Conversation w/ Vincent Geloso: The Gilded Age & Inequality? | Yaron Brook Show - Yaron Brook Show

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Speaker 1 (00:02):
A lot of them unders of the national so interesting
and an individual lots.

Speaker 2 (00:14):
This is the show, all right, everybody, welcome to your
one book show on this Monday, December fifteenth. And I'm
really pleased to have Vincent and I you know, you
have to correct my pronunciation, but geluso, that's perfect, gluso great.

(00:38):
I usually I usually butchered the name. So welcome Vincent.
It's great to have you on.

Speaker 1 (00:44):
It's a pleasure.

Speaker 2 (00:45):
So Vincent's an assistant professor of economics of Judge Mason University,
where I don't know, probably half the free market economists
in the United States work. It was you got to
pee the London School of Economics and we were talking
before we started it. He was the lone free marketer

(01:07):
at the l C. I mean and know a little
bit about the LC Department is not friendly to to
to free marketers. So he survived that.

Speaker 1 (01:17):
So I have I have to confess that I was
lonely ideologically, but they were. They were intellectually generous.

Speaker 2 (01:26):
Good yeah, it's and and uh uh so, uh tell us,
how did you how did you get into free market economics?
I mean you're you're Canadian from Quebec. Yes, not a
bastion of freedom generally and markets in particular. So so
how did how did you? How did you get into this?

Speaker 1 (01:49):
So I started doing politics when I was a bit
younger towards the center. I veered a bit towards the
neo conservative right when I was in my early twenties.
But as I was gradually exposed to more and more
economics training, I gradually realized the limits of central planning.

(02:15):
And it meant not just central planning in terms of
economic policy, but in terms of multiple aspects of any
type of voluntary exchange, going from cultural exchange to choice
of languages to use, to education, to things that are
less obvious at first sight to economists. But once I

(02:38):
started appreciating the complexity of societies and how order could
emerge without a plan, I gradually became free marketer actually
anti status very first, but later gradually free market here.

Speaker 2 (03:00):
Okay, And and what the interest in the history of
of of economics or economic history? So which way is it? So?
What what's what?

Speaker 1 (03:09):
So when when people say history of economic they mean
history of economic taught, so that can be tracing the
evolution of economic ideas. Whereas economic history is what I
specialize in the measurement of living standards in the past
and trying to understand the importance of certain events in

(03:31):
human history or certain processes the emergence of property rights
institutions in the West, uh, the emergence of liberal democracies,
the emergence of constitutions, the process of economic growth, the
process of innovation.

Speaker 2 (03:48):
UH.

Speaker 1 (03:49):
I was really rapidly interested in those questions, largely because
it speaks to the fundamental essence of the human and venture,
which is to end up conquering your state of poverty.
And history is kind of the you know, the empirical

(04:09):
observations that we have to see that process of civilization
building that humans are very good at and if given
in the correct incentives. And it felt natural for me
to engage in economic history rather than the minutia of

(04:30):
economic policy today, even though I do that bill in
that domain occasionally.

Speaker 2 (04:35):
So I think the first time I was introduced to
you or discovered you was a tweet you had during
the the April was the tariff tsunami or whatever we
want to call it, where you know, as Trump was saying,
when a tariff Canada and everybody and the Canadians were

(04:56):
saying we're going to retaliate. You came out and said
this should do she should lower tariffs if anything, or
something like that, or should do nothing, or should lower
tariffs your lower tests to zero. And I was impressed
because I didn't, you know, I hadn't seen anybody else
say that. So run us to the logic of that,
given you know, given them points of tariffs these days.

Speaker 1 (05:20):
So so when that started coming out, and I'll be honest,
I never thought tariffs would be something I would discuss
public policy wise, at least like a year ago. But
when that started coming out, I proposed to the Montreal
Economic Institute, with whom I collaborate occasionally, that we issue

(05:42):
a policy note explaining that unilateral trade liberalization is the
way to go, so that obviously it would be good
if everybody liberalizes together, and that's, you know, the ideal world,
but in a world of less than ideals, open borders
in terms of goods and services and capital investments is

(06:03):
the second best policy, even if no one goes along.
And so we made the case for that, and to
just make a summary of the case, the very obvious
part is tariffs end up being taxes on consumers so
in one way, you're going to reduce demand for other
services in the economy as you increase costs for some people,

(06:27):
but also at the same time you increase costs of inputs.
But the most important cost of protectionism that a lot
of people forget, and even economists sometimes don't put their
fingers on it, is that once a government decides to
it says publicly it will do tariffs, it opens the
door to rent seeking, which means that every interest group

(06:47):
is going to lobby like beggars at the popular soup,
asking for their own tariff, their own exemptions. And the
process of rent seeking is socially costly because so many
resources are spent just trying to get favors from the
politically powerful. And this is a form of institutional not corruption,

(07:09):
but perversion degradation that happens. So it's kind of a
poison and the long run is even more damaging. So
I was trying to make the case that the correct
route for Canada was to stick with free trade and
in fact to remove whatever barriers it has. Notably, in

(07:29):
terms of this, Canada is pretty restrictive on a few
things like telecommunication services, air transport, and of all things,
well of two of all things very Canadian things maple
syrup and for which there is really big supply side
restrictions in my home province, but also dairy and avian

(07:52):
at poultry production. So these are insanely restrictive systems that
are designed to restrict competition on each of these markets.
Can even consumers pay more. If consumers were free to
pick whoever producer they wanted to buy from, their living
standards would massively increase and at the same time it

(08:14):
would liberate massive sums for other sectors of the economy
to grow. And that's the case we were making, and
we made no friends.

Speaker 2 (08:22):
Yeah, I was gonna ask you, what was the response
in Canada?

Speaker 1 (08:26):
Well, I had one response that made me very happy.
Was the son of former Prime Minister Brian Maroney, who
was the for Canadians. Maroney was Canayans know, but non
Canadians won't know that. Maroney was the prime minister who
unpopularly advocated free trade in the eighties and was pretty

(08:50):
adamant about it and basically ran a referendum election on
a free trade deal with the US, and so pretty
much like the closest thing to a political champion of
free trade in Canada that's consistent was Brian mrooney, and
his son was saying, I'm very happy that you're channeling

(09:10):
the spirit of free trade battles. Okay, this is you know,
it's one wine and I'll take it. I don't get
a lot of wins in terms of the battle of ideas,
but that was, you know, a minor one, and I'm
very happy about it.

Speaker 2 (09:24):
But did you get did you guys get a lot
of negative negative commentary?

Speaker 1 (09:29):
Oh? Yes, that The usual response that is not the
first time it's been encountered, is that obviously this was
politically naive. The other ones are doing it, we have
to do it too, And so I had to reply
the usual reply that it's I have to tell my

(09:50):
kids very often, not because the other kid does it,
that you have to do it too, somewhat counterproductive to
play this game. So I was surprised that I had
to explain to people who are my age and far older,
even though I'm no spring chicken, that I had to
explain to them the same thing I have to tell
my six year old about how to behave in the

(10:12):
real world. So that was a bit of a frustrating one.
But the other one we frequently get is the one
that Americans subsidize their own industries, especially in farming, And
each time I have to explain to them that that's
actually something that we as Canadians, even though I live
in the US now, should actually welcome. If Americans want

(10:34):
to tax themselves, first of all, they're making themselves less
attractive to any investments by virtue of the higher taxation.
That's number one. Number two is if we're importing it,
we're importing their tax dollars. So that's the closest thing,
at least from the Canadian advantage points to a free lunch.
So Canadians should actually welcome other countries giving them their

(10:59):
tax payer money without any effort for it. And every
time I said, oh, you're being flippant, and it's true,
I was being a bit flippant, but it's still true.
And even if let's say I was overstating the case,
it still goes back to the first argument. If the

(11:20):
other person is doing it, you don't have to do it.
If it's done.

Speaker 2 (11:24):
And last question on this, and then we'll go to
the to the Gilded Age. What's your assessment of the
Canadian response to the turfs.

Speaker 1 (11:36):
Confused, garbled, and incomprehensible. I think they're trying to and
this probably results one of the things I mentioned earlier,
because of the rent seeking, they're trying to patch work
political considerations with grand standing, essentially to reduce the damages

(11:58):
of the terrorists, but at the same time accommodate political necessities.
The result of this is something that makes absolutely There's
an expression in French which is a Niekernite neither head
nor tails. You can't there's nothing to understand about it.
And even and this is especially since when we know

(12:19):
what the easy answer is is because the one big
policy that's that would actually end the conversation over tariff
is this thing called supply matterer. So I briefly alluded
to it. But in Dairien poultry, which is the two
big sticking points for American negotiators is in Canada, since
the nineteen seventies, we have a quota system where you

(12:40):
have to acquire a right to own cows and chicken.
You don't even have to have the chickens, you just
need to buy the quota to have them. And this
number of quota has been essentially fixed since the seventies.
The result is the number of the demand has outstripped
the supply. Prices are really high, and that system would

(13:02):
not be sustainable were it not for massive tariffs that
prevent American producers that do not have to labor under
these costs of the quota system, because they could enter
the market at much lower price, which is why we have.
For example, on cheese the tariff is above two hundred
and eighty percent. On milk it's above three hundred percent.

(13:26):
And if you look at price gaps between the US
and Canada, actually here in Virginia, which is not a
dairy lane in any way, shape or form, price of
milk in a solid container is half the Canadian price
and the Canadian price comes in a plastic bag. I'm

(13:46):
not kidding. This is something people don't know. In Canada.
We decided to reduce the cost so much we were
going to sacrifice on every feature of quality that consumers
might care about. And then the this is an seriator
point for me, is the dairy union farmer who have
basically sent very rude messages to one of my ex

(14:08):
in the past saying really good, They're very aggressive, and
they kept saying, oh but you know, you're comparing American
price with Canadian one, but ours come in the plastic bags.
They're come in the solid packaging. And I'm like, you
realize that actually makes my case. You know, maybe Canadians
would like to actually get the milk itself cheaper, but

(14:30):
would be okay with paying a bit more for not
having milk in a bag. There is one state in
the US, however, where milk in the bag is popular,
and it's Nebraska. And when you go there, it's even
cheaper than everything else, and the fine enough.

Speaker 2 (14:44):
Don't freak out at about plastic. You know, we can't
even drink use straws in some states in the United States.

Speaker 1 (14:53):
Well, this is this is well, I'll be less generous
than I usually am. This is status contradictions that are
better shuffled under a carpet.

Speaker 2 (15:05):
Yeah. Yeah, And then are many of them. There are many,
many of them. So you have a book coming out
next year that's exciting, So I am I'm sure you are. Yeah,
I'm too. I'm go get it. I'm we get to
read it, you know. I and one of the most
interesting periods in human history, I think, well maybe the

(15:27):
most interesting period in human history in my view has
to be the nineteenth century the century in which we
in a sense became rich, right, we stopped being put
And there's so little good economic history on what actually
happened in the nineteenth century. So I'm excited by the
fact that you know your books to tell us a
little bit about what period it covers and the what

(15:50):
the what the idea is.

Speaker 1 (15:54):
So the point that I'm trying to make in that book,
which covers the period eighteen seventy nineteen ten in the US,
so basically the Gilded Age, progressive era, everything from the
end of the Civil War essentially to World War One.
And the case I'm trying to make is that markets
are the most egalitarian forces that the world ever saw.
And I don't mean a galitarian in the philosophy of egalitarianism,

(16:18):
but in the sense of if you look at the
ladder of income and you look at person on the first, wrong,
second third, up to the ninety nine rung of the ladder,
does everyone enjoy the same rate of economic growth? Is
the growth going largely the same for everyone or some

(16:42):
people getting faster? Is it faster at the bottom. And
the point I make is that actually, well functioning markets
will generate massive improvements for pretty much everyone, and that
we massively under estimate the amount of economic growth that

(17:03):
took place in America for the bottom ninety percent of
Americans from eighteen seventy nineteen ten.

Speaker 2 (17:10):
So there's this perspective that, you know, the nineteenth centuries
a period of extreme poverty. You know, we've already dickens,
you know, child labor, and you know dirty slums and
real horror. So to what extent is the truth to that?
And you know what going into the guild and age,

(17:33):
what was the situation and kind of what was the
situation coming out of the guilded age.

Speaker 1 (17:38):
So obviously at the beginning, so eighteen seventy, the world
is very poor, and in the United States people are
very poor now by global standards. Back then American were
already pretty wealthy. But you know, from anyone's vantage point
using a time machine today going back to that period

(17:59):
would find that this looks like very extreme poverty. If
they ended up going to the house of someone who's
an industrial worker in say Chicago or New York, they
would find this to be a very poor living condition.
But what I point out is that actually we probably
underestimate how poor people were at the beginning, and we

(18:21):
massively underestimate how much better off they got, so that
the starting point is lower than we believe, and the
end point, by World War One is higher than we believe.
Which is why I say that in this period you
get growth that is so rapid at the bottom that
it's the first massive eradication of poverty that takes place.

(18:42):
And it's seen in stuff obviously incomes, but also things
that are less obvious. So there's lower lifespan and equality.
So if you look at how much if you take
people and you'll take a how long they live, essentially,
you would find much more at the beginning of the
period and inequality of life spans. At the end of

(19:04):
the period, not only does the average lifespan increase, but
they've increased far more for people who used to die
far earlier. So and that's very obvious from lower infant
mortality rate, but it's also obvious for people above age ten,
so that there's reductions in life and you want to
think about health inequality, Uh, there's reductions in inequality in

(19:31):
the cost of living. So the goods that are falling
in prices more in that period are goods that feature
more predominantly in the baskets of the poor. So once
you account for that, you realize, oh, Americans were got
the poorest. Americans got a much much more impressive rate

(19:54):
of improvement over the period, so much so that ye're
in year out from eighteen seventy to nineteen ten, Americans
saw their living standards broadly defined, increased by two and
a half percent every year. And that mat seem small,

(20:15):
but it means that by nineteen ten living standard like
a person would have seen his living standard close to
three times higher than he would have had at the
beginning of the period. So this is a like a
near tripling of living standards, and a forty year window
is exceptional. And when you then compare, and this is

(20:36):
the part that's pretty provocative I think in the upcoming work,
is if you look at the top one percent of
Americans and you look at their improvements and living standard,
accounting for the health stuff, accounting for the cost of
living differences, they increase at the same rate as the
bottom ninety percent of Americans. So what you're getting is
a society that is no more in egalitarian or no

(21:00):
less egalitarian at the end than at the beginning. But
the improvements in absolute terms have been so massive that
the poorest Americans are richer than the average Frenchman, the
average British, the average German, the average Italian. Americans have

(21:22):
in that period what I call the first egalitarian enrichment.
Again I use the term as an ejective, the first
egalitarian enrichment of the Western world. And it had not
been seen before. You had had period of enrichment before,
but living standards would have increased slower at the bottom
than at the top. This period was unique, and it

(21:47):
was the first for having such massive improvements at the bottom.

Speaker 2 (21:51):
So this is counted to kind of the conventional story
that's told, which is this is the age of robber
barons who get super rich by exploiting the poor. You know,
the the what is it unions fighting employers to get
raises and again reinforcing this idea of exploitation. So you

(22:14):
know what is wrong in the other story other than
empirically it's wrong, But what is kind of driving that story?
And of course why is it that this was such
a period of enrichment across the board.

Speaker 1 (22:25):
So the argument that I try to explain to people
is that and I have to make a small digression.
There's a big concept in economic history. It's called the
Kusnitz curve, and it's name after an economist called Simon Cousinants,
and he basically said that as societies develop, when they're
very poor, they will have as they get richer, for

(22:47):
the average person, there will be more in equality, and
then after a certain point in equality will decline. And
his argument was essentially, think about it this way. A person,
you get like a largely agrarian economy and everyone's a
farm and the first guy who goes to the city
for the high wages in the city, he creates a
lot of inequality just because he's the first guy to

(23:07):
earn the higher wages. And as long as it's really
hard for people to move from the countryside to the city,
you will keep seeing inequality increase until there's a critical
mass of people inside the city. This argument the Cousin's curve.
The way I argue to people is that we've miscomprehended
the logic is people see it as like an inevailability

(23:30):
or either it never applied or it's just something that
we have to go through. And I say that's incorrect
to think about it. The Kuzness curve emerges if you
have poorly functioning markets, markets with lots of friction, where
it's hard for people to move to the industries that
want the workers. Because if an industry in a city
wants to offer twice the wages that farmers have, then

(23:55):
that's saying that there's huge potential in the city. If
there's a friction either because of geography or distance, or
communication costs or the ability to communicate information, or because
property rights are weak right, or that I can't do
certain forms of industrial organization, then you're going to have

(24:15):
this process take longer and longer. However, if markets can instantaneously,
and I'm going to use this as an extreme, they
can instantaneously move a person from a low value sector
to a high value sector, from a low value place
to a high value place, the cousin It's curve never emerges.
So the thing I point out is America's markets are

(24:36):
so dynamic, they're so open, they're so exhaustive compared to
other places, and the protection of property rights that are
afforded that the Cousett's curve never has a chance to
exist in America. But that's because markets were so well functioning.
And this is what I argue makes it that you
get this great, this first egalitarian and rich because America's

(25:01):
markets are a lean and mean, egalitarian growth machine. They're
they're designed the way they exist because they have. Now
it's not ideal, it's not close to what we want.
There's obviously legal discrimination against African Americans. There's uh legal
discrimination against the property rights of women for for some
periods of time. But even despite these imperfections, they're far

(25:24):
ahead in their exhaustiveness and uh than than other places.
That entrepreneurs find ways to conquer natural frictions. They find
ways to build railways, to build telegrams, to build infrastructure
that relays information that moves worker from one place to another,
that make market work better. Because if you're like an

(25:46):
entrepreneur or a person who thinks about like profit opportunities,
and you realize that there's a worker in Mississippi and
if you just move them magically to New York, he's
three times more productive. Then if you can find a
way to move him to New York are at a
low cost, then you make a profit and you make
society better off. So that's the thing I point out

(26:06):
and One of the other things I point out, and
this is an argument that regards to innovation, is people
tend to think that innovation requires like so's if there's
spillovers from an innovation, So you invent something and you
don't get the full reward. So some people can basically
freer ride on some of the benefits that you have
from your from the innovation. And so people say this

(26:28):
is a case for government invention, and I say, no,
you got it backwards. If there's spillovers and we observe spillovers,
what it means is property rights are so secure that
people are willing to do innovations that have spillovers and
they don't care that there's spillovers. They actually are okay
with people free writing because the private benefits are so
large that they'll do it. So if you think about it,

(26:49):
like in a dynamic sense, the innovations that we observe
in America that are that have tons of spillovers, they're
there because property rights are supertant.

Speaker 2 (27:00):
Give an example of an innovation from that period that
had significant spillovers railways.

Speaker 1 (27:06):
So railways, like the person who develops a railway, he
gets rewards in terms of the revenues from the traffic
along the line. But people whose estates or land or
farms are near the railway, the value of their estates
has gone up. They've got they've obtained wealth because now

(27:28):
they have an easier access to markets. So the railway
yes understands that, like some people will move there and
they will try to buy some land around it, but
it can buy all the land around the railway, so
some people get some spillovers. Same thing with for example,
barbed wire. Barbed wire is a magnificent invention in American history.

(27:52):
Think about like a farmer who needs to protect from trespass,
not from just neighbors, but just the nameghbor's animals, And
a neighbor's animal doesn't really care what the property line is,
will come, We'll trample on corn, we'll trample on we'll
eat the crops. So there's cost to fencing your land,

(28:13):
and if you're doing it with the timber, it's pretty expensive.
But now if you get barbed wire, barbed wire is
incredibly cheap. It's like exceptionally cheap, so cheap compared to
the alternatives that now more land can be used, Like
farmers don't need to use they can pick better crops,

(28:33):
crops that now they can pick crops that utter animals
from the neighbors might have liked, but now they won't cross,
so they can pick the optimal crops, not the optimal
crops under constraint of I don't want the utter animal
the neighbors animals to come on my farm. And which
yet is even though the guy who made the barbed wire,
the only profit he makes is the barbed wire, but

(28:54):
the social returns that he generates the spillover is more
land that is used, more land that is better used,
and obviously better crops that are being used, more remunutory
of crops. So the result is, but that guy just
makes profit from the barbed wire, he doesn't tap into

(29:15):
the vast number of spillovers that come from his innovation.
And these are just two examples, but you can pile
them up. You can add in the telegram the telegraph.
You can add in refrigeration, which allow for seasonal goods
to now become non seasonal canned goods. Can goods massively
reduced problems of health and cities. These are all individually

(29:40):
very small, but when you accumulate them, they generate together
a sum that is of massive improvements and absolute living standards.
But all of these require well functioning markets, and well
functioning markets require strongly protected property rights. And America that
this perfectly well, which is why the main claim of

(30:02):
the book is markets are and I want to keep
pointing this out to people, markets are egalitarian forces. There
are forces that raise the poor, and they will raise
the poor far more than we actually understand. Even economists
who are free markets that generally they'll do like a
small giveaway, and they say, yeah, but you know what
we care as fighting poverty is no, No, I'm guaranteeing

(30:24):
you that societies that have markets will actually improve the
lot of the poor far more than they will that
of the rich.

Speaker 2 (30:31):
And so what was special about the United States in
that period eighteen seventeen nineteen ten, and is how things
change in stand And how does it compare the United States?
They say, to what was going on in the UK
or Canada during that same period.

Speaker 1 (30:50):
Well, here's an example for the UK of something that's
really weird in the UK. Servants who work in you know,
rich people's household, if you want to think about it
this way down an abbey. If you want to have
like a reference in your mind that's if you left
your employer, it was a criminal offense. So certain types
of breaches of contract where like we're deemed criminal, and

(31:13):
this works in a way to restrict the functioning of
labor markets. So there is in other countries there are
violations like this of property rights. But also in terms
of industries, there's a lot of industry where you still
have to ask permission to enter the industry, you need

(31:35):
to talk to politicians. The United States, despite having for example,
pretty high tariff on the inside market of the US,
which is pretty big in and of itself, barriers are
very limited, and in fact, the Constitution gives a lot
of checks and balances to limit the state, the police

(31:56):
powers of the different states to intervene in ways that
could negate people's right to an occupation, to a trade,
to make contracts as they so desire, so that these
safeguards are functionally deeper than they are in Europe. Not
that Europe has no property rights, but if you want

(32:18):
to think about an intensity of the protections and depth
of property rights, the United States is miles in leagues
ahead of this. Despite the very obvious glaring hole for
the US which is a Djuri segregation. But in the
book I spent an entire chapter explaining that in a
weird way. That actually makes my case even stronger, because

(32:40):
if you look at African Americans in that period, they
are converging very mildly towards whites. So they start the
beginning of the period with incomes roughly twenty percent that
of whites. They end the period at roughly thirty to
thirty five percent. So there's some convergence. But this is

(33:00):
some convergence under legal segregation, with barriers in southern states,
for example, against recruitment agents, so people from the nord
who try to recruit workers from the South to go north.
Some state legislatures pass laws preventing this recruitment, and very
frequently these laws are struck down by the Supreme Court arguing,

(33:25):
well initially under privileges or immunities doctrine of the fourteen Amendment,
but later under substantive due process clause, argue that this
is a violation of fundamental rights. So they strike down
very frequently these laws, and even though they have some damage,
the reality is the environment is actually even allowing some
degree of market forces to be harnessed by the African

(33:49):
American community, allowing them a mild degree of convergence. So
the thing I try to point out is actually the
true tragedy in what I'm describing is not what everyone
else keeps saying that, oh, look there's rising inequality. Is no,
there wasn't. The true tragedy here is that there was
a group of people who had innate skills, innate abilities

(34:13):
that they were not allowed to tap and the small
degree to which we allowed them to tap into those
potential it allowed them some degree of convergence. So the
true tragedy is all the loss potential. So if the
lean and mean, egalitarian growth machine that was America's market

(34:33):
economy had been allowed to work, had been allowed to
be written by everyone, America would have been an even
more exceptional place than it was by nineteen ten. So
this is where I point out that we don't understand
how exceptional that period was and how inherently egalitarian. Again,

(34:57):
I don't mean this in the philosophy philosophical sense. I
mean in the distributional sense how egalitarian market forces are.

Speaker 2 (35:05):
When did blacks in the south start emigrating north and
take jobs in northern cities?

Speaker 1 (35:12):
So this is the Great Migration. It starts well, some
degree of debates, but it accelerates very much after World
War Two. So this is where there's a big jump
in the nineteen twenties. And this is like a very
mean no after World War two. So if I said

(35:33):
the nineteen twenties, I'm sorry. And so there's a slight
pickup in the twenties, but in the forties there's a
really big pickup. There's a great book by if anyone interested,
by Leah Platt Bustan from she's at UC Berkeley. Now
if I'm not mistaken, but she has a very beautiful
book called Competition in the Promised Land, where she points

(35:54):
out that this was the largest egalitarian force. The migration
of blacks from south to north was the largest one
of the largest egalitarian forces during the nineteen forties and fifties,
and explains a large share of the convergence between blacks
and whites pre civil rights legislation. So obviously the question

(36:18):
of these forementioned laws that prevented migration, well people from
now the north to come and try and recruit blacks
from this out had a mild effect initially in slowing
down that potential. Now, how much did they slow it
down as a matter of debates, but in essence it
does speak to this core point that I keep trying

(36:40):
to point out is if people are allowed to use
market forces by pitting employers in New York against employers
in California against employers in Mississippi, because they're free to
move around, this feature of a market economy will be
insanely egalitarian. And we under estimate how much there was

(37:02):
of this in that particular period. And again I keep
reiterating this. This was in a period with very different
technological abilities than today, which makes me wonder if we
gave let's say, a bit more of the freedom that
people had back then, and just like just a bit more,

(37:25):
given the insane level of technological abilities that we have now,
how much of this egalitarian growth machine could we reclaim
and put America on a growth track where living standards
for everyone raised by two three four percent a year
and people at the bottom of the income ladder can
see their absolute living standards increase, but they can also

(37:48):
climb along the ladder so that in the next generation
they're far wealthier than their parents, but they're also far wealthier.
And say a person and that was the median income
person was a generation and ago. We want a society
like this. And the key point is markets are so agalitary,
are so egalitarian in their nature that it is a

(38:10):
tragedy that we have not allowed them to work as
much legally speaking.

Speaker 2 (38:17):
And usually in the name of trying to help the poor.

Speaker 1 (38:21):
Yes, very often in the name of trying to help them,
but in reality we put under But that's because I
think people have a negative prior about markets, either because
it looks like it's disorganized, whereas no, it's does it
looks like it's disorganized, but there is order in that
seeming chaos because people try to figure out new plan,

(38:46):
people try and adapt to new situations, and the great
virtues that markets also generate. And this is something that
comes from related research of mind, which is probably the
next book I'll be working on. Is my related agenda
is income, mobility and economic freedom. And rather than just
looking at inequality, I look at can a person born

(39:09):
in the poorest death style of society can he climb
to the top death sile and societies that are very
economically free, especially with respect the property rights and regulation,
can make massive climbs along the ladder over time relative
to themselves in the past or relative to their parents.
And this I think is important because obviously the absence

(39:33):
of legal barriers help, but economic growth has Another feature
that people underappreciate is because market economies require specialization to
generate growth, specialization are also pat ways for ascendance. So
if you have more specialization, you have more ways to
rise up. In a society that's only a galitar, that's

(39:54):
only a grarian, the only way up is to work
harder on the farm. However, if you have another sector emerging,
you could work harder on the farm, but you could
work in another sector and work harder in that other sector.
So now you have three ways up. Just because you
added one other sector. Well, that's one pathway. Market economies

(40:16):
generate these new extra pathways for upward mobility, and that
connects to the point of the book is markets are
so inherently egalitarian, and people don't see that part because
they just focus on the chaotic seeming nature of it.
But what seems like chaos is these new pathways to

(40:36):
upward mobility.

Speaker 2 (40:38):
So I was going to ask you about mobility. So
during this period, do you see dramatic mobility and does
it go both ways? That is it upward mobility. But
do we also see people lose all their money? I mean,
do we see download mobility as well?

Speaker 1 (40:54):
So we have a hard time measuring it. So, without
getting into the details of the measuresurement battles, if we
look at white Americans, there is a very high level
of what we call relative mobility. So this says, if
you were in the bottom twenty percent of the income distribution,
can you rise will you stay in that bottom twenty

(41:15):
For white Americans, there was a great deal of relative mobility,
and it stayed more or less stable over the period. However,
once you include Black Americans, you see that there is
less mobility socially speaking, but there's actually a slight improvement
over the period. So and that coincides with my point

(41:37):
that there was a mild improvement for blacks in the
sense that they had some improvement, but these were again
very small and very far below what potentially could have been.
So that in that narrative, I think when people think
about income mobility, it was pretty exceptional America. But that's

(42:01):
relative mobility. Relative mobility doesn't ask how much you're better
off relative to say, your parents or how much better
off you are relative to yourself ten, fifteen, twenty years ago.
This is absolute mobility. Absolute mobility definitely one of the
highest in the Western world. So there's like a new
paper that came out very recently by the same person

(42:24):
I mentioned earlier, Leaplot Boston and the United States had
one of the highest level of absolute mobility. So do
you out earn your parents at by age thirty? You
out earned your parents when they were thirty? And the
answer was yeah, most Americans did. And when I say most,
the near totality of Americans did. And this was not

(42:46):
the case in other nations. The proportion was smaller elsewhere.
So what you observe is the United States was a
very mobile society, the in where markets were allowed to
work best, but even where they were not allowed to
work fully by legal discrimination, markets were eroding the barriers

(43:13):
by allowing Some think about it this way is this
is how I think of most state interventions or legal
discriminations that the state puts on. Is the human creativity
is a river the state puts on a dam. The
river still has its own flow and power, and if

(43:34):
the dam could crack eventually, the continuing force of markets
and human creativity eventually erodes this, and in this case
it was a poorly built dam, or at least poorly
built relative to the power of market forces in America.

Speaker 2 (43:52):
So this is also a period of massive immigration, you know,
you know, relative to the population in America, immigration was enormous.
How does that fit into the story? I mean people
coming not just from other parts of the United States,
but actually from outside of the United States.

Speaker 1 (44:11):
So there's two ways this factors in. So one is
a boring mechanical wat statistically is people who come from
other countries, if they come, and so it will still
apply by the way, today, let's say, like tomorrow morning,
only doctors migrate from other countries to the United States.
That will swell the right end of the income distribution.

(44:34):
If only unskilled workers entered, that will swell the left
end of the distribution. So anything that is not exactly
identical to the current distribution of income in the United
States will change in equality. So in the period we're
talking about, the left end ended up being swollen. So

(44:54):
people were entering at the bottom. But that's like, first
of all, already really telling because a Norwegian who enters
at the bottom of the US income distribution is still
better than you would have been in Norway. So there's
this a massive jump forum. And the thing I point
out is actually there's two ways you can do this.

(45:16):
You can either do something that's called removing a composition bias.
You want to compare the US population with the similar
population right, so where the left end is not allowed
to be swollen. That actually creates the impression that there's
more inequality. Once you remove it, it actually shows that
there's less inequality increase over the period. Or the other

(45:39):
way you can look at it is if you look
at the global distribution of income, American markets being so
dynamic reduces global inequality in the sense that it pushes
up people so much, not by anything that's related to
their skills. By the way, right, the Norwegian who came
from Oslo to Minnesota, and as a Canadian, I don't

(46:02):
understand why you'd move from cold to cold. I think
you both to Florida or something like this. But let's like,
I've had my first snowless winter a few years ago,
and I didn't know snow was optional. As a Canadians
like I just assumed that was always going to be there.
But if you think about the movement that this person makes.
He makes a massive income jump, and that means that

(46:25):
if you take all the people in Norway and all
the people in the US, him moving to the US
reduced inequality. But he's still the same guy. He still
has the same skill, the same education, the same experience,
the same family. Nothing has changed about him. The only
thing that has changed He's been brought to better institutions,
better property rights, better and more capital. And the result

(46:48):
is magically he's fifty sixty seventy percent richer than he
was had he stayed in Norway, which means that when
I say America, it was in egalitarian groat machine. I'm
still understating my case because I'm only looking at it
from the vantage point of an American. If I look
at advantage point globally, this was an even more powerful

(47:09):
poverty eradication machine than people even appreciate.

Speaker 2 (47:15):
So if the result had been that the rich god
richer faster, but it would still be true that the
poor god richer significantly richer three times is rich. Would
that have would Would that have made you less happy
with the results of the book. I'm just of the
of the research. If the poor still getting you know,

(47:36):
getting less poor. Doesn't matter what the top of the
distribution is doing.

Speaker 1 (47:43):
Uh from my vantage point, No, So I generally I
care about the absolute living standard of people, and I
think the ideal that we should normally strive for is
a high mobility society. That I am better off than
my parents, and my parents were better off than their parents.
And if I'm born in the bottom ten percent, I

(48:03):
can climb up. And the guy who is born in
the top one percent, if he wants to just go around,
fart around, waste all his fortune and return to the mean,
then that's his problem, and that's the society I would
I desire. But that argument, if I think is true

(48:25):
but does not convince, does not appeal to as many people.
So I think I would have been sad in the
sense that I don't think the book would be as appealing.
I think here the virtue of when I was trying this,
I actually had the prior that you have just stated.
I actually expected to show Look, the rich one percent
got yes, richer, but we underestimate the improvements at the bottom.

(48:47):
That's what I expected to happen. But I actually underestimated
even high who's a rabid free marketer, and like a
very optimistic guy, I undersmated how much returns had gone
to the very poor. In fact, in the book, when
I wrote the first draft, I was I couldn't believe myself.

(49:12):
So what I did is I shifted all my hypothesis
to the most conservative one, so I use the worst
price index, the one that went most against me when
I was talking about something called the missing poor problem,
so that census would not census enumerators missed a lot
of people who were the poorest in society. When I

(49:33):
was looking at mortality amongst the very poor, I kept
using systematically the worst assumptions possible to hinder my case.
And the thing I point out in the book is
relatively is made to be short and accessible to all.
But there's an one hundred and fifty page appendix something
like this where I go through the alternative hypothesis, where

(49:54):
I actually make the case that if you ease some
of my conservatives asumptions, you might find that actually my
case is even stronger than I state. So that's what's
because I couldn't even believe my own my own argument initially,
and that makes me happy, because that's it will generate

(50:19):
it at least the debate, And I'm okay if I'm
mildly off, because I gave myself some confidence interval around
which I am very confident of the of my general conclusion.

Speaker 2 (50:34):
So to what extent is the phenomena from eighteen seventeen
ninety ten still occurring today? That is, to what extent
do we see do you think we see we're seeing
the same phenomena today, given that we've lost a lot
of the protections of property rights we've lost, you know,
we're much more highly regulated and more redistributive than we

(50:54):
used to be.

Speaker 1 (50:55):
So I'm not sure I out of answer that directly,
but I can answer it in a series of milder ways.
The best one I can give is why didn't socialism
pick up in America the same way it did in Europe?
Because if you look at Europe on the eve of
World War One, every major European country has a significantly

(51:18):
large size socialist party. The US doesn't. And there's a
very famous book by Seymour, Martin Lipsett and Gary Marx.
I always forget if it's David Marx or Gary Mark,
but anyway they have it didn't happen here why socialism
fail in America? And their claim is, well, the American

(51:38):
constitutional system offers so many slowing safeguards that it had
a harder time picking up, but also that these safeguard
generates so much economic growth that the poor understood that
they were far better off than elsewhere, and not only
that they were far better off, but that they sensed

(51:59):
the improvement from time to time. So I think we
still live in the shadow of this in that sense
that some very bad ideas are not as able to
break through the American market in terms of policy implementation,
largely because people still understand instinctively some reflexes that are

(52:22):
transmitted through traditions that markets have worked really well at
generating people's upward mobility. You'll have probably someone in the
room who will mention a grandfather who told him that
he was dirt poor in southern Italy, came to the
United States, and now he has a flat screen TV,

(52:44):
and he's looking at it and he thinks the world is,
you know, could be better, But he understands the distance
that has been traveled relative to ancestors not far removed.
So I think there is that kind of TRANSMISSI that
that carries on in which Dan explains why certain really

(53:04):
bad ideas don't don't well cross the border from north
to south because some of them have are in Canada,
but also don't cross the Atlantic as well. So I
think that would be the way I would answer your question.
I think this period we still probably have some benefit

(53:25):
from it in terms of immunity to the what I
could call socialist populism. I think it has Americans, They're
not immune, but if we can think of immunity as
some dial it's not zero immunity.

Speaker 2 (53:44):
So over the last you know, forty years, China has
seen a dramatic reduction in poverty. To what extent do
you think that what's happened there is similar to what
was going on in the US in eighteen seventies and
nineteen ten.

Speaker 1 (54:03):
So obviously in terms of the pace of improvement, it's
pretty exceptional. But the big difference is the United States
is having this in a you know, largely open society
with very strongly protected property rights, whereas China is a

(54:25):
far more territarian regime. And there's some literature that I mean,
it's a nascent subset of the literature that points out
that liberal reforms. Even in like modest liberal reforms, they
can get reversed very very easily in countries with you know,

(54:48):
mild to moderately acceptable institutions, let alone horrible institutions like China,
And it kind of fits a dictator who liberalized. This
can also be a dictator who deliberalizes, which is and
this will freak out some free market people when I
say this, but when we look at Chile, we have

(55:09):
some ways to test the empirical effect with some causal
methods of Pinochet's regime, and we don't find effect of
his reforms until he leaves office. But it's not because
he leaves office that's important, because there's a constitutional reform
that creates safeguards, that creates checks and balances, and now

(55:31):
people know that whatever the reforms are, the dictator can
just turn around. So it's also that these kind of regimes,
because they have these features of discretionary powers to politicians,
any reform will not give its full benefits. So in
a way, what I'm wondering when you're talking about China
is kind of the same thing as with African as

(55:53):
American for the US is how much more potential would
there have been if China had been and we're going
very extreme counterfactual here, but had been a liberal democracy
with strongly protected property rights, checks and balances, divided powers,

(56:16):
market preserving federalism, where different provinces can compete with each
other to attract investment, capital workers. I wonder how much
less poverty did be in the world today. Hence my
returns to my core points. Markets are inherently egalitarian. The
more you give them room to work, the more they

(56:37):
will generate improvements that will matter dis proportionately for people
at the bottom.

Speaker 2 (56:43):
So tell us a little bit about when the book's
coming out, and how people can get it when it
comes out, and all the good marketing stuff.

Speaker 1 (56:50):
So I sent the last version today to the University
of Chicago Press.

Speaker 2 (56:56):
So it's.

Speaker 1 (57:00):
So it's that they decide the date. I forget exactly
which date they said, but it should be I think
at the beginning of the second half of twenty twenty six,
if everything goes well. But I don't want to hold
them to a date because they have, like they don't
want to cannibalize their own sales. So but it is
coming out in twenty twenty six, that one I'm willing

(57:21):
to bet my shirt on, although no one would want
to see me going shirtless. But so it's coming out
with University of Chicago Press.

Speaker 2 (57:32):
Title The Great Enrichment, The Great Enrichment.

Speaker 1 (57:38):
So I'm you're actually, by the way, the first I
talked to since I handed in the final draft.

Speaker 2 (57:44):
Okay, that's great, but congratulations, that's a terrific achievement. Is that?
Is that from Didri's Uh? The great enrichment?

Speaker 1 (57:55):
Is that?

Speaker 2 (57:56):
Is that a did she coin that?

Speaker 1 (57:58):
So she has that term, but the title is not mine.
What I wanted to do was the first egalitarian enrichment,
and the editor explained some technical reasons why it doesn't work.
So he proposed a series of alternative and I think,

(58:19):
as a wink wing to Dedre McCluskey, I thought that
was probably the best title. Uh so it's the one
in the contract that we settled on. Good even though
it wasn't my first choice. But I think that's okay
because the more I'm thinking about it, the more I

(58:40):
like my second choice more. Then maybe it's post factor
rationalization or cognitive dissidents in subway, but I'd like to
get more and more.

Speaker 2 (58:50):
It's not clear that the author has any insight into
what the title should be, given that the title is
there for marketing purposes, and you know, as is, I
don't know how good we are marketing.

Speaker 1 (59:02):
I would tend to agree, and that would fit with
the fact that people who have been doing this for
twenty years probably have some knowledge that I do not,
is my assumption. So I can at least my strategies.
I ask them the questions of why, and generally at
least the one I'm dealing with. He's a great guy,

(59:24):
Chad Zipperman. He gives me very good answers, and I'm like, oh, yeah,
that makes a lot of sense.

Speaker 2 (59:30):
Specialization, as we said, the vision of labor wooks. All right,
thanks Vincent, this has been fascinating. We've got some questions
from the audience, if you don't mind taking some of them.
Some of them I'm on the fun side and less serious.
So let's see what we have. Let's start with Shasbad,

(59:52):
who's got a Star Trek question for you, says, the
economics in Star Trek have been you have ambiguous. Sometimes
they say they don't even use money. Wouldn't it be
impossible to have a civilization spanning hundreds of planets? Without
using money of some kind, no matter how advanced they are.

Speaker 1 (01:00:15):
So I think we're people will try to put a
lot of coherence on a fictional edifice because there is
I can't believe I'm going to have this discussion and
it will peg my status as a nerd. There are
episodes in the Space nine where we understand that they
have credits, and there's I think a few episodes so
they have latinum bars in the Space nine. They have

(01:00:38):
some credits in the next generation, so there's mention of this.
Will some people seem to use some type of currency. Now,
how much of this is like the initial creator Gene
roden Berry's weird politics that just get care and some

(01:01:00):
people like it. However, there is one thing that's that
I always thought was interesting is if you compare the
economics of Star Wars with those of Star Trek, there's
no productivity growth. As the Star Wars universe, they're the
same technologies over a long period of time, they don't

(01:01:21):
change that much, whereas Star Trek looks like a far
more dynamic world. Now, as an economist, if I see this,
my assumption is that to some degrees, markets must be
much more functional in Star trek than in Star Wars,
because you wouldn't see that much growth without some degree
of well functioning markets.

Speaker 2 (01:01:41):
And for that they would need something that serves as money.

Speaker 1 (01:01:44):
Something that serves as money is something that serves to
coordinate economic activity, coordinate very complex exchanges, and also very
secure property rights somehow. Now they don't go into that,
but by virtue of what the universe gives me in
terms of information. But again, it's a fictional world, so
let's not try to. If we're going fictional world, we

(01:02:06):
could talk about socialism for hours.

Speaker 2 (01:02:10):
True. True, Well you made chasbut's day. I think though,
because you know you gave you a much more nod
answer than I could have, So I think that's good.
All right? Lincoln asks what is a bigger hood of ts?
Economic growth? Regulations, attack and spending policy both a bad
But I'm I'm which one do you think.

Speaker 1 (01:02:32):
Regulation? By far? So, when the electoral campaign was happening,
I had this puzzle that I put by all my
fellow economists just to see how they would react, and said,
let's say you have to take ten percent tariffs, but
you get something in return, one thing in return? What

(01:02:54):
would it be? So it doesn't. Maybe you can think
it doesn't compensate fully, but you'll give me something that compensation.
It's the most right by definition. And the one that
came out very frequently were a mixture of the following
removing certificate of needs regulation and healthcare which basically limit competition.

(01:03:14):
They basically allow incumbent hospitals or other types of businesses
if it applies to them, to vote on whether a
new hospital should enter the market, which is I would
always yeto opponent entering my own market, but that's never
understood why this is necessary, So that came up. Housing
regulations came up very frequently as well, largely because of

(01:03:38):
by the way of all the regulations we have in
the US, this is probably the most depressing for income
mobility because you're locking high opportunity areas from people who
are in low opportunity areas but cannot get a wage
jump sufficient enough to compensate the rent increase. So what
you're doing is creating essentially parallel markets rather than a

(01:04:01):
national market, which is a really bad thing. So that
came up very frequently, And then there was a collection
of either removing some FDA regulation for food energy regulation,
regulation on nuclear energy as well, But rarely did people

(01:04:23):
say reduce government spending by ten percent. And the reason
for this is the literature on the welfare state suggests
that of all the things the States does, it's not
the worst, and it's there's bad ways of doing it,

(01:04:44):
but when you compare to other alternatives. So, for example,
if you were let's just go full Milton Freeman here,
take the welfare state, replace it by a negative income tax,
which is a variant of the basic income, it's actually
would probably limit all lot of the damages of the
welfare state. And it's not clear whether that would be
like a dramatic bad or super great positive, or if

(01:05:08):
you had more means targeted measures. So the welfare state
literature is complex to navigate because sometimes you could get
some improvements by making some reforms, but even like the
very damaging thing is relatively small when again you compare
with things like housing regulation, daycare regulations, certificate of the

(01:05:32):
barriers to entry, tariffs. And this is the way I
always think about it. I still don't remember who told
me this, but I still think it's true. There's three
horses in a race. There's the Adam Smith horse, There's
the Joseph Schumpeter horse. And there's the size of government horse.
You want the first two to run faster, right, The

(01:05:55):
other one can keep spending as much as he wants
as long as he doesn't drag the other ones. He
can actually be dragged by the other ones. But it's
the thing that slows down the other two is regulation
closed markets. So hence, why if you ask me, in
a world where we have to prioritize and I can't

(01:06:16):
get my ideal set of policies, take a chainsaw or
run through the zoning code, or run through the regulatory
codes the Federal Gazette randomly pick fifty percent of the
pages to rip off. You'll probably break some eggs, but
you'll probably make a lot more omelets than you would expect.
So yeah, that would be my answer.

Speaker 2 (01:06:38):
I live in Puerto Rico, so I have a soft
spot for the Jones Act, so I.

Speaker 1 (01:06:43):
Would put it in my list as pretty damaging. In fact,
I was a peer reviewer for and now I mean
I shouldn't disclose this normally, but I was a peer
reviewer for someone who made a study on the Jones
Act and saw the damages as being actually even more
substantial than I expected. I think it came out the

(01:07:03):
close alone to I think point three percent of US GDP,
which is again shouldn't like for people all point three
point three is huge? Yeah, all right? Point three percent
for one one is I'm sorry, this is I just
want to point out that. And I had to go
through that paper like that that seems big, and the

(01:07:24):
guy was actually down playing it. So I was this
is it's it's it's a big deal.

Speaker 2 (01:07:30):
Yep. Yeah. Lincinos asks why do you think there was
never Silicon Valley type boom in the EU or Canada.
Some companies have made modest improvements like Spotify for music
or Shopify for e commerce, but no major innovations equivalent
to Facebook, Amazon, Google, Nvidia.

Speaker 1 (01:07:52):
Well, there's a I don't know the answer to that,
but there is a semi answer that I can give,
so I'll be cautious. Here is one thing that's very
at least for the two examples I have in mind
are for my native Quebec and France, is very often
when a sector tries to innovate something in either of

(01:08:14):
those places, the state very often comes in right after
and say we want to participate, and then what you
get is a flurry of political entrepreneurs who are there
because the state is signal that it will dispense subsidies
and privileges, and then you get a lot of noise
between the true innovator and the political entrepreneur. The person

(01:08:39):
who is really good that she's moosing and dining the politicians.
So that would be my answer is very often this
is what happens. But again, the two examples I have
in mind of this is France and Quebec. So I'm you,
I don't know enough about this for example in Germany

(01:09:00):
or Italy or the UK. However I could. I don't
know why I didn't think about this. But Ireland, Ireland
has a massive tax sector and I don't think it
planned to have one. What it did is it massively
cut corporate taxes. Yeah, so I don't know why I
didn't think of that as my first answer. Yes, Europe
could have this, it could just do what Ireland did.

Speaker 2 (01:09:23):
But it is interesting that Ireland's tech sector is mainly
American driven. It's not innovative in the same sense as
silicon value is. It's driven around support for American companies
that are based there because they based it, because they
get corporate tax break.

Speaker 1 (01:09:43):
So some people say that, but I've recently read a
paper that uses one of the causal method I was
reading recently that tries to disentangle different things about Ireland.
And there is genuine growth and investment boom that happened
in the pendant of the foreign capital flow, So there is.

(01:10:04):
It seems like it had spillovers on otter sectors of
the Irish economy, So it's I think this is there
might there's some of it is sufficiently true that the
pooh poohing that people make of the Irish policy sounds plausible,
but it's also pooh poohing. It's there's gender the reforms

(01:10:25):
were genuinely positive.

Speaker 2 (01:10:29):
Andrews says, what do you think of the modern pessimistic
attitude of many Americans? You know, the life was better
than the fifties kind of attitude, Given how good American
stand up living is in historical tombs.

Speaker 1 (01:10:45):
I think this speaks to expectations versus reality. So it
could be that people expected year in, year out five
percent growth, right, let's exaggerate, and they get two percent.
Now two percent is a big deal. That means that
every thirty five years more or less you're living standard increases,

(01:11:05):
so it's not it doubles, so it's not I take
that like I take an extra two percent. But if
you're expecting five and you're getting two five means you're
getting an improvement pretty much every ten years, like ten issues. Ye, yeah,
you're getting it. Like like fifteen years, I think is

(01:11:25):
the number I have in the back of my mind,
like I'm not going to do mental calculation on the
spot this might happen despite having a PhD in the matter.
I can't. I can't do fifteen percent at the bar.
But if you're expecting so much more and you're getting
far less, even if it's a lot, people are disappointed.
And I think this is where a lot of the

(01:11:47):
nostalgia comes around. These people's baselines seem to have been foiled,
and I kind of get the feeling. But I think also, like,
don't confuse levels with trends. Right, level wise, we are
so much better off. I'm sorry, Like, and this is

(01:12:10):
just a story. I keep telling to people how much
people don't appreciate how wealthy the US is. So when
I crossed the border, we moved to the US, my
wife and I. My wife was pregnant with our second son,
and the pregnancy went in the last the last day
of the pregnancy, things went very poorly and there was

(01:12:34):
a risk that I am, either my second son or
my wife would have life was on the line. And
the thing that was fascinating is that in the hospital
room there was a very amazing large amount of resources

(01:12:55):
ready to go for emergency procedures that were entirely different
than what was happening. And I remember the birth of
our first son, who was born in Canada, where there
was far less resources, the material was less impressive. It's
not that people were lazy, it's just you could see
what the difference between my native Quebec and my adopted Virginia.

(01:13:19):
The difference in income between them is roughly forty thousand
dollars US. You could see what the difference in wealth
did in terms of a deeply personal outcome. So when
I say people don't understand the difference in levels, you
don't like. The United States is far better off than

(01:13:39):
it was in the past on dimensions we failed to appreciate,
and is still far better off than a lot of
places that we also think is developed. Don't confuse that
with thinking that we are under the potential that we have.
I think we are below potential. But that's not the
same same thing as saying, well, this is not great.

Speaker 2 (01:14:03):
Yeh HUPA. Campbell said, despite a horrible anti growth political climate,
do you foresee a stock market growth and quality of
life increases from AI in the tech sector.

Speaker 1 (01:14:20):
Yes, I actually tend to believe that. I mean, I'll
make a conditional statement. So this is based on a
paper with one of my graduate students, Pradior Sharma, who
if ever someone is listening and is an academic employer
and is looking to hire him, and you've seen a
CV on your pile, please hire him. He's a really

(01:14:41):
great student. We wrote a paper where we looked at
the effect of industrial automation on income mobility across generations,
and there was a lot of people showing that where
new technologies emerged fast, income mobility went down. And what
we pointed out is is actually this is entirely conditional

(01:15:02):
on the degree of occupational licensing on these markets. The
more occupational licensing you have, the more frictions you put
for people to move to new jobs and also to
allow prices of certain services to fall so that people
don't get higher real wages from prices falling, but you're
also not getting people being able to relocate across industries.

(01:15:26):
So we point out that most of the effect of
new technologies that people tend to perceive as regressive are
actually conditional on bad policy. So here I could see
ways in which AI could be regressive. However, I do
not believe it is inherently regressive. We can have as

(01:15:48):
much improvement as we allow it to be at the bottom.
The more we try to put hurdles on people's ability
to adapt, the more likely it is that things like
AI could become even more disruptive than they are enhancing. Yep.

Speaker 2 (01:16:06):
So Lincoln, as a question about education is does education
really colorate economic and wealth growth. We have a majority
of young people have college degrees, and almost everyone graduated
high school, but we grow at a slow rate compared
to you know, fifty years ago, sixty years ago, and
especially compared to the guilded age.

Speaker 1 (01:16:25):
So I have an office neighbor who Brian Kaplan would
say that you are entirely correct. I am not as
sanguine as him on this. I would point out that
from very low level of education, some improvements in education

(01:16:46):
is going to have huge effect. But if everybody's already
educated at one unit, increase in years of schooling is
not going to have a huge effect. So we're probably
in the very, very strongly increasing marginal returns of education
in rich country, which is probably what you're describing. But

(01:17:07):
there's also a part of this that we don't allow
enough markets in education. One of the things I pointed
out in the book is that, and I was really
happy to put that in, and it's one of my
next research agendas. A lot of what people point out
as being a galletarian in that period is the rise

(01:17:28):
of elementary schooling in the United States, and there's a
big rise of literacy rates. And I point out that
while this is true, there was a lot of private
complements that existed on the side that improved the efficacy
of whatever the public sector was doing. So, for example,
where Catholic schools existed at parochial schools, parochial schools had

(01:17:50):
one effect as first of all, Catholics didn't send their
kids to public school but still pay the taxes, so
they allowed more funding for the other kids. But more importantly,
they created competition on some margin, so schooling governance was
a bit better. And there's a great historian, Richard Gross,
who wrote a very good book. It's a more qualitative

(01:18:12):
than quantitative, and this is where I want to bring
my research is trying to quantify some of his points.
Is he actually points out that where there was that competition,
public schools were better by virtue of the contrast and
the ability of people to defect between schools. And the
other thing I point out is there was a strong
and vigorous market in correspondence schooling in that time, and

(01:18:34):
that meant schooling for adults who had already left school
and generally people who would have had a higher cost
of schooling in terms of foregone income than everybody else.
And so I try to point out in the book
that a lot of what people assigned to governments in
terms of the egalitarian and Richmond actually was even more

(01:18:56):
effective because there was markets working around what's happening. Take
that for today. Imagine if we allow just vouchers and
people moving around between schools and letting people experiment with
methods of teaching. Like, there's something I would love to
do as a university is offer a VA and economics

(01:19:16):
that takes a year where every week you get a
one week intense course in Principles one and a one
week intense course and Principles two. And it's a one
year and it's intense. There's no break, there's classes on weekend.
The teacher teaches the whole year, all the set of content.
Once he's done, he takes a year off, right, But
it's an intense thing, and you don't lose three years

(01:19:36):
of income. Some people would be adequate for this. Some
people like the three years. And the thing is is
that when you have more and more government intervention, there's
weird ways in which you end up with an overly
standardized product that is two uniform eyes, and people don't
try to experiment on the formula. And I think a
lot of what you might be describing, I think it's

(01:19:57):
Lincoln who asked the question. I think what Lincoln is
asking here is maybe a part of this is this
decreasing marginal return I mentioned earlier, but also this lack
of ability of letting markets try shit out.

Speaker 2 (01:20:09):
Yep, all right, we have let one last question from Andrew.
He says, how do markets work as well as they do?
Still do? Given them out of government intervention? In the
economy today.

Speaker 1 (01:20:23):
That is a story. If I had the answer for this,
I'd be very happy to have one. However, I can't.
I can't help but being amazed at how well markets
keep working despite the amount of regulatory burdens we put

(01:20:44):
in people's way. I think it's it's a testimony to then.
So I had my Like every libertarian, it usually starts
with ain Ran. So I had my rand my Ranyan
moment when I was younger. But I still kept this
idea that the exercise of reason is a very very

(01:21:08):
powerful tool. And someone who's dedicating the exercise of reason
in the pursuit of wealth creation is an incredible, incredible machine.
So I think that might be why you're getting this.
Markets are still working very well, it could work even better.

(01:21:28):
But the exercise of reason channeled by the quest for
profit is an exceptional engine of wealth creation. And I'm
still amazed, despite all the sand in the machine, how
well the machine works.

Speaker 2 (01:21:44):
That is a great place to end. This is great,
This was fun, Good luck with the book.

Speaker 1 (01:21:51):
Thank you very much.

Speaker 2 (01:21:52):
Absolutely, have a great night. Bye, guys. Shall see you
guys tomorrow and Vincent, hopefully we'll meet in push in
one of these days

Speaker 1 (01:22:00):
I hope so too good, right mhm

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Conversation w/ Vincent Geloso: The Gilded Age & Inequality? | Yaron Brook Show

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Conversation w/ Vincent Geloso: The Gilded Age & Inequality? | Yaron Brook Show