Transcript for A Conservative Futurist and a Supply-Side Liberal Walk Into a Podcast …

The most obvious change in these, especially if I'm an economics point of view is that the sort of rapid productivity growth that we saw in the previous couple of decades that economists and other experts in the 60s thought was going to be a permanent state of affairs slowed down. And other than really the late 90s or early 2000s, it's been in that sort of weaker state. And that's it's one of the great still conundrums for economists. I mean, a common still less so now would have the base about what caused the great depression. And to me, this downshift, where I call my book, the great downshift and productivity growth is as significant as that because of we are not where we could be if it hadn't.

Bigger, more, multiples more. And that was the expectation. So instead of having a $25 trillion economy, no, depending how you want to slice the numbers, it could be twice as big. It could be three times as big. So I don't know. I mean, I think, conservatively, instead of like the median family making $80,000, just a foreflation, maybe they make $150,000. It's pretty significant. What that economy would look like. Well, listen, the grow that fast would be driven by technological progress. And that's what people expected in those immediate post-war decades. So all the sort of the kind of classic retro Jutsons kind of sci-fi things that people imagine back then. It wasn't just sort of cartoons and films, experts, technologists, CEOs, economists, all expected. That kind of stuff actually happened. So nuclear power and everything, nuclear actors from coast to coast. We would probably have, you know, colonies on the moon and Mars, cures to diseases, which see my crop diseases, which we still battle will be cured. All of that together would be part of sort of this grand future driven by rapid technological progress, which drives faster productivity growth, which drives faster economic growth. There's one last of a pandemic is people don't like suffering and shortages, so we better figure out it out for a way. I see the only path forward is through growth and technology and making that work.

I think certainly is probably multi-causal. One reason I wrote the book to be honest is a paper, a paper by the economist named Ray Fair from Yale University. We noticed something weird happened around the 70s. He wasn't focused on productivity growth, but he looked at infrastructure spending as a share of total economic spending. He looked at what was going on with the budget, where we started to begin to run smaller surpluses than run budget deficits around 1970. And he asks the exact same question that you're asking. So like, what happened? Because from those two statistics, he began to wonder like, that to me seems like a society that's less future oriented than it used to be. You tended to see it more in the United States than in other places. So what are your theories? I'm not going to create a brand new theory. It was just that all the great inventions, internal combustion engine, electrification of factories and come all those great inventions of the second kind of phase industrial revolution we've kind of squeezed all the sort of productivity gains out of those and they went replaced by another wave of great inventions I mean that's a theory I mean another theory is just that as we've advanced in science technology It's just harder to climb that tree of knowledge and come up with more big ideas and requires more people and resources. All of that is probably true. But our decisions mattered and there are things that we did, which hurt And I hope we can reverse some of those things to that would help. And I think the two, I think, screamingly obvious things that we stop doing is we stop spending on science, research, and development the way we did in the 1960s. And we began to regulate our economy as if regulation would have no impact on innovation.

I think a lot of that was because of NASA, and we won the space race, and there just wasn't an interest in continuing that. Okay, so that's the immediate short-term explanation.

Right, so the game is going strong, but we had clearly won that space race. And while we've continued to spend a lot of money already as a share of the economy, it's a lot less than what it used to be. That's not surprising that perhaps there was a shift in priorities. People did begin worrying about budgets back then. And the regulation part to me also sort of isn't surprising when countries become wealthier. They tend to care a lot more about the downsides of economic growth. They're books like Silent Spring and some events like the Santa Barbara oil film. We began learning more about the radiation from Hiroshima and it's worrying about nuclear. So that is not surprising that we that we started to pass environmental regulation. What is surprising is that when it became clear that the economy was not re-accelerating the way they thought that there was not more of sort of a holistic effort to change that, to not give up on like those expectations that people had in the 1960s.

What do you think when you hear that? I think that's exactly what I would expect to hear for a country that has gone through a period of industrialization and economic growth where people had become rich enough that the immediate sort of material concerns could be balanced off with other kinds of concerns such as The water they're drinking, the air we're breathing, is it worth losing a little bit of growth maybe to deal with that. So that doesn't surprise me. And as you know, some of the key environmental legislation, we still have happened under the next administration.

But they'd people back then assume that what they were doing with that environmental legislation was making it very difficult to build the kind of future they had imagined heading into the 1970s. I don't think they did. I believe they thought that the economy was so strong and that technological progress, the momentum was so tremendous. that we could have cleaner air and water and still have everything else. The people who voted for French at the National Environmental Policy Act, most people thought that was just kind of like a good mom and pop and baseball and apple pie piece of legislation. Hey, who doesn't want to clean or water? That's all what we're doing here. I don't think anyone imagined that then it would make it hard to build a factory that makes wind turbines in the year 2024.

After the space age, after Apollo, we didn't follow it with anything, right? One thing we Nixon thought about following it with was Building nuclear reactors, a thousand nuclear reactors from coast to coast. Would it have been possible to build a thousand nuclear reactors from coast to coast with the emerging regulatory regime that was beginning to happen? absolutely not, absolutely not. And it became obvious even in the early 70s that there was a problem that there was a problem that was becoming harder to build. That was the case with the Alaska pipeline. It became again, you're too young to remember this, but it was a running joke in the United States in the 1970s that they could not build a new dam in Tennessee because of a tiny little fish called the snail darter. And that fish was preventing that fish that no one could barely see it. Nobody knew about it. You couldn't build that damn because that was in endangered species act. I think the weight of those kind of incidents, the weight of the academic studies I cite in my book, have there been studies looking at how much it costs to build a highway and does NEPA, the National Environmental Policy Act, does it make it more expensive? Does it make it harder to build? Yes. And I think if you just look around right now, I don't think it's a tremendous leap of imagination to think that if it makes it very difficult to build a transmission line, a nuclear power plant, where are the nuclear power plants? I mean, you know, it's like the dog that didn't bite.

Do you not think that NEPA had a material impact?

It sort of doesn't surprise me that countries which I think have been over these decades, far less innovative at pushing forward the technological frontier might not be pushing forward the technology of nuclear power. So why doesn't France have very cheap nuclear energy? Why doesn't France already have these very small nuclear reactors? I'm not sure what the incentive was or whether they were capable of innovating to that degree. I don't know.

I mean, it's not a market-based power system in France. These are all state subsidized. Ractors.

Well, we can make mistakes that are very specific to us and other countries may have made different mistakes even though there was as you say this great enthusiasm in the 80s that Japan had it sort of figured out that they could do economic growth and innovation in a brand new way, which turned out not to be the case. And then you mentioned Germany. We seem to have this insatiable desire to find, at least some people do, to find some other model. I don't think those models have turned out better than the American model.

Yeah, I mean, listen, I don't think it is wrong to do sort of a cross country because this productivity slowdown didn't just happen in the United States. Clearly there were some sort of macro reasons. It just becoming harder and more expensive to do research. Those things affected everybody. So once you've assumed, okay, there was heard this umbrella effect that would sort of make difficult to do productivity and economic growth and faster tech progress everywhere. So that mattered. And then to what extent do our decisions matter? At first, we didn't understand what happened. And then when we did, I think we just underestimated the difficulty. These certainly in the United States are returning to fast growth. And the ideas that we put forward, whether there was a little more spending on this program, a tax cut here, maybe those are individually great ideas. But given, I think, the headwinds from these macro factors, sort of the tailwinds need to be much, much stronger. And even now, when we're talking about spending more money on R&D, I don't think it's enough.

I think inherently people pull back from risk. You know, to go back to the 70s, there are some conservative thinkers who thought that capitalism was doomed because the intellectuals who were separated from actually working and producing wouldn't appreciate how hard it is to do that. They wouldn't appreciate how hard it is actually to grow in economy. And these are the people who would be our bureaucrats and to be focused on risk of version and creating more rules. So yeah, I think that's an obvious problem. Then add in the fact that as countries get richer, they care more about the environment you see it in China. As China's gotten richer, they care more about smog and for people to, I think, move beyond that inherent caution. They have to believe it is worth it. people need a realistic plausible image of why it's all worth it. And we used to have people who would do that for us. We had public-into-electuals and we had Hollywood who would say the future can be better and it's going to be awesome. And then that disappeared. So who paints a future? Listen, I used to have a lot of time going on like the drug report used to be, you know, it's still operating. I don't think it is what it used to be. And every article about technology And science and Silicon Valley was these are crazy people who want a future in human future for you, where you're going to all live in tubes, and you're going to all have bugs. It bugs for, you know, no more stakes are all going to have like bug stakes. That's one small example I can point to pretty much every Hollywood film in the past 50 years. So what is our sort of collective imagination of why are we going to do this? That we don't live in a world that's destined to burn, that we don't live in a world where if we should have all these wonderful inventions, only the people at the very rich will have it. It will be that they'll be living above us on the space platforms. While everybody on earth is groveling around. So we've had this inability to say like, why should you take a risk? And other has to change.

Was that the majority opinion? Do you think that people thought There was too much affluence and beauty. Again, that's a preference. Some people of this notion of like solar punk, we're all going to live in sort of these giant trees, or part tree, but you know, even skyscrapers will be gardens. And that is a personal preference for a kind of world. I think we're maybe taking our views now. We're kind of imposing on what people thought in the 1960s based on one speech.

And I think that's

Is it a story of aesthetics or is it a story of a generation sort of repulsed by their parents? I guarantee the parents and those tiki tiki houses. Probably thought those are pretty good houses. Probably better houses than what they grew up. And I take Mike.

Well, because that generation was really, really big, and eventually that generation took control, but okay, to get to where you get to your question. What is this future going to look like? I could point to some possibilities, and I could maybe, I would love this sort of science fiction people, and there are people in science fiction who think that as well, if they need to create images that aren't utterly dystopian, like that's an entire movement within that community, but like, I wouldn't say like that's my image of the future. I want to give people like the tools and make sure the economy is growing and then we can all kind of create the future we want. But I don't think it needs to be one particular preference. It needs to be like a solar punk vision or some other kinds of visions.

If you go less controversial, you can say Steve Jobs, who took how things look at the elegance. I mean, he's a boomer and he wanted to create beautiful elegant products. Now how you translate that into a public policy that creates a beautiful elegant future, but I think Elon Musk to some degree has that. I mean, who wants to go to Mars really? It's cold. There's no air. There's nobody there, but SpaceX has created these marvelous little videos about what it would be like to get out of Starship's spaceship. And if you get to Mars and see these beautiful kind of domes and it's a green and that's an elegant, beautiful vision of future for a place that's none of those things.

I'm confident about that at least on even days.

Well, I mean, I think the people at SpaceX would say that they stand on the shoulders of giants. So they did not have to start at a baseline at zero and figure out how to get something in the space. So I think that's important to note. I would like the government spending more money on R&D. I think I would like a hard look at what they call the meta science, which is, how is that money actually spent? What is that process like? Are good ideas squashed? This is sort of emerging area of public policy, where they're taking a hard look at that process. Are good controversial ideas? Are they not getting funded? Like, those kinds of reforms, I think would have to be part of anything. And I'm not, like, I'm not sure that spending more, I mean, great. I can point to studies, but until we actually do it, I don't know. I think we're at sort of like a moment that we should try to use every plausible idea to make sure we don't waste a moment that I think we had at the end of the 60s that I think we had at the end of the 90s to create a much faster growing economy. We have this, you know, a burgeoning cluster of technologies that let's support these technologies and I think AI is a great example and see if like this is possible because I've lived through 50 years of what some people call the great stagnation and the book I call the greats downshift. I don't want that to be the next 50 years because what if our politics look like if for the past decade of economic tumult stagnation? I don't want to look at our politics after another decade of that.

Well, I mean, you have highly motivated people working on very specific projects. The managers of those programs are not there forever. Like they're there to create new technologies. that would have some sort of military application. So like the easy answers, we need DARPA for everything. We need to have this can you scale that? I would like to try. I would like to try scaling that. I would try scaling a lot of things. I think it shows that despite skepticism that can't accomplish anything, you can point to the successes of DARPA.

When Slinger happened, there was a sort of a deep skepticism that the era of Bill Clinton, the era of big governments over, and I was seeing like the era of big governments back, and I think people were waiting to pounce on that. I mean, I looked at Slinger and my immediate thought was, this is back then, like this is government. failing again. So I don't think I had that kind of tolerance for failure. I sort of do now. My personal tolerance is higher. I don't think for most people on the right right now is yet particularly high, especially if you're looking at it purely in a political standpoint, listen, and I'm sure you're aware of this that like in the past, when there have been these government science programs that have been conservatives who have picked through them, try to find something that it sounds like ridiculous or silly or correct. The ridicules are silly like why are we spending money? The figure out like how hamsters survive and orbit or something like that. So we shouldn't pretend not to have a toleration of basic science because you know the kinds of basic science that didn't seem like it had any application like I don't know the theory of relativity is why we have GPS's.

So I was listening to the podcast that you did fairly recently with Jerusalem Dempsis and thinking about, you know, some of these issues of zoning housing restrictions and why it's hard to, you know, build anything and housing actually is the perfect issue. Housing seems like we need more housing and concerns should like that's growth and we could serve as supposed to like economic growth and tumult and dynamism and people can move the high productivity cities. Because servers seem to be against housing reform. At least some conserves. They don't like the idea because they view it as a culture issue which eventually eats up everything because you're destroying the suburbs. You're going to bring the wrong kind of people to our neighborhood and all that kind of thing. So the people who are on the left who are looking at these issues and think we need maybe need to grow faster and there's things we need to build in this country and maybe regulations are a problem and you know, funding is a problem. There needs to be an ally on the right where you're certainly not going to agree on everything, but like there's a common ground of people who have some sort of confidence that we can actually move forward on problems. But right now, I think while there are some pockets of that, I think on the right and in the Republican Party, it just seems to be sort of more abundant at the moment.

My hope has been, and as you just suggested, it has yet to be realized that the pandemic would accelerate this need. I would hope to accelerate technological progress in growth. This is a perfect example of a problem that many people knew was coming, right? I mean, there's a gazillion white papers that we're going to have a pandemic. But yet, despite that fact, we didn't have enough ventilators and we didn't have enough masks. And what finally, despite all the white papers, all the thoughts about preparation, what finally really allowed our economy and our lives to go on was the fact America is a really rich country and a really technologically advanced and we are able to solve a problem on the fly. because of those two things, and that people will look at that example. And we no longer have to go back to Apollo to be excited about something where we all came together and solved the big problem, beating with the Russians. This time we all came together and solved the big problem, and people have yet to look at that. Instead, it has sort of gotten lost. And I can't blame Donald Trump for that, for not talking about that. Like, he should be talking about that. And if he's not going to talk about it, I would love for Democrats to talk about it and use that an example, but I hope that eventually we'll be able to look at the pandemic and operation warp speed as sort of proof of concept that all of the things we've been talking about can work.

I don't want to create like a China 2025 plan where we're going to pick a bunch of technologies. And I do worry about being locked in a certain kind of technological path, which is why I do like basic research. And I do let's see what the private sector is doing and try to support that. Like with my example, you know, deep geothermal looks like it might be something, but they need more money for demonstration projects. I think having some sort of, you know, imprimatur that this is actually going to work. And as making progress, I think government has a more of a role in that situation, but I'll tell you. I don't know if you were called the last summer for about a week. There was this notion. And I think it was a Korean researchers had figured out superconductivity that we could create these materials, which would allow us to transmit electricity with no loss. And if that was possible, Like everything was possible, like 90% of what Star Trek's about was possible. We could build very fast, very cheap high speed rails, brand new medical devices, and then it turned out that that's not the case. I'll have to admit, I thought hard. Maybe we need a Manhattan project for superconductors. Maybe that's something. All these problems we've been talking about, that kind of breakthrough would utterly change our entire sort of political discussion. And AI that can be 80% as efficient as a human. We have a very different discussion. All of a sudden the economy can grow at a point and a half faster for extended period of time our entitlement discussion, our politics is completely different. So yeah, technology, driving progress, driving growth, it's a different kind of politics and one where we're not fighting over a, you know, a fixed pie, but how to grow the economy faster.

But first, somebody has to decide how we are allocating this money, how much to what kind of scientist, but to go over and is to decide, as you're inclined, to go over and decide, and people will have to make decisions, not against making decisions. I am against someone making a decision saying, this is the kind of engine we need to have.

Yeah, I was in, I think, one technology that if we're able to crack it and there's already money pouring into it is nuclear fusion. I don't think I've ever seen a cabinet officer happier. The when energy department secretary Jennifer Grant home was talking about the nuclear fusion breakthrough about a year and a half ago like that like there's more work that needs to be done on that technology and I think government has a role. I think a lot of these energy technologies if you talk to these startups, I always ask them like what do you want government to be doing? And of course, you guys will point to some regulation and I'll say, okay, that's great. Now, I'm not surprised that you said that. But what about is there some aspect of the technology that needs more work? And they'll, they'll point when it could be like, you know, some sort of drill bit for geothermal. But yeah, so the, I think broadly areas of, I think energy, I'm, I'm just, for not saying I was going to stop with energy because that just seems to be the lynch pin. I mean, I'm very excited about artificial intelligence and what it can do and it can be a general purpose technology that can help us, you know, do science better and come up with cures. But already you have people saying, Oh, great. Maybe it'll do all that, but we just can't afford amount of power. We're how you can empower those data centers. So if that's like the thing, if that's like a key constraint, to artificial intelligence? Yeah, then energy is pretty important, and we better be doing more work. Again, we've mentioned nuclear fusion, but it might not be. Maybe it's not nuclear fusion. Maybe it is geothermal. And I'm glad we're going to space. I love the space program. I love the idea of us doing things in orbit, but you know what? Someday we may be able to use the materials from Mars to build space solar panels to beam infinite amount of power to Earth. So yeah, I think energy certainly is sector that I would like to see more research done, and I think federal government has a role.

You often hear now, economists talking about AI and how will automate jobs? And I say, well, we need the kind of AI that will create new things, but less of a kind that will automate people on a job. So we need job creating kind of AI, but not sort of the job replacing kind of AI, which is I think we probably need both. But I don't know of any real public policy that can do that. So to me, then, that sort of, there's no remedy that's realistic that. So I'm not going to give that a lot of regard what we need is both. And say, like, well, I'm going to get a certain kind of outcome by tweaking the tax code in this way. Seems to me to be unrealistic. So I guess I'm skeptical about the guiding technology sort of path. I think you're suggesting.

Well, I mean, to use that example, I'm certainly where there are people who don't like, for instance, how tech companies make money. They don't like the advertising and the targeted ads. And they feel like there's privacy issues. I don't really have a problem with that. I certainly know some people do. I think they call it surveillance capitalism. I don't have a problem. But isn't it true that that revenue is what is sort of financing? All the R&D, these companies are now doing into AI and creating the kinds of models that might actually not just create like better advertising, but create a corner copy of scientific advancements. that's an unexpected consequence and before we I think begin thinking hard about it with this emerging technology that none of us really heard of up until 18 months ago before we start thinking about ways to shape this technology we probably should have a little humility that we don't know all the things that can be we don't know the paths it will take And there might be some unexpected consequences in a rush to begin shaping and guiding this technology. And even people who are really upset about digital platforms, I don't think they're saying like the internet was a bad idea and we should be an animal. So what do you say is your view we should not regulate AI at all? I would be very, I would think very hard about very specific use cases. I would think very hard about existing sorts of laws on the books, things you cannot do. I think my default position would be rather than try to glamon our sort of social media concerns, which I think a lot of policymakers, because they feel like they missed the boat and social media regulation. So now they're taking those concerns and planning the AI, is they think a lot about the internet in the 1990s, in which We saw that it was an evolving technology and we decided to let it evolve and see what happened. That seems to be an example we've forgotten because we've been so overwhelmed by social media and sort of content and privacy issues. And so that would be my instinct.

I, I just am not sure where your confidence comes from. That we will come anywhere close at this early stage to getting it right. I mean, it did not take long. after the passage of the National Environmental Policy Act for the problems to become obvious. And did we correct those problems? We did not. So I guess I have low confidence that this early stage, we will get the regulation right. Nor do I have confidence that if we figure out we've gotten the regulation wrong, that those fixes will be made because I think As you know, once something is past, it's very difficult to undo it, which is why even though it's been screamingly obvious, for a long time, that we have a regulation problem for making it hard to build in this country, it has been very difficult to undo those rules.

Well, no, I get, I get, I think inherently people are super risk-averse. So why should we confident? I think confidence comes from my core thesis, which is rapid growth. When the economy is growing, people become more confident. They become less risk-averse. And I don't think it's any coincidence that not only did we see light regulation on the internet in the 1990s, but other times where we've had fast economic growth, we've been able to take more risks with social policy such as a civil rights act like good things happen when an economy is growing quickly. So I think that would be very helpful if we went through a period of rapid growth for us to have more confidence that like, you know what technology's going well? The economy's going well, let's go easy on AI.

Right. At a certain point, right. people become more willing to have less growth. But I would hope that after the past half century of going through a period where that kind of risk of version has turned out to be the riskiest possible thing. I mean, we're in sort of this populist moments. And one reason I think that you get populous moments, because people think the government is really incompetent, particularly on economics. We've had this period where we've had a war people then think very well. We had a global financial crisis, a bit of pandemic that people, you know, maybe we responded well as we mentioned earlier, but we didn't seem to be particularly well prepared for us. Yes, I'm talking about learning from history.

One book which greatly influenced my book was the book Why Information Grows, which is by a physicist named Caesar Hill Dago, who presented this a very different way of thinking about economic growth rather than merely thinking about labor and capital and land all sort of the foundational aspects you may have learned in a high school economics class he thinks what matters is Connection people connecting with each other companies and people and universities and even countries so that's sort of connection economics and economic openness is really sort of at the heart of a vision I tried to give in my book I would also recommend, since I write about a sci-fi, so much on my book, The Expans series, which they turned into a TV series, which I view, I may be in the minority, that I view as a future optimist, hard-science series, because it shows Earth a few hundred years from now that has sort of mastered the solar system, but it's not a perfect world. Things have gone wrong. Climate change was bad, though we seem to have gotten a hold of that. And technology, as meant, there are people out of work and I'm basic income. So it's not a perfect world. But nothing in my vision is about creating utopia. It's about solving problems. And that's why I think the expansion series does. My final book is the American Dream is not dead by one of my AI colleagues, Michael Strange, which is sort of a no nonsense look at issues like wage stagnation, income inequality, and the supposed gap between productivity, there's productivity again, and worker pay. And I think it's a bit of a myth, but very cautious myth-busting book that what you may think about all those issues may not be true, so it's a pretty great book. Jim Bethkukus, thank you very much. Thanks for having me.