May 3, 2025 • 53 mins
Over the last several years, both parties in the US have been drifting away from laissez-faire thinking about the economy, and more towards the view that the state has an active role in shaping markets. You have Republicans talking about stricter anti-trust and sovereign wealth funds, and of course Democrats embracing things like industrial policy efforts in key strategic sectors. But how do you design markets well? When does it fail? And what is the history of this type of thing in the US. In this episode, we speak with Facebook co-founder-turned-economist Chris Hughes, who has published the new book Marketcrafters: The 100-Year Struggle to Shape the American Economy. In this conversation, recorded at the New York Public Library in April, we talk about his research on the history of marketcraft in the US, and how that study of history informs his understanding of today's economic policymaking.
Read more: Markets Plummet as Tariff-War Woes Fuel Exodus From US Assets
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 1 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, we recently did another special live episode at the
New York Public Library.
Speaker 3 (00:29):
Yeah, a really great venue, a really special evening, and
fittingly given that we were recording at a library, the
library in New York, it was all about a new.
Speaker 1 (00:39):
Book, that's right.
Speaker 2 (00:41):
It was a pretty fitting location. So you were going
to listen to our live episode that we recorded with
Chris Hughes. He's actually one of the original founders of Facebook,
but he left fairly early into the company's journey. He's
currently getting his PhD at Penn in economics and he's
the author of the book Market Crafters, One hundred Year
Struggle to Shape the American Economy.
Speaker 3 (01:02):
Yep, take a listen.
Speaker 2 (01:04):
Thrilled to be a chatting why market craft? You know,
we talk people use the term industrial policy a lot
these days. It's got very hot over the last several years.
What is market craft mean? Why title it that?
Speaker 4 (01:16):
Well?
Speaker 5 (01:17):
Hello, Hello, I'm happy to be here. And before I
answer exactly what market craft is? And we spend the
next hour talking about it. I just have to say
that it is such a huge honor to be both
here at the library and institution that I care immensely about,
and to be a guest on this live tapings.
Speaker 4 (01:35):
Than is my number one favorite podcast, and so we.
Speaker 2 (01:38):
Love when they say that on the recording. But that
is a good reminder. It is a live taping, so you.
Speaker 1 (01:43):
Know, silence cell phones, you can you can share it.
Clap a little bit.
Speaker 5 (01:46):
So market craft, what is it? The basic idea is
that policy makers are often harnessing and shaping, harnessing private
markets and pointing them towards public goals like making Americans richer, safer,
and more economically secure, and that there's actually a very
long history of doing that in the United States. It's
(02:09):
done by Republicans, it's done by Democrats. It's done to
ensure energy stability, financial stability, or make semiconductors here at home.
There are a ton of successes in the past, plenty
of failures, and the whole point of writing the book
was to try to tease out what are the lessons
(02:30):
for our contemporary policy environment today, because we're going to
have to rebuild on the other side of the chaos
that exists in the world right now.
Speaker 3 (02:39):
So just on this point, I mean, a large part
of the book is pointing out that the US does
in fact have this history of market craft as you
put it, and certainly other countries this is kind of
the norm. You know, Norway has sovereign wealth funds, parts
of the Middle East have sovereign wealth funds. Even in
economies that aren't necessarily centrally controlled, there's a bigger role
(03:01):
for governments to play in the economy. And yet in
the US up until fairly recently, I think it's fair
to say industrial policy was almost like a dirty word,
and there's this knee jerk reaction to this idea.
Speaker 4 (03:14):
Why is that?
Speaker 5 (03:15):
Yeah, I mean I think, listen, we all exist with
this idea in our heads that markets exist and are
almost forces of nature, and then on the other side
of the balance sheet there's government. I mean, I'm the
first to say that the language that I've used for
years has been around verbs like to intervene, as if
(03:39):
markets come first, and then government is just like the
emergency room that happens when things go awry and you've
got to bail out a bank. And the whole point
of My book is to say, actually, something bigger is happening.
Like if you look at the American economy between healthcare, pharmaceuticals, aviation, semiconductor,
(04:00):
and high tech clean energy, and add up the size
of these industries, you are well over half of American
GDP in industries where the state not just has a
heavy hand, but is actually crafting it from the beginning.
And so it is about industrial policy. There's a lot
in there about industrial policy, but it's actually about something bigger.
(04:21):
Market craft is something that encompasses what the FED does
in financial markets, what the Strategic Petroleum Reserve does in
energy markets. There's a whole set of strategies that I
think we have to be wrestling with.
Speaker 2 (04:34):
All Right, I had a question that I was going
to save to near the end after we had gotten
more relaxed, et cetera.
Speaker 1 (04:40):
But I've decided just do it. I've just decided that
I'm just.
Speaker 2 (04:43):
Going to jump in with this question, which is you're
one of the co founders of Facebook.
Speaker 4 (04:48):
Many people in.
Speaker 2 (04:49):
Silicon Valley and tech have enjoyed extraordinary fortunes under a
sort of existing market economic regime, and in recent years
we've seen a number of them become seemingly very hostile
towards the public sector, the sort of emergent anti state politics,
and people have different theories. So people are like, oh,
(05:10):
they got their feelings hurt from the New York Times
or something like that. What is your theory for the
emergence of this?
Speaker 5 (05:16):
Well, I mean it's hard not to have that image
of Bezos and Zuckerberg and the whole crew behind Trump
at the inauguration and just see that and say, what
are those guys hoping for? You know, certainly it's to
make more money somewhat, but I think it's about something bigger.
I think they want to have more power, they want
(05:37):
to have more respect, and they feel like in the
Biden years there was too much focus on things like
competition and fair markets. But if you fast forward, I
mean it's not even been one hundred days. You know,
the trial against Facebook is ongoing. Mark Zuckerberg was on
the stand for much of last week. If you're not
following it closely, the FTC filed suit against Uber two
(05:59):
days ago, and there's and Google just last week lost
its second antitrust case with a federal prosecuted by the
Justice Department, making clear that it's a monopoly. So we're
only a few months in and you squint and you
look at you're like, what are these guys getting out
of this? It doesn't seem like very much since you
(06:21):
brought up the FTC.
Speaker 3 (06:22):
I mean, this is something I don't think a lot
of people were expecting this to happen. But like, anti
monopoly seems to be a through line between Biden and
Trump to some extent, right and certainly pursuing some actions
against big tech. Why do you think that is? Like
why is this an area of consensus? And then just
(06:43):
going back to Joe's question, you think any of those
guys who were standing at Trump's inauguration are they happy
with the current situation?
Speaker 4 (06:51):
I don't think so.
Speaker 5 (06:52):
No, But you know, anti monopoly is a bit how
I got into market craft in the first place. So
about six years ago I wrote an article in New
York Times saying that I thought Facebook should undergo structural
separation or breakup, that its corporate power had become too
concentrated and it become a monopoly. And that started me
(07:12):
on a journey of really wrestling with the history of
anti monopoly in the United States. And you can't think
about that set of topics without seeing public actors saying, hey,
we want markets to work a certain way. We don't
think that they should be concentrated with a lot of power.
We think they should be competitive. We think it should
(07:33):
be easy for new entrants to come in and innovate.
We think markets should keep prices low, wages up, and
innovation going. And so we are going to use the
tools of public policy to craft those markets to ensure
that's the case. Whether it's the free market going to
lead to it or not, it really doesn't matter, because
we have this goal as a common good. And so
(07:55):
once you sort of once I began to see that
in the anti monopoly world, you quickly saw it at
the FED as an institution that you know, most free
market Bible thumping folks would say that they appreciate, but
you know, the FED sets the price of short term
(08:15):
credit and is actively in markets buffering that price through
open market operations. And then if things really go awry,
you bet it's going to be there to step in
to stabilize, so that market is crafted and managed every
single day for stability. And so I began to see
(08:35):
all these kind of cross pollinations and similar trends and
that you know, a couple of years later, here's the
fruit of that.
Speaker 1 (08:59):
I have one. I want to go back to resentful
billionaires again and do it, and I have a different
You're not the only worry. But tell me if it's
total nonsense.
Speaker 2 (09:07):
You know, I tweet all day because I want people
to hear all my thoughts. And you wrote a book,
you left Facebook, and you're an economist and you're published
a book that's influential and intellectual. How much is it
about resent that they're extremely wealthy and successful, but they
also want to be regarded as smart.
Speaker 3 (09:27):
This, in my opinion, is why Twitter exists, Like this.
Speaker 2 (09:30):
Is my impression, so that there is that they also
want to be market crafters.
Speaker 4 (09:35):
They don't just.
Speaker 2 (09:35):
Want to be market competitors. They want to My sense
is that we all want to be market crafters. And
how much is it about they felt like, yeah, incredibly successful,
but they didn't get to help craft it.
Speaker 4 (09:47):
Yeah, I think that's I think that's directly right.
Speaker 5 (09:50):
I should say I try very hard to avoid social
media so that you're not on the blue app. I'm
not on Instagram, I lark on Twitter. I recently opened
a blue Sky account. It doesn't have a lot of followers,
be great if I had a couple more, But so
I'm not actively using social media, so it's harder for
me to weigh in on that.
Speaker 4 (10:09):
But I am.
Speaker 5 (10:10):
I do think that there is this lurking desire to
partner with government in some cases in craft markets. And
so there's a very crisp example. It's not from one
of the current billionaires. But there's this guy, Robert Nois,
which some of you may have heard of. He was
one of the co founders of Intel. Grew up as
a son of a Congregationalist minister and a family in Iowa,
(10:34):
ends up going to MIT and then invents the integrated circuit,
which is a fundamental part of the semiconductor makes gobs
of money, and after years of that, guess what happens
in the mid nineteen eighties Japan. Japan as an industry
(10:54):
starts really out competing the American semi conductor manufacturing market.
They are moving faster, they have their own industrial policy
that's pushing it. And so all of a sudden, Noise,
who had for his entire life been a libertarian who
didn't want anything to do with government, thought it was
not a great idea, would have liked to downsize it
as we're seeing other billionaires be interested in today, all
(11:17):
of a sudden he shows up in Washington and he says,
wait a second, we need an industrial policy for semiconductors
and for chips. And the Defense Department agrees because they're
concerned for national security reasons and noise, and the government
effectively partner because their interests at that moment are overlapping.
(11:38):
We get something called semitech which is created, which is
about a billion dollars. It's invested to enable the semiconductor
companies to begin coordinating, making their vertical their supply chains
vertically more integrated and more efficient, and a few years later,
America recaptures its market share and globally of semiconductors, we're
(12:02):
back on the top. So, you know, I think that
the lesson from that is complicated because on the one hand,
you do see a private sector actor with a lot
to gain from private private wealth maximization, but working with
the public sector, where the public sector also has a
lot to gain from semiconductors being made in the United States,
(12:25):
and in that case it worked for both. It doesn't
always work out like that. But I think that's clear
historical evidence of the fact that there is this lurking
desire for market craft on the part of a lot
of these folks.
Speaker 3 (12:38):
Now I'm torn whether I should ask another question about
angry billionaires who tweet a lot, or about the books.
So I'm going to try to thread the needle elon
musk at Doje. It's a very active organization. Some would say,
would that count as market craft under your framework?
Speaker 4 (12:55):
No? No, no, But I mean seriously, it's.
Speaker 5 (13:00):
That's just tearing apart the federal government and the administrative Yeah, because.
Speaker 3 (13:04):
Your book is actually emphasizes the importance of institutions.
Speaker 5 (13:07):
It's the exact inverse. So my book makes the case
that when market craft is successful, you have administrative agencies
like the Chips Office, like the FED, like this SPR
that have a clear mission on chore semiconductors, keep financial
markets stable, et cetera.
Speaker 4 (13:24):
And then they have the discretion to pursue.
Speaker 5 (13:26):
That mission and the ability to get it done. And
that it is critical to understand that institutions in America
need that power in order to make markets work more effectively.
That doesn't mean that they're always perfect, but we get
much worse outcomes when we create these balkanized sort of
(13:48):
hybrid setups, and that's what you see in something like
healthcare markets today. So the importance of institutions is at
the center of this book, and my belief in Musk
and Crewer just trying to demolish all of them.
Speaker 3 (14:02):
So on the institution's point, I mean, I think part
of the institution's problem in US politics is that you
get a lot of people who think that these are
unelected officials with a lot of power, you know, those
sort of like Ivory Tower bureaucrats who are deciding everything.
How do you, I guess, how do you overcome that
(14:22):
sort of instinctual I guess negativity towards building more institutions
in the US government?
Speaker 5 (14:29):
I think you show people where it works, and you
have to be clear about where institutions actually deliver for people.
So I'll give you an example that's a little bit
further back in history. So the book starts with the
story of the National Investment Bank that we create in
the depression. In nineteen thirty two, Herbert Hoover, actually a Republican,
(14:51):
creates an institution called the Reconstruction Finance Corporation, with a
clear mandate, first to reinforce capitalism that was disintegrating at
the time, and then a few years later the mandate
expands to actually spur development. At the head of this
thing is this larger than life figure named Jesse Jones.
(15:13):
So this guy was born in Tennessee, but he moves
to Texas at a young age. He invests in all
kinds of local businesses, and by the time he's thirty,
he's a millionaire. And a few years later he's got
so much money that he's building buildings in New York
City and all across the Eastern seaboard. Then nineteen twenty
nine happens, and he has less to do, so he does.
(15:36):
He is a Democratic Party activist. He's been a fundraiser
for a long time, even shares an office with Roosevelt
in nineteen twenty four. He convinces the Democrats to have
their convention in Houston in nineteen twenty eight, where oh
so conveniently, balloons fall from the ceiling that say Jesse
Jones for President.
Speaker 4 (15:53):
He's like a larger than.
Speaker 5 (15:54):
Life figure, but he's at the head of this bank,
this institution, the National Investment Bank, And when he comes
into power. At the beginning, he says, you know, our
first mission is going to be to reinforce all of
the private commercial banks, recapitalize them, make sure that they're
ready for deposit insurance. But then in the second phase,
on the advice of John Maynard Kaines and some other
(16:15):
economists Jones and consultation with Roosevelt, says, we got to
really deploy public capital into the American economy, particularly in
industries that are going to encourage a lot of employment
and make things cheaper for consumers. So they prioritize housing,
and they build a kind of institution that's named Fanny
(16:37):
May which endures obviously today, and they invent the thirty
year mortgage, which at the time mortgages had been ten years.
By expanding it to thirty years, the cost of housing
comes down significantly, and all of a sudden you see
a boom in housing. And then there's a third phase
in the war years where they bird the aviation industry
and synthetic rubber and all kinds of other things. And
(16:57):
so my point is is you see a man who
comes in skeptical of, you know, of the far left.
In the New Deal period, certainly wouldn't have identified with
those folks, But who ends up believing in and building
an institution of American capitalism that crafts markets toward a
(17:18):
common good. And so that example is really inspiring. It's
further back in history, but we've got all kinds of
things that are closer.
Speaker 2 (17:26):
One of the criticisms of a lot of legacy institutions,
whether it's universities or various parts of the public sector,
et cetera, that comes from the right is that they've
lost their own sense of mission. We have to tear
them down because they have lost their own sense of mission.
They're consumed with niche obsessions, consumed with identity things like
(17:47):
that that are unrelated to their mission of whatever it
is their building, whether it's homes, whether it's semiconductors, whether
it's education. When you look at the history, do you
see any evidence of sort of mission deviation or institutions
that have lost their north star.
Speaker 5 (18:05):
It's not a pattern that I saw in the research
of the book. And if that happens, that's what Congress
is for. I mean, the Congress holds institutions accountable and
monitors their activity. I mean, take the Chips Act. It
was passed in twenty twenty two. But chips was actually
an idea from the first Trump.
Speaker 4 (18:25):
Era that.
Speaker 5 (18:29):
Yeah, well yeah, and the Undersecretary of State for Economic
Affairs and a whole set of folks were very.
Speaker 4 (18:36):
Invested in it.
Speaker 5 (18:37):
It gains steam and is passed in twenty twenty two,
and then you know, quite quickly.
Speaker 4 (18:43):
Money begins to move.
Speaker 5 (18:46):
Congress actually a year later, says, you know what, We're
going to exempt semiconductor construction from NIPA requirements, making the
environmental requirements that in some cases could have made it
harder to build. So Congress stepped in to make sure
that something that they did actually happened more effectively. Or
similarly with the FED, I mean, Congress is constantly tweaking
(19:08):
the FED. Who gets to decide who's going to be
a reserve beank president, even in some cases the methodologies
for monetary policy implementation.
Speaker 4 (19:17):
So I think accountability is very important.
Speaker 5 (19:20):
But accountability rests in the legislative branch, not with an
impulsive billionaire just running through town with a hammer.
Speaker 3 (19:27):
Speaking of the FED, I think you mentioned that you
initially set out to write a book just right like
what was the Cause of the Switch? And then I
guess how did that inform your research process?
Speaker 4 (19:39):
So I have a special place in my heart for
fed history.
Speaker 5 (19:41):
I've been working on a dissertation at Wharton for a
few years which is more properly narrow and focused on
that topic, and I thought that's what this book was
going to be initially. But then when the conversation around
industrial policy exploded, and the the Climate Bill happened, the
(20:01):
Chips Bill happened, the Infrastructure Bill happened, a new conversation
around tariffs in the Biden administration was happening, it felt
like there was a bigger story to tell and the
challenge that the thing I wanted to do was to
explain how did we get from the era that I
grew up in, you know, the Clinton and George W.
(20:23):
Bush era where most people thought markets self regulate and
work on their own, to a moment where both parties,
both Democrats and Republicans, put the state at the center
of the economic story. And I wanted to track that
history in the past fifteen years and see it through
(20:43):
the Great Recession and then the challenge of climate and
then the rise of China and the pandemic, and understand
how you got these bizarre agreements, like you know, almost
a dozen Republicans voting for Lena Khan in the Senate
to run the FTC. How did that happen? Where did
that come from? And how enduring might that be? And
(21:04):
that set of questions then took me way back into
history and then back into the present day, and well,
how did we.
Speaker 1 (21:11):
Get twelve Senate Republicans to vote for Lena Khan.
Speaker 5 (21:15):
I think the confluence of those four events made Americans,
let alone policy makers, realized that markets don't just take
care of themselves, and that that whole idea, that whole story,
wasn't working. That capitalism needs to be cultivated, and that
markets need to be cared for. In the introduction of
(21:35):
the book, I talk about this metaphor of a vegetable garden,
which might seem a little hokey, but at least for me,
it's personal because when I grew up, I grew up
in North Carolina in a small town, and my dad
tilled up a third of the backyard to make a
vegetable garden and constantly forced me in the summers to
go like weed and pick green beans and steak tomatoes
(21:59):
and do all these things that I did not want
to do. Yeah, a lot of people enjoy this, it
turns out me.
Speaker 4 (22:08):
So.
Speaker 5 (22:08):
But nonetheless, I spent an inordinate amount of time in
that garden. And so when I started to think about, like, well,
what are markets like if they're not these self regulating systems,
the best metaphor that I that I landed upon is
a garden because it recognizes there are organic forces that
can sometimes be unruly, that won't necessarily cooperate and just
(22:29):
do exactly what you want to do. But it also
recognizes that you need care and cultivation to steer those plants.
You need to plant some things in the sun and
some things in the shades. You need fertilizer for some things,
you need to get the weeds out for others. You
need to shape these markets. You need to point them
in a direction to ensure they're actually working, that they're
(22:51):
producing a harvest that you want to eat and then
and that is going to be nutritious. And so I
kept coming back to that metaphor, and I think it
is the right.
Speaker 4 (23:01):
One to think about how markets actually work.
Speaker 3 (23:04):
I want to say one thing about gardening, which is
everyone has this image in their minds that it's like
this really peaceful like pastoral activity, and it's not. It
is like this violent struggle to stop everything from.
Speaker 4 (23:18):
Killing each other. Basically.
Speaker 3 (23:20):
Yeah, So I like the metaphor, okay, speaking of bad
stuff happening. Almost every example in your book of you know,
instances of market craft actually developing stems from a crisis
of one sort or another. There's the Great Depression, There's
obviously the COVID pandemic. You know, high inflation, high oil prices,
(23:44):
things like that. Do you have to have a market
crisis before people can start building consensus that there is
actually a role for the government to come in and
try to achieve some policy aims through market craft.
Speaker 5 (23:57):
No, but it helps, and it's always matters how you
define the crisis. You know, there are several examples of
market crafters who are very successful in the book, who
are not responding to crisis. So I have an extended
passage on Alan Greenspan, who is normally not thought of
as like a market crafting kind of guy. He's supposed
(24:18):
to be the deregulator in chief, and he did do
plenty of that when he was the Chair of the FED,
But he also had a vision, And so I'm going
to use him as an example to make to make
it clear that market craft is neither good nor bad
and of itself, it matters. It's a tool and it's
pointed towards a certain end, and it can be a
(24:40):
good one or it can be a bad one. For
green Span, it was financial innovation. He's so intensely believed
that the more efficient markets would be, the more prosperity
and stability would come out of that. I mean, the
guy is writing papers when he's a young analyst in
(25:00):
the fifties along these lines and eventually knits them together
in his PhD dissertation, And then when he becomes chair
of the Fed, Yeah, he does deregulate and take a
lot of rules out of the way, but he also
makes really important policy actions to encourage the development of
financially innovative tools, things that we now know of as
(25:23):
credit defaults, fops and special purpose vehicles and the kinds
of things that did indeed significantly increase leverage in the
financial sector, did in some cases mean markets moved faster
and more efficiently, and he believed would ultimately create that
kind of market discipline that would keep the whole system stable.
Speaker 4 (25:46):
So he had a goal.
Speaker 5 (25:47):
It was market it was financial innovation, and he was
using the power of his institution to deliver on it.
It's just it had disastrous consequences and he was wrong.
Speaker 1 (25:58):
Let's talk more about the event.
Speaker 2 (25:59):
By the way, I think it's really cool that you
went and after, you know, after the Facebook, and did
all this stuff, then you got your pH d.
Speaker 5 (26:06):
Well, we're still working on it, working on your PhD.
Speaker 2 (26:11):
I read Kevin Rudd, the former Prime Minister of Australia,
after he was PM, went and got his pH d
at Oxford and wrote an amazing book about hues and pain.
So maybe there's hope. Maybe Tracy and I will get
PhDs one day. But I hear different things about the
history of what people call FED independence.
Speaker 1 (26:29):
And people in the old days presidents were always hectoring.
Speaker 2 (26:31):
The FED chief to do this or that and this
isn't really that unusual, and other people like, oh no,
this is a cherish thing, and we've that we ever,
you know, interventioned by the White House.
Speaker 1 (26:40):
In your research on the FED, how unusual or.
Speaker 2 (26:45):
Usual is it for this sort of pressure that we see.
Did presidents use to tweet to lower rates whatever the
equivalent was back.
Speaker 1 (26:54):
In the day.
Speaker 5 (26:54):
Yeah, well, obviously it's a very timely topic given that
you know, last week Pal was about be fired. This
week apparently it was never even really considered. So there
is a very long history of presidents trying to bully
FED chairs to get what they want with monetary policy.
(27:15):
It is, you know, virtually since the beginning of the institution,
this has been a trend. Kennedy and Kennedy's administration does
it with Bill Martin. In nineteen sixty, Lyndon Johnson summons
the FED chair down to his ranch in Texas and
takes him on this legendary jaunt. Richard Nixon is pressuring
Arthur Burns. Reagan doesn't really like Vulcar so he replaces him.
(27:40):
We could go through all of the examples, and this
is different because this time the president isn't just pressuring
the FED chair to do what he wants. He is
threatening to take illegal action to fire him, which it's
very clear in the Federal Reserve is not legal. The
(28:02):
president can only remove the chair four cause, and similarly
with the other members of the Board of Governors and
so and it's not just a threat obviously like Trump
has done this. He has fired two of the five
FTC over at the FTC two of the five commissioners
who are Democrats, also illegal in the FTC Act, it
(28:24):
is illegal to fire them unless it's four casts. He's
done at the NLRB, at the credit unions, et cetera.
So I think this is a real threat. I tend
not to use the word independence because I think the
FED is actually quite sensitive to political and economic trends,
what they're hearing in a lot of different domains. It
(28:45):
is an insulated institution, which I think makes it stronger,
but it is not a purely independent one. And these
threats I think are really unprecedented and we should all
be frightened by them.
Speaker 3 (29:13):
All right, So, speaking of things that might be different
this time, we do have a president who seems very
very determined to divorce the US in some ways from
the rest of the global economy, the global financial system.
The subtitle of your book is the one hundred Year
Struggle to Shape the American Economy. You could easily have
titled it the one hundred year Struggle for the US
(29:34):
to shape the global economy, right, like, the US went
on a very explicit mission to shape our current financial
system and you do have a very chunky chapter in
there about Breton Woods. Talk to us about why we
should all, I guess, familiarize ourselves with things like Breton Woods,
euro dollars, capital controls in our current climate.
Speaker 5 (29:55):
Let me tell you a little bit of the story
of the breakdown of Brettonwoods and why it matters for today,
because when I wrote that chapter, I had no idea
that the dollar would actually be threatened as the global
reserve currency.
Speaker 4 (30:09):
And this is real.
Speaker 5 (30:11):
So BRETTONWOODZ was this agreement that came out of World
War Two that where the United States committed to sell
gold at thirty five dollars announce and it would peg
the dollar to all other foreign currencies. So this way,
the dollar effectively became the bedrock of the global financial system.
(30:32):
And underneath it there was gold, so it was an
effective gold standard. But the United States was making the
commitment to be able to redeem dollars for gold should
a foreign country or anyone else in the market and
want to make that exchange. Now, the whole system was
premised on the fact that as the rest of the
(30:53):
economy grew, the United States had to increase the amount
of dollars in circulation for time, because as economies grow,
they need more currency. If the dollar is the base currency,
is the global standard, you need more of it. One problem,
the more dollars you print, the less they're worth. And
(31:14):
so by its very nature, you are not going to
be able to deliver on the promise to redeem gold
at thirty five dollars announce. So it's like a vice
that tightens between nineteen forty, between the post war years
and nineteen seventy one, when it gets just so impossible
(31:34):
for the United States to continue this commitment, there's a run,
and I tell the story of the book where Nixon
summons every single person who runs any of the economic
institutions in the country to Camp David, and they come
up with a plan, and they end the Breton Woods system.
They in the gold commitment, and they move into a
(31:57):
regime of eventually it becomes a regime of float exchange rates.
Now we make it through partially because price and wage
controls hold down inflation for a period, etc. But it
is touch and go for a lot of that period.
And so then you fast forward to today, and I
think the easiest way to think about it is, instead
of gold being that thing underneath the dollar that guarantees
(32:20):
its value. It's the institutions of American capitalism. So the
dollar continues to be the global reserve currency today. And
the reason that is is because we have had an
independent central bank, We have had a treasury that reliably
and always pays the coupon on its debt in a
way that investors can believe in and expect. And so
(32:44):
does people want dollars. People want us treasuries, people want
these financial assets. And now two things are throwing that
into question. The first, obviously is Trump's impulsive economic policy,
which disregards the importance of institutions in the first place.
But the second is we're flooding the market yet again
with dollars and dollar denominated assets. Like the deficit last
(33:09):
year was seven percent of GDP. It's not supposed to
be that high in a healthy economy. And right now
the plan is another six trillion dollars of tax cuts,
which is just to give it for perspective, is as
much as the tax cuts of Trump one point zero
and the pandemic aid combined. And we're already at seven
(33:29):
percent of g So we have another moment where we've
flooded the world with dollars where they're losing value and
the underlying guarantee of that value, the security of American
capitalists institutions is under threat, and so you're seeing an
unprecedented period and a potential run do it.
Speaker 2 (33:50):
Yesterday night there was a news story President Trump said
he wouldn't want to raise taxes on millionaires because it
would be quote disruptive to the and then he said
that the millionaires would leave the country, which I'd hope
most of them would be, uh, you know, stick around.
Speaker 1 (34:06):
But that's his view of them.
Speaker 2 (34:09):
But what does it say, you know, about even the
prospect for market craft if people in government don't feel
that they have the capacity, the political power, et cetera
to at times bring pockets of wealth truly healed, so
to speak, and to wield that power, or were they like,
is there any prospect for positive market craft in a
(34:30):
world where politicians feel that like they're subservient to.
Speaker 1 (34:36):
Huge pockets of wealth.
Speaker 4 (34:37):
I very much think so.
Speaker 5 (34:39):
So I'm skeptical in this administration that that's gonna happen,
but I think there's all kinds of opportunities for positive
market crafts. So the things that I focus on these
days are the cost of living crisis in the United States.
I mean, that is what voters are very clearly still
frustrated about. Prices are up twenty percent from the beginning
(35:01):
of the pandemic till now, and it's particularly concentrated in
things like housing. I meaner can spend a third of
their income on housing, and then if you go to groceries,
and then you go to care, healthcare, childcare, you're above
fifty percent for most families. And so we can craft
housing markets to make housing cheaper. We can certainly do
(35:23):
some of the zoning and streamlining that the abundance folks
like Ezra Kline and others are for. I think that's
a good idea.
Speaker 4 (35:29):
I kind of.
Speaker 3 (35:30):
Wondered how long it would take us before I mentioned abundant.
Speaker 4 (35:33):
We got it's pretty good. I think that those are
good ideas.
Speaker 5 (35:38):
But I also don't think that you can just make
it easier to build and then sit back and hope
people show up. At least that's not been the experience
in California. Like it's been years since they have been
on this process of trying to change their laws and
building starts are not showing the same kind of growth
that you would like. You have to craft markets more aggressively.
There's a lot of other tools, particular public investment. So
(36:02):
we need a housing construction fund for multifamily developers to
make it cheaper to build. You guys have had some
folks on your podcast make who make this case. You know,
the estimates are that for an investment of about fifty
billion dollars at a federal level, you could get somewhere
between one and two million home spell and that's about
(36:23):
half the housing shortfall in the United States. That's quite
a lot of progress. You could have an industrial policy
for modular. So modular is the kind of housing where
you build the components off site and then you bring
them in. And there's this amazing time lass video which
I saw about six weeks ago of an apartment building
in Denver where they bring in the pieces and it
(36:45):
goes so quickly. It looks like the Mike Sun places
with magnetiles, these like pies. They're amazing. But you just
see it, and you just watch this. This apartment building
with seventy seven units go up in the course of
seven days, and it's mind blowing. And half of the
building that happens in the Nordic countries is through modular
(37:07):
and so that's a kind of industry that I think
if we had an industrial policy to encourage and not
just public investment, but also standard setting making sure it's
possible for people to get mortgages for them, you could
see significantly more development. So I think we need a
market craft for housing. On food, I think we could
do reserve stock buffering on eggs and coffee, like I
(37:31):
talk about in the book on care, there's a whole
set of interventions as well. There's an aspirational agenda, is
what I'm trying to say, that could help us attack
the cost of living crisis. And this administration is going
to hike prices through the tear of policy, not bring
them down. And so Democrats are going to have to
have another message and also the specific policy expertise to
(37:55):
get it done.
Speaker 3 (37:56):
Yeah, there's a long running joke on all Blots that
what America really needs is a strategic pork preserve.
Speaker 4 (38:01):
I think all agree on this.
Speaker 3 (38:04):
Okay, speaking of agreeing, one of the chapters in your
book that I really enjoyed was the sort of behind
the scenes look at Bidenomics.
Speaker 4 (38:14):
Yeah, and you.
Speaker 3 (38:16):
Do get a really good sense of some of the
discussions that take place, the areas of disagreement. The sort
of protagonist and antagonist, I guess in this discussion in
your book is Larry Summers versus Brian Deese exactly. And
you were also involved in the Obama administration, like talk
to us what you learned about the actual sausage making
(38:38):
process of market craft and what sort of like how
do people actually reach consensus on a lot of these
things when they have very different opinions about how the
world works.
Speaker 5 (38:50):
So I had this experience where in writing for most
of the book, I was largely in archives and secondary
literature in the past, and then the last third of
the book is contemporary, and so the methodology just shifted
to talking to a lot of people. So I ended
up talking to most of the folks who had been
(39:12):
involved in Bidenomics inside the administration, and people like Larry
Summers and Jason Furman and a lot of people on
the LM.
Speaker 3 (39:18):
Larry does like to talk.
Speaker 4 (39:20):
It turns out.
Speaker 5 (39:23):
I talked to a lot of people, and the person
that I zeroed in on was this man named Brian Deese,
who some of you may know. He has an odd
launch guest. Indeed, he was the chair of the National
Economic Council. The reason he's so interesting is because he
was one of Larry's protegees in two thousand and eight.
(39:43):
In two thousand and nine, he is on the Obama
campaign and he effectively runs the bailout of the auto companies,
and in that experience begins to see, wait a second,
we can't just be bailing. We can't have the emergency
room view of the economy where we come afterward. We
have to be thinking proactively ahead of time about how
(40:04):
to shape and build industries that work better. That takes
him to work on climate change. And then all of
a sudden the Biden administration, he becomes a director of
the National Economic Council, and then he.
Speaker 4 (40:17):
Articulates this big vision. It has two pillars.
Speaker 5 (40:20):
The first is build, so that's public investment in climate
infrastructure and chips. And the second is balance, so that's
competition in particular, but also supporting labor and other similar
kinds of initiatives to ensure that the economy is competitive.
(40:40):
And boy, Larry doesn't like it. He is throwing rocks
from the outside pretty much the entire time, and often
talking to Brian and others on the inside. And the
reason I think that story is so powerful is because
it shows the emergence of not just a new generation
and of policymakers, but a new way of thinking about
(41:03):
the economy which starts from the premise of market craft
and doesn't fall back into kind of neoclassical economic framework
of market failures and externalities. And how are we going
to fix things after the fact?
Speaker 2 (41:17):
I guess I have more of a politics question, or
you know, we had this sort of nascent industrial policy
market crafting, and then it looks like the plug is
being pulled after four years, and I would guess that
there must be a lot of frustration among Democrats to
hear someone run on, We're going to build things in
America again, We're going to build manufacturing right after a
(41:39):
period of two or three years in which more plants
were opened and more factories were broken ground on than
any time in my life. And so what I'm curious
from your perspective, I guess from a political sustainability standpoint
is people seem to like in theory the idea of manufacturing,
the aesthetics of it, but do people actually like it
(42:02):
in practice? Or is like because it didn't seem like
it got any results politically.
Speaker 5 (42:07):
I don't know if manufacturing per se is the thing
that people like. And I'm a little skeptical that you're
going to really reinvigorate the American economy by rebuilding a
manufacturing sector. But I'm not quite sure I agree with
the premise of the question. Trump is certainly not pursuing
a market craft, that's clear. However, a lot of the
(42:28):
people around him have spent years developing their own visions
of a market craft that puts the state at the center.
Speaker 1 (42:36):
So you're talking about or in Cass in your book,
for example.
Speaker 5 (42:39):
Well, or in Cass, But I'm talking about Marco Rubio
and JD. Vance and Josh Holly, a lot of these
guys who I think are the future of the Republican Party,
who believe that we need state institutions to direct markets
towards certain goals. Now, their goals are not really my goals,
I should say that. I mean, they are very concerned
about drone and critical minerals and national security, whereas I'm
(43:03):
more interested in climate change and other things. But nonetheless,
right before Vance became the vice presidential nominee, he was
about to introduce a bill for a national Investment Bank,
the same idea that I was just talking about from
the New Deal era, that he believed as an institution
(43:24):
would have the power to direct markets. Now he was
doing that with Chris Coons and Mark Warner and folks
on the left. But what I'm trying to say is
it may be dormant in this period, but I don't
think that ideology is gone. We're going to hear about
a sovereign wealth fund in the next few weeks from
this administration, and there's a deadline that the Treasury Secretary
will have to bring a report on it. I wouldn't
(43:46):
be surprised if we see some trace remnants there. Even
though I am skeptical that anything meaningfully will be will
be done. I don't think that means that it's that
Trump's chaos can define the Republican Party for wherever and ever.
Speaker 3 (44:01):
We do have some questions from the audience that we
should probably bring in. I'll start with one, obviously very
topical at the moment, but how is market craft playing
into the race for dominance in artificial intelligence?
Speaker 4 (44:17):
Yeah?
Speaker 5 (44:18):
I mean, so far, the federal government has decided to
let the private sector, you know, develop AI on its own.
In the United States, it's certainly different than in China
and then elsewhere, and there hasn't been a market craft.
There's been talk of it in the Senate in particular.
There's interest in public investment. There's been talk of what
(44:40):
we call public option for the cloud, so a way
of making it easier for smaller companies to access computing
powder to build advanced AI models. But none of that
has yet come to fruition, And so I think it's
important to say that, like, market craft isn't everywhere all
the time. You know, lots of policies effect markets, but
(45:01):
the craft and market you have to have, you know,
policy makers with a clear intent shaping it and guiding it.
And so far in the AI markets it's been more
of a hands off kind.
Speaker 3 (45:12):
Of But if we had like a loan office for
AI startups something like that would count as explicit market
craft for sure.
Speaker 5 (45:19):
If Congress said, hey, we want more small businesses doing AI,
so we're going to appropriate money and we're going to
create an office over here in the Commerce Department to
do that, they're there, they have they have an agenda,
they're crafting that market just putting.
Speaker 2 (45:32):
It back on your tech founder for a second, kind
of separate from market craft, but I guess it sort
of intersects with this. When Deep Seat came out, people
started really and it was before that too, but people
really started to talking about AI specifically. Is this existential
area of competition kind of like uh, kind of like
achieving the nuclear bomb?
Speaker 1 (45:54):
Like who is going to get to AGI first? US
or China?
Speaker 4 (45:57):
Do you uh?
Speaker 2 (45:58):
I mean, do you think of AI or AGI specifically
in such stakes?
Speaker 5 (46:05):
It's a huge deal. I'm not sure I want to
go to the nuclear bomb. That seems like a very
high bar, but it's a huge deal. I think that
the advances in AI, it's certainly the most profound changes
in technology in my I think, I want to say,
in my life. It feels more transformative to me than
the mobile phone, which I think would be my bar.
Speaker 4 (46:28):
I mean, it's I'm using the models.
Speaker 5 (46:31):
My husband's in the front row, he watches me, and
to use the models all day every day for everything
from like recipe substitutions to you know, doing deep research
on a particular topic. Of course, you have to check
the facts, this and that, but I mean they are
incredibly powerful, Tracy.
Speaker 2 (46:48):
I have to say, like I'm an AI user enthusiast
for Tracy.
Speaker 3 (46:51):
I to watch Joe use the models all day.
Speaker 4 (46:54):
You don't use them.
Speaker 3 (46:55):
I do know, I do it, just not as.
Speaker 1 (46:57):
Much as way.
Speaker 2 (47:00):
I am an enthusiastic trier outer of all the AI models,
and I recently got access to Mannus. Yeah, but I
have yet to find an application that consistently enhances my
work productivity.
Speaker 1 (47:13):
Really, Yeah, that's not true.
Speaker 4 (47:14):
Okay, headlining, I haven't.
Speaker 1 (47:17):
But I'm better at headlines, of course you are.
Speaker 4 (47:19):
No.
Speaker 5 (47:19):
No, but that's of course you are. But it's helpful
to have a kind of sidekick to brainstorm headline Tracy.
Speaker 4 (47:26):
Okay, well, fair enough. Not all of us have, Tracy.
Speaker 3 (47:31):
No, I disagree with this. Like AI is a phenomenal
tool for our day to day productivity, it just is.
Why did I ask another question from the audience. I
know you care about climate change and this is one
of your big projects. So we have someone asking how
do we make progress with climate policy in light of
its politicization, politicalization and the issue of affordability. And one
(47:55):
thing I would just add on to that question is,
you know, one of the things we've seen under binomics
was Oh, we should build more green technology in the US,
and a lot of that makes sense. But I guess
the counter argument to doing that is, if we really
care about the climate, and if there is actually this
massive sense of urgency to doing something about it, then
(48:17):
why not get all the really cheap solar panels in
volume from a place like China.
Speaker 5 (48:24):
Well, I think we need even more investment, likely significantly
more investment than we got out of the IRA, and
we need it to be better coordinated. So I think
the IRA investments are still stand. Obviously, business uncertainty has
just gone through the roof, so no one exactly knows
what's going to happen. There are signs that the Republicans
(48:47):
will keep some of the pieces of the IRA, maybe
not for solar panels or evs, but for things like
hydrogen or carbon capture or things like that. I'm cautiously optimistic,
but we need additional investment, and then we do really
need an institution whose mission it is to tackle climate change,
(49:07):
and the Congress can hold accountable so that instead of
just saying, oh, we're going to give subsidies through the
tax code, where the government effectively has no ability to
determine what's getting the most funding.
Speaker 4 (49:18):
There is an ability to say.
Speaker 5 (49:20):
Okay, this, these breakthrough technologies need more support. These other
things are doing just fine. I think that's going to
be the long term solution. I'm a bit I'm with you.
I'm not sure that tariffs on solar panels are going
to help us get to the you know, the tools
that we need to combat climate change that we need.
Speaker 4 (49:41):
Trace is right by the way.
Speaker 2 (49:42):
I get a couple when it comes to AI, I
sometimes be like, okay, we're in.
Speaker 3 (49:45):
I know because I literally watch you do this.
Speaker 2 (49:49):
Joe was at the I co host the Audlats podcast.
We're interviewing Chris used tonight that your public library. What
would be some questions I do ask that and I
sometimes upload PDFs and just like just give me to
the summary.
Speaker 4 (49:59):
So I wanted with me.
Speaker 1 (50:01):
Yeah, yeah, no, that is helpful. It's helpful.
Speaker 2 (50:06):
Someone to ask about student loans. And I'm curious, you know,
people perceive the market for higher education to be broken
in various ways, and I'm curious whether it's on the
funding side for the consumer, the student, or whether there's
anything interesting that you've learned.
Speaker 1 (50:23):
About that space.
Speaker 5 (50:25):
Yeah, so there are a lot of these markets that
I would call gray zones. Is higher education a market,
at least the way that I want to think about
it most of the time, it's not. It should just
be a fundamental, you know, good an opportunity that everybody
can get an education.
Speaker 4 (50:42):
That they want.
Speaker 5 (50:43):
So I'm not sure we even have to use a
market crafting framework to say, you know, college in the
United States should at least be affordable, if not free,
and there's a way to use policy to make that happen.
But I think that it is due for sort of
wholesale reimagination, and there is something wonderfully simple and direct
(51:06):
about you know, Bernie's promise for free college that you
know is hard to do, but I think it's that
kind of aspirational guarantee that people crave, people respond to,
and it's policy makers response to deliver on that. Of course,
you're going to have to raise taxes, whether it's for
this or some of the other issues that we've talked
about to make that happen, But I don't know that
(51:30):
that's the I think that's the kind of country I
want to live in. I think that's the kind of
country that most Americans want to live in.
Speaker 1 (51:36):
It's a great place to leave it. Chris Hughes, thank
you so much.
Speaker 6 (51:39):
For joining us in this live episode.
Speaker 3 (51:59):
That is our interview with Chris Hughes, the author of
Market Crafters, live at the New York Public Library.
Speaker 2 (52:05):
Really good evening, really interesting topic. One very near and
dear to the themes that we've been talking about on odline.
Speaker 3 (52:12):
Yeah, definitely touches on a lot of them.
Speaker 2 (52:14):
Shall we leave it there, Let's leave it there.
Speaker 3 (52:15):
This has been another episode of the Odd Lots podcast.
I'm Tracy Alloway. You can follow me at Chacy Alloway, and.
Speaker 2 (52:21):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow Chris Hughes on Twitter. He's at Chris Hughes. Follow
our producers Kerman Rodriguez at Kerman armand dash Ol Bennett
at Dashbot and Killbrooks at Kalebrooks. From our Odd Lags content,
go to Bloomberg dot com slash odd Lots. We have
all of our episodes and a daily newsletter. You can
chat about all of these topics twenty four to seven
(52:41):
in our discord Discord dot gg slash od lots.
Speaker 3 (52:45):
And if you enjoy odd Lots, if you like it
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if you are a Bloomberg subscriber, you can listen to
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toys find the Bloomberg channel on Apple Podcasts and follow
the instructions there. Thanks for listening.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 1 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:24):
Tracy, we recently did another special live episode at the
New York Public Library.
Speaker 3 (00:29):
Yeah, a really great venue, a really special evening, and
fittingly given that we were recording at a library, the
library in New York, it was all about a new.
Speaker 1 (00:39):
Book, that's right.
Speaker 2 (00:41):
It was a pretty fitting location. So you were going
to listen to our live episode that we recorded with
Chris Hughes. He's actually one of the original founders of Facebook,
but he left fairly early into the company's journey. He's
currently getting his PhD at Penn in economics and he's
the author of the book Market Crafters, One hundred Year
Struggle to Shape the American Economy.
Speaker 3 (01:02):
Yep, take a listen.
Speaker 2 (01:04):
Thrilled to be a chatting why market craft? You know,
we talk people use the term industrial policy a lot
these days. It's got very hot over the last several years.
What is market craft mean? Why title it that?
Speaker 4 (01:16):
Well?
Speaker 5 (01:17):
Hello, Hello, I'm happy to be here. And before I
answer exactly what market craft is? And we spend the
next hour talking about it. I just have to say
that it is such a huge honor to be both
here at the library and institution that I care immensely about,
and to be a guest on this live tapings.
Speaker 4 (01:35):
Than is my number one favorite podcast, and so we.
Speaker 2 (01:38):
Love when they say that on the recording. But that
is a good reminder. It is a live taping, so you.
Speaker 1 (01:43):
Know, silence cell phones, you can you can share it.
Clap a little bit.
Speaker 5 (01:46):
So market craft, what is it? The basic idea is
that policy makers are often harnessing and shaping, harnessing private
markets and pointing them towards public goals like making Americans richer, safer,
and more economically secure, and that there's actually a very
long history of doing that in the United States. It's
(02:09):
done by Republicans, it's done by Democrats. It's done to
ensure energy stability, financial stability, or make semiconductors here at home.
There are a ton of successes in the past, plenty
of failures, and the whole point of writing the book
was to try to tease out what are the lessons
(02:30):
for our contemporary policy environment today, because we're going to
have to rebuild on the other side of the chaos
that exists in the world right now.
Speaker 3 (02:39):
So just on this point, I mean, a large part
of the book is pointing out that the US does
in fact have this history of market craft as you
put it, and certainly other countries this is kind of
the norm. You know, Norway has sovereign wealth funds, parts
of the Middle East have sovereign wealth funds. Even in
economies that aren't necessarily centrally controlled, there's a bigger role
(03:01):
for governments to play in the economy. And yet in
the US up until fairly recently, I think it's fair
to say industrial policy was almost like a dirty word,
and there's this knee jerk reaction to this idea.
Speaker 4 (03:14):
Why is that?
Speaker 5 (03:15):
Yeah, I mean I think, listen, we all exist with
this idea in our heads that markets exist and are
almost forces of nature, and then on the other side
of the balance sheet there's government. I mean, I'm the
first to say that the language that I've used for
years has been around verbs like to intervene, as if
(03:39):
markets come first, and then government is just like the
emergency room that happens when things go awry and you've
got to bail out a bank. And the whole point
of My book is to say, actually, something bigger is happening.
Like if you look at the American economy between healthcare, pharmaceuticals, aviation, semiconductor,
(04:00):
and high tech clean energy, and add up the size
of these industries, you are well over half of American
GDP in industries where the state not just has a
heavy hand, but is actually crafting it from the beginning.
And so it is about industrial policy. There's a lot
in there about industrial policy, but it's actually about something bigger.
(04:21):
Market craft is something that encompasses what the FED does
in financial markets, what the Strategic Petroleum Reserve does in
energy markets. There's a whole set of strategies that I
think we have to be wrestling with.
Speaker 2 (04:34):
All Right, I had a question that I was going
to save to near the end after we had gotten
more relaxed, et cetera.
Speaker 1 (04:40):
But I've decided just do it. I've just decided that
I'm just.
Speaker 2 (04:43):
Going to jump in with this question, which is you're
one of the co founders of Facebook.
Speaker 4 (04:48):
Many people in.
Speaker 2 (04:49):
Silicon Valley and tech have enjoyed extraordinary fortunes under a
sort of existing market economic regime, and in recent years
we've seen a number of them become seemingly very hostile
towards the public sector, the sort of emergent anti state politics,
and people have different theories. So people are like, oh,
(05:10):
they got their feelings hurt from the New York Times
or something like that. What is your theory for the
emergence of this?
Speaker 5 (05:16):
Well, I mean it's hard not to have that image
of Bezos and Zuckerberg and the whole crew behind Trump
at the inauguration and just see that and say, what
are those guys hoping for? You know, certainly it's to
make more money somewhat, but I think it's about something bigger.
I think they want to have more power, they want
(05:37):
to have more respect, and they feel like in the
Biden years there was too much focus on things like
competition and fair markets. But if you fast forward, I
mean it's not even been one hundred days. You know,
the trial against Facebook is ongoing. Mark Zuckerberg was on
the stand for much of last week. If you're not
following it closely, the FTC filed suit against Uber two
(05:59):
days ago, and there's and Google just last week lost
its second antitrust case with a federal prosecuted by the
Justice Department, making clear that it's a monopoly. So we're
only a few months in and you squint and you
look at you're like, what are these guys getting out
of this? It doesn't seem like very much since you
(06:21):
brought up the FTC.
Speaker 3 (06:22):
I mean, this is something I don't think a lot
of people were expecting this to happen. But like, anti
monopoly seems to be a through line between Biden and
Trump to some extent, right and certainly pursuing some actions
against big tech. Why do you think that is? Like
why is this an area of consensus? And then just
(06:43):
going back to Joe's question, you think any of those
guys who were standing at Trump's inauguration are they happy
with the current situation?
Speaker 4 (06:51):
I don't think so.
Speaker 5 (06:52):
No, But you know, anti monopoly is a bit how
I got into market craft in the first place. So
about six years ago I wrote an article in New
York Times saying that I thought Facebook should undergo structural
separation or breakup, that its corporate power had become too
concentrated and it become a monopoly. And that started me
(07:12):
on a journey of really wrestling with the history of
anti monopoly in the United States. And you can't think
about that set of topics without seeing public actors saying, hey,
we want markets to work a certain way. We don't
think that they should be concentrated with a lot of power.
We think they should be competitive. We think it should
(07:33):
be easy for new entrants to come in and innovate.
We think markets should keep prices low, wages up, and
innovation going. And so we are going to use the
tools of public policy to craft those markets to ensure
that's the case. Whether it's the free market going to
lead to it or not, it really doesn't matter, because
we have this goal as a common good. And so
(07:55):
once you sort of once I began to see that
in the anti monopoly world, you quickly saw it at
the FED as an institution that you know, most free
market Bible thumping folks would say that they appreciate, but
you know, the FED sets the price of short term
(08:15):
credit and is actively in markets buffering that price through
open market operations. And then if things really go awry,
you bet it's going to be there to step in
to stabilize, so that market is crafted and managed every
single day for stability. And so I began to see
(08:35):
all these kind of cross pollinations and similar trends and
that you know, a couple of years later, here's the
fruit of that.
Speaker 1 (08:59):
I have one. I want to go back to resentful
billionaires again and do it, and I have a different
You're not the only worry. But tell me if it's
total nonsense.
Speaker 2 (09:07):
You know, I tweet all day because I want people
to hear all my thoughts. And you wrote a book,
you left Facebook, and you're an economist and you're published
a book that's influential and intellectual. How much is it
about resent that they're extremely wealthy and successful, but they
also want to be regarded as smart.
Speaker 3 (09:27):
This, in my opinion, is why Twitter exists, Like this.
Speaker 2 (09:30):
Is my impression, so that there is that they also
want to be market crafters.
Speaker 4 (09:35):
They don't just.
Speaker 2 (09:35):
Want to be market competitors. They want to My sense
is that we all want to be market crafters. And
how much is it about they felt like, yeah, incredibly successful,
but they didn't get to help craft it.
Speaker 4 (09:47):
Yeah, I think that's I think that's directly right.
Speaker 5 (09:50):
I should say I try very hard to avoid social
media so that you're not on the blue app. I'm
not on Instagram, I lark on Twitter. I recently opened
a blue Sky account. It doesn't have a lot of followers,
be great if I had a couple more, But so
I'm not actively using social media, so it's harder for
me to weigh in on that.
Speaker 4 (10:09):
But I am.
Speaker 5 (10:10):
I do think that there is this lurking desire to
partner with government in some cases in craft markets. And
so there's a very crisp example. It's not from one
of the current billionaires. But there's this guy, Robert Nois,
which some of you may have heard of. He was
one of the co founders of Intel. Grew up as
a son of a Congregationalist minister and a family in Iowa,
(10:34):
ends up going to MIT and then invents the integrated circuit,
which is a fundamental part of the semiconductor makes gobs
of money, and after years of that, guess what happens
in the mid nineteen eighties Japan. Japan as an industry
(10:54):
starts really out competing the American semi conductor manufacturing market.
They are moving faster, they have their own industrial policy
that's pushing it. And so all of a sudden, Noise,
who had for his entire life been a libertarian who
didn't want anything to do with government, thought it was
not a great idea, would have liked to downsize it
as we're seeing other billionaires be interested in today, all
(11:17):
of a sudden he shows up in Washington and he says,
wait a second, we need an industrial policy for semiconductors
and for chips. And the Defense Department agrees because they're
concerned for national security reasons and noise, and the government
effectively partner because their interests at that moment are overlapping.
(11:38):
We get something called semitech which is created, which is
about a billion dollars. It's invested to enable the semiconductor
companies to begin coordinating, making their vertical their supply chains
vertically more integrated and more efficient, and a few years later,
America recaptures its market share and globally of semiconductors, we're
(12:02):
back on the top. So, you know, I think that
the lesson from that is complicated because on the one hand,
you do see a private sector actor with a lot
to gain from private private wealth maximization, but working with
the public sector, where the public sector also has a
lot to gain from semiconductors being made in the United States,
(12:25):
and in that case it worked for both. It doesn't
always work out like that. But I think that's clear
historical evidence of the fact that there is this lurking
desire for market craft on the part of a lot
of these folks.
Speaker 3 (12:38):
Now I'm torn whether I should ask another question about
angry billionaires who tweet a lot, or about the books.
So I'm going to try to thread the needle elon
musk at Doje. It's a very active organization. Some would say,
would that count as market craft under your framework?
Speaker 4 (12:55):
No? No, no, But I mean seriously, it's.
Speaker 5 (13:00):
That's just tearing apart the federal government and the administrative Yeah, because.
Speaker 3 (13:04):
Your book is actually emphasizes the importance of institutions.
Speaker 5 (13:07):
It's the exact inverse. So my book makes the case
that when market craft is successful, you have administrative agencies
like the Chips Office, like the FED, like this SPR
that have a clear mission on chore semiconductors, keep financial
markets stable, et cetera.
Speaker 4 (13:24):
And then they have the discretion to pursue.
Speaker 5 (13:26):
That mission and the ability to get it done. And
that it is critical to understand that institutions in America
need that power in order to make markets work more effectively.
That doesn't mean that they're always perfect, but we get
much worse outcomes when we create these balkanized sort of
(13:48):
hybrid setups, and that's what you see in something like
healthcare markets today. So the importance of institutions is at
the center of this book, and my belief in Musk
and Crewer just trying to demolish all of them.
Speaker 3 (14:02):
So on the institution's point, I mean, I think part
of the institution's problem in US politics is that you
get a lot of people who think that these are
unelected officials with a lot of power, you know, those
sort of like Ivory Tower bureaucrats who are deciding everything.
How do you, I guess, how do you overcome that
(14:22):
sort of instinctual I guess negativity towards building more institutions
in the US government?
Speaker 5 (14:29):
I think you show people where it works, and you
have to be clear about where institutions actually deliver for people.
So I'll give you an example that's a little bit
further back in history. So the book starts with the
story of the National Investment Bank that we create in
the depression. In nineteen thirty two, Herbert Hoover, actually a Republican,
(14:51):
creates an institution called the Reconstruction Finance Corporation, with a
clear mandate, first to reinforce capitalism that was disintegrating at
the time, and then a few years later the mandate
expands to actually spur development. At the head of this
thing is this larger than life figure named Jesse Jones.
(15:13):
So this guy was born in Tennessee, but he moves
to Texas at a young age. He invests in all
kinds of local businesses, and by the time he's thirty,
he's a millionaire. And a few years later he's got
so much money that he's building buildings in New York
City and all across the Eastern seaboard. Then nineteen twenty
nine happens, and he has less to do, so he does.
(15:36):
He is a Democratic Party activist. He's been a fundraiser
for a long time, even shares an office with Roosevelt
in nineteen twenty four. He convinces the Democrats to have
their convention in Houston in nineteen twenty eight, where oh
so conveniently, balloons fall from the ceiling that say Jesse
Jones for President.
Speaker 4 (15:53):
He's like a larger than.
Speaker 5 (15:54):
Life figure, but he's at the head of this bank,
this institution, the National Investment Bank, And when he comes
into power. At the beginning, he says, you know, our
first mission is going to be to reinforce all of
the private commercial banks, recapitalize them, make sure that they're
ready for deposit insurance. But then in the second phase,
on the advice of John Maynard Kaines and some other
(16:15):
economists Jones and consultation with Roosevelt, says, we got to
really deploy public capital into the American economy, particularly in
industries that are going to encourage a lot of employment
and make things cheaper for consumers. So they prioritize housing,
and they build a kind of institution that's named Fanny
(16:37):
May which endures obviously today, and they invent the thirty
year mortgage, which at the time mortgages had been ten years.
By expanding it to thirty years, the cost of housing
comes down significantly, and all of a sudden you see
a boom in housing. And then there's a third phase
in the war years where they bird the aviation industry
and synthetic rubber and all kinds of other things. And
(16:57):
so my point is is you see a man who
comes in skeptical of, you know, of the far left.
In the New Deal period, certainly wouldn't have identified with
those folks, But who ends up believing in and building
an institution of American capitalism that crafts markets toward a
(17:18):
common good. And so that example is really inspiring. It's
further back in history, but we've got all kinds of
things that are closer.
Speaker 2 (17:26):
One of the criticisms of a lot of legacy institutions,
whether it's universities or various parts of the public sector,
et cetera, that comes from the right is that they've
lost their own sense of mission. We have to tear
them down because they have lost their own sense of mission.
They're consumed with niche obsessions, consumed with identity things like
(17:47):
that that are unrelated to their mission of whatever it
is their building, whether it's homes, whether it's semiconductors, whether
it's education. When you look at the history, do you
see any evidence of sort of mission deviation or institutions
that have lost their north star.
Speaker 5 (18:05):
It's not a pattern that I saw in the research
of the book. And if that happens, that's what Congress
is for. I mean, the Congress holds institutions accountable and
monitors their activity. I mean, take the Chips Act. It
was passed in twenty twenty two. But chips was actually
an idea from the first Trump.
Speaker 4 (18:25):
Era that.
Speaker 5 (18:29):
Yeah, well yeah, and the Undersecretary of State for Economic
Affairs and a whole set of folks were very.
Speaker 4 (18:36):
Invested in it.
Speaker 5 (18:37):
It gains steam and is passed in twenty twenty two,
and then you know, quite quickly.
Speaker 4 (18:43):
Money begins to move.
Speaker 5 (18:46):
Congress actually a year later, says, you know what, We're
going to exempt semiconductor construction from NIPA requirements, making the
environmental requirements that in some cases could have made it
harder to build. So Congress stepped in to make sure
that something that they did actually happened more effectively. Or
similarly with the FED, I mean, Congress is constantly tweaking
(19:08):
the FED. Who gets to decide who's going to be
a reserve beank president, even in some cases the methodologies
for monetary policy implementation.
Speaker 4 (19:17):
So I think accountability is very important.
Speaker 5 (19:20):
But accountability rests in the legislative branch, not with an
impulsive billionaire just running through town with a hammer.
Speaker 3 (19:27):
Speaking of the FED, I think you mentioned that you
initially set out to write a book just right like
what was the Cause of the Switch? And then I
guess how did that inform your research process?
Speaker 4 (19:39):
So I have a special place in my heart for
fed history.
Speaker 5 (19:41):
I've been working on a dissertation at Wharton for a
few years which is more properly narrow and focused on
that topic, and I thought that's what this book was
going to be initially. But then when the conversation around
industrial policy exploded, and the the Climate Bill happened, the
(20:01):
Chips Bill happened, the Infrastructure Bill happened, a new conversation
around tariffs in the Biden administration was happening, it felt
like there was a bigger story to tell and the
challenge that the thing I wanted to do was to
explain how did we get from the era that I
grew up in, you know, the Clinton and George W.
(20:23):
Bush era where most people thought markets self regulate and
work on their own, to a moment where both parties,
both Democrats and Republicans, put the state at the center
of the economic story. And I wanted to track that
history in the past fifteen years and see it through
(20:43):
the Great Recession and then the challenge of climate and
then the rise of China and the pandemic, and understand
how you got these bizarre agreements, like you know, almost
a dozen Republicans voting for Lena Khan in the Senate
to run the FTC. How did that happen? Where did
that come from? And how enduring might that be? And
(21:04):
that set of questions then took me way back into
history and then back into the present day, and well,
how did we.
Speaker 1 (21:11):
Get twelve Senate Republicans to vote for Lena Khan.
Speaker 5 (21:15):
I think the confluence of those four events made Americans,
let alone policy makers, realized that markets don't just take
care of themselves, and that that whole idea, that whole story,
wasn't working. That capitalism needs to be cultivated, and that
markets need to be cared for. In the introduction of
(21:35):
the book, I talk about this metaphor of a vegetable garden,
which might seem a little hokey, but at least for me,
it's personal because when I grew up, I grew up
in North Carolina in a small town, and my dad
tilled up a third of the backyard to make a
vegetable garden and constantly forced me in the summers to
go like weed and pick green beans and steak tomatoes
(21:59):
and do all these things that I did not want
to do. Yeah, a lot of people enjoy this, it
turns out me.
Speaker 4 (22:08):
So.
Speaker 5 (22:08):
But nonetheless, I spent an inordinate amount of time in
that garden. And so when I started to think about, like, well,
what are markets like if they're not these self regulating systems,
the best metaphor that I that I landed upon is
a garden because it recognizes there are organic forces that
can sometimes be unruly, that won't necessarily cooperate and just
(22:29):
do exactly what you want to do. But it also
recognizes that you need care and cultivation to steer those plants.
You need to plant some things in the sun and
some things in the shades. You need fertilizer for some things,
you need to get the weeds out for others. You
need to shape these markets. You need to point them
in a direction to ensure they're actually working, that they're
(22:51):
producing a harvest that you want to eat and then
and that is going to be nutritious. And so I
kept coming back to that metaphor, and I think it
is the right.
Speaker 4 (23:01):
One to think about how markets actually work.
Speaker 3 (23:04):
I want to say one thing about gardening, which is
everyone has this image in their minds that it's like
this really peaceful like pastoral activity, and it's not. It
is like this violent struggle to stop everything from.
Speaker 4 (23:18):
Killing each other. Basically.
Speaker 3 (23:20):
Yeah, So I like the metaphor, okay, speaking of bad
stuff happening. Almost every example in your book of you know,
instances of market craft actually developing stems from a crisis
of one sort or another. There's the Great Depression, There's
obviously the COVID pandemic. You know, high inflation, high oil prices,
(23:44):
things like that. Do you have to have a market
crisis before people can start building consensus that there is
actually a role for the government to come in and
try to achieve some policy aims through market craft.
Speaker 5 (23:57):
No, but it helps, and it's always matters how you
define the crisis. You know, there are several examples of
market crafters who are very successful in the book, who
are not responding to crisis. So I have an extended
passage on Alan Greenspan, who is normally not thought of
as like a market crafting kind of guy. He's supposed
(24:18):
to be the deregulator in chief, and he did do
plenty of that when he was the Chair of the FED,
But he also had a vision, And so I'm going
to use him as an example to make to make
it clear that market craft is neither good nor bad
and of itself, it matters. It's a tool and it's
pointed towards a certain end, and it can be a
(24:40):
good one or it can be a bad one. For
green Span, it was financial innovation. He's so intensely believed
that the more efficient markets would be, the more prosperity
and stability would come out of that. I mean, the
guy is writing papers when he's a young analyst in
(25:00):
the fifties along these lines and eventually knits them together
in his PhD dissertation, And then when he becomes chair
of the Fed, Yeah, he does deregulate and take a
lot of rules out of the way, but he also
makes really important policy actions to encourage the development of
financially innovative tools, things that we now know of as
(25:23):
credit defaults, fops and special purpose vehicles and the kinds
of things that did indeed significantly increase leverage in the
financial sector, did in some cases mean markets moved faster
and more efficiently, and he believed would ultimately create that
kind of market discipline that would keep the whole system stable.
Speaker 4 (25:46):
So he had a goal.
Speaker 5 (25:47):
It was market it was financial innovation, and he was
using the power of his institution to deliver on it.
It's just it had disastrous consequences and he was wrong.
Speaker 1 (25:58):
Let's talk more about the event.
Speaker 2 (25:59):
By the way, I think it's really cool that you
went and after, you know, after the Facebook, and did
all this stuff, then you got your pH d.
Speaker 5 (26:06):
Well, we're still working on it, working on your PhD.
Speaker 2 (26:11):
I read Kevin Rudd, the former Prime Minister of Australia,
after he was PM, went and got his pH d
at Oxford and wrote an amazing book about hues and pain.
So maybe there's hope. Maybe Tracy and I will get
PhDs one day. But I hear different things about the
history of what people call FED independence.
Speaker 1 (26:29):
And people in the old days presidents were always hectoring.
Speaker 2 (26:31):
The FED chief to do this or that and this
isn't really that unusual, and other people like, oh no,
this is a cherish thing, and we've that we ever,
you know, interventioned by the White House.
Speaker 1 (26:40):
In your research on the FED, how unusual or.
Speaker 2 (26:45):
Usual is it for this sort of pressure that we see.
Did presidents use to tweet to lower rates whatever the
equivalent was back.
Speaker 1 (26:54):
In the day.
Speaker 5 (26:54):
Yeah, well, obviously it's a very timely topic given that
you know, last week Pal was about be fired. This
week apparently it was never even really considered. So there
is a very long history of presidents trying to bully
FED chairs to get what they want with monetary policy.
(27:15):
It is, you know, virtually since the beginning of the institution,
this has been a trend. Kennedy and Kennedy's administration does
it with Bill Martin. In nineteen sixty, Lyndon Johnson summons
the FED chair down to his ranch in Texas and
takes him on this legendary jaunt. Richard Nixon is pressuring
Arthur Burns. Reagan doesn't really like Vulcar so he replaces him.
(27:40):
We could go through all of the examples, and this
is different because this time the president isn't just pressuring
the FED chair to do what he wants. He is
threatening to take illegal action to fire him, which it's
very clear in the Federal Reserve is not legal. The
(28:02):
president can only remove the chair four cause, and similarly
with the other members of the Board of Governors and
so and it's not just a threat obviously like Trump
has done this. He has fired two of the five
FTC over at the FTC two of the five commissioners
who are Democrats, also illegal in the FTC Act, it
(28:24):
is illegal to fire them unless it's four casts. He's
done at the NLRB, at the credit unions, et cetera.
So I think this is a real threat. I tend
not to use the word independence because I think the
FED is actually quite sensitive to political and economic trends,
what they're hearing in a lot of different domains. It
(28:45):
is an insulated institution, which I think makes it stronger,
but it is not a purely independent one. And these
threats I think are really unprecedented and we should all
be frightened by them.
Speaker 3 (29:13):
All right, So, speaking of things that might be different
this time, we do have a president who seems very
very determined to divorce the US in some ways from
the rest of the global economy, the global financial system.
The subtitle of your book is the one hundred Year
Struggle to Shape the American Economy. You could easily have
titled it the one hundred year Struggle for the US
(29:34):
to shape the global economy, right, like, the US went
on a very explicit mission to shape our current financial
system and you do have a very chunky chapter in
there about Breton Woods. Talk to us about why we
should all, I guess, familiarize ourselves with things like Breton Woods,
euro dollars, capital controls in our current climate.
Speaker 5 (29:55):
Let me tell you a little bit of the story
of the breakdown of Brettonwoods and why it matters for today,
because when I wrote that chapter, I had no idea
that the dollar would actually be threatened as the global
reserve currency.
Speaker 4 (30:09):
And this is real.
Speaker 5 (30:11):
So BRETTONWOODZ was this agreement that came out of World
War Two that where the United States committed to sell
gold at thirty five dollars announce and it would peg
the dollar to all other foreign currencies. So this way,
the dollar effectively became the bedrock of the global financial system.
(30:32):
And underneath it there was gold, so it was an
effective gold standard. But the United States was making the
commitment to be able to redeem dollars for gold should
a foreign country or anyone else in the market and
want to make that exchange. Now, the whole system was
premised on the fact that as the rest of the
(30:53):
economy grew, the United States had to increase the amount
of dollars in circulation for time, because as economies grow,
they need more currency. If the dollar is the base currency,
is the global standard, you need more of it. One problem,
the more dollars you print, the less they're worth. And
(31:14):
so by its very nature, you are not going to
be able to deliver on the promise to redeem gold
at thirty five dollars announce. So it's like a vice
that tightens between nineteen forty, between the post war years
and nineteen seventy one, when it gets just so impossible
(31:34):
for the United States to continue this commitment, there's a run,
and I tell the story of the book where Nixon
summons every single person who runs any of the economic
institutions in the country to Camp David, and they come
up with a plan, and they end the Breton Woods system.
They in the gold commitment, and they move into a
(31:57):
regime of eventually it becomes a regime of float exchange rates.
Now we make it through partially because price and wage
controls hold down inflation for a period, etc. But it
is touch and go for a lot of that period.
And so then you fast forward to today, and I
think the easiest way to think about it is, instead
of gold being that thing underneath the dollar that guarantees
(32:20):
its value. It's the institutions of American capitalism. So the
dollar continues to be the global reserve currency today. And
the reason that is is because we have had an
independent central bank, We have had a treasury that reliably
and always pays the coupon on its debt in a
way that investors can believe in and expect. And so
(32:44):
does people want dollars. People want us treasuries, people want
these financial assets. And now two things are throwing that
into question. The first, obviously is Trump's impulsive economic policy,
which disregards the importance of institutions in the first place.
But the second is we're flooding the market yet again
with dollars and dollar denominated assets. Like the deficit last
(33:09):
year was seven percent of GDP. It's not supposed to
be that high in a healthy economy. And right now
the plan is another six trillion dollars of tax cuts,
which is just to give it for perspective, is as
much as the tax cuts of Trump one point zero
and the pandemic aid combined. And we're already at seven
(33:29):
percent of g So we have another moment where we've
flooded the world with dollars where they're losing value and
the underlying guarantee of that value, the security of American
capitalists institutions is under threat, and so you're seeing an
unprecedented period and a potential run do it.
Speaker 2 (33:50):
Yesterday night there was a news story President Trump said
he wouldn't want to raise taxes on millionaires because it
would be quote disruptive to the and then he said
that the millionaires would leave the country, which I'd hope
most of them would be, uh, you know, stick around.
Speaker 1 (34:06):
But that's his view of them.
Speaker 2 (34:09):
But what does it say, you know, about even the
prospect for market craft if people in government don't feel
that they have the capacity, the political power, et cetera
to at times bring pockets of wealth truly healed, so
to speak, and to wield that power, or were they like,
is there any prospect for positive market craft in a
(34:30):
world where politicians feel that like they're subservient to.
Speaker 1 (34:36):
Huge pockets of wealth.
Speaker 4 (34:37):
I very much think so.
Speaker 5 (34:39):
So I'm skeptical in this administration that that's gonna happen,
but I think there's all kinds of opportunities for positive
market crafts. So the things that I focus on these
days are the cost of living crisis in the United States.
I mean, that is what voters are very clearly still
frustrated about. Prices are up twenty percent from the beginning
(35:01):
of the pandemic till now, and it's particularly concentrated in
things like housing. I meaner can spend a third of
their income on housing, and then if you go to groceries,
and then you go to care, healthcare, childcare, you're above
fifty percent for most families. And so we can craft
housing markets to make housing cheaper. We can certainly do
(35:23):
some of the zoning and streamlining that the abundance folks
like Ezra Kline and others are for. I think that's
a good idea.
Speaker 4 (35:29):
I kind of.
Speaker 3 (35:30):
Wondered how long it would take us before I mentioned abundant.
Speaker 4 (35:33):
We got it's pretty good. I think that those are
good ideas.
Speaker 5 (35:38):
But I also don't think that you can just make
it easier to build and then sit back and hope
people show up. At least that's not been the experience
in California. Like it's been years since they have been
on this process of trying to change their laws and
building starts are not showing the same kind of growth
that you would like. You have to craft markets more aggressively.
There's a lot of other tools, particular public investment. So
(36:02):
we need a housing construction fund for multifamily developers to
make it cheaper to build. You guys have had some
folks on your podcast make who make this case. You know,
the estimates are that for an investment of about fifty
billion dollars at a federal level, you could get somewhere
between one and two million home spell and that's about
(36:23):
half the housing shortfall in the United States. That's quite
a lot of progress. You could have an industrial policy
for modular. So modular is the kind of housing where
you build the components off site and then you bring
them in. And there's this amazing time lass video which
I saw about six weeks ago of an apartment building
in Denver where they bring in the pieces and it
(36:45):
goes so quickly. It looks like the Mike Sun places
with magnetiles, these like pies. They're amazing. But you just
see it, and you just watch this. This apartment building
with seventy seven units go up in the course of
seven days, and it's mind blowing. And half of the
building that happens in the Nordic countries is through modular
(37:07):
and so that's a kind of industry that I think
if we had an industrial policy to encourage and not
just public investment, but also standard setting making sure it's
possible for people to get mortgages for them, you could
see significantly more development. So I think we need a
market craft for housing. On food, I think we could
do reserve stock buffering on eggs and coffee, like I
(37:31):
talk about in the book on care, there's a whole
set of interventions as well. There's an aspirational agenda, is
what I'm trying to say, that could help us attack
the cost of living crisis. And this administration is going
to hike prices through the tear of policy, not bring
them down. And so Democrats are going to have to
have another message and also the specific policy expertise to
(37:55):
get it done.
Speaker 3 (37:56):
Yeah, there's a long running joke on all Blots that
what America really needs is a strategic pork preserve.
Speaker 4 (38:01):
I think all agree on this.
Speaker 3 (38:04):
Okay, speaking of agreeing, one of the chapters in your
book that I really enjoyed was the sort of behind
the scenes look at Bidenomics.
Speaker 4 (38:14):
Yeah, and you.
Speaker 3 (38:16):
Do get a really good sense of some of the
discussions that take place, the areas of disagreement. The sort
of protagonist and antagonist, I guess in this discussion in
your book is Larry Summers versus Brian Deese exactly. And
you were also involved in the Obama administration, like talk
to us what you learned about the actual sausage making
(38:38):
process of market craft and what sort of like how
do people actually reach consensus on a lot of these
things when they have very different opinions about how the
world works.
Speaker 5 (38:50):
So I had this experience where in writing for most
of the book, I was largely in archives and secondary
literature in the past, and then the last third of
the book is contemporary, and so the methodology just shifted
to talking to a lot of people. So I ended
up talking to most of the folks who had been
(39:12):
involved in Bidenomics inside the administration, and people like Larry
Summers and Jason Furman and a lot of people on
the LM.
Speaker 3 (39:18):
Larry does like to talk.
Speaker 4 (39:20):
It turns out.
Speaker 5 (39:23):
I talked to a lot of people, and the person
that I zeroed in on was this man named Brian Deese,
who some of you may know. He has an odd
launch guest. Indeed, he was the chair of the National
Economic Council. The reason he's so interesting is because he
was one of Larry's protegees in two thousand and eight.
(39:43):
In two thousand and nine, he is on the Obama
campaign and he effectively runs the bailout of the auto companies,
and in that experience begins to see, wait a second,
we can't just be bailing. We can't have the emergency
room view of the economy where we come afterward. We
have to be thinking proactively ahead of time about how
(40:04):
to shape and build industries that work better. That takes
him to work on climate change. And then all of
a sudden the Biden administration, he becomes a director of
the National Economic Council, and then he.
Speaker 4 (40:17):
Articulates this big vision. It has two pillars.
Speaker 5 (40:20):
The first is build, so that's public investment in climate
infrastructure and chips. And the second is balance, so that's
competition in particular, but also supporting labor and other similar
kinds of initiatives to ensure that the economy is competitive.
(40:40):
And boy, Larry doesn't like it. He is throwing rocks
from the outside pretty much the entire time, and often
talking to Brian and others on the inside. And the
reason I think that story is so powerful is because
it shows the emergence of not just a new generation
and of policymakers, but a new way of thinking about
(41:03):
the economy which starts from the premise of market craft
and doesn't fall back into kind of neoclassical economic framework
of market failures and externalities. And how are we going
to fix things after the fact?
Speaker 2 (41:17):
I guess I have more of a politics question, or
you know, we had this sort of nascent industrial policy
market crafting, and then it looks like the plug is
being pulled after four years, and I would guess that
there must be a lot of frustration among Democrats to
hear someone run on, We're going to build things in
America again, We're going to build manufacturing right after a
(41:39):
period of two or three years in which more plants
were opened and more factories were broken ground on than
any time in my life. And so what I'm curious
from your perspective, I guess from a political sustainability standpoint
is people seem to like in theory the idea of manufacturing,
the aesthetics of it, but do people actually like it
(42:02):
in practice? Or is like because it didn't seem like
it got any results politically.
Speaker 5 (42:07):
I don't know if manufacturing per se is the thing
that people like. And I'm a little skeptical that you're
going to really reinvigorate the American economy by rebuilding a
manufacturing sector. But I'm not quite sure I agree with
the premise of the question. Trump is certainly not pursuing
a market craft, that's clear. However, a lot of the
(42:28):
people around him have spent years developing their own visions
of a market craft that puts the state at the center.
Speaker 1 (42:36):
So you're talking about or in Cass in your book,
for example.
Speaker 5 (42:39):
Well, or in Cass, But I'm talking about Marco Rubio
and JD. Vance and Josh Holly, a lot of these
guys who I think are the future of the Republican Party,
who believe that we need state institutions to direct markets
towards certain goals. Now, their goals are not really my goals,
I should say that. I mean, they are very concerned
about drone and critical minerals and national security, whereas I'm
(43:03):
more interested in climate change and other things. But nonetheless,
right before Vance became the vice presidential nominee, he was
about to introduce a bill for a national Investment Bank,
the same idea that I was just talking about from
the New Deal era, that he believed as an institution
(43:24):
would have the power to direct markets. Now he was
doing that with Chris Coons and Mark Warner and folks
on the left. But what I'm trying to say is
it may be dormant in this period, but I don't
think that ideology is gone. We're going to hear about
a sovereign wealth fund in the next few weeks from
this administration, and there's a deadline that the Treasury Secretary
will have to bring a report on it. I wouldn't
(43:46):
be surprised if we see some trace remnants there. Even
though I am skeptical that anything meaningfully will be will
be done. I don't think that means that it's that
Trump's chaos can define the Republican Party for wherever and ever.
Speaker 3 (44:01):
We do have some questions from the audience that we
should probably bring in. I'll start with one, obviously very
topical at the moment, but how is market craft playing
into the race for dominance in artificial intelligence?
Speaker 4 (44:17):
Yeah?
Speaker 5 (44:18):
I mean, so far, the federal government has decided to
let the private sector, you know, develop AI on its own.
In the United States, it's certainly different than in China
and then elsewhere, and there hasn't been a market craft.
There's been talk of it in the Senate in particular.
There's interest in public investment. There's been talk of what
(44:40):
we call public option for the cloud, so a way
of making it easier for smaller companies to access computing
powder to build advanced AI models. But none of that
has yet come to fruition, And so I think it's
important to say that, like, market craft isn't everywhere all
the time. You know, lots of policies effect markets, but
(45:01):
the craft and market you have to have, you know,
policy makers with a clear intent shaping it and guiding it.
And so far in the AI markets it's been more
of a hands off kind.
Speaker 3 (45:12):
Of But if we had like a loan office for
AI startups something like that would count as explicit market
craft for sure.
Speaker 5 (45:19):
If Congress said, hey, we want more small businesses doing AI,
so we're going to appropriate money and we're going to
create an office over here in the Commerce Department to
do that, they're there, they have they have an agenda,
they're crafting that market just putting.
Speaker 2 (45:32):
It back on your tech founder for a second, kind
of separate from market craft, but I guess it sort
of intersects with this. When Deep Seat came out, people
started really and it was before that too, but people
really started to talking about AI specifically. Is this existential
area of competition kind of like uh, kind of like
achieving the nuclear bomb?
Speaker 1 (45:54):
Like who is going to get to AGI first? US
or China?
Speaker 4 (45:57):
Do you uh?
Speaker 2 (45:58):
I mean, do you think of AI or AGI specifically
in such stakes?
Speaker 5 (46:05):
It's a huge deal. I'm not sure I want to
go to the nuclear bomb. That seems like a very
high bar, but it's a huge deal. I think that
the advances in AI, it's certainly the most profound changes
in technology in my I think, I want to say,
in my life. It feels more transformative to me than
the mobile phone, which I think would be my bar.
Speaker 4 (46:28):
I mean, it's I'm using the models.
Speaker 5 (46:31):
My husband's in the front row, he watches me, and
to use the models all day every day for everything
from like recipe substitutions to you know, doing deep research
on a particular topic. Of course, you have to check
the facts, this and that, but I mean they are
incredibly powerful, Tracy.
Speaker 2 (46:48):
I have to say, like I'm an AI user enthusiast
for Tracy.
Speaker 3 (46:51):
I to watch Joe use the models all day.
Speaker 4 (46:54):
You don't use them.
Speaker 3 (46:55):
I do know, I do it, just not as.
Speaker 1 (46:57):
Much as way.
Speaker 2 (47:00):
I am an enthusiastic trier outer of all the AI models,
and I recently got access to Mannus. Yeah, but I
have yet to find an application that consistently enhances my
work productivity.
Speaker 1 (47:13):
Really, Yeah, that's not true.
Speaker 4 (47:14):
Okay, headlining, I haven't.
Speaker 1 (47:17):
But I'm better at headlines, of course you are.
Speaker 4 (47:19):
No.
Speaker 5 (47:19):
No, but that's of course you are. But it's helpful
to have a kind of sidekick to brainstorm headline Tracy.
Speaker 4 (47:26):
Okay, well, fair enough. Not all of us have, Tracy.
Speaker 3 (47:31):
No, I disagree with this. Like AI is a phenomenal
tool for our day to day productivity, it just is.
Why did I ask another question from the audience. I
know you care about climate change and this is one
of your big projects. So we have someone asking how
do we make progress with climate policy in light of
its politicization, politicalization and the issue of affordability. And one
(47:55):
thing I would just add on to that question is,
you know, one of the things we've seen under binomics
was Oh, we should build more green technology in the US,
and a lot of that makes sense. But I guess
the counter argument to doing that is, if we really
care about the climate, and if there is actually this
massive sense of urgency to doing something about it, then
(48:17):
why not get all the really cheap solar panels in
volume from a place like China.
Speaker 5 (48:24):
Well, I think we need even more investment, likely significantly
more investment than we got out of the IRA, and
we need it to be better coordinated. So I think
the IRA investments are still stand. Obviously, business uncertainty has
just gone through the roof, so no one exactly knows
what's going to happen. There are signs that the Republicans
(48:47):
will keep some of the pieces of the IRA, maybe
not for solar panels or evs, but for things like
hydrogen or carbon capture or things like that. I'm cautiously optimistic,
but we need additional investment, and then we do really
need an institution whose mission it is to tackle climate change,
(49:07):
and the Congress can hold accountable so that instead of
just saying, oh, we're going to give subsidies through the
tax code, where the government effectively has no ability to
determine what's getting the most funding.
Speaker 4 (49:18):
There is an ability to say.
Speaker 5 (49:20):
Okay, this, these breakthrough technologies need more support. These other
things are doing just fine. I think that's going to
be the long term solution. I'm a bit I'm with you.
I'm not sure that tariffs on solar panels are going
to help us get to the you know, the tools
that we need to combat climate change that we need.
Speaker 4 (49:41):
Trace is right by the way.
Speaker 2 (49:42):
I get a couple when it comes to AI, I
sometimes be like, okay, we're in.
Speaker 3 (49:45):
I know because I literally watch you do this.
Speaker 2 (49:49):
Joe was at the I co host the Audlats podcast.
We're interviewing Chris used tonight that your public library. What
would be some questions I do ask that and I
sometimes upload PDFs and just like just give me to
the summary.
Speaker 4 (49:59):
So I wanted with me.
Speaker 1 (50:01):
Yeah, yeah, no, that is helpful. It's helpful.
Speaker 2 (50:06):
Someone to ask about student loans. And I'm curious, you know,
people perceive the market for higher education to be broken
in various ways, and I'm curious whether it's on the
funding side for the consumer, the student, or whether there's
anything interesting that you've learned.
Speaker 1 (50:23):
About that space.
Speaker 5 (50:25):
Yeah, so there are a lot of these markets that
I would call gray zones. Is higher education a market,
at least the way that I want to think about
it most of the time, it's not. It should just
be a fundamental, you know, good an opportunity that everybody
can get an education.
Speaker 4 (50:42):
That they want.
Speaker 5 (50:43):
So I'm not sure we even have to use a
market crafting framework to say, you know, college in the
United States should at least be affordable, if not free,
and there's a way to use policy to make that happen.
But I think that it is due for sort of
wholesale reimagination, and there is something wonderfully simple and direct
(51:06):
about you know, Bernie's promise for free college that you
know is hard to do, but I think it's that
kind of aspirational guarantee that people crave, people respond to,
and it's policy makers response to deliver on that. Of course,
you're going to have to raise taxes, whether it's for
this or some of the other issues that we've talked
about to make that happen, But I don't know that
(51:30):
that's the I think that's the kind of country I
want to live in. I think that's the kind of
country that most Americans want to live in.
Speaker 1 (51:36):
It's a great place to leave it. Chris Hughes, thank
you so much.
Speaker 6 (51:39):
For joining us in this live episode.
Speaker 3 (51:59):
That is our interview with Chris Hughes, the author of
Market Crafters, live at the New York Public Library.
Speaker 2 (52:05):
Really good evening, really interesting topic. One very near and
dear to the themes that we've been talking about on odline.
Speaker 3 (52:12):
Yeah, definitely touches on a lot of them.
Speaker 2 (52:14):
Shall we leave it there, Let's leave it there.
Speaker 3 (52:15):
This has been another episode of the Odd Lots podcast.
I'm Tracy Alloway. You can follow me at Chacy Alloway, and.
Speaker 2 (52:21):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow Chris Hughes on Twitter. He's at Chris Hughes. Follow
our producers Kerman Rodriguez at Kerman armand dash Ol Bennett
at Dashbot and Killbrooks at Kalebrooks. From our Odd Lags content,
go to Bloomberg dot com slash odd Lots. We have
all of our episodes and a daily newsletter. You can
chat about all of these topics twenty four to seven
(52:41):
in our discord Discord dot gg slash od lots.
Speaker 3 (52:45):
And if you enjoy odd Lots, if you like it
when we do these live events, then please leave us
a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
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Joe Weisenthal
Tracy Alloway
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