Making the Case for a New Economic Model

Do you have a piece now out of National Affairs talking about sort of economic models, different models through the years and why maybe we need maybe a new model? Take us through what we have been through and where we need to go. Well, you know, the historical debate over mercantilism is one we're living through again today. The traditional response from economists is you need to focus on markets. Yet as economists, we often make that sound very abstract. And why should you care about markets? The reason is that they are delivering the best outcomes for all of us in the economy. The markets don't always work perfectly. The title of the piece I wrote was Markets for the People. When would you step in? You'd step in for National Defense reasons, for example. You would step in to support basic research and innovation. But we need that kind of a new focus. We don't need to go back to Hayek and Friedman on the one hand, or the mushy industrial policy of the Biden administration on the other. And there are massive slowdowns. Only the Great Depression, I mean, the great financial crisis, I assume, where you would say, yeah, the government does need to step in there. You can't just let the markets bail us out of that. Well, correct. But let's go back to the intuition economists like Keynes had at the time of the Depression. It was really the notion of the state being a kind of actor of last resort in a true crisis, You know, really awful events. The state steps in. But now the state keep stepping in. When does the state not step in? That's not what Keynes had in mind, and it's not even a question about budget as much as it is dulling the competitive senses of the private economy. If the state is always going to bail us out, is it a question of democracy as well? Ironically, in the sense that once the people see that they can get bailed out, then there's sort of an impetus to have their elected representatives bailing out. And people want to get reelected. So they say, let's, let's make sure we smooth over all the rough patches. Exactly. So, except the problem is we can't do it. If if you look ahead in the next 20 years of the nation's fiscal policy, we are going to need to spend more on aging Americans. We are going to have to raise spending on defense. No one seems excited about raising taxes. This math doesn't work. How do we create a society where we have equal opportunity without guaranteeing results? Great question. I think we need to have a right to opportunity much as we have property rights in markets. But a right to an opportunity is not the right to resolve. So to be specific, a right to an opportunity could be much more support for education, for training, for places that have been left behind, for the government, supporting much more in the way of basic research. All of that's very different than a system that says results only matter. How do you have say for very large differences in where people start out in the process? I mean, we all differ of where we start out, no matter where we went to school, where we grew up, whatever. But there are some huge differences here where some people are well behind in terms of their wealth, in terms of their background. How do we, how do we make sure that they have an equal opportunity that compensates for what they've been deprived of for generations? For example, the black white divide. It's a great question. There are a lot of reasons we have black white wealth differentials, some of which sadly come from public policy errors over decades. I don't think we can fix that overnight, but I think what we can do very quickly is make sure that everybody has access to the same opportunities and have a system that encourages work, encourages wealth building for anyone who wants to do so. Glenn, through so much of your work, you often come back to education and education, not just getting a bachelor's degree. It can be trade schools with various education. You talked for example, about land grant schools in your in your book, The Wall in the Bridge. But whenever we have money to spend, we don't seem to spend on the education. We find all sorts of other things. We can have wars we spend money on. We can spend all sorts of money on infrastructure, which is a good and useful thing. I don't ever hear that coming up to the top of the list. And the agenda politically, well, it's got to, and we've done it successfully at least twice. So the land grant college movement was a decision by political powers that be that the country needed a different set of skills. We were going from an agrarian economy to a manufacturing economy. After the Second World War, the GI Bill was the same kind of intervention. Today with globalization, with technological advance and especially new developments and artificial intelligence, we need that kind of moon shot approach to education and it's got to come up to the top of the list. Unfortunately, in the 2024 campaign. I'm not hearing it. No, I don't hear it either. That's right. But let me ask you about that because higher education in this country right now is under a microscope. There's a lot of criticism of it from all sorts of different directions. Would it make sense to write a big check for higher education right now without reform of higher education? Because not all of us think it's heading the right direction on its own. Completely agree with that. But I don't think elite private universities are the problem or the solution to what we're just talking about. Rather, it's community colleges, it's vocational training. That's where we need to be spending a lot of money writing big checks to the Harvard's and Columbia's of the world from the federal government. I'm, I'm not sure it's good for that problem. It may be good for basic research or things like that. But yes, our elite universities need to get their house in order and fast. That's called an admission against interest on your part. Coming from Columbia Business School, I'd say yeah, exactly. So are you seeing any movement? And it can be just intellectual movement right now, not even political one, in a direction you think is constructive in the United States? Is anybody taking a leadership position saying some of the things you're saying besides you? You do see it in Congress, from individuals, even in the presidential campaign. Governor Haley had a lot of these themes, both from her personal experience as governor of South Carolina and in campaign themes. Whoever wins in November is going to confront these challenges and is using a model that needs reform. So I'm very hopeful these ideas and ideas like them come to bear. Do you think that it would have any appeal to the masses? I mean, do you think people would really rally behind this? I think yes, because this actually works. You can actually raise people's living standards and they're flourishing in their local areas. Tariffs aren't going to do that. Mushy industrial policy isn't going to do that. People are going to look for something different. Where are the economists on either side right now, either for Donald Trump or for Joe Biden? Where are the economists taking some of the positions you're taking? The mushy industrial politics and, and the well, I think many economists have been critical of tariffs and the fact that U.S. citizens really bore the costs of the most recent rounds of tariffs. And by the way, that's not just a comment on former President Trump. The President Biden has been just as aggressive in the use of tariffs. Industrial policy meets with a lot of skepticism from economists. Not necessarily that you would never do it, but without a plan of when wouldn't you or when would you take off support? I think economists tend to be uneasy.