BPR Interviews: Tyler Cowen

 Tyler Cowen is the Holbert L. Harris Professor of Economics at George Mason University, General Director of the Mercatus Center, and a New York Times best-selling author. In 2011, Foreign Policy magazine named him one of its “Top 100 Global Thinkers,” and he was recently dubbed “America’s Hottest Economist,” by Bloomberg BusinessWeek and included in The Economist list of the most influential economists of the last decade. He co-writes a blog at www.marginalrevolution.com.  

 

What was the impetus for your book An Economist Gets Lunch? How do you think food interacts with Economics? 

Food is a great laboratory to study economic ideas. You have extreme competition; you have a lot of innovation; you have blending of cultures that overlaps with immigration issues. You can personally experience it at the micro level in a way that you can’t [with] the manufacture of a sailboat…You’re actually seeing and interacting with what’s going on. You can try to make it yourself. You can read the cookbook. So you can observe a lot of different stages of the production process. So I’ve always used that to try to hone or shape my thoughts on economics. But I use economics to understand food. These are products, but they have to make money across some time horizon or they’ll go away. So like why is one place good and the place down the street bad to me is an important question. With a bigger meaning above and beyond restaurants.

 

What are your thoughts on the current academia, especially in regards to economics?  

 

I think a pernicious story that you see…in higher and more academic levels is one of “I’m being true to the canons of science and not really giving a damn that you’re not doing anything of any import.” And that’s a story about self-integrity that is very easy to fall into. You glorify the whole enterprise [and] your role in it. How you followed all these canons, peer-review, whatever. At the end of it all you don’t quite ask yourself “What the hell do I have here and was it all worthwhile?” And in opportunity cost terms, that too is a pernicious story. And it’s easy to fall into because you are at each step of the way doing something right. Somehow the system as a whole overly invests in its own image of being so properly scientific when they ought to view it as more of an art.

 

You argue that society as a whole needs to focus more on revering scientists, what do you believe is scientists’ current role in pop-culture? 

Popular culture is not nearly pro-science enough…. It should be much higher status to be in science. This would boost the rate of innovation. I think people privately can just choose to respect science more. In a sense it’s a free lunch! You don’t have to spend money, people just have to actually believe science is really good. So that’s what I advocate. And that’s a question of role models and exposure when you’re young. I think TV shows are very important… Star Trek and even Gilligan’s Island I think made science cool to a lot of people. I think President Obama actually has done a pretty good job of being a pro-science role model and how he talks about science. His powers are limited but I think he actually gets this pretty well, because he’s made a real concerted attempt rhetorically to work that into what he’s about. I think historically, America has not been all that pro-science, but we invented the atomic bomb, we industrialized in this fantastic manner. In a bunch of ways pro-science and nationalism should overlap. Being the first country to put a man on the moon gave a huge boost to science. That boost has proven temporary, much to my dismay.

 

What do you think should be priorities for education reform?  

 

It depends on the level you’re looking at. You look at US colleges and universities– They’re very good. I think some of them are in trouble, but the best ones I don’t think need policy changes, They’re the world’s best; They’re healthy. I do think at the state level there’s a funding problem combined with a malaise problem and too much bureaucracy.

 

I like to think about state budgets as a whole: How could they be different? Medicaid, which is a big and growing part of state budgets, we should either federalize it completely or do block grants, which would still be the Fed paying for it at least up to some margin. And no matter which one is better, doing one or the other has to be better than the status quo. If, fiscally, Medicaid worked better, state budgets would make more sense.

 

K-12 is very different story, but again I think there should be more school choice. There should be more charters, more vouchers. I don’t think we know how to do it in one big way, but we are federalistic especially for K-12 and let’s take more advantage of that. To be federalistic and to have so many places try the same model is an enormous shame so I’d like a lot more experimentation.

 

What are the immediate policy concerns for the American healthcare system?  

 

We pay way too much for what we get. But two-thirds of Americans have some of the best health care in the world, relatively speaking. But the billing cycle is torture. We need much better price transparency. There should be much freer entry. There are too many barriers to innovation. I would, at whatever margins possible, convert Medicare payments to Social Security dollars, because I don’t think a lot of health care spending does a lot of good. The rates at which people go into hospitals and come out worse are startling. And in some randomized control trials, like when the doctors go on strike, death rates go down. So we’re not even sure the marginal product is positive, and we’re spending 18 percent of GDP. We know penicillin works; we know setting broken bones works we know a lot of things work, a lot of things we’re not sure. Give people the option of taking their Medicare dollars, cashing them out. Don’t make them do it. If they want the insurance you know fine, but I think a lot of people would take the cash, and you get rid of a lot of the third party pressure on prices; you relieve bottlenecks and scarcity constraints.

 

In Average is Over, you predict that inequality will greatly increase, but productivity will also vastly improve. What do you think the next 50 years will look like in America?  

 

People will be pretty happy, but you’ll have extended multi-decade periods where large groups will not see real wage increases. Keep in mind, we’ve already seen almost 20 years with no real wage increases to the middle class, so this is not science fiction or my crazed imagination. I’m just saying it will continue to be part of our future. A very tolerant world. A lot of new forms of happiness and discovery and creativity. A disappointment compared to what we expected in the ’60s (like everyone gets 3 percent richer every year), but on the whole not a bad world. The Internet, the Internet of things, artificial intelligence, other things will come together and we’ll have another series of big breakthroughs at some point in the future. Not next year, but certainly within your lifetime. And we’ll have like 20-30 year golden era of just some amazing shit happening.