the financial crisis with EconTalk host Russ Roberts. Posner (despite the title of his recent book on the crisis, A Failure of Capitalism) places most of the blame for the crisis on the Federal Reserve, inattentive regulators and the subsidization of risk. He also criticizes economists for complacency in the face of impending disaster. A recent convert of sorts to Keynesianism, Posner confesses some disillusion with the implementation of the stimulus plan and the expanding role of the Federal government.

Scott Sumner of Bentley University and the blog The Money Illusion talks with host Russ Roberts about monetary policy and the state of the economy. Sumner argues that tight money in late 2008 precipitated the recession. He argues that the standard measures of monetary policy--growth in reserves or the Federal Funds rate--are misleading. Sumner suggests focusing instead on nominal GDP. He argues that the failure of the Fed to counter the drop in nominal GDP in late 2008 intensified the recession and points to the growth in unemployment. Along the way he discusses the Taylor Rule and other monetary prescriptions.

Michael Heller of Columbia Law School and author of The Gridlock Economy talks to EconTalk host Russ Roberts about the book and the idea that fragmented ownership is a barrier to innovation. Heller makes an analogy between the tragedy of the commons and what he calls the tragedy of the anticommons--the problem of bundling together numerous individual claims to a resource. Examples discussed include drug innovation when the innovator wants to use technologies of multiple patent holders, new music or visual media where the creator wants to use multiple copyrighted works, and allocation of spectrum rights and its role in wireless innovation.

Charles Calomiris of Columbia Business School talks with EconTalk host Russ Roberts about the financial crisis. Calomiris argues that it is important to put the crisis in historical perspective in the context of other bank crises. He argues that bank crises differ widely across time and place--some times and some places are placid, others are prone to regular crises. Calomiris argues that frequent episodes of failure are tied to government guarantees such as various forms of deposit insurance or similar incentives for risk-taking. Looking at the current crisis, Calomiris indicts "too big to fail," the government's reliance on ratings agencies as a measure of risk, and poor corporate governance as the key causes.

Mike Munger of Duke University talks with EconTalk host Russ Roberts about the limits of prices and markets, especially in the area of health. They talk about vaccines, organ transplants, the ethics of triage and what role price should play in allocating. The discussion concludes with a discussion of how markets respond to price controls, particularly minimum wages.

Daniel Willingham of the University of Virginia and author of the book Why Don't Students Like School? talks with EconTalk host Russ Roberts about how the brain works and the implications for teaching, learning, and educational policy. Topics discussed include why we remember some things but not others (and what we can do about it), the central role of memory in problem solving and abstract reasoning, the current state of math education in America, and what makes a good teacher.

Gary Stern, former President of the Minneapolis Federal Reserve Bank, talks with EconTalk host Russ Roberts about Stern's book, Too Big To Fail (co-authored with Ron Feldman), a prescient warning of the moral hazard created when government rescues creditors of financial institutions from the consequences of bankruptcy. Stern traces the origins of "too big to fail" to the rescue of Continental Illinois in 1984 and then follows more recent rescues including those of the current crisis. The conversation explores the incentive effects of such rescues on the decision-making by executives in large financial institutions. The discussion concludes with Stern's ideas for alternative ways to deal with large, troubled financial institutions.

William Cohan, author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Steet, talks with EconTalk host Russ Roberts about the life and death of Bear Stearns. The discussion starts with how Bear Stearns and other Wall Street firms made money and how they financed their operations. The conversation then turns to the collapse of Bear Stearns's hedge funds in the summer of 2007 and how that collapse and the firm's investments in subprime mortgages led to the death of the firm in March of 2008. Cohan explains the role of borrowed money in the financial crisis and Bear Stearns in particular. The conversation concludes with the incentives facing Wall Street executives and the price they paid or didn't pay for the gambles they made with other people's money.

Paul Buchheit, developer of Gmail and founder of FriendFeed, talks with EconTalk host Russ Roberts about the evolution of the Gmail project, how innovation works and doesn't work in a large corporation, how Google has changed as it has grown, and corporate culture generally. The conversation then turns to social networking and what might be coming next. The discussion concludes with Buchheit's observations on Silicon Valley and the power of failure.

John Nye of George Mason University talks with EconTalk host Russ Roberts about the Great Depression, the evolution of the State, and attitudes people have toward free markets. Nye argues that support for modern capitalism is fragile because people have trouble trusting the market process which is based on anonymous exchange with strangers. So when a crisis comes, it leads to demands for a larger role for top-down decision making. Nye sees the Great Depression as part of a larger public disillusionment beginning in World War I.

Tyler Cowen of George Mason University and author of Create Your Own Economy talks with EconTalk host Russ Roberts about the ideas in his recent book. The conversation ranges across a wide array of topics related to information, the arts, and the culture of the internet. Topics include how autistics perceive information and what non-autistics can learn from them, what Buddhism might teach us about our digital lives, the pace of change in the use of technology, Nozick's experience machine and the relative importance of authenticity and what the Alchian and Allen theorem has to do with the internet and culture.

Michael Munger of Duke University talks with EconTalk host Russ Roberts about cultural norms--the subtle signals we send to each other in our daily interactions. Mike, having returned from a four-month stint as a visiting professor in Germany, talks about the challenges of being an American in a different culture with very different expectations on how people will interact. Our speech patterns, how we wait in line, how we treat each other at the grocery, the interaction between a teacher and a student, how we drive, how we tip for services rendered, even how we listen to music all emerge from our culture and are often different in different countries. The listener will learn what Ted Williams and Joe Dimaggio have to do with the Book of Judges along with the relative merits of Williams and Dimaggio performances in 1941.

David Brady of Stanford University talks with EconTalk host Russ Roberts about American public opinion on changing the health care system. Brady discusses the impact of taxation on public opinion toward health care reform--if the poll includes a measure of the likely increase in taxes necessary to pay for expanding coverage, support for expanding coverage drops dramatically compared to generic polls that ignore costs. He also discusses the role of the party system and partisanship for the health care issue and more generally, how partisanship has changed over time. The conversation concludes with Brady's views on how much science there is in political science.

Christopher Hitchens talks with EconTalk host Russ Roberts about George Orwell. Drawing on his book Why Orwell Matters, Hitchens talks about Orwell's opposition to imperialism, fascism, and Stalinism, his moral courage, and his devotion to language. Along the way, Hitchens makes the case for why Orwell matters.