Regardless of who wins in politics, the national debt grows, and America, it seems, has entered a new age of debt.
While the rest of us were watching Netflix and posting pictures of our baking projects on social media, the economist Tyler Cowen devoted some of his considerable energies and intellect to addressing the Covid crisis. He collaborated with billionaire entrepreneur Patrick Collison to quickly raise around $50 million for 260 research grants far faster than government agencies were able to invest in similar research. He calls this project his own “war on bureaucracy”—and that is only one of his wide-ranging endeavors.
Cowen is probably best known for the blog he and colleague Alex Tabarrok started together, Marginal Revolution, named after the fundamental change in economics spearheaded by Jevons and Menger emphasizing marginal value rather than labor value in analyzing markets. The blog is widely seen as one of the best and most influential economics blogs in the world. He’s leveraged that fame to write regular columns for Bloomberg and numerous popular books. He has a video interview series “Conversations with Tyler.” And he accomplishes all this on top of his full-time job as professor of economics at George Mason University.
Cowen agreed to have dinner with me on May 19th to discuss the state of the world slowly emerging from the pandemic—a doubly exciting prospect because Cowen also wrote a book titled, An Economist Gets Lunch: New Rules for Everyday Foodies and maintains a food blog. I was understandably intimidated when he asked what kind of food I would like to eat, coming back with the obvious answer: “whatever you like.” And so we are sitting at Mama Chang, one of several restaurants owned by famed restaurateur Peter Chang. Cowen tells me this is his favorite one of the group (he’s tried them all) and I can see why. The staff all know him, and he and the waitress carefully review the extensive menu as he looks for both classics he wants me to try, such as Chang’s famous Bamboo Fish, and new entrées, all of which I rather shamelessly eat more than my fair share of. The food is simply amazing.
Early in our meal, Cowen describes the process of assessing and distributing that $50 million in Covid research grants: He and Collison created “Fast Grants” because researchers at universities and labs were stymied by roadblocks in funding their work quickly: “They couldn’t get money right away. . . . Why not? Because there is too much bureaucracy, and we were set up for a minimum of bureaucracy.” Among their success stories was the saliva Covid test used in the NBA bubble and support for research on assessing genetic risks and examining new strains of the virus.
I wondered if this type of initiative might offer a glimmer of hope for liberty in this unprecedented crisis. While he doesn’t believe we’ll be able to push back bureaucracy permanently, the re-examination of all the rules surrounding biomedical research during the emergency will help ease the regulatory burden, much as it did during the HIV crisis. He also points to the remarkable technological advances that this new mRNA vaccine technology might provide: “We’re going to have a good vaccine against malaria; we might cure the common cold. We’ll probably end up with what’s called a pan Coronavirus vaccine. Biomedical science has advanced so quickly in the last year and a half that people don’t realize it yet.”
The American Future
But for all the technological advances, did not the pandemic bring on a new era of intrusive government? On this front—the liberty front—Cowen emphasizes a point that often gets lost among defenders of limited government who focus, rightly or wrongly, on mask mandates and vaccine passports. This was “the worst crisis of my lifetime: 600,000 Americans dead, possibly more, probably in the world we’re close to 10 million dead.” Cowen argues that we might have expected a far more intrusive response: “What our government actually did when you cut through the whining (by some small government advocates) it didn’t even vaguely move to a planned economy.” He believes that “the basic structure of capitalism was not affected much at all.” More generally, compared to crises such as World War I and the New Deal, capitalism has come through this process relatively unscathed.
How does this position square with the massive increases in government spending and debt we’ve seen in the US? He acknowledges the obvious: “So I think we are screwing up to be clear—spending too much, spending it too early, borrowing too much.” But despite the fact that the US’s budget position is poorer than it was 50 years ago, Cowen doesn’t see himself as a “doom and gloomer.” Conventional measures of indebtedness might not paint the clearest picture of the country’s financial footing. “If you compare debt to US GDP, it looks terrible . . . It’s headed to 200%.” Yet the big picture is less dire: “If you compare US debt to US net wealth it doesn’t look that bad. So think of national wealth. It is maybe six to eight times national income.” He estimates a debt-to-wealth ratio of something like 30-40%, which “doesn’t sound so terrible.” And even if our fiscal position 50 years ago was more balanced, he notes that the “wealth” of the country is much higher now. As Cowen sees things, Japan is headed along this same path and isn’t facing an impending financial crisis, even if that trajectory is hardly ideal for long-term growth.
Compared to some forecasts, Cowen doesn’t believe the current situation will endanger the status of the American dollar as the world’s reserve currency or lead to hyperinflation. He sees no real competitor to the dollar and believes inflation will be between 3-4% over the next two years. He points to the current low yield on the 10-year Treasury bond to support his position. When I ask if the Fed will change its policy with a Democratic administration, he points to continuity: “Easy money under Trump; easy money under Biden.”
Many observers of American politics today believe that we have become polarized to such a degree as to make the country ungovernable. Here, Cowen takes the long view, holding that the current level of political division is “like 19th-century history plus the internet.” The rise of the internet made “people more loopy and weirder” in their approach to discourse and communication. He describes America as divided, much like we were for most of our history, but not actually polarized. He’s much more sanguine about the prospects for American politics in the next two years. After vaccinating “as many people as we can,” he sees the world reopening. “We’re going to have a boom for two years. People are going to celebrate. It will be fine.” This will have a salutary effect on our politics.
We will need to adapt to some new, but also old, realities in our politics. We are returning to the openly partisan press of the 19th century, which will make things different in terms of public discourse. For some time, the state of affairs has amounted to “a bunch of lunatics yelling at each other. For me, the peak moment of polarization was something like 2011, where it’s like Obama and the Tea Party, left wing, right wing.” But at this moment Cowen surprisingly sees more similarities between the Trump and Biden administrations than either side would care to admit or contemporary observers of politics are willing to accept. He observes the overlapping policies: “Most of Biden’s agenda is Trump’s. He doesn’t call it that, but ‘buy American,’ right? Hesitancy about immigrants at the border, a trade war with China is still going on. Trump handed out $2 trillion. Biden—what do you know—he handed out $2 trillion!” Despite all of Trump’s claims to the contrary, even with a Republican Congress for his first two years, he didn’t eliminate Obamacare. In terms of tax policy, Cowen observes that “(t)he corporate tax rate was 35% and Trump cut it to 20%. Biden probably will raise it to 25%.”
Significant foreign policy similarities abound as well. “Trump said he’d pull out of Afghanistan. He didn’t succeed, but I’m pretty sure he meant it. Biden is calling us out of Afghanistan.” Despite the recent tensions in the Middle East between Israel and Hamas, Biden isn’t diverting too far from Trump’s policy. “Well, the Abraham Accords, Trump designed. I don’t think Biden would have had the stones to try. Biden has since endorsed them and basically ratified them.” Of course, Biden isn’t as transparently pro-Israel as Trump, but Cowen also notes “he’s certainly not Bernie Sanders.”
Cowen recognizes the differences—stylistic and substantive—between the parties, as well as the ways that the post-election rhetoric and actions of the Republican Party exacerbated the concern about division and polarization. And yet he characterizes these concerns in one word: “Overrated. I don’t like it, but way overrated.” He points to the fact that all of the Republican judges who were asked to rule on the election lawsuits ruled against Trump, bluntly calling all the noise surrounding this “bullshit.”
Putting Fear in Its Place
So while we do have structural, long-term problems, as most political communities have, ours today “are not worse than, say, they were in the 60s is the way I would put it, okay? And they were severe then. Vietnam War, hippies, draft riots, cities burning.”
Of course some cities have burned during the past year, and at this point we turn to one of his more recent, and in retrospect, prescient books, The Complacent Class in which he claims that a sort of economic, political, and social malaise had fallen upon the US. There, he argued that America had settled into a boring, complacent acceptance of shrinking growth and opportunity. We had moved less, protested less, become stuck in our jobs and social statuses. Considering the crises the country faced this past year, I wondered what factors were catalysts for this apparent awakening from complacency transforming into mass demonstrations and civil unrest.
I think the pandemic was a big factor. People cooped up, frustrated, nothing to do, often out of work. And here it’s like, ‘exercise your body!’ . . . ‘go to the streets!’ I think they were sincere. I don’t mean to deconstruct them in a cynical way. I just think you get a very different response if you’ve been cooped up for about six or seven months and you’ve lost your job.
And these unique pandemic circumstances, combined with all of the unusual factors associated with the protests and election, fits into what Cowen calls the “everything is getting weirder thesis.”—the idea that the previous equilibrium in politics and society is being upended in unpredictable ways. How else would you explain Trump receiving larger percentages of the African American and Latino vote in 2020 than in 2016 despite his governing style? Another piece of evidence is the steep decline in unifying social events and the rise of a multitude of alternative choices individuals are provided today. He cites network television to illustrate this. “In the 70s you have three channels, every show is boring. Mary Tyler Moore is like the big radical . . . The role models it gives you are so circumscribed it’s unbelievable.”
Contrast this with the explosion in entertainment and information alternatives today, which he describes as providing “so much diversity in good and bad ways.” The good has been the explosion in culture, arts, music, and other forms of entertainment catering to different tastes and perspectives. The risks however are that in our culture, “people latch onto cults, beliefs, arguments,” and tend to pick and choose their facts accordingly. Cowen observes that contestation over facts has been a regular part of human history. However, he underscores one looming problem with these disputes over facts: “The people who deny the vaccines, that bothers me a lot, and we’ll pay a huge price for that.” “I think now is a very exciting time to be alive, but in a precarious sort of way. The other way (of complacency) was not sustainable. But I do think most people prefer stability and complacency, and there are good reasons for that.” In this new world things overall will be better “but in a highly varied way—like, a lot will be worse.
As upbeat as Cowen is regarding the outlook for the US, he is less sanguine looking elsewhere in the world, particularly in Asia and Europe. In the case of Europe, the lagging vaccine rollouts are a cause for concern. “The political rhetoric has been awful. It’s been like ‘these vaccines, like they’re not so great. You’ll get one in time; we’re locked down a bit more.’ They should all be falling on their swords.”
Cowen is also worried that the disruptive forces we’ve seen in the protests and civil unrest unleashed in the US last year haven’t occurred in Europe. Europeans “have simply lost the capacity to imagine how things might be different. And Americans never lost that.” In facing the pandemic, Cowen describes America as adapting to the challenges of Covid in ways that Europe simply hasn’t. “Somehow we processed it as a society, and came up with a solution and implemented it” while Europe is “still kind of spinning their wheels” by tolerating lockdowns and slow vaccine rollouts. He attributes part of this to the decline of Christian faith in Europe as compared to America. Christianity, “whether or not you believe it, it’s asking you to take on some fantastical idea, and to make it real for you. And America is very good at that.” Europeans, by contrast, are “more cynical.” And it is this cynicism that has left Europe behind the United States.
He is also less optimistic regarding Asia, particularly the growing influence of China. “I think a lot of Asia has to really worry about China. It may not be conquest, but they much prefer the US as an overlord to China. China’s relative power is rising partly because they moved to more of a market economy, but they’re not a free country right?” Hong Kong he describes as “toast” and listed Taiwan and even Singapore as places that are and should be worried. Part of the reason for those concerns is that the political system in China has become what Cowen describes as “tyrannical,” and aside from the obvious problems such a system can cause in a major economic and political power, he notes that “information stops flowing to the leader. And some very bad decisions end up being made.” He worries about how this will affect Chinese stability, and he points out that the entrepreneurs in China, who he describes as “tremendous” will face extreme political pressure. Shortly after our interview, news leaked about one of the examples in his book, Jack Ma, having been censored and limited in his mobility by the Chinese government. This follows the mysterious death of another Chinese billionaire, prompting Cowen to refer to Chinese billionaires as having “the most dangerous job in the world.”
Delivering Results at Scale
In 2019, Cowen published Big Business: A Love Letter to an Anti-American Hero. This was exquisite timing, and Cowen deservedly takes a brief victory lap when I ask him if we could have survived the pandemic without big business. “Am I allowed to just boast?” he asks, as we both chuckle. He lists some of the numerous companies that helped most Americans through the pandemic—“Amazon, Zoom, Netflix,” to name a few. “Big business had a stellar performance, saved us in a way . . . you needed big companies to have the resources and logistics to pull all that stuff off.”
As much as big business deserves kudos for its performance during the pandemic, what of the political questions surrounding large corporations? Cowen believes the trend towards progressive, enlightened business practices is overstated. We notice the companies that immersed themselves in progressive activism, and extrapolate too broadly from them. The most egregious examples “genuinely have customer bases that want that . . . so, coastal companies, companies with highly educated buyers and in major cities.” Some business executives in these companies honestly believe in these causes and will continue supporting them. But this is not mere altruism. “Maybe the managers believe sincerely, but it’s also a strategy. And that’s going to stick.” For others with different customer bases, the woke strategy proved unprofitable and will probably fade.
However, Cowen views the way investment funds have employed criteria of sustainability and diversification against a focus on profitability as more permanent. Concerning sustainability, he says that green investment funds are going to be a permanent part of the investing landscape until we move towards a fully green model of energy. At that point everything will be green in energy production and special funds will no longer be needed. Concerning the pressure on companies to diversify away from carbon energy, he argues that “if you think about the logic of diversification, once you own a certain number of firms, you’re pretty well diversified, and if you simply don’t own Exxon or whatever you’re really not less diversified. So there’s not a cost to running your fund that way for many kinds of funds, and there’s some modest marketing benefit. A lot of the people who invest in those funds are wealthy coastal people who don’t mind it anyway.”
Despite the deep respect he has for Milton Friedman, Cowen describes Friedman’s famous claim that private companies have a fiduciary responsibility to avoid such commitments as “wrong” and written in haste in response to Galbraith’s sweeping claims about the broad social responsibilities of major companies. He pointedly reminds me that Liberty Fund’s benefactor, Pierre Goodrich, passed out books to employees and encouraged them to learn about classics in the traditions of liberty, even on company time—hardly consistent with an exclusive focus on fiduciary duty.
Big business has also come under criticism for its apparent support for progressive social causes and a tendency to mute dissenting voices. Most of the concern has focused on tech companies like Facebook, Google, and Twitter, and here Cowen takes a fairly doctrinaire free market view of things. These large tech firms are “private actors who have been very successful, and they are very competitive.” He reminds us that “most people are not on Twitter. It’s not like Twitter has some stranglehold on discourse.”
He argues these platforms had every right to ban Trump, who Cowen believes will eventually return to the public sphere in some sort of new platform. Cowen thinks Trump views himself as “a professional wrestler who has suffered a dramatic defeat and he needs to go quiet before making this re-entrance.” How will history treat Trump? “He’ll be seen as an important President who has transitioned to a new America. The stuff that upset everyone, rightly or wrongly, will mostly be forgotten. He’ll be remembered for vaccines and still viewed as a kind of lunatic.” To say nothing of the fact that he was “the first president to stand up to China.”
We could have spoken longer, but Cowen had to wrap up dinner so that he could go home and prepare for a podcast with one of the world’s leading ornithologists, reminding me of his incredible work ethic. He has no hobbies and takes no real vacations—just more projects, work, and work trips.
What’s next for Cowen? He is co-authoring a book entitled Talent with a “venture capitalist.” While he’s largely circumspect about the contents for contractual reasons, he says the book is about “what the social sciences know about how to find talent,” particularly entrepreneurs and organizational leaders of creative teams. Considering his network of connections in the tech and venture capital world, it’s safe to say that the book will draw a wide audience and bring practical and theoretical wisdom to bear on the issue. He describes another, more eclectic project—a review of individuals he sees as critical to the development of modern economic theory. As Cowen began reading economic theory and philosophy as a 13-year-old in suburban New Jersey, it’s not surprising that he would return to these foundations at this stage in his career. This project is still in the research and conception phases, but we can expect to read about Smith, Malthus (who Cowen believes has been vastly underappreciated), Hayek, Keynes, Friedman, and many others.
Thanking him for taking the time out of his ridiculously busy schedule I help load him up with leftover food and he departs, and I am left with the conversation’s leftover thoughts. I wonder what the future holds for us all, and what role he will play—a person of boundless energy, well-informed opinions, and always provocative ideas.