A Professional Interviews a Professional At the Top of Their Game

Reason online (here) carries an excellent and interesting article reporting on a conversation between Nick Gillespie (‘reason’ in the transcript below) and Tyler Cowen, a numero uno among bloggers (Marginal Revolution), entitled ‘Inside the Mind of an inner economist’ (10 August) here.

I offer two extracts and then a comment:

Part One (enjoy professionals at work):

reason (8:53:55 AM): you write of the limits of applying economics to everything. at one point you even call out a couple of fellow economists for being caricatures of utility-maximizing drones applying supply and demand, etc. to every aspect of human life. where do you draw the line in applying econ principles to human activity?

Cowen (8:55:10 AM): economics—properly understood—applies to human choices quite generally. It even seems to apply to other animals, at least mammals. Gordon Tullock wrote a great book on the economics of insect societies. the problem is when people think that everything boils down to money, or buying and selling. I'm still very influenced by [Ludwig von] Mises's notion of economics as a general "logic of choice." [James] Buchanan and Tullock, my colleagues, have promoted much the same.

reason (8:55:55 AM): you love mises but didn't name your book "the inner praxeologist"...

Cowen (8:56:26 AM): my publisher advised against that idea.

reason (8:56:44 AM): besides buchanan and tullock, the creators of the public choice school of thought, who are your heroes in economic thought?

Cowen (8:57:21 AM): Thomas Schelling is a big one. also Adam Smith and his integration of economics, psychology, and a notion of moral sentiments. Milton Friedman on policy. Hayek. He "got" the dynamic virtues of capitalism better than just about anybody. We've yet to fully absorb those insights. It's a long list.

reason (8:59:28 AM): what's the role of human emotion in understanding economics? i agree that mises was on to something when he referred to humans as "choosers"--that our ability to choose is one basic thing that defines us. but we don't do that rationally. or not just rationally.
we're hardwired to have extreme emotional responses. can economic science deal with that?

Cowen (9:00:49 AM): Human emotion is paramount in life and choice. I think of my book, in part, as "economics for the emotional." I'm very influenced by the French moralists, Schopenhauer, and Adam Smith on this point. That's a neglected strand of Western thought among economists and I'd like to bring it back. Schelling has it in his writings, though perhaps not very self consciously. Thomas Schelling that is, not the German Idealist Schelling.

reason (9:02:19 AM): does the behavioral work of people such as nobel co-laureates vernon smith and daniel kahneman undermine the notion of individualism in the traditional or classical liberal sense? that is, they talk about how certain structures and institutional arrangements will create very predictable behavior in individuals. that suggests that we may think we exercise choice, but we really don't.

Cowen (9:03:07 AM): Smith and Kahneman seem to differ on this. Smith thinks that individual irrationality "washes out" in broader market settings. I've never heard or read Kahneman argue that. oddly Kahneman's scheme leaves more room for individuals to matter, though smith is the libertarian, not he.

reason (9:04:22 AM): among economists under the age of, say 60, (or pick an age), whose work do you most admire?

Cowen (9:05:17 AM): I truly love my George Mason colleagues Bryan Caplan, Robin Hanson, Alex Tabarrok, among others. I am quite taken by Greg Clark's new book, A Farewell to Alms, also. [Freakonomics author] Steven Levitt has been important in a positive way.

reason (9:05:19 AM): how do you mean, with regards to levitt?

Cowen (9:05:56 AM): Freakonomics has both made economics broader, more about real life, and has forced a lot of specialists to think more explicitly about incentives.

reason (9:06:15 AM): do you think the general level of economic literacy is higher now than 30 years ago? if so, will that have an effect on public policy?

Cowen (9:06:59 AM): literacy is much higher, especially among the left where hardly anyone still glorifies socialism. I don't see policy getting better in this country, but it is around the world.

reason (9:07:33 AM): why wouldn't a better general understanding of econ affect policy over the long run? and why is it getting better around the world?

Cowen (9:08:40 AM): the collapse of communism was a huge event, much bigger than we think, and its positive ramifications are just starting to kick in. Americans perceive themselves as doing well, correctly, and they see less need to change. Our big success at markets has made it a lot easier to afford big government as well.

reason (9:09:35 AM): that's a message buried in a new book by your new colleague, john v.c. nye—that britain could afford big government when it levied big taxes for most of the 19th century. talk a little about why george mason has become such an incubator of interesting economics.

Cowen (9:10:12 AM): John is one of the smartest people I know. George Mason consistently hires interesting people and we expect them to be interesting. We provide one of the very best intellectual environments in modern economics academia.
The Mercatus Center [of which Cowen is general director] has been essential to building up what is happening at GMU; it would have been impossible without Mercatus.

reason (9:11:20 AM): who do you think is overrated among your generational peers? what departments or institutions are declining as george mason rises (not that it's a zero-sum game completely).

Cowen (9:12:53 AM): A lot of mid-level schools just don't have anyone interesting to me. Right now Harvard is a clear No. 1, by either mainstream or my personal standards. Overrated, that is a tough question. We are in a world where people don't acquire Arrow, Friedman, or Samuelson-like reputations. The overrated are not a problem, the problem is that the ratings are pretty concentrated in the first place, and maybe don't last that long, as people move into consulting or other endeavors.

reason (9:13:05 AM): names, dammit, give me names!

Cowen (9:13:33 AM): to clarify when I wrote "ratings are pretty concentrated": I mean there are lots of specialists rated highly by their immediate peers and not know to the broader world; that makes it hard for anyone to be overrated. any economist with a downward sloping demand curve, and opportunity cost, is underrated.

reason (9:13:44 AM): is specialization a general development throughout academia—areas of specialization have been getting tighter and tighter?

Cowen (9:14:28 AM): absolutely, academia is ruled by Adam Smith's principle of the division of labor and we don't have enough generalists.

Part 2:

reason (9:16:20 AM): what are the battles we've lost probably permanently?

Cowen (9:17:54 AM): I don't, for instance, think we'll ever roll back big government. But we can get rid of many government interventions or make them less intrusive and get all those people out of prison who are sitting there for simply having possessed marijuana, for instance. and we need to stop taxes from rising to European levels. America is a great provider of innovation and global public goods and if that dried up the world would be much, much worse off. we should be making our economy freer, not less free. but the talk of overturning or reversing the entire New Deal and welfare state is, in my view, not going to get us anywhere.

reason (9:18:21 AM): but we can effect "marginal revolutions," as you suggest on your blog, right?

Cowen (9:18:46 AM): "Small steps toward a much better world!"

reason (9:18:42 AM): give a couple of examples of such.

Cowen (9:19:40 AM): We need serious deregulation in health care. We need to rethink many parts of the war on drugs. We need to get long-run government spending under control. Those are a few examples.

Comment
Enjoy the exchange in the first part. And take close interest in the second smaller part. It is pure Smithian. Pragmatic, not dogmatic.

Smith’s big issue was mercantile political economy. Everything in Wealth Of Nations led to the objective of removing its policies from the British economy (that included withdrawing from the British American colonies) and allowing the flow of surplus capital to work on the domestic economy with a policy of trade without tariff protection and without the dangerous and wasteful jealousy of trade with neighbours, which promoted wars, boycotts and the waste of productive potential.

He too concluded that his programme, though closely argued in Wealth Of Nations, was not going to be adopted soon, if ever. He likened the proposition that free trade would be restored to a belief in utopia. Hence, he settled for winnowing this or that illiberal policy out of the suite of protectionist policies then in vogue in Britain.

Tyler Cowen takes the same approach to ‘US big government’: ‘I don’t think we'll ever roll back big government. But we can get rid of many government interventions or make them less intrusive and get all those people out of prison who are sitting there for simply having possessed marijuana, for instance. and we need to stop taxes from rising to European levels.’

Remember Tyler Cowen is a libertarian with a small ‘l’. He will have more influence on US policy by selecting his targets and seeking to influence others than he would if he went at big government in a full frontal, everything must change by next week, loud voice. If only more reformers would adopt this Smithian stance and apply it to their influence initiatives.