Transcription
So Steve, uh, you know, as an economist, you know, where you you were famous for making quite a few different predictions, one of them being a 2008, and your work's been documented all over the place. How do you think we, the average people who read and study economists? How should we judge economists >> as frauds in so many words? [laughter] >> Not that they're conscious of their frauds. Yeah.
But fundamentally all the economic theories with with the exception of the school of thought that I'm part of which are called just for historical reasons are called postcanesian. They tend to be people who got sick and tired of leftwing versus right-wing views from other economists and say we simply want to understand how the economy works. Uh and so there's less ideology in the postcanesian school. But you get Marxists to one end who think capitalism is going to give way to socialism. You get neoclassicals and Austrians at the other end who think that capitalism is the best possible social system and those ideological biases drive their analysis more than more than logic and more than data do.
>> Got it. And so how how do you view I've seen the work and the things you've said about Karl Marx versus Milton Friedman? Who's Karl Marx to you and who's Milton Friedman to you?
>> Pardon me. You better you better explain that question.
>> Yeah. Who who is Karl Marx to you and who is Milton Friedman?
>> Well, Karl Mar both of them are caught up with some sense of ideology. I regard Marx as a far superior intellect to Friedman. Uh but just like uh other ideological branches of economics, Marx had a set of conclusions he wished to reach. When his logic didn't reach those conclusions, he twisted his own logic. Milton Friedman does the same thing. I don't know how anybody takes him seriously. Uh when you take a look at his uh detailed work the the stuff he puts across uh the at the sort of political level the sort of standing on a podium giving a speech level can be persuasive but if you look at the arguments behind his logic that's just mythical completely mythical. Uh there's a wonderful put down of people like Friedman by Joseph Schumpeter who is the the great non-orthodox Austrian economist and uh and historian of economic thought and he talked about what he called the Ricardian vice. He said that's when you set up a set of assumptions that leave the conclusion you wish to reach as the only possible conclusion. You're conning people that way. And that's what Friedman does. It's what Ricardo did as well. Uh so there's a large amount of of um of rhetoric in economics which rest people outside the the discipline will mistake that as logic but it's actually trying to reach a rhetorical position and it's it's a question of how clever you are with words rather than what whether you what you say actually makes any logical sense.
>> So you think you think Milton Friedman was a con man? Do you think uh Karl Marx was a con man?
>> Um no it's beyond saying a con man. People people convince themselves of a particular set of conclusions about about capitalism. Uh it's a question of how well they reason within their own frameworks. I regard Marx as not only a far superior thinker to most people in economics uh but a a great logician but when he pushed his logic uh when he started including his philosophical thinking in how he analyzed the economy he ended up contradicting what's called the labor theory of value. Now the labor theory of value says that all basically all profit comes from labor and if you have a a industry with a high amount of labor and a small amount of capital will make more profit than one with a lot of capital and a small amount of labor and this is empirically wrong and uh it it argues that all output comes from workers. Uh but it also gave Marx an argument that there'd be a tendency what he called the falling rate of profit and that would lead to socialism. Now when he used his own he developed his own philosophy uh to apply his philosophy to economics he ended up saying that labor is not the only source of value machines can produce value as well and that meant there's no tendency for the rate of profit to fall. Now that meant he basically he proved there wouldn't be socialism and his response was to bury his own logic because he wanted to reach the conclusion that socialism was inevitable. So there's an extent to which people uh twist their economics because there's a set of conclusions they wish to reach and if their own logic doesn't reach to those conclusions then they disrupt their own logic and you can find that both in you can find that in Friedman you can find it in Paul Samuelson you also find it in Marx.
>> So I is it fair to say um Marxist theories Marxism communism miserably failed his theories?
>> No it's not. No it's not. Okay tell us tell us why you think it succeeded. It didn't succeed because people people's people outside economics um it I'm not saying that you socialism succeeds I'm saying that a form of thinking about capitalism can be successful or unsuccessful and the way we think about capitalism which comes from neoclassical theory is completely unsuccessful you take a look at the theory as carefully as I have done over you know it's one and a half centuries of existence they've contradicted their own logic. They contradict empirical data and they keep on going with that same belief system regardless. Uh so the logic inside neoclassical economics is extremely poor. Now Marx worked out a brilliant form of logic but he didn't like the conclusion. So his logic is great. His deductions for it contradict his own logic. So in terms of having somebody with an intellectual framing to understand the capitalist economy, I'd go with Marx any day, but not with the labor theory of value and not what most Marxists believe.
>> But let's stay on that. If somebody what what countries would you say tried to follow Marxist philosophy and miserably failed?
>> The Soviet Union?
>> So they miserably failed and they were all about communism, right? They followed
>> Yeah. I'm sorry. Look, this the the um it uh how do I how do I frame this? The the Sov Soviet Union basically thought you could have a centrally controlled command economy. Okay. Now, that failed uh to grow anywhere near as fast as the capitalist economies did. So Marx's belief and the belief of the Soviets was that socialism would grow so much faster uh and produce so many more goods for the workers that it would overwhelm capitalism by being more productive and giving a better salary to the workers. In fact, it failed on that front and that's why rather than you know it wasn't the east it wasn't the west that tore down the Berlin wall to get into the Soviet Union. It was the opposite direction. So the system failed. But there's a brilliant Hungarian economist I'm sure you haven't heard of called János Kornai. Ever heard the name?
>> I haven't.
>> Okay. János Kornai was a socialist economist in Hungary and he's asked this question why did the Soviet Union fail and why did capitalism succeed? And what he looked at he said well in the Soviet system of course you the when when so when when the Soviet Union began it was in a feudal society. Russia in 1917 still had serfs. So we're talking about a very primitive mainly agricultural society very very backward and therefore because you had the the Soviets had the ambition of industrializing Russia uh every last sector of the economy needed development goods and they were trying to centrally plan each one. Now what it meant was every sector got less than it needed. So they were all resource constrained and when you're resource constrained the best way to meet the physical targets you're given in the five-year plan is to produce more of what you produced last year. You don't innovate. Okay. Whereas capitalism in in Kornai's analysis is demand constrained. You've got lots of people producing cars uh inadequate aggregate demand because you try to pay workers as low a wage as possible. So in that situation the out you have more productive capacity than you need to supply the actual level of aggregate demand. So there's excess capacity everywhere. And the way that firms make try to get the demand to come in through their doors rather than through a rival's door is by innovation. And so the constraints of capitalism give you innovation. The constraints of the Soviet system gave you no innovation. So that's what's Kornai's explanation for why the Soviet system failed. Uh now China has studied both Marx and the Russian and the Chinese and and the Russian experience and um and and Kornai's work as well and they realized they had to find some way of guaranteeing innovation would occur at the level of consumer products and they've done that. They have centrally planned laying out the infrastructure. So the the roads, the rail systems you see are all state-owned and state managed. But in the uh in things like car manufacturing, I think it's around but about 120 Chinese car companies at the moment. There won't that won't maybe won't last, but it means you've got 120 different companies competing for the share of the same market. They're innovating like crazy. And therefore this Chinese system has got the best of both worlds in the sense they've got central planning for infrastructure and long-term development and they're doing that quite brilliantly and at the same time they've got enormous innovation taking place uh in the private sector which is all driven by uh profitability and capitalist motivations and so on. So um in in terms of the country which has succeeded from a Marxist foundation it's definitely China.
>> Yeah. So I if we if we were to judge the systems what is the right way for us to judge economic systems if it's communism and capitalism to judge it. So, you know, like to me, if I a personal trainer comes up to me, Stephen, and he says, "Hey, Pat, I want you to help you lose 40 lb, but the guy's 300 lb, 40% body fat, out of shape, but he wants to be a trainer to tell me I can help you get in shape." Right? And so, the average person will look at him and say, "How can you get me in shape if you're out of shape yourself?" What is the right way for us to judge an economical system, communism versus capitalism, to say, "Well, capitalism produced this. what the communism produced not much and even you know hang on hang on when you're talking about China let me finish this when you're talking about China >> uh China even had to go and you know sit down with Japan to find out how they were growing exponentially and then finally they said look you got a couple banks in China you need a lot of banks you need thousands of banks that are doing what they're doing and then China finally listens and opened it up and realized they need a form of free market yes they don't believe in free speech yet they don't believe in a lot of that stuff, but they allowed guys to have ownership and that changed. And so, how do you judge success between how should we judge success between capitalism and communism? Well, if you're going to use the America versus China result, China's rate of economic growth and China's uh lifting of people out of poverty transcends anything America's achieved over its time. So, America, American industry has lost complexity, lost sophistication. China's increased its complexity, increased its sophistication and uh since the Deng Xiaoping reforms which are absolutely critical occurred, you've had you know something like over half a billion people raised from uh out of absolute poverty. So there so there's the so >> which they embrace capitalism right they embrace an element of capitalism >> an element of capitalism we we there's a tendency to be like a cardboard cutout um attitude you know capitalism versus communism uh as if there's a standard version of both now of course there's dramatic variations in capitalist nations and in communist nations and like if I had to choose a communist nation which as well as suffering from American um uh sanctions is done very well badly in its own form, I'd choose Cuba. Okay. Uh having spent some time in Cuba, China is stunning at the other extreme and you cannot believe >> capitalism though. I I would put China as capitalist because their government is communism, but they're they have a free market element that allows you to compete. It's not by force. You can't have an opinion. You you have an ability to build a business. And they watch others succeed. and they decided to copy what was working, which is America. So did Russia in a sense. Wouldn't you agree on those two concepts?
>> No, I wouldn't.
>> So you would say that Russia and China are still 100% communist nations.
>> No, I'm not saying 100%. This is why I think you're trying to put things, you know, black and white pictures when everything is show.
>> Why don't we do this? Can you can you define what communism means to you? What is the definition of communism to you?
>> Well, we don't have communism anywhere on the planet. Okay? Because when you look at a Marx, Marx defined communism as once you get to the stage where people you know every each according to their ability from each according to their each from each according to their their ability to each according to their needs that sort of you know idealist system in the future. What you have is socialist versus capitalist and the socialist uh if you had to get a a pure statement of the ideologies of both systems. Capitalism basically says, you know, everybody out for themselves. Get the best possible gain you can for yourself and out of the self-interest and and and self-obsession, you'll get the best possible outcome.
>> That's your definition of capitalism that it's only >> potential. It's it's not the one that I heard.
>> It's mathematically impossible if it's only self-interest for you to >> That's true. That's true. That's that's an important point. in both systems are impossible and they're extremes and there's a tendency in western thinking to go left versus right, one extreme versus another extreme.
>> Not necessarily. I'm I'm more interested in in being specific. You you've been doing this for 50 years. I've talked to a lot of different economists. I enjoyed my conversation with Richard Wolf who's a socialist.
>> I've spoken to Slava Zizek who was more of a communist himself and we had a very good conversation. I've sat down with Ray Dalio. We've sat down with a lot of billionaires. We've sat down with a lot of heads of states and and and uh >> presidents. If if we were to put a percentage to it, Steve, and say taxes, because to me, capitalism, socialism, communism can be tied to percentage of taxes. Communism is the state owns everything and they, you know, seize the means of production. So, it's 100% taxes. You don't have the ability to build anything. And maybe capitalism is going to be a lower rate of taxes. You pick and choose where you want it to be. 10% flat, 30% or some states want to do progressive. I know you guys in your state uh just launched that if somebody decides to sell you you could and your capital gains just went to the roof depending on what time frame you sell it in. And then socialism could be in the middle. How would you describe those three economical systems specifically tied to percentage that people pay in taxes because that's how clear would make it for the average person?
>> I think it's a percentage of the of the services that are provided are provided by the state rather than provided by the market. And in that sense, uh the socialist economies tend to be 50/50 or more provided by the state. Uh capitalist less than 50/50. But there's so as time has gone on there's more and more things that are that are needed for a sophisticated society that uh what you can call public goods. So for example, health in my health affects your health. If I come down with a communicative disease, you're going to catch it. So there's there's ways in which that's a public good rather than just a private good. Now there's an enormous range of things that are like that. Now education, we all benefit from an educated workforce. We suffer from a dumb one. Uh education is a public good. Health is a public good. uh transportation to some extent is a public good because if it's easy for workers to get from one point to another without paying a great deal of money then it makes it cheaper to hire those workers because your wages don't have to cover high transportation costs for them to get to the factories. So there's a division between what is a public good and is better provided in a public environment and what is a private good things like now television sets and fancy restaurants and so on uh which are best provided by the private sector. And there's also a time dimension to it. When you're looking at uh normally ordinary consumer goods uh there's plenty of potential for a a manufacturer to make a profit out of things like television sets and so on. You can't make a profit of the same scale for sewage systems. You you if you if you leave those sorts of things for profit-oriented providers in the first instance to provide you'll have less sewage than they need. So I think that's really it's a division between the extent to which goods are provided by the state sex system as as just part of the fact that you're a citizen versus having to pay for them. And the socialist economies will have more of that. And I think that's actually in effect that's the trend we've been going through over time because 150 years ago you didn't worry about sewage. You had running down you know the streets of London uh into the into the Thames River. Uh if you move to a more advanced and sophisticated society we can't tolerate that. And that means you have the state providing those services. If you leave it to the private sector, those services will break down.
>> Those services would break down. I mean, a lot of people would say uh anything uh produced by the government, it's shittier customer service. They treat you horrible. They can make you wait as long as possible. And free market, if they do do that, they get complaints and those complaints hurt their business. But the state doesn't have competition. What would the state worry about if they don't treat you well? They have a different energy when they talk to certain people. Uh I was in the US Army. I was in the military and I've dealt dealt with the state for a long time. I've never seen any customer service on how they treat people be better that's ran by the state than ran on the free market side.
>> When I was in China the first time, which is 8182, I ran a seminar between Australian journalists and Chinese journalists, which was observed by a large number of students of journalism in China. This is the beginning of the of China having a not not a free press but a press system. And the one thing the students were most fascinated by that I unfortunately did not give them information on for various reasons was the ombudsman system that Australia had which had copied from Sweden. And the ombudsman system put controls and and monitoring sets on public servants. Now it seems that China has implemented that. If you become a a bureaucrat in China, you have a set of guidelines that you're required to reach. And if you don't reach them, you either get sacked or you don't get promoted and you you get ostracized. And that seems to be a large part of why the public services in China seem extremely well well provided and certainly better than what you get in America.
>> You you said certainly better than what you get in America. transportation, public transportation.
>> So you feel you feel service is going to be better rendered uh by the government than free market. What what uh what does the government have an alternative example the best example to free market failing America is your health system?
>> Would you agree with that?
>> No, I don't think so. I think we have a great health system. I think uh >> do you now cost three times as much as the rest of the world? Hey you you pay you pay about three times as much per head for health as most western nations do.
>> Our our you know capita per GDP is also higher. If Australia was a state with us you would be number 40. You know if if UK was a state it would be behind Mississippi at 51. So it's also capitalism's brought more people out of poverty in US than any other country in the world. I'm surprised you're fighting this, but let let me let me >> I'm surprised you're fighting it as well because you're making so I live here. I escaped Iran to come live in America because I have a incredible life. And by the way, I'm I'm surprised the level of tension you have in defending uh communism, a failed economical system. I'm surprised.
>> I'm surprised by this stuff, mate. You're not letting you you this is I'm sorry but I'm finding this a very black and white conversation when I prefer to preserve work in shades of gray.
>> Feel free to make it colorful. I mean go ahead if you want to make it color.
>> Color is I mean I me the mention about the medical. Now you you say the medical system in the states is fine. You have a low you have a a lower life expectancy than virtually every other major western nation. I don't know the actual numbers but I think the life expectancy in America is of the order of about 74 or 78 I think it is and the most of the rest of the world it's 84 and you pay about three times as much per capita for the health system and the reason the health works very badly as a private good is because when you find you're dying of a fatal disease or that's you don't have any bargaining power if you if you find you've got a disease you need the best doctor for you'll pay the best doctor >> I think a lot of people would say on that side how do you like Robert Kennedy how do you about RFK.
>> I think he's a fool.
>> You think he's a fraud?
>> I think he's I think he's he's weird. I mean, his attitudes to vaccines, uh the idea that you should catch diseases and and the idea you're going to have herd immunity from uh from exposure to diseases.
>> Do you agree with that? Do you agree with them? Do you agree with them on >> the types of food that we eat in America is a lot worse than other places because of >> Oh, yeah. That that that he's definitely right on.
>> Okay. So, you agree with him on that? So what do you disagree with them on [snorts] >> belief that vaccines cause diseases?
>> So you so you don't think you don't think that the studies that show that in the last 50 years and this is the part that you and I may actually agree on. You don't you don't think uh uh uh Steve that these big pharmaceutical companies have benefited from increasing from the average kid would get five vaccines, three vaccines back 50 years ago and now they're getting anywhere between 50 to 72 vaccines. You don't think financially that's benefited big pharma in America?
>> Well, certainly it has. But now you're being a critic of capitalism.
>> I am. I am. I am with pharma. I am with pharma because they they force down. You see, to me it's >> I have the ability to reason and see the flaws in certain areas and weaknesses. I'm very comfortable doing that.
>> Uh that's not something I'm uncomfortable with. I do think with the help of the state, they forced these vaccines on kids. And if we go look at stats, because I know you like stats as an economist, it's not hard to see what number of kids were getting autism 50 years ago versus today. Have you looked at those numbers?
>> I'm not a political person and I've seen arguments from people I know who are medical researchers say those stats are are nonsense. I'm certainly not going to get involved in saying I mean the antiax >> the antivaccine like I'll give you one reason why I'm pro vaccines. Okay. My father had polio.
>> I didn't. Okay. Uh and and the but certainly a big pharma making money out of unnecessary drugs for sure. And that's one reason you need a state system. And it may be that that health in general is better at the state level where it's provided in the state health is guaranteed uh in that sense rather than being something you can only afford an operation if you have the money for it or you have the insurance cover from your private company which is very much an American thing. It's not the rest of the world.
>> Got it. But but it when you're looking at numbers, I mean, these are numbers that's coming from the state, an organization you trust, right?
>> Please, please, please, please. So, I you're doing a caricature of me here. I'm a critic of the state. I've worked in the state. I I used to regard the Department of Trade, which I worked in at one stage, as a retirement center.
>> Are you familiar with the CDC?
>> The Center for Disease Control. Yes.
>> Okay. So, this is coming from CDC. You brought a vaccine. Nowhere in my notes was I planning on going into vaccines. I was going to, you know, you talk about >> You asked me about John Kennedy. What do you expect me to say?
>> No, I don't have I'm glad you did. I'm glad you, but since you did, let's look at some numbers because you're a numbers guy. You're an economist. So 1970s in America, according to CDC, one in 10,000 children had autism. 8 1995 was 1 in 500. 2000 was 1 in 150. 2010 is 1 in 68. 2020 is 1 in 36. The latest is 1 in 30. About 4.9% of boys today are identified as autistic. 1.4% of uh girls. How do you think that happens? Should we not consider vaccine as possibly one of the reasons for it?
>> We can probably think sunshine or god knows what else is possible.
>> You think sunshine caused autism?
>> I'm just saying it's a silly argument and I'm not going to I don't see any point in having this conversation. But you but you you brought it up and >> you brought up John Kennedy and I to I mentioned vaccines as well. You said do I like John Kennedy? I instantly said I had no intention of discussing vaccines and I let's talk about something that's actually my area of expertise.
>> No, no, but you brought this up and you had strong opinions and I'm just sharing.
>> You said John F. What do you expect me to say if you raise Robert Kennedy?
>> Yeah. I think Robert Kennedy, he's a guy that brought >> Why did you raise Robert Kennedy?
>> Because why did you raise him in the first place?
>> I'll tell you exactly why I raise it. because you said the health care is the issue in America and I said he brought up the food that we eat in America is a lot more processed than other states. I was going in the food direction. You went to vaccine. I never brought up vaccine. You brought up vaccine.
>> Okay. Well, let's let's go back to food. I got >> No, let's stay on that. Let's stay on vaccine. If you brought it up and let's just move on past this because you brought it up.
>> How do you how do you feel when you see data if an average person like me or you who is not in this space, you're a thinker, right? And if you see we go from one in 10,000 autistic rate to now one in 31 according to CDC not pharma. What do you think could be those reasons?
>> Different definitions of autism.
>> Such >> I have like you know I if I think back to my school class 50 years ago, there's about half a dozen kids I could classify as autistic today who wouldn't have been called that 50 years ago. Uh but in terms of I have I've vaguely seen some research contradicting the argument there's any relationship between vaccines and autism and I have no expertise and I have no interest in the topic either. I figured that makes sense why you wouldn't have any interest when we set out to create a shoe [music] that blends comfort function and luxury. We had the choice to make it fast. We had the choice to make it cheap. We chose neither. Instead we chose Tuscan Italian. We chose [music] true Italian craftsmanship. Each pair touched by 50 skilled hands. We chose patience, spending two years perfecting every detail. And we chose the finest [music] quality at every step. Introducing the future looks bright collection. Not rushed, not disposable, not ordinary, rather intentional, luxurious, timeless. If you enjoyed this video, you want to watch more videos like this, click here. And if you want to watch the entire podcast, click here.