You can also listen to the episode on Apple podcasts, Spotify, and YouTube.

You can also listen to the episode on Spotify, Apple Podcasts and YouTube.

Transcript

Ben Southwood [00:00:00]: The mainstream media is lying to you. ‘Sobering study shows challenges of egg freezing"‘. That’s the New York Times. ‘The failed promise of egg freezing’. That’s what Fox calls it. ‘Success rates for frozen eggs vary widely but rarely go above 30%’. That’s what the Financial Times says. Glamour Magazine says ‘the odds are stacked heavily against you’. This is all extremely misleading; it’s true that women in their forties who freeze their eggs, which is most women who freeze their eggs, have relatively low success rates, but that’s because they have relatively low fertility. If women freeze their eggs in their twenties, then when they unfreeze those eggs and use them, they have the fertility of their twenties. Eggs age, but uteruses don’t as much.

The oldest woman to ever give birth was 72, but she did it with donor eggs. Where did I learn these facts? Issue 23 of Works in Progress. So I’ve brought my colleagues, Aria Schrecker, Peter Garicano, I’m Ben Southwood, to discuss the latest issue of Works in Progress, issue 23.

Pieter Garicano [00:01:00]: Ben, I don’t even think that’s the most interesting fact in that whole article.

The much more interesting story the article tells you is that you’ve been lied to about fecundity curves. People often think that your probability of giving birth or your fertility, declines very gradually between ages 18 and 35 and then very steeply as women enter middle age. This is the story you hear in school, this is the kind of graph you see, this is the kind of general wisdom that people will accept. The problem is this is totally not true. It’s based on the fact that in the past we couldn’t observe actual fertility, which is like your probability that you’ll give birth if you’re having unprotected sex. We could just observe how many people were having children.

So we have these big data sets of German peasants. We have the datasets of Iranian farmers. It turns out the fertility curve correctly measured, including just non-pregnant women, is totally linear. It declines just as much between 18 and 25 as it does between 25 and 30. And importantly, this means that actually it’s quite a bit higher as you get older than what is commonly assumed when you look at the concave line.

Ben Southwood [00:02:00]: The key thing is, this isn’t looking at someone’s fertility throughout their life, in which case it would catch all of the children they had had previously to the study or after the study because they were pregnant or they’d recently given birth. Instead it’s just looking at if they had a child this year. And one of the main reasons you wouldn’t have a child this year is because you had a child last year, or you’re going to have a child next year.

Pieter Garicano [00:02:24]: If you actually plot monthly birth rates in non-pregnant women, it’s an extremely steep, basically linear curve between 18 and 40. It doesn’t go slowly and fast. It’s every single year that you wait, it becomes harder and harder to become pregnant.

Ben Southwood [00:02:39]: But there is no steep decline after age 35. It’s flat. There’s no particular year where fertility drops off a cliff. It’s just a steady decline throughout a woman’s life.

Aria Schrecker [00:02:49]: So fertility aging is much more like regular aging than it’s like going through puberty.

Pieter Garicano [00:02:56]: Exactly. And of course the key point is that what is aging is not the ovary or the uterus, it’s the eggs themselves.

Women start their lives with 2 to 6 million primordial follicles, of which roughly 400 will be menstruated. But the vast majority of them will die off throughout a woman’s life at a very linear rate. Which means that when you’re doing, for example, egg harvesting to freeze them, it becomes increasingly hard.

Now Aria, you may know something about this.

Aria Schrecker [00:03:21]: I may have some relevant information. I’m currently about to lay about 44 eggs on Saturday.

I’m going through the process of egg freezing currently. Top line review is, it’s not as bad as people say. People say it’s very painful, that you get very bad mood swings, that it’s very rough on your body, that it probably won’t work.

There are lots of things that you generally hear when people are weighing up whether or not to do it. They say it’s expensive, and it is kind of expensive, but not for what you’re buying, which is the insurance of getting to have children in the next 10 years or so, being able to have children maybe when I’m 40, which I might not be able to otherwise.

Ben Southwood [00:04:16]: Ruxandra and Luzia, the authors say that the world capital of fertility for that purpose is Spain. Are you going to Spain?

Aria Schrecker [00:04:39]: I’m not going to Spain. I’m going to a lovely place in London.

Pieter Garicano [00:04:42]: I don’t think they say the world capital is Spain. they say Spain is very cheap and also generally a nice place to be. And so if you’re going to be there anyways, you might as well take a day off.

Ben Southwood [00:04:53]: That’s the starting point for a flood of international egg tourists turning up and getting their eggs frozen.

Aria Schrecker [00:05:04]: I’m not against it. It’s much more convenient to do it in London. The price differential doesn’t seem to be that extreme. My husband would also need to come to the place that we extract them so the costs compound because we’re not just doing egg freezing.

Ben Southwood [00:05:24]: What is a typical price to pay?

Aria Schrecker [00:05:29]: A typical price would be about £5,000 in Britain and then £200 per year for keeping them frozen.

Ben Southwood [00:05:37]: So I remember being quite interested in the piece about how the eggs winnow down from the starting point. Is that something you’ve experienced?

Aria Schrecker [00:05:49]: Before you even start any hormones, they just want to make sure it’s actually going to work if they do it. They’ll give you an ultrasound and they’ll look at your ovaries to make sure they look healthy and they can roughly get a ballpark number of how many available follicles you have that plausibly would develop into mature eggs.

They literally just do a count; you can see it on the screen and they you can see the little black holes that the ultrasound doesn’t go through. I don’t really know what the typical numbers of something like this were. I had high twenties in both ovaries, and then once you start the injections, most of those do actually start to mature.

And so when I say I’m going to lay about 44 eggs, that’s what I’m referring to. There are 44 mature follicles. After that point, you should expect a winnowing at each potential stage, once they take the eggs out of the follicles, only about four fifths of them will end up being mature eggs.

And after that point, only a certain number of those are actually going to be successfully fertilized. After that, only a certain number of the successful fertilizations are going to actually develop and grow. And after that, only a small proportion of those are going to end up not having any chromosomal abnormalities.

And then when it comes to implantation, you lose a lot in implantation as well. You should expect from 44 follicles to result in something like five or six children.

Ben Southwood [00:07:14]: The message of this piece is that egg freezing and embryo freezing are both much more effective than many people have been led to believe.

Aria Schrecker [00:07:49]: When you’re talking to the doctors and nurses, many of them express that they wish all of their patients came to them at a younger age.

They wish they were working with people in their twenties. They’re saying part of the reason the symptoms aren’t that bad is because you’re quite young, we don’t have to pump you with as many hormones. This is actually just much easier.

Obviously to some extent, everyone who works in that industry are trying to sell their goods, but you can tell that they’re actually very enthusiastic and in favor of more people doing this while they’re young.

Pieter Garicano [00:08:19]: They say in the piece, the average age someone currently does this in the United States is 37 or 38. It’s extremely late to be going through a procedure like this one.

Aria Schrecker [00:08:28]: It’s very sad that when tech companies and private insurance schemes offer egg freezing, people often view it quite cynically, as the company trying to basically buy their workers extra time and trying to hope that they’re encouraging them to delay making family formation decisions.

It’s very rare that that would be persuasive to people or that companies are thinking in that sort of homo economicus kind of way. There are lots of people who have this perk available to them as a side thing from their job that they never think about that it would actually be essentially free for people in 20% of young employees.

Also, I’ve decided not to sell my eggs. This also has an interesting reason, because you can’t sell eggs in Britain. That’s fine. I can travel abroad and I can take my eggs with me. But the main market for egg selling is America.

And because I was born in 1996 in Britain, we had mad cow disease and you cannot donate any blood or organs or anything in the United States if you lived in Britain for more than six months, from a period that ends at the end of 1996. So technically, I’m eligible to sell my eggs in America because I was born in August.

I did not live in Britain for six months. I wasn’t around for six months in 1996, but I get screened out by all of the donor websites pretty quickly. And so I would have to come up with a bespoke brokerage agreement. And that seems like a lot of work. But if you tick like a bunch of boxes, a whole bunch of them saying you a normal weight, are you, did you go to a good university?

Especially if you’re South Asian, because Indian people love having children and they hate donating eggs. You can actually make a lot of money from selling your eggs. So if you are worried about being able to afford it, you could earn between 30-50 grand per cycle of eggs.

You can come up with a bespoke arrangement, so if you want to freeze them, then you can also plausibly come up with a freeze and share agreement with a couple that would like a couple of your eggs.

Ben Southwood [00:10:44]: So basically, egg freezing is really awesome and it’s great that we have this technology.

Pieter Garicano [00:12:58]: My hope with this article is that it corrects some pretty big misconceptions. In this case, you’re being told it doesn’t really matter if you’re 25 or 35. It really does matter, and the fertility curve has a different shape, and just having that information in your mind will allow people to make more informed decisions.

But correcting big misconceptions is a broader theme in this issue because the article immediately after the egg freezing article is about how Australia stopped the boats by Amelia Wood. Now, you may have heard of things like the Rwanda deal in Britain or Netherlands has the Uganda deal. Italy has the Albania deal. The idea behind all these deals is that if you have Illegal immigrants, or asylum seekers which come to you by boat or by land, and they arrive in your country to process their asylum requests. You can process their requests offshore and in the case they are rejected, they’re no longer in your country. Many countries around Europe and indeed around the world are really keen to try out this model of offshore processing. And why are they all doing this at the same time? Well, because there’s one country in the world, which had an asylum problem, and they solved it by doing offshore processing; Australia. And in this article by Amelia Wood, Amelia pretty definitively proves that in fact, offshore processing is not what Australia did, and is not necessary at all if you would like to reduce the amount of legal immigrants arriving in your country.

Ben Southwood [00:14:32]: So explain how she does this?

Pieter Garicano [00:15:29]: So Australia’s had very low rates of boat migration since the seventies.

Initially it was people coming from Vietnam, and then towards the eighties it really started picking up and you start getting people coming from the Middle East as well. They often fly to Indonesia, and in Indonesia they’d pay a smuggler to bring their boat to Australia. And in the late nineties the Australian populists had enough and a liberal, which is in Australia conservative Prime Minister, decides to put a halt to it.

And so he does two things. One thing is that he started offshore processing. He takes people who come by boat and brings them to Christmas Island and to Nauru, which are territories or islands near Australia, and processes them there. But the other thing they do is turnbacks. A turnback is that the the Australian Coast Guard encounters your ship, or the Navy encounters your ship and then very gently either tows you back or invites you on board and brings you back to the beach.

Aria Schrecker [00:16:25]: Where do they tow you back to?

Pieter Garicano [00:16:26]: Indonesia.

Ben Southwood [00:16:27]: How far is Indonesia from Australia?

Pieter Garicano [00:16:29]: Extremely close, like 200 miles.

Pieter Garicano [00:16:32]: Christmas Island in particular. So they were heading for a offshore Australian territory at Christmas Island, which is off the coast of Java. So it’s really not far at all. It’s also because the Australian navy and Coast Guard were basically camping outside the Australian EEZ.

They just wait for people to come. And so it wasn’t as if they were dragging them a hundred miles. They would drag them 20, 10 miles back.

So these both things at once, that offshore processing was very high profile, very controversial, and then Turnbacks were actually done in secret because this whole process was classified in part because Indonesians, as you might expect, were not very happy about this. And they complained. That’s the end of the first wave from Australia. This doesn’t give us any evidence which of the two things actually works, but Australia’s actually interesting and the media shows this because they had a liberal, a left wing prime minister who came afterwards, who ended both programs.

And as expected between 2012, to 2013, the whole thing happened again; a huge wave of people came from Indonesia, 30,000 people tried to move to Australia. And there they actually staggered the two approaches. So first they tried offshore processing, and then a few months later they started Operation Sovereign Borders, where they did a very large scale term expiration.

And if you look at the time of arrivals, almost no one is deterred immediately after the introduction of offshore processing. It’s only once turnbacks are happening that people stop trying to come. And the most important and the most surprising bit of evidence that she gives in this whole article is that since 2014 Australia hasn’t done any offshore processing. They secretly wound it down, and since 2014, they’ve only done turnbacks and nonetheless they’ve had zero arrivals overseas.

Aria Schrecker [00:18:19]: Why doesn’t offshore processing work?

Pieter Garicano [00:18:20]: It might work, but it’s extremely expensive. Even Australia had to spend billions and billions of dollars on their programs in Nauru.

Ben Southwood [00:18:29]: And it gets full.

Pieter Garicano [00:18:30]: It’s so expensive that you only have a capacity of 1000 to 2000 people. And so almost everyone that was taken off offshore was actually, eventually released into Australia because when too many people came at once, they decided to clear the camps by bringing people to Australia to post them there.

And so offshore processing is so hard that it is incredible. And so it doesn’t work as a deterrent.

Aria Schrecker [00:18:53]: So it’s just a gateway drug to onshore processing.

Pieter Garicano [00:18:56]: You could call it that. The people who are being processed see it that way. They expect that de facto they will be posted onshore.

Aria Schrecker [00:19:05]: Also depending on the situation you’re fleeing, maybe just being offshore processed is better than what you’ve left behind. So you don’t mind languishing in those camps.

Pieter Garicano [00:19:15]: The camps seemed pretty bad. Part of the story here is that a mix of circumstances, the fact the camps were so bad that like the NGOs made a very big deal of it and the press made a big deal of it, and the fact that Indonesia hated Turnbacks.

And so the Australian government kept it secret, which meant that almost everyone who studied the Australian migration story only heard about the offshore processing.

Aria Schrecker [00:19:57]: So do we think anywhere else is going to do Turnbacks? Could Britain do turnbacks?

Pieter Garicano [00:20:06]: So the problem is that Turnbacks currently are seen as illegal on the ECHR because it’s collective punishment. You’re always meant to treat everyone as an individual.

Ben Southwood [00:20:23]: Firstly, that’s inconsistent with the Turkey deal -So after Libya fell, you get the migration crisis coming to Europe from North Africa and the Middle East.

And in 2016, if I remember correctly, they signed a deal with Turkey, which said we’re going to turnback every migrant and you’re going to take them. You can turnback every migrant over the border, you’re going to take them, but we’ll take someone else from you. So they’re not treating them as individuals.

They’re saying that migrants are an undifferentiated mass and we are accepting people, different people from the people who walked over the border, we’re turning about the ones who come over the border and we’re giving asylum to the same number of people, but just without an incentive to come over the border.

And that seemed to have worked in that case. But is that not inconsistent with ECHR?

Pieter Garicano [00:21:17]: Officially, the Greeks say they do no pushbacks.

Aria Schrecker [00:22:08]: Seems like it would be in a lot of European countries’ interests because obviously, everyone’s kind of slightly defending their borders against each other, probably to focus a lot more Navy effort over there.

Pieter Garicano [00:22:20]: Yeah, and also it seems much more- It’s both cheaper than doing a Rwanda deal or an Albania deal. And also it seems much more humane.

Aria Schrecker [00:22:28]: what’s very appealing about this framework is it appeals to my sense of what I would call decision theory about how you should devise rules for your country.

So a lot of people like to think of policy, immigration policy and refugee policy is a very classic version of this, where they see the problem that they have on hand at the moment they have it. So they see that they’ve got these people, a lot of them are very sympathetic people and you decide, okay, what do we do?

How many of these people do we want to take? Whereas you should actually be thinking, what rules do we want to set earlier so that we have the best way of making these decisions in the future? And turnbacks are appealing because obviously if you’re picking your refugees that you want to take from the whole world of refugees, you’re not going to simply choose the people who happen to end up on your shores.

There are loads of much more appealing things you can do. Like the Hong Kong refugee scheme is a perfect example of this. But your press and your general political establishment cannot be relied upon to allow you to make those decisions when you’re actually pressed with the problem. So it is nice that you can kind of take that option away from them and give yourself the ability to make those rules by doing the turnbacks instead of the processing where you are already stuck with those people.

Ben Southwood [00:23:46]: So the public is a principle and it has its agent, the government. Government is not completely reliable on delivering what the public wants at all times. One thing the public wants is we want these refugees but we don’t want those refugees. Right? There are many in the public who are very sympathetic towards Hong Kong and Ukraine war refugees, and then there are other cases of people they refuse. If you see a protest, people say they’re all male. If they were refugees from a war, they would not all be male.

And that might not be true actually, because of who can get there, etc. But when people say stuff like that, they’re worried that people are taking advantage. What you are suggesting, which I like, is that you can only get the trust that allows you to have the other refugees if you bind yourself in the case of some refugees.

My understanding is that Australia has quite a generous and well respected asylum system relative to most European countries, which are, where most European countries are voting far right parties or most European countries are seeing a lot of distrust in mainstream parties.

One of the causes is distrust in the immigration system. But it, see, my understanding is that that’s not true in Australia.

Pieter Garicano [00:25:05]: this is the most convincing point in favor of this policy. Is that Australia now has more refugees per capita than any country in Scandinavia.

In fact, it takes three times as many people right now than it did at the very height of the boat wave. So it turns out by being very predictable and consistent by building trust amongst the public, you actually get a much, much more generous overall policy than you do in this kind of uncontrolled principle agent world.

And in Australia, in fact of all the countries pulled by Ipsos in OECD the Australians were by far the most positive on asylum. In fact, 60% of the Australian public think refugees make a positive economic contribution to the country, which is really incredible compared with Western European countries where people are quite skeptical.

Aria Schrecker [00:25:55]: This is a white pill. I would say.

Pieter Garicano [00:25:57]: It’s a huge white pill. You can do a thing which is both cheaper, more humane and allows you to have a much more generous immigration policy.

Aria Schrecker [00:26:04]: The thing that really is appealing about it is that I have always kind of believed that Anglo countries aren’t actually racist.

And then you see all the new news from Britain and America and you think, oh no, what if they actually are? And it’s very satisfying to say, I think that Australia can continue to have actually quite a high proportion of people who aren’t white, quite a high proportion of refugees. Just the sense that they’ve got their borders under control is enough to make them happy with that circumstance again.

Ben Southwood [00:26:33]: I do think that ideological entrepreneurs, including far right racist ideological entrepreneurs, have an easy time of it when most mainstream parties won’t tackle issues that the public has - like that a significant subsection of the public has a strong opinion on. I don’t think that’s an excuse for people doing nasty stuff or having nasty opinions, but that it’s probably a predictor.

We were just talking about the principal agent problem between the public and its representatives, and did you know that in 1965 Britain had almost more reactors - nuclear reactors than all the rest of the world put together?

Pieter Garicano [00:27:18]: Because you talk about it every single day.

Ben Southwood [00:27:20]: Because I talk about it every single day and it was not true. So I originally thought they had more reactors than all the rest of the world put together, because a source I saw that seemed plausible and then another source backed it up, said that in fact, Britain had 19, the rest of the world had 21 put together, so it wasn’t far off, but it wasn’t quite true when I said that originally.

Aria Schrecker [00:27:42]: Can we slightly change the bounds of the question so that two of them don’t count?

Ben Southwood [00:27:53]: You can, so here’s one way of really changing the bounds.

So I have said many times that Britain had the first civil nuclear reactor. Britain did in fact have the first full scale civil reactor delivering power to a grid. Now if you take away all of those adjectives, it’s not definitely true.

Both the Soviet Union and the US can claim a certain first reactor that produced power. It’s just a question of where you set full scale and supplying energy to the grid. But because it was all in such a short time period and during 1952 this, everyone was getting there at the same time.

One of our articles is by Alex Chalmers, who sadly no longer works at Works in Progress. But while he was here, he did wonderful things on Nuclear energy. And in one year his incredible advocacy was clearly the main reason why John Fingleton’s review of nuclear regulation was so influential.

And the government said that they were going to repeal things, but he tells a very interesting story of British nuclear power. Britain, relatively early during the 1950s, quickly built 20 reactors in 10 years, we planned and delivered the first one in three years.

We commit to it, come up with the design for it, completely construct it, and it’s plugged in within three or three and a half years, maybe four years. And then that continues happening through the program. One of the big memes of the moment on how you should deliver nuclear reactors is that you should do it in fleets. The countries that do it best today, like Korea, and some of the countries that have done it best in the past, like France, have taken the design and then copied and pasted it around the country. In France, they rule that if you find a change that will be good, they will implement it, but during the next wave, as to not delay things or change things immediately.

Aria Schrecker [00:30:12]: That’s also our rule for editing the podcast.

Ben Southwood [00:30:14]: It’s also our rule for editing the podcast. And it is a great rule. Britain didn’t do this. Britain basically had totally flexible designs. The Magnox reactor, every Magnox reactor is totally different.

Britain builds out a bunch of reactors quickly; they do it with a really flexible design, they do it very cheaply. By today’s standards, these are small modular reactors, although obviously they’re neither small nor modular.

These are 80 megawatts or up to 200 megawatts, the last wave of Magnox reactors. But then after 1960s, despite building out the Magnox reactors pretty cheaply, and despite doing it quickly, and despite being a nuclear leader, after the 1960s everything goes wrong.

And there’s a common story of why this is, which is that when we built the Magnox reactor, it was a special kind of reactor design that no one else decided to do at scale; using the Advanced Gas-Cooled reactor, known as the AGR Advanced Gas Reactor. In the world today, about 75% of reactors are something called a pressurized water reactor. Which is the simplest kind of a reactor you can imagine.

You just have a core chain reaction going off, heat, some water that heats some other water. It’s like this, it’s the simplest possible reactor.

Aria Schrecker [00:32:36]: I saw a good meme on the internet that was like, we’ve invented a new form of power. You invented a new form of power? Or is it just steam again? Just steam again.

Ben Southwood [00:32:43]: Yeah, exactly. It’s the same old thing. The magnox is a bit more complicated than that. The reason we went for it is that it generates plutonium, weapons grade plutonium as a side product. Britain wanted lots of plutonium at the time, now we don’t want it.

The common story is that when a new design went ahead for the Advanced Gas-Cooled reactor, the difference was that they didn’t need a pressure vessel; their view was they didn’t need a vessel at all. It was completely safe automatically, there was no way it could ever go wrong, it had built in safety features. And to be fair, they ran a bunch of them for a long time and none, never had a disaster. So maybe it was true, but there was no containment vessel.

The AGC reactors were going to run at a much higher heat than if it was with water, as you can’t heat water past a certain point, but you could run gas at a higher temperature such as 600 degrees.

So that was all going to happen and then it went wrong. Alex takes a different view. He says that a lot of things went wrong at the same time, and it’s related to the fact that they chose a bad reactor design. But if you look later on, once the Advanced Gas-Cooled reactors were privatized and handed over to professional managers, they actually ran them pretty well and they were pretty good designs.

They had some flaws. They have to be retired more early than the standard reactor designs, but it wasn’t an utter disaster. The problems were the public started getting antsy about all government projects during the 1960s and 1970s in the UK. And this is not just nuclear. Everything starts going wrong.

Everything started after a certain point, takes ages to finish, goes through constant fights with everyone who’s nearby it in a way that just wouldn’t have happened before. When they were building out the first nuclear program the Minister for Power might do an inquiry that finds that the National Parks have said that this is going to damage the national park. Then the decision is that the benefit of cheap electricity outweighs that damage, and one week later they can start construction.

It seems this problem began during the 1970s. So Alex’s view is that the technocrats who ran everything were widely accepted when they made the right decisions, but once the public as the principal lost trust in its agent, in the state to make these decisions on its behalf, everything went to pot and perhaps the technocratic model was backfiring.

Aria Schrecker [00:36:38]: And you would say that in the 1970s we had a period of high inflation. And this is why the public lost trust.

Pieter Garicano [00:36:57]: So I am skeptical of the inflation story. You know, ‘68 happens before the oil shock. And also, for example the country worst hit by the oil shock in Europe was the Netherlands, because Netherlands was most pro-Israel.

And so the Netherlands embargoed for the longest. In fact, Netherlands embargoed for so long, the French volunteered to join the Arab embargo if in exchange, they got oil from the Arabs. So the Dutch had the worst inflation shock, yet didn’t have a big upswing in social disorder. But let’s disregard inflation.

We dedicated a whole episode to this question. I’m trying to understand what you mean by technocrats, or people losing trust in technocrats. Is it that the technocrats who were in charge of nuclear mismanaged the programs such that people were then against nuclear? Is it that different technocrats who are responsible for planning screwed it for everyone else because they made all products hard to deliver?

Or is this a third thing, which is kind of this general sense of how elites want ugly things, they believe social change is not good, that modernity is going the wrong direction. Therefore I’m generally distrustful whether they are technocrats in government or business elites or art elites.

Like which of these three stories, or maybe a fourth story is actually the Ben Southwood view for why people lost trust.

Ben Southwood [00:38:33]: Here are my suspicions.

Suspicion one is that the AGR did cause the problem. Not because it was really bad, because it turns out that the AGR was still five times cheaper than the supposedly good design that we’re implementing now in Hinkley point C and Sizewell C, which is basically a pressurized water reactor.

The AGR was supposedly worse than them, but it was much cheaper in real terms than those, and they still ran them for 40 years with no accidents. Once they worked out how to use them, it was completely fine. So it wasn’t that bad of a design. Now, the thing that it hurts the program through, was by being perceived as a really bad design and by having really bad hiccups for the first 10 years. It did have some clear flaws, but the main reason they hurt the nuclear program is not because it was so unworkable, but because they actually did make it workable and they could have kept building them.

And if we continued the program even at that cost, we would have saved tens of billions of pounds in the Ukraine crisis, and on the subsidies that Britain paid for energy during that time alone. I do think that the fact that it messed up initially punctured faith at the same time as a lot of other things punctured faith.

Pieter Garicano [00:39:57]: What’s the pattern there, that the technocrats were very consumed by glamorous technological super projects? Is it just a kind of cultural fad that happened to pass over?

Ben Southwood [00:40:09]: Think of the general experience you’ve had, which is that if the technical people are in charge, they always want to do the technically perfect idea.

They don’t want any other considerations. They’re not very good at trade offs if given complete control, they’re extremely useful people to have around, maybe the most important, but you don’t want them to be in charge of everything. If it was a bridge, they’ll build the coolest possible bridge that could take a hundred earthquakes at the same time, not the cheapest bridge that does the job sufficiently.

On another note, the laws that came in weren’t designed explicitly to hamper nuclear power. To make this more general, there are lots of things that got destroyed by 1970s reforms where the thing being targeted wasn’t really what ended up getting destroyed.

So the US Clean Water Act type; they brought in an NEPA review system that means you can’t reclaim land. And we just disagree with them about whether claiming land was good and maybe we’re right, maybe we’re wrong, but we just disagree.

But there are some other things similar to nuclear power here. A lot of the review systems that were brought in could have just been written except energy projects with the national security element.

And there are contingent factors that led to that happening and then unwinding that is difficult over time, because you build up stakeholders who like the system as it currently is. Now why did people lose faith in their system as a whole? There are a wide range of things that were happening at the same time.

So people will forget it now, but there was a lot of worry about immigration in the 1970s in the UK and there were in lots of other countries as well. Maybe that’s a UK specific factor, but it definitely seems like it was an important new case specific factor. It is clear that high inflation periods tend to be periods with more social dynamic, people voting for weirder parties. And so that was an important factor.

And then I do think that like the elites of the post-war era had a lot of different opinions from the public they represented and they did because of their especially strong powers that they had at that time, especially in Anglo countries where they had overwhelming power to expropriate to take decisions on behalf of society. There were lots of administrative systems that would’ve stopped the German government taking decisions quite so quickly on nuclear power during the 1940s, fifties and sixties.

Whereas the British government could decide within a day whether it was starting a nuclear power program. So many of these decisions were taken in ways that the public decided it didn’t like over time, it gave them a lot of benefit of the doubt. And then when things came to a head, they came to a head altogether.

Pieter Garicano [00:43:23]: So if I had to combine the reasons, it’s a mix of contingent nuclear specific mistakes plus elites who were generally very out of touch with the population. Plus a very, very responsive political system, plus a very responsive state, plus high inflation, all of which combines to ensure that British nuclear loses its way.

Aria Schrecker [00:43:45]: So these stories about bad British technocrats should bring us onto a piece about good technocrats, good American technocrats, good Dutch technocrats. We should talk about ASML, which is another piece by Neil Hacker in the issue 23 of Works in Progress.

It’s plausibly the most important company in the world, depending on what you think about AI.

But lots of people are very familiar with TSMC and Nvidia as being the two big chip companies that you should buy stock in, that you should be watching, but both of those companies are totally reliant on this other company, further down in their supply chain called ASML.

What ASML does is they make what is called an extreme ultraviolet lithography machine. One of the features of chips is that they cut patterns in very, very small to transmit information across. They used to cut them with physical tools, but once you’re getting down to the 10 nanometer, 3 nanometer sizes, physical tools start to leave enough residue that the lines aren’t perfect.

So instead they are cut with pure energy, light, and ASML make the only machines in the world that are capable of doing this. Other companies tried to make extreme ultraviolet lithography machines, but they’ve all failed up to this point. It’s an incredibly complicated machine.

We call it the world’s most complex machine because of how many parts there are inside of it to make this very precise technology. ASML would not be here without the American government, probably without the Belgian government and possibly without the Dutch one as well.

Pieter Garicano [00:45:20]: I don’t have a big Ben Southwood theory for ASML, but I do think there’s a few interesting lessons that I learned from this piece.

For example, the American government, so ASML has EUV technology, Extreme Ultraviolet technology, because the American government gave it EUV technology in the 1990s.

There were big cuts to the Department of Energy. And so they closed this EUV program and instead they asked the private industry to come and take care of it. Intel provided most of the funding, and they were looking for a manufacturing partner to actually make the machines. At the time there was a little worry about Japanese companies, for example Canon and Nikon, which were the two primary chip manufacturers. They were excluded from the competition and instead the sole contractor were ASML and a Californian company which soon went bankrupt and was bought by ASML, which left ASML as the only participant in this consortium.

Aria Schrecker [00:46:23]: What’s particularly interesting about that is it seemed like their initial instincts were to make it only American companies, and the whole project would’ve likely failed if they’d stuck with their gut instinct there.

Pieter Garicano [00:46:34]: Well, but in some ways the product also failed because when the Americans gave the technology to ASML, they required ASML to make 55% of the components in America, it was one of these classic JVs. The technocrats wanted to have spillovers in America and make sure America still controlled the technology. But it turns out that once you hand over all the IP and all the knowhow to a company like ASML, it’s really hard to enforce the contract obligation they had to create 55% of their components in America.

Aria Schrecker [00:47:06]: And ASML now basically have the opposite stance, which is they guarantee that maybe a third of their supply chain is EU specifically because they don’t want to be disrupted.

Pieter Garicano [00:47:14]: Correct. ASML has huge suppliers in Europe, they buy a lot from Germany and Belgium in particular. They buy most of the components from Eurasia. And so the Americans — it’s kind of a time inconsistency problem here — where they invited a foreign firm, set a set of requirements, and by the time the transfer happened there was no way to enforce the rest of the contract.

Aria Schrecker [00:47:34]: They did get their primary goal, to have a significant part of the chip industry outside of East Asia, because at that point that was a big geopolitical problem for them.

The people who started the program probably have a strong preference for this to be happening in Europe than in East Asia. And they probably are happy with the results.

Pieter Garicano [00:47:52]: I don’t think this outcome we got is bad at all. The national security fears they had were very overblown, but it is notable that even in a case where you’re making a deal with a company based in a very friendly country, there is no way of actually enforcing these contracts oftentimes.

Aria Schrecker [00:48:06]: Europe’s greatest industrial strategy from America.

Pieter Garicano [00:48:51]: I also think, by the way, ASML entirely fits the model I described; when we say that the labor markets are the main problem for European innovation, because the kind of innovation ASML has done has been extremely incremental.

They were given the big jump, the big bet part they were given, and the rest of it was the kind of thing Europeans have always been very good at. And so as Neil describes in his article; ASML has some of the longest tenures of any company of its size; their CEO joined 30 or 40 years ago when he was 29.

Many of their senior engineers are people who joined during its founding in the eighties. And so in many ways, ASML is an example of incremental innovation, the kind of innovation we actually predict that Europe would be good at.

Aria Schrecker [00:49:46]: This is why lots of the chip industry is in either Asia or Europe, it seems like it fits that business model more because it seems like it is just squeezing out more and more efficiency out of something that we already have rather than coming up with something totally new and disruptive.

And it matches my stereotypes about East Asian and European economies.

Ben Southwood [00:50:05]: That makes sense. But you have to remember that the chip industry is now fabs and designers, right?

Pieter Garicano [00:50:13]: It’s mostly just files. Just software.

Ben Southwood [00:50:15]: So it’s split perfectly along the lines that you would expect if the Peter story of the world is true, they’ve actually broken the firms down the middle so that the Americans can do the radical design elements, and in fact, Britain to some extent and the Europeans can do the incremental innovation.

Pieter Garicano [00:50:33]: Another great fact that I really enjoy in this issue of Works in Progress is in our article about buses by Samuel Hughes. The bus actually is not very radical technology. You need stable roads, you need pretty sophisticated carriages, but you can do it with horse drawn carriages, which we’ve had for the last 5,000 years. So why does it takes so long for bus to come about? Well, we invent buses once in the 1660s. It turns out Pascal, famous for Pascal’s wager invents the bus, the very first bus service in history, and he has a bus that runs around Paris.

Pascal was defeated by the great enemy of all innovation, which is regulation. The workers of Paris are very angry to see in the 1660s to see the bourgeois in their fixed little route coming around through the streets of Paris, and they riot and they make the bus illegal.

And then the bus technology is lost for the next 150 years until 1824, when it is once again invented by a different Frenchman who has a bathing house, I believe in Rennes or in Nantes.

He just has a service where he brings people to his bathing house. And then he realizes that people who know that he has a bathing house service will get on his carriage and then get off later, without reaching the bathing house because they know he is going to pick them up anyways.

And he figures out this is actually something you can commercialize. And within six years, the bus technology spreads from France to London, to Manchester to Birmingham. It spreads across the ocean. Like the moment people figure out you can just run a carriage in predictable routes, predictable times, the bus technology is everywhere, unfortunately for the inventor of buses, there’s a market crash in 1829 and he kills himself.

And the tragedy is that his bus company, which he invented, is actually the main founding company of the current Parisian power transport monopoly. And so the guy who invented buses, still lives on both the fact that his buses exist and his company exist, RATP.

Aria Schrecker [00:53:02]: Actually this segues surprisingly well onto Ben’s piece. I have always thought since UberPOOL and obviously since the great death of UberPOOL in London, that we are clearly very, very close to not not needing buses exactly, but being able to have a bus like thing where you can hire it and it gets a whole bunch of people in the same vehicle and moves you around.

And it feels like once we have autonomous vehicles regularly driving on London roads, that should be a very, very easy technology to be accessible to everyone.

Pieter Garicano [00:53:32]: Will it really? Will we have autonomous vehicles driving everywhere on London roads? Or will we have total gridlock because I read a piece arguing in fact we’re doomed to gridlock unless we do one simple fix.

Aria Schrecker [00:53:47]: Unless we impose a very particular form of tax slash regulation.

Ben Southwood [00:53:51]: So I’m not the only person to have ever said this. I’m not the originator of this thought, lots of people have predicted that autonomous vehicles, without some sort of change in our institutions would lead to gridlock, because you can have an office, you can have a bed, you can have a little bar with your friends. Like all of these things are possible. They reduce the cost of sitting in traffic to basically zero.

Once that’s zero, then you are completely indifferent about sitting in traffic. Though there might be some people who still need to get where they’re going- for those people, it’s still an enormous problem. I call this the Ogallala trap, after the Ogallala aquifer, which is this gigantic aquifer under the Midwest, which is why all the way from Texas up to Montana is some of the most productive farmland in the world. In the 1940s, farmers invented these centrifugal pumps that were cheap. Everyone could get and could pump tens of thousands of gallons of water per week. And so it started off as a seemingly endless resource, the water down there in the aquifer, and now many places have cut a hundred feet off this apparently endless resource and in decades, in some places it’ll be almost dry. Obviously they need to come up with some way of charging for it, replenishing it, etc. And there are many cases, the passenger pigeon, for example, survived until the telegraph allowed people to send quick messages about where the passenger pigeon flocks were going. This drove it extinct within a few years. Once they got sonar and all the other tools that allow- and diesel boats that could stay out at sea for a long time, the Atlantic whales died quickly after that. Common pool resources will get destroyed by technology in certain cases.

My opinion is that the roads are going to be just like that. Now, that’s actually not a very original contribution, this is well known. The thing that is slightly original from me is that there’s a wide perception that charging people more to use the roads is just completely impossible. That’s mistaken.

There have been lots of successful road pricing schemes introduced around the world. People often artificially restrict their range of what paying for the roads counts as so they say only Singapore has introduced variable time of use pricing on all its major expressways, so therefore only Singapore has road pricing, everywhere else just has a kind of tolling system. But tolls are also paying for the roads on the margin, and the interesting thing is that these schemes work on two very simple principles; with a toll road, tolls are very unpopular if you put them on roads that people are already driving for free.

If you build a new road and put a toll on it, people might grumble. There are always whingers out there, but people will think this is a new thing, I can choose whether I want to use it or not. They consider the roads they already drive on to be something they can’t choose.

Don’t change the rules of the game. So if you want, you can charge on new things, but not on old things. And the second is if you want to charge for stuff, then giving people stuff in return makes it much easier to sell.

And so the classic example of this would be how in most European countries, fuel duties and road taxes pay for more than the cost of building and upkeeping roads, right? So people are very willing to pay for that, which in most countries it’s been justified as something you pay in exchange for getting the roads.

And drivers have generally been the people who pushed it into existence in the beginning because they wanted more money for roads, which they wanted to drive on. So if we were to use both of those things to think about auto autonomous vehicles potentially causing massive gridlock, we would put a tax on autonomous vehicles now, perhaps a surge pricing style tax, as with an Uber when it’s in higher demand. The people who already use Waymo’s in the small number of places where it exists won’t like it, could become much more expensive, but almost no one uses autonomous vehicles. But once they become omnipresent, it’ll be built into what people think of as using it.

And the second thing is that if you really want to build a strong constituency for this tax surviving and not getting ground down by inflation or changes, make it go to something that the people who pay it want. If at least 50% of this money is going towards building new roads, tunneling roads, building bridges, things like that, then if you put the money raised from this to something that drivers want, they might not oppose it as strongly.

Pieter Garicano [00:58:44]: And you have some very notable examples in your piece of this happening, especially in the United States, which people commonly associate as being very pro driving and very anti-tax. I myself live in Washington DC in Virginia, around the corner from me is a huge network of expressways, which are private highways, which you pay a huge toll for.

They’re very expensive. It costs you $30 or $40 to go from DC to the airport. And the trick is the expressways are only new roads added afterwards that are built by private companies that pay down the road with a tolling. There’s huge support for them. One of the reasons people like them is that the police don’t operate on them. So you can in principle go as fast as you want.

It’s a trust system and as far as I can tell people abuse it only slightly, and so my point being that America’s actually very supportive of tolling and paying for roads.

Ben Southwood [00:59:39]: Through Florida there are loads of cases where you add the lanes onto existing roads, so Lexus lanes they sometimes call them, but I actually don’t think it’s because the people who use them are exclusively well off people.

It’s people who need to get somewhere fast. And they have them across the US like there are enormous numbers of these additional lanes where the lanes are paid for, the road widening is paid for by charging for those lanes. And very often those lanes have varying prices based on how busy the road is.

I always enjoy driving through France. In Britain, most of our major roads are built on exactly the site of our old minor roads. Some of them are Roman roads, some of them medieval, but they’re all very old. Whereas in France they left those roads, you can still drive on them; many of them became dual carriageways, and became major roads.

But their best roads were built again by private companies, these are massive motorways near to but not the same alignments, so you always have the choice of any journey that can be done on a slower, more winding, but still good road. But you always have the choice of upgrading, and you pay about 10 euros every hundred kilometers.

Aria Schrecker [01:01:44]: I have another additional take on one of the pieces, which is I was deeply curious about the giant neo trad Hindu temple piece.

I was surprised at how colorless all of the Hindu temples are, because my family is from South India. And so if I imagine a Hindu temple, I imagine it blue and pink and green. It’s gaudy, kind of quite similar to our classical statues piece from before; I imagine these things to be painted. I was disappointed to see they’re all white. They’re very ornate. Sure, they’re like neogothic buildings, but they’re not exciting.

Pieter Garicano [01:02:37]: We all agree, temples are very pretty and it is genuinely very cool that the stone is load bearing. I never knew this. Almost every building being built today is load-bearing steel.

But the temples are almost the only buildings being built in America, in Britain, in Spain, where the actual load-bearing part of the building is the masonry.

Ben Southwood [01:02:59]: The modernistic impulse, which is similar to the gothic impulse, is to say that authenticity is extremely important, right? You should never lie with a building, and this leads them to the view that facades in themselves are lies.

And you should never have ornate, beautiful, ornate or in any way beautiful facades. You should be making a building maximally functional, and it should be truthful and show you what it actually is. In this case, the important thing is if the facade is not load-bearing, it should not look like it’s load-bearing.

So it’s obliged to have a curtain wall style aspect, or you can even see that it’s glass the whole way down, so it couldn’t possibly even hold itself up. I object to this very strongly because once you look into the history of architecture, you find that almost nothing passes their standard of authenticity and truth.

Aria Schrecker [01:04:03]: In fact, Samuel says this is maybe one of the solid trends in what people find beautiful in buildings, which is that people like to be able to see how they think it’s load bearing. That seems to be a source of comfort, people don’t like it if columns are too spindly.

Ben Southwood [01:04:18]: Unless they’re made out of steel, because then you can tell they’d be very strong anyway unless they appear to be made out of steel.

And so my view is that it’s kind of more noble if a building is not showing its structure on the outside. because that’s thumbing its nose at the modernist impulse thing, which is the wrong impulse.

Pieter Garicano [01:04:35]: I’m totally with Aria here where you need very elaborate counter signaling about the snobbish modernness, but I believe thick walls are cool.

And so I see these temples and they look very massive. They look very permanent. I don’t really care if it’s fake or not, I just think the thick wall looks cool and I’m glad they’re making them.

Ben Southwood [01:04:50]: Yeah, It’s a slightly perverse impulse of mine, but I want it to be fake, to show that fakeness is not in itself bad and that what we should care about is what the building looks like, and how we experience it and how enjoyable it is to be around, and not some idea of how true the outside is to the inside or those kinds of considerations.

Aria Schrecker [01:05:09]: Of all of our pieces this is probably one of the ones that I would most recommend be read on the physical magazine rather than online, because obviously the whole point is to look at the temples and see the descriptions and line it up, and the way that is set on the page has been a real triumph of our art team.

I’m sure it’ll look nice on the website, but this is the piece that is most enjoyable in this format.

Ben Southwood [01:05:32]: That’s all we have time for. Thank you very much for listening to the Works in Progress podcast. If you’re not a subscriber, you can subscribe by going to worksinprogress.co/print if you are a subscriber, I hope you’re enjoying issue 22. Thank you.

You can listen on Apple podcasts, Spotify, and YouTube.

If you enjoyed this episode, you'll enjoy Samuels many essays on beauty in architecture.
Cheap ornament and status games
The beauty of concrete
Making architecture easy
Against the survival of the prettiest

You can also listen to the episode on Spotify, Apple Podcasts and YouTube.

Transcript

Ben Southwood [00:00:00]: Welcome to the Works in Progress podcast. My name is Ben Southwood. I’m one of the editors at Works in Progress. I’m here with Aria Schrecker, another one of the editors and Saloni Dattani, who’s another one of the editors, and also runs the podcast Hard Drugs. Today we’re going to talk about some of the extremely long lived animals that exist out there. There are animals, just out living there, like lobsters and axolotls and naked mole rats that can live or regenerate in surprising ways. And it might be possible for us as humans to learn from these animals, learn their secrets, and also live longer, but possibly, hopefully without having to be naked and bald, underground or live with a heartbeat many times slower than our own in extremely cold water. Aria, what got you onto the subject of longevous animals?

Aria Schrecker [00:00:55]: I want to live forever. That’s the starting point here. And there are lots of people who are spending lots of money on different research labs that are trying to figure out what is a secret to human longevity or aging, and can we figure out a way to overcome it? I think the most intuitive way to get a grip with that is to see some animals with these adaptations. There are things that are actually happening in nature and if we understand them, we know which of those things might then apply in people as well. So that’s the logical reason for being interested. There’s a fun reason, which is that animals are cool, and I like to know fun facts about animals and this is another reason to know fun facts about animals.

Saloni Dattani [00:01:58]: Do you have a favorite long-lived animal? Or a fun fact about them?

Aria Schrecker [00:02:03]: I am particularly compelled by naked mole-rats. I think naked mole-rats are maybe the weirdest animal I’ve come across. So they’re eusocial mammals, which is strange.

Saloni Dattani [00:02:15]: What is eusociality?

Aria Schrecker [00:02:16]: So they’re basically creatures where each one has a really specialized role in its hive. So in ants you’ll have the breeding queen, and then you’ll have the worker drones. Naked mole-rat colonies usually have one breeding queen and usually three breeding males, and then all of the others they’re known as socially infertile as opposed to actually infertile, but they don’t reproduce at all, and you get weird hive-bullying behaviors where it’ll be that more dominant females will encourage more submissive females to do work by shoving them. Another interesting thing about naked mole-rats, they don’t really regulate their temperature at all. They will at very high temperatures, they will start to do other physiological normal things that animals will do to cool themselves down, but at low temperatures, they don’t warm themselves up except socially, they warm themselves up by huddling.

Saloni Dattani [00:03:14]: Does that mean their body just works at any temperature or do they just happen to be in environments that are stable?

Aria Schrecker [00:03:21]: They’re largely from very warm places in Africa, so it doesn’t come up that much. But anything below 29 degrees Celsius, they’ll just keep getting colder and they’ll keep getting colder, and they’ll just change the amount of activity they do in response to that.

Saloni Dattani [00:03:34]: Do they hibernate?

Aria Schrecker [00:03:36]: I didn’t read about them hibernating on their Wikipedia page, so I’m going to gently say no.

Ben Southwood [00:03:43]: So they just run at a lower clock speed when they’re at a lower temperature. They just sped up when there was a higher temperature?

Aria Schrecker [00:03:50]: Yeah. It seems to be.

Saloni Dattani [00:03:51]: That’s so fun! A sloth.

Ben Southwood [00:03:54]: So eusociality means just very, very social. They basically put the interests of the overall group ahead of their own personal interests.

Saloni Dattani [00:04:04]: Got it.

Aria Schrecker [00:04:04]: Yeah, I feel eusocial animals, the way I think of them anyway, is they’re one step closer to each animal as a cell and the entire hive or colony is the organism.

Saloni Dattani [00:04:16]: Right.

Aria Schrecker [00:04:16]: And I think they make more sense if you think about that.

Ben Southwood [00:04:19]: In bees and ants, that works because everyone is a clone of each other. If you’re a worker, you are basically a clone of all the other workers.

Aria Schrecker [00:04:36]: I know that there are complicated genetic relationships there, because I know that sisters, though this is maybe a type of ant rather than a type of bee, but it’s another type of eusocial creature where the sisters are more related to each other than they are to their own children. Where children have only 50% of the DNA, sisters are a 75% match. And so the best reproductive strategy for them is to farm their mother for more siblings, through a selfish gene way of thinking about this.

Ben Southwood [00:05:08]: And what I was building to with that is do naked mole-rats also have the strange genetic thing or are they more like us?

Aria Schrecker [00:05:14]: I don’t think so. They’re more like us.

Saloni Dattani [00:05:17]: Do they live long?

Aria Schrecker [00:05:19]: So they live weirdly long for a rodent. They’re the longest lived rodents but it seems their environment is actually quite dangerous.

Saloni Dattani [00:05:31]: What eats a naked mole-rat?

Aria Schrecker [00:05:34]: Snakes mostly.

Saloni Dattani [00:05:35]: Oh, that’s sad.

Aria Schrecker [00:05:37]: But in captivity I don’t think - in captivity, a naked mole-rat has never died of anything that is age. They just seem to keep going and keep going. So I think the oldest one in captivity is now in its forties, and everything seems okay.

Saloni Dattani [00:05:53]: I read a study that contradicted the general trend even though it seems some of them live really long, and I think the disagreement was that the people who studied how long naked mole-rats live only looked at those that had already survived to a given age. Then after that they didn’t have that many. They looked at naked mole-rats who have lived to this age, or were born after that age, and looked at their mortality rates in that sample.

Aria Schrecker [00:06:24]: So the conventional opinion is that for most creatures, each year that they live, their odds of dying go up. So usually your safest age are your first reproductive years. Though it varies so much from animal to animal - like one year old, it would be about that for a naked mole-rat. And then each year your risk of dying goes up and up and up and up and up and up. So you have fewer and fewer older ones. But for naked mole-rats, their odds of dying are stable over each year. You are saying that that is only true for the naked mole-rats that made it to a certain age.

Saloni Dattani [00:06:57]: I’m saying that it’s not true, and that it seemed like it was true because people were only looking at a very selected sample.

Aria Schrecker [00:07:04]: Okay. But it’s not that the very selected sample is just the older naked mole-rats?

Saloni Dattani [00:07:08]: Yes.

Ben Southwood [00:07:09]: So naked mole-rats, we’re not sure if it’s actually true that they live very long, but they might do.

Saloni Dattani [00:07:14]: But some of them do.

Ben Southwood [00:07:15]: But some of them do, and the potential to live very long is very interesting to us anyway, because it might just be that we can just get those naked mole-rats and learn from them. I think we need to categorize the kinds of different long lived animals, and I think there are multiple different categories right? So naked mole-rats, what category are they?

Aria Schrecker [00:07:37]: I think they basically standalone. There is another eusocial rat that I think has some of its features.

Ben Southwood [00:07:43]: Another long-lived eusocial rat.

Aria Schrecker [00:07:45]: I’m not sure.

Ben Southwood [00:07:46]: Okay. Well, I’m thinking of the long lived creatures, some of which you’re going to tell us about, I imagine they fall into categories of why they’re long lived or maybe they’re all long lived for the same reason, but if they fall into categories, I would love you to give us those categories.

Aria Schrecker [00:08:00]: So I think naked mole-rats are probably a subset of what I’m going to call the group that we are part of which is highly social mammals with interesting cancer adaptations and maybe slower metabolisms. But that’s not necessarily the massive part of the reason for their longevity.

Ben Southwood [00:08:22]: So we don’t have a core reason because I guess you’re about to tell me that some animals live long because they have a very slow metabolism.

Aria Schrecker [00:08:39]: Yes, and I’ll tell you the other categories. Category number one, a creature that can go back to its embryonic stage and then respawn again. So that’s it’s a particular kind of jellyfish. They, and maybe one of their cousins that is slightly less common can, under extreme stress, go back to their embryonic or polyp stage, which is very, very durable. And then it can wait out whatever the problem is and come back. The problem is usually that the water’s really polluted, it’s too hot, it’s too cold, I think sometimes blunt force trauma can also get it to do this. But also that can also kill them because they’re tiny.

Saloni Dattani [00:09:28]: Right, that could go either way.

Aria Schrecker [00:09:32]: But yeah, and then basically after that point they can then respawn again, so it’s unclear if they even have memories. They can respond to electric shocks and maybe learn that those electric shocks are bad, but that is even now a little bit suspect. So maybe that’s longevity and maybe it’s just a system spinning up and down. There’s another category, in which lobsters are the core kind, and axolotls are also like this, which is they seem to have really, really good regeneration properties. With a lobster, you can cut off bits of a lobster and it’ll regrow, you can definitely do that with axolotls. You can do that with some forms of worm as well, but lobsters are the only ones that then use that to have really, really long lifespans. Lobsters are bizarrely long lived for the kind of creature that they are.

Saloni Dattani [00:10:24]: How long do they live?

Aria Schrecker [00:10:25]: So the oldest known lobsters are hundreds of years old. Over 200 years old.

Saloni Dattani [00:10:31]: How do we know that?

Aria Schrecker [00:10:34]: That is a really good question.

Ben Southwood [00:10:50]: We’ve got a good story about how the oldest lived lobster, died.

Aria Schrecker [00:10:54]: Yeah. The oldest lobster that we ever found. I wouldn’t be surprised if it is just that lobsters grow and they never stop growing. They get bigger and bigger and bigger over their lives. So you just find a really big one, and then you can map roughly, which might be why some of the oldest living is a little bit of a suspect number. Because we can map that, assuming that this didn’t grow really, really quickly, it’s this old.

It was caught by a shipping company, and it wound up in a lobster restaurant. And the people at the restaurant thought ‘this is a bizarrely large lobster’. So they kept him on display as a mascot but then PETA, the charity, did a campaign to release him, the oldest known lobster, back into the wild. And probably he was then released into the wild and starved to death, because the problem with lobsters is they don’t die the normal way. They don’t get more and more diseases as they get older. They just at some point need to shed their shell and regrow it and the bigger they get, the harder it is for them to eat enough calories in order to energetically do that. So when lobsters die of old age, they starve to death basically. Saloni Dattani [00:12:01]: That’s really sad.

Aria Schrecker [00:12:02]: So he’s probably starved to death. This was around 2006.

Ben Southwood [00:12:05]: So we have; category one is that we can turn ourselves back into an undifferentiated mass of our stem cells, and then regenerate ourselves, maybe isn’t that good. It would be quite cool, but you would probably think of it as dying.

Aria Schrecker [00:12:19]: Well, that’s a glimmer of hope in there, in that if you can do that with individual tissues that is actually very helpful.

Saloni Dattani [00:12:26]: Yeah.

Ben Southwood [00:12:27]: Segment two is regenerative abilities. So you can either regrow your arms, or regrow a tissue or something. That’s category one-

Saloni Dattani [00:12:34]: We can regrow our liver.

Aria Schrecker [00:12:39]: And the benefit of that would also be if you can think about it in terms of your cells, your DNA is incredibly robust when you keep being able to do it. So usually as you age, you have more and more complications in your DNA. Each time each cell is copying it and makes some mistakes, lobsters don’t seem to have those mistakes.

Ben Southwood [00:13:05]: And we’re not growing inevitably anyway, so that’s not a big problem for us. And we’re not going to have an issue with calories.

Aria Schrecker [00:13:11]: Yes. It’s really obvious that if lobsters had human’s ability to control the world, they would just stop dying.

Ben Southwood [00:13:22]: Or if they had automatic hormones that kicked in saying, you’re an adult now, you don’t need to grow anymore, which is what we have. So category one, polyp stage, go back to stem cells, category two, regenerate. Category three?

Aria Schrecker [00:13:36]: Category three, and this is a very, very big category. Most of the creatures that you’ve heard of that have weirdly long lifespans fit into this which is that they just have really, really slow metabolisms. They don’t do anything. I think of them as creatures that have the same life in total that you would expect a species of their kind, but they just have it on slow.

Ben Southwood [00:14:21]: They’re mostly quite big, right?

Aria Schrecker [00:14:22]: Yes. So it’s the Greenland shark, the Bowhead whale, the Aldabra tortoise, and they’re basically the biggest of their kind. So I think it’s interesting that the Greenland shark and the bowhead whale both have this, the Greenland shark lives for much longer, but it’s quite a bit smaller because it’s a shark. And then the bowhead whale is massive. It’s 70 tons. They eat one meal a year and then they just sit in really, really, really cold water. They wait for their prey to come by them. They don’t do anything. And the Greenland shark can live for about 500 years doing this, and probably it’s the same number of meals that we do in that time, which is it’s weird thought. Maybe fewer.

So the bowhead whale is the one where we didn’t realize they were super long lived, and then some people were illegally trying to kill the whale, and they succeeded; they were hunting it, they found it, again this is the early two thousands. They found a Victorian harpoon embedded into the whale, and realised that someone had tried to kill it about a hundred years before and failed. And now we think that they live for about 200 years. But because they live in the coldest oceans and quite deep, we actually know surprisingly little about them. We don’t know, for example, what their litter sizes are, there are really, really big ranges on this.

Ben Southwood [00:16:05]: So categories one, two, and three are; undifferentiated polyp state, regenerate bits, and move very slowly and live in the cold, and be large enough that people don’t eat you during that time.

Aria Schrecker [00:16:16]: Essentially. And clams, which are technically the longest living creatures, are in that category, probably live for 500 years. But they literally do nothing and vegans will sometimes eat them.

Then, there’s the final category, which I think is a bit more complicated. The weird thing that we and naked mole rats share, and also elephants share, is that we seem to be very, very social creatures that are very helpful to others of our own species. And so therefore seem to live much longer than other animals that are similar to us; humans live much longer than other apes and chimps, and apes and chimps also live much longer than other categories of mammal. Elephants are like this too. And it seems the ways in which we biologically manage to do this are because we’ve had convergent evolution of longevity. It’s not exactly the same, but we have some genes that that seem to protect us from cancer. We have two of those genes, elephants have 16 of those genes. Naked mole rats have some of those genes. Obviously these categories are fuzzy, but some of the animals with very slow metabolisms also have some of these genes as well. And if you look over the entire animal kingdom, having a bigger brain and having more neurons is pretty well correlated with having a longer lifespan. I suspect because being a social creature probably means that you adapt to a bigger brain, but also probably means that you are better served by living longer, and learning from other animals. So the bigger brain is more useful only if you have a social community and also a long lifespan in which to exploit it. It’s a complicated set of things that all seem to go together.

Saloni Dattani [00:18:14]: Some of this longevity, especially in humans, isn’t that because we’ve made lots of innovations that have helped us live longer? Which is part of what you are describing?

Aria Schrecker [00:18:25]: You will know far more about that than I do. I think It seems implausible to me that it’s only that on the basis that even if you look at our natural hunter gatherer times, I still think we live a weird amount of time for how big we are. Creatures usually live longer the bigger they are - tigers for example, are only moderately bigger than us, and a tiger life expectancy is 25 years. And it seems once you’d made it out of extreme childhood mortality, humans even as hunter gatherers were living longer than that.

Ben Southwood [00:19:03]: There’s obviously a distinction as well between, when we’re talking about longevity, what actually matters to us as people living in the world which is how long am I likely to live? Which factors in a bunch of social considerations. Such as, if I live in a country with lots of disease and poor healthcare institutions, I’m going to live for a shorter period of time. It doesn’t really matter to me that the theoretical maximum limit of human lives is X. But when we’re thinking about longevity, we’re also often thinking about how long can this animal live even if you’re trying really hard? I gather in captivity, you can’t keep a tiger alive for more than about 40 years. Whereas with humans in captivity you can keep ‘em alive for 80 years quite reliably.

Saloni Dattani [00:19:49]: Right.

Ben Southwood [00:19:50]: That’s our maximum now. Yeah. 90.

Saloni Dattani [00:19:52]: Well, in Hong Kong, the life expectancy right now is 88 years. Pretty high, but it’s part of a distribution. People live different lengths of their lives, some people live much longer than others and we’ve been able to move the entire distribution. So on average, life expectancy has risen, but also the people who live the longest are living longer than before and I think there’s pretty good evidence of both of those.

Ben Southwood [00:20:21]: Here’s a question, is it correct that the actual longest ever life hasn’t really gone up that much over the last thousand years as far as we know? So they thought there were people who had lived a hundred years a thousand years ago. They certainly thought there were some people who’d lived a hundred years, and now we can get to a hundred years. Basically maybe we can get to 112 now? It’s the actual verified maximum?

Saloni Dattani [00:20:51]: So I think that it’s hard to find the longest lived people, and that’s quite hard to do historically as well because they had poor record keeping. But if you look at people who live over a hundred years old, that fraction has increased over time, so there’s pretty good databases where they’ve verified when was this person born? When did they die? And that fraction has been increasing over time. It’s mostly women who live that long, which is very similar to how women tend to have longer lifespans on average than men. But it’s really rare to see people right at the extremes. And that means that it’s hard to tell if there’s been a change over time, even though I would guess that there probably is. If you can increase the number of more than a hundred year old people, then you probably are also increasing the longest lived people.

Aria Schrecker [00:21:43]: I have a question; so I hear that people basically age bimodally and that one subset of the population, so by the time they’re 60, they’re starting to accumulate lots and lots of different diseases, and they’ll get diabetes or whatever, they’ll stack and they’ll stack and they’ll have several decades of accumulating these problems until one of their problems eventually kills them. And that the other subset of people who live totally healthily until they’re in their nineties and then suddenly something will kill them. Is that accurate or is that a massive oversimplification?

Saloni Dattani [00:22:17]: I haven’t heard, I would guess that these are just extremes of a range. Because one thing that you do see is that when people live longer, they tend to live healthier. They tend to get diseases later as well.

Aria Schrecker [00:22:36]: If you die at 90 do you still spend 10 years before you are 90 with loads of chronic problems? If you die at 60, do you also spend about 10 years like that?

Saloni Dattani [00:22:46]: So you start getting diseases later on. The total amount of time you spend with a disease might be different. But the longest lived people, people who live over a hundred years — and there’s this big study in Sweden that looked at this — tend to have developed cancer much later than other people who died earlier.

Ben Southwood [00:23:07]: Lots of people have made the case to me that we’re just dragging the end of people’s lives out. So we hit the ability to get to 80 years at some point in the past, and then now we just add on extra years of being ill. So health span doesn’t go up much at all, we just drag out people being demented and having cancer in hospital but we keep whacking the little moles to keep them just about alive.

Saloni Dattani [00:23:41]: I think this is the common perception, and I think this is why people are skeptical of attempts to live longer. They just think “I don’t want to live longer because I’ll just have more unhealthy years at the end of my life.” But I don’t think that’s true. So I think that, as I said, people who live longer tend to live healthier lives. There are a few exceptions to that, we haven’t made that much progress on Alzheimer’s disease for example. And once you get that, you’re going to live with it for how ever many years you have left. But that could change. We could get a new drug that actually treats or prevents Alzheimer’s and that would change the picture.

Aria Schrecker [00:24:19]: How much of the improving lifespans is tackling childhood mortality? Diseases that people get when they’re young? Maybe it’s actually really difficult to decompose that.

Saloni Dattani [00:24:28]: No, it’s actually not. So would look at mortality rates across different age groups and how that has affected the life expectancy metric that you get. So in the past, most gains in life expectancy were because of reductions in child mortality. Child mortality used to be really high in the past. 200 years ago, it would be about 15% of kids in France or Western Europe would die in infancy, that’s really high. And if you think of the life expectancy metric, it’s basically a summary of your risks of dying across your lifespan. If your risks at infancy are so high that massively reduces the average life expectancy that people have, so if you’re able to reduce infant or child mortality, that makes a massive difference. But at a certain point, those rates are already so low that reducing them doesn’t get you very much, and so from the 20th century onwards in Western European countries and North America, most of the gains in life expectancy have actually been improvements in middle age and old age. So we’ve actually made quite a lot of improvement in reducing cardiovascular disease, cancer mortality, infectious diseases especially. And those things have actually made a big difference since the mid 20th century.

Ben Southwood [00:26:46]: So when people think about aging, there’s a divide between people who think that maybe there is an underlying cause for everything, and the only valuable thing we can do is tackle that underlying cause. And then other people who think that there are just lots of different ways that your body becomes unhealthy, decrepit, and dies, and if we can just tackle them individually, we can have big benefits as well. Would you say you’re in the second camp?

Saloni Dattani [00:27:23]: I would say so far, most of the gains have come from the second. I don’t know if the first could also be true, maybe there is some secret thing that if we unlock, we can live forever or we can live much longer. And I can imagine that there are certain things that would help with that. So improving our DNA repair mechanisms, or reducing our metabolism. I could see that having very broad effects, but I don’t think we’ve found that so far, and I also think there’s still a lot you could gain from just using the second method of just whacking all the moles.

Saloni Dattani [00:27:54]: What about you, Aria?

Aria Schrecker [00:27:57]: I’m a total centrist on this issue actually. I think there will probably be some massive gain that we can get from one of the things that you can hint at with longevity research. Maybe cellular reprogramming or DNA repair or something like that. And you’ll get a lot of gains on lots of things, but there’ll be a handful of systems that are still held back. So I suspect if we did that, our skin would still age a lot. Or our skin would age slightly more slowly because part of it’s caused by the DNA repair, but some of it is just caused by being subjected to light. So I suspect there’s a little bit of both. What I could imagine being a problem is doing lots for our bodies, and lots of our brain is our body, but there is maybe a RAM problem that we’d reach.

Saloni Dattani [00:28:49]: Wait, what do you mean? So you could increase the RAM in your brain?

Aria Schrecker [00:28:53]: I don’t really know how the brain works, but I imagine the brain works a bit like a computer and at some point you just run out of memory storage space.

Ben Southwood [00:29:02]: I think that my memory’s already going in the early ones to make space for the new ones.

Aria Schrecker [00:29:06]: That must be how it works a bit. Even if you were just a simple algorithm that worked sensibly, it would obviously be that you can withdraw the stuff. It’s why Anki decks work, right? You withdraw the stuff that you use repeatedly and more recently, right? That is how you would program it if we were a computer.

Ben Southwood [00:29:25]: So you said maybe our skin would continue aging. But it seems to me one of the areas where we have made the most progress on aging, especially in recent years, and especially if you look at the extreme cases, celebrities and rich people, it seems that we’ve made incredible progress. People like me will see pictures every day of ‘This is what a 20-year-old looked like in the 1980s.’ They look like a 50-year-old. People’s hair and skin seem to be an area they care about a lot and maybe they are tackle-able. One way of looking at things is we’re all doomed to aging and death unless we can find the secret formula. Another way of looking at things is we’ve tackled hair and skin, we’ve tackled all the diseases that we know. Each year we are coming up with new ways to tackle disease. But what else is there? All our organs are still working individually sorted. And if you can tackle all the problems in principle?

Saloni Dattani [00:30:32]: The disagreement is about just how much risk we accumulate with age. So for most organisms as you age, you have an exponentially increasing risk of death. I think the question with longevity is, is there a way to prevent that from rising at all? What we’ve seen so far is that it still rises, but starts out at a lower level. So at each age you’re delaying death. But is there a way to just prevent death entirely? And I think that’s what people who believe this first idea — that there’s some secret — would say.

Ben Southwood [00:31:11]: I think an area that would be interesting to think about is that yes, most of the stuff we’ve done on longevity is this second type we’re talking about, which is tackling specific problems. Making it much less likely that you’ll die of cancer or heart disease. It’s crazy how if you watch any film, read any book, talk to your family of people who were men in their fifties in the 1960s and 1970s, they just died all the time, randomly, they’d be in the peak of life and just suddenly die from a heart attack.

Saloni Dattani [00:31:40]: They didn’t have AEDs (Automated External Defibrillators) back then, they had just barely invented CPR.

Ben Southwood [00:31:43]: They were just constantly dying of heart attacks. And now that just doesn’t seem to happen. If you follow academic research, you’ll see there are findings of everything all the time; ranging from green tea to any compound that exists, finding that they increase longevity. But followers of the replication crisis will know that a lot of this is dubious, and they didn’t pre-register their findings, they p-hacked a result, et cetera. But there is an interesting set of studies where they are using normal mice, doing pre-registered studies and then going through all of the standard compounds that people think might extend life and trying them. And by the way, green tea, no result. Aspirin also did not extend life.

They have found four compounds that extend life in mice. Obviously we’re not mice, but we’re close enough to mice that maybe they have some effects. So I’d like to talk about these four compounds.

Saloni Dattani [00:33:09]: It’s the US’s National Institute of Aging’s program called the Interventions Testing Program, ITP. And they have a lot of different labs in different countries or different places to run the same tests. So they’re testing the same compound, with different types of mice, different labs, and they see if there are replicable results. There were four, rapamycin, acarbose, Metformin, and one of the SGLT2 inhibitors.

Ben Southwood [00:33:58]: It was for diabetes first, and then it got a heart disease and the kidney disease indication.

Saloni Dattani [00:34:04]: It removes excess blood sugar and something else from your urine, from your blood, and it means that you excrete more in your urine salt.

Ben Southwood [00:34:17]: So SGLT2 reuptakes sugar from your urine so that you don’t waste calories by urinating them away. And SGLT2 inhibitors stop you from doing that.

Saloni Dattani [00:34:27]: Right. So you excrete more, that reduces blood pressure, which reduces the pressure on your kidneys and heart.

Ben Southwood [00:34:34]: And reduces blood sugar so that you don’t have as many diabetic problems. It turns out that reducing your blood sugar extends life by about 10% in mice.

On the one hand, that’s great. That’s amazing; imagine we could extend all of our lives by 10% on a drug that is quite simple and easy to make and will be out of patent in 10 years. On the other hand, it’ll be quite disappointing if 10% is the max we can get out of these metabolic improvements. Maybe if you stack the other metabolic drugs. So acarbose, the other one you mentioned, stops you from digesting carbohydrates, so you don’t make amylase. Amylase is what digests most carbohydrates, so this effectively turns every carbohydrate you eat into a fiber. So, if you are eating 200 grams of rice every day, you’re getting 200 grams of fiber, five times the really high targets that people are going for. But one third of people withdraw from the drug for gastrointestinal reasons straight away. And the other two thirds I suspect either develop machine-like gut bacteria systems that can churn through so much fiber so that it doesn’t become really troubling, or they just stop eating carbs altogether because you don’t get any gastrointestinal symptoms if you do it. Saloni Dattani [00:35:53]: Right. And they might live longer for that reason.

Ben Southwood [00:35:56]: Exactly. So I suspect that what this is finding, the fact that all of these things go in the same direction, is that there is a metabolic effect. We know that animals live longer when they have slow metabolisms. We have reasonable evidence that humans and other species will live longer if you control the calories, and then if you give them drugs that mimic controlling calories, they also live a bit longer. So maybe we can get 10 to 20% out of these.

Aria Schrecker [00:36:27]: There was a big study of Ashkenazi Jewish people who lived to over the age of a hundred, and they found that a lot of them had a gene that imitated some diabetes outcomes as well, essentially they were better at controlling their blood sugar and insulin.

Saloni Dattani [00:36:49]: Well also GLP-1 agonists, a lot of these are for some weight loss or some diabetes reduction. It also gets to the point where some of the interventions that you could have in your life to live longer are fairly simple things that people have recommended for ages and ages, which are exercise, lose weight.

Ben Southwood [00:37:11]: It’s so distressing when you discover those things are true.

Aria Schrecker [00:37:21]: And I think there’s a study in chimps which shows that if you are already calorically restricting the chimps, then give them one of the big diabetes drugs, there is no increased lifespan at all.

Saloni Dattani [00:37:39]: I would guess that you can’t stack them all up because some of them will just tackle the same pathways and once you’ve reduced that risk, it’s gone. You don’t need to worry about that anymore.

Ben Southwood [00:37:50]: But. We mentioned three drugs, all of which tackled the one pathway. But we’ve got one other drug here; tell us about rapamycin.

Aria Schrecker [00:38:02]: This tackles a part of your body that, as far as I can tell the acronym — it’s mTOR — but the acronym is just ‘target of rapamycin’. And that seems to be involved with signaling about cell growth, and so rapamycin the drug deals with immunity and deals with cell repair. So if you take rapamycin, your wounds don’t heal very well. And in large amounts, it’s an immunosuppressant in people, which is it’s current use, but in small amounts it seems to make your immune system work better, especially in older people, and is somehow also related to your metabolism. So it seems there is some relationship between cell repair and your metabolism that exists.

Ben Southwood [00:39:15]: It also turns off too much growth is what you were suggesting.

Aria Schrecker [00:39:18]: And it may also turn off growth. If you grow very quickly, you probably won’t live very long, that seems to be a general rule across the animal kingdom. And also actually within humans if you take growth hormone, it’ll probably also decrease your lifespan. We know short people live longer.

Saloni Dattani [00:39:34]: I didn’t know. I would’ve guessed that it’s the opposite because people who are taller tend to have better nutrition.

Aria Schrecker [00:39:39]: So I suspect that in the modern west, if everyone is well nourished then smaller people do live longer. And smaller dog breeds also live longer than big dogs as well, which is interesting.

Saloni Dattani [00:39:57]: I read a study about how domestic pets are living longer than in the past. So there’s this data set of millions of domestic dogs and cats in the US, and over the last 10 years, they’ve gained one year of life expectancy. I would guess from better healthcare, better medicine.

Ben Southwood [00:40:20]: I would’ve thought that it was just that Americans have gotten much richer and they’re spending a lot more money on keeping their dogs alive when they’re reaching the end of their lives. Because usually we’re a bit more utilitarian about pets than we are about other humans.

And we decide is it worth $10,000 for an extra couple of years of dog life? I could get another dog and when they have enough money, people can say ‘No, I want my dog. This is my dog. I love this particular dog. Not just any dog in general.’

Aria Schrecker [00:40:53]: Also, having been a cat owner for a long while now, they are getting stricter about making sure that you vaccinate your cats if you want to do anything with them. So it used to be that you had them vaccinated once and then it could go to the kennel and it’d be okay, and now you’ve gotta do an UpToDate certificate all the time. You can’t be lax on your cat vaccines, even if your cat doesn’t go outdoors. I assume there are also lots of structural reasons that people are getting more risk averse across society with their pets as well.

Saloni Dattani [00:41:19]: That reminds me of other things that help us live longer. Flu vaccines are actually very effective at reducing the risks of heart attacks and strokes. People don’t really know this, but they reduce those by roughly the same amount as statins do. Statin’s are another great example.

Ben Southwood [00:41:36]: The preventative ones appeal to people more than the responsive, because the preventive ones feel like you are healthier. What people want is not to age in the conception we have - if you can not visually age, and also survive, and also stay fit, what is it that’s different?

Aria Schrecker [00:42:04]: I think you just run life on slow. Or maybe you get more conscious moments per unit age, or something like that?

Ben Southwood [00:42:14]: I agree that that’s what people want, but I think it’s very hard to map our intuitions. I think a lot of people have the intuition that the things we have done so far have not slowed down aging. I think that it’s very hard to justify that if you compare it to any possible yardstick you could have.

Aria Schrecker [00:42:32]: I think it’s definitely slowed down aging; there are so many ways in which it just feels obviously true that we are younger than other people were when they were at our ‘clock’ age.

Ben Southwood [00:42:41]: Yes. So here’s another thing people say is that we’re going through life stages more slowly. The claim is that people get their driving licenses later, they lose their virginity later. They spend longer in education. Now, do you think that’s related to the fact that we live longer?

Now people are hitting puberty later as well. Lots of things are happening later. There are lots of people who used to do their first job when they were 14 or they would oft be in the world of work.

Aria Schrecker [00:43:22]: People are definitely having children later.

Ben Southwood [00:43:25]: All of those things. I wonder if you think those things are related by the fact we know we’ve got longer to spread out into?

Saloni Dattani [00:43:29]: Oh, I see. So you’re saying- Well, I guess there’s two ways. There’s one, we’re living longer and therefore we can delay these things and we don’t have to worry that much. Or is it, we’re delaying these things, which helps us live longer.

Aria Schrecker [00:43:41]: Oh I think what Ben’s saying is that we are biologically at younger life stages. So mentally we are choosing to not worry.

Ben Southwood [00:43:52]: Saloni’s one is one route. Yours is another, and mine was the third one. They could be unrelated as well. I think that the baseline view would be that they’re unrelated. The baseline view would be that we have a coddling society now. In a totally unrelated way to how we have done lots of medical interventions that make us live longer.

Saloni Dattani [00:44:21]: There’s one version of it that I actually do believe, that coddling in terms of reducing our risks of injury or accidents actually does make us live longer.

Ben Southwood [00:44:32]: I’ve totally changed my mind on this since having children; now it may possibly be because my children are more danger seeking than other children, or they’re a mixture of being extremely malcoordinated like me, or extremely brave and danger seeking like Eloise, my wife, and when that crosses over, you get children who go to hospital lots.

But billions of people have had children. It’s the most normal thing in the world. Keeping children alive must be very easy, you shouldn’t worry about it too much. Then I remember, no! Loads of children just died in horrible accidents all the time! What’s actually happening here is that we have more free time, we have more wealth, and to some extent, coddling is just rationally ‘I love my children. I don’t want any harm.’ They could get a traumatic brain injury and you could get a disfigurement across their face and people might treat them differently. All these things can just happen. And it’s just wrong to think that it was all happening at the same rate. No, it was happening much more often. People were getting hit by buses and cars and everything all the time. Saloni Dattani [00:45:43]: I take that view as well.

Aria Schrecker [00:45:45]: From my own family story, my mum was one of six in India in the sixties. She lost one sibling to typhoid, but she lost another to a car accident. I just don’t think most parents let 17-year-old boys ride motorcycles like that now. Whereas at the time is was more normal.

Ben Southwood [00:46:29]: We want to keep our children alive, and probably that’s just a social wide thing of, ‘We are coddling them collectively because we are trying to keep ‘em alive and trying to keep ‘em healthy’.

Aria Schrecker [00:46:46]: Yeah. I guess I intuitively agree with your model, but I do think it is true that even though the world is so much safer, we still don’t let teenagers have the same freedom to roam that clearly we did historically. You see those little maps where it’s family that grew up in the same house and it’s grandfather was allowed when he was seven years old to go all the way down to the creek and fish. That actually seems insane.

Ben Southwood [00:47:15]: In that specific map, that he goes to Rotherham, he’s allowed to go 11 miles.

Aria Schrecker [00:47:19]: There you go.

Ben Southwood [00:47:20]: And then the today one is allowed to go to the end of the street with slight supervision. I think there are lots of things going into that. I don’t think it’s just an increase in coddling. I think that although the world is much safer in general, there are certain features of the world that are totally different. So in 1911 there weren’t motorways between his house and Rotherham. That’s a really dangerous thing where young people under the age of 10 are not reliably to be trusted to stay safe from. So I think that’s probably the overwhelming thing, and I think if you find places where that isn’t the case, even at high levels of wealth Japan, for example. They’ll let children go out and roam relatively freely.

Aria Schrecker [00:48:09]: And Japan is actually very very safe.

Saloni Dattani [00:48:10]: Have you seen that show where they do that? They’re kids that are one or three years old just going out doing groceries.

Ben Southwood [00:48:18]: I have watched clips from it. Okay. And it’s very funny how easily they get distracted from their mission. They have no long term ability to keep to the same plan. There’s immediate stimulus and then they keep going home because they forget what they’re supposed to be doing.

Aria Schrecker [00:48:35]: Other coddling related ways that we have definitely increased lifespans - I’m endorsing them here, which is there are lots of interventions that can actually stop people from committing suicide by, making it harder for them to unscrew pesticide caps, or even just the American way of taking paracetamol just makes it easier for them to commit suicide, the British way of paracetamol, you’ve got to pop each individual one.

There we go, that’s coddling, which has definitely increased lifespans. That is good. Banning drunk driving, that’s obviously one of those things.

Saloni Dattani [00:49:24]: Seat belts.

Aria Schrecker [00:49:25]: Seat belts.

Saloni Dattani [00:49:26]: Vaccines.

Aria Schrecker [00:49:28]: Yes. We definitely have a social infrastructure that is pro-longevity.

Ben Southwood [00:49:31]: Okay. So we’ve talked about every possible way that we stop people from dying in accidental ways. Are there any promising things for the other method? The the underlying aging idea. Do you go to bed at night thinking, I probably won’t die of the same diseases that we have now, but I will die of something?

Aria Schrecker [00:50:09]: I think this belies a whack-a-mole mentality, but there are a couple of ways where I think that we’ve fixed that for the time when I get old. I think I won’t go through menopause. We’ve already started to give lots of women HRT, who are already of menopause age. I’m almost 30 and when I’m 50, 60, I think that is going to get much, much better. That’s a form of aging that I’m going to be able to skip out on. I think I probably won’t die of most of the major cancers that people die of now. I think that seems to be just getting better and better and better. I probably won’t get diabetes.

Saloni Dattani [00:50:53]: I’m somewhat optimistic about Alzheimer’s disease as well. I think if we just try enough things, maybe we’ll find something, but also we’ll probably get better at measuring the brain and understanding it and finding medicines that work.

Ben Southwood [00:51:06]: What did you think about that viral nature study where they said that people rarely get cancer and Alzheimer’s at the same time?

Saloni Dattani [00:51:15]: I didn’t read that, but I just assumed it was some statistical artifact. Sadly.

Ben Southwood [00:51:20]: Skeptical Saloni, we should have you on everything. Sorry. It’s probably just statistical.

Aria Schrecker [00:51:25]: Naked mole-rats probably don’t even age that badly. I think there is other stuff that you can do in your personal life that mean will achieve slowing your aging rate. So the biggest one is if you’re not fat, you’re doing so much more than the average person in a developed nation now, and if you are staying at one of the lowest possible healthy weights for someone of your size, you’re doing even more. would put money on rapamycin being a drug that lots of people take in a few decades.

I think we are also going to get new drugs. Let’s cast back to a piece in issue 21 of Works in Progress, Nature’s Laboratory. about how genes seem to be a source of new drugs. I think we are going to get much, much better at measuring people’s genomes and picking up statistical signals that show that some genes help you live longer, which will be a source of novel compounds that we learn about. We will find some useful genes and we will start to make drugs that replicate that effect. I think we will actually get to having novel compounds if the course of science continues, I think we probably will get some all-cause mortality tackling drugs from genomes. That’s one guess. Saloni Dattani [00:53:24]: That has actually happened in a few high profile examples of drugs that have come from studying some population or some family that either has a very high risk of dying early or lives longer for some reason, and then trying to understand what gene is linked to that and then developing drugs against that. So I think the famous one is PCSK9 drugs, which reduce cholesterol levels, but then there’s also various other cholesterol and other drugs that are in the pipeline for things like that.

Aria Schrecker [00:53:55]: The big thing I’m hoping for is an ozempic style thing, but instead of meaning that you eat less it just burns all the energy without it going into your body and coming out as fat in you somehow.

I had a crackpot idea a while ago which is that Vaseline Petroleum, it’s basically a fat. If you fried your food in it, you would still get the Maillard reaction. It would taste like fatty food but you can’t digest it.

Ben Southwood [00:54:48]: We discussed acarbose earlier, it works by stopping you from producing amylase, so you can’t digest carbohydrates. There was an equivalent for fat called lipase. I would rather have the gastrointestinal symptoms of acarbose, which is just lots of bloating and gas than what they call greasy stools. All the fat you’re eating is just going through. That’s an option that’s open to you right now; it’s a generic drug.

Aria Schrecker [00:56:04]: This is not diet advice.

Ben Southwood [00:56:04]: It’s perfectly safe, it was approved through the normal process then on very large studies and then post-market, very large studies. There are no health downsides, it’s just quite unpleasant to have lots of actual oil in your stools. So that would be a downside of your petroleum jelly frying.

Saloni Dattani [00:56:41]: Well, I think the better drugs that work on cardiovascular risks, like cholesterol reducing drugs and triglyceride reducing drugs are better because they’re not engulfing - they’re not leaving fat in your digestive tracts, but you mop up more LDL cholesterol and that’s probably better.

Ben Southwood [00:57:00]: A favorite fact of mine - So I spend a lot of time on the internet consuming on a superficial level research about health, diet, all those sorts of things, and one of the things that I discovered in all of this is that in a lot of studies, raw correlation between cholesterol levels and lifespan is positive, not negative. And I was confused by this because there are loads of drugs that reduce cholesterol and appear to be good for you.

And so I presented this to Stefan Guyenet, who is a nutrition expert and wrote for Works in Progress, and he said, yes, strangely enough, having genetically higher cholesterol is good for you, but also reducing it is good for you. And so clearly having genetically high cholesterol is a signal of overall body health in some sort of way. And cholesterol itself is probably bad for you, but the mechanisms of action of how these things actually work is slightly more confusing than when we started using them. Saloni Dattani [00:58:02]: So we’re going to talk about this in an episode of Hard Drugs, but the problem with cholesterol is not the cholesterol itself, it’s the particles that carry it. And if those particles are small enough, they get into your blood vessels and just stick there, and that causes atherosclerosis, and that can reduce your ability to circulate blood efficiently.

So it’s not about the total amount of cholesterol in your body that is a marker for poor health. It’s about the type of cholesterol particles and how big they are and how, where they stick, things that. Ben Southwood [00:58:46]: You mean it makes intuitive sense.

Saloni Dattani [00:58:48]: Yes.

Ben Southwood [00:58:49]: So we talked about some drugs that seem to extend the life of various different groups of mice when we really test them. There are some other things that probably extend life. I don’t think that they’ve been tested to the level where we can say with absolute certainty that in a normal person they would extend life. But I gather from the kinds of evidence I’ve seen, they’re pretty good. I said before, green tea doesn’t extend life, or at least that there’s no compelling evidence that it extends life. But with coffee it seems that if you go in big studies of a population, like Americans, and then you look at how much coffee they have per day from zero to say six cups, it’s pretty dose dependent on lots of different diseases, especially kidney. They’ve never done a proper randomized control trial on coffee, because the cost of doing that would be too expensive, and then everyone’s already allowed to sell coffee, so you can’t make any money from that. But there are lots of small, randomized control trials and they usually find the same results, especially if you add them all together. And then there are bigger cohort studies where they’re looking at people through their life, how much coffee they have, and they all find coffee extends life.

Saloni Dattani [01:00:16]: I’m skeptical of this. I would guess that there is a confounding there and that people who drink more coffee are healthier and that if you drink coffee, you wouldn’t be able to take various drugs and things that you would need if you had a disease. So I feel there are probably various things that and I’d want to look into how they actually did those studies.

Ben Southwood [01:00:36]: The reason why I don’t jump to confounding in my own head, is that the usual confounder is socioeconomic status. I just do not think coffee has that correlation at all. And if anything, I’ve lived a life of people propagandizing and intuitively believing that having too much coffee is bad. And so I would’ve guessed that in the US, coffee drinking is flat or negatively correlates coffee.

Aria Schrecker [01:01:38]: Conscientious people are always giving up coffee.

Ben Southwood [01:01:40]: I just don’t believe that they will find that coffee correlates with socioeconomic status.

Saloni Dattani [01:01:46]: Well, it’s also expensive if you’re having that many drinks, I do think that, I would guess that there is a correlation.

Ben Southwood [01:01:52]: Interesting, well we will have to look into this and then I’ll do an apology post on my, ‘Saloni was right again, I was wrong. Skepticism was the right answer’.

Let’s try another one. Having a walk after you eat something. Having a walk after you eat something might be good. One of the main hypotheses why all these drugs metformin, acarbose, SGLT2 inhibitors, have a positive effect on lifespan in humans is that they reduce blood sugar spikes. Having a walk after you eat reduces blood sugar levels. Aria Schrecker [01:02:52]: There’s also some evidence that if you eat the sugary things after you have already started eating, it has less of an extreme spike to your blood sugar as your insulin is already started to run, so it’s better to have ice cream after your meal and not before.

Saloni Dattani [01:03:16]: I like to have dessert at the start of the meal, because otherwise I might get too full to eat it. Now you’ve convinced me that I shouldn’t be doing that.

Ben Southwood [01:03:24]: Well look, everything’s a trade off. What else do we have in this list of potentially normal things you can do?

Aria Schrecker [01:03:29]: Blood donation.

Ben Southwood [01:03:31]: Ah blood donation.

Saloni Dattani [01:03:31]: I don’t believe that one either.

Ben Southwood [01:03:32]: I know you don’t believe that one. Fair cop governor, it obviously correlates with socioeconomic status.

Saloni Dattani [01:03:52]: But also a lot of unhealthy people are ruled out from donating blood for various reasons, like too high BMI.

Aria Schrecker [01:03:58]: But I’m told that once you control for all of that, blood donors still live longer.

Saloni Dattani [01:04:09]: I’d be skeptical. I just think that the ‘healthier people are more likely to donate’ thing is actually really strong.

Ben Southwood [01:04:15]: I’m open-minded on this. My theory was that it reduced iron stores. It is established that there is such thing as iron overload, and that you can have too much iron. The authorities agree on this. The Ben version was that there were numerous deleterious effects that you could experience prior to that point. For example, bacteria like eating iron, so it might be that you get more infections, or various other things. There are lots of angles, one study looked at coal miners and compared coal miners in ferrous deposits, coal that has iron, and non ferrous deposits, and found that black lung rates were dramatically higher in the ferrous ones - black lung being a standard disease of coal miners - I thought perhaps this person came into this with my view and they were trying to substantiate it. But if not, that’s interesting. A second interesting one is that cigarette smokers seem to have much higher rates of lung cancer than cannabis smokers, and there are lots of other things going on there, but one interesting factor is that cigarette smoke has a lot more iron in it than Cannabis smoke does, and it’s possible that that it might be related. These days I think that when you have lots and lots of small interlocking reasons to believe that something rather than one big reason? That’s a reason for suspicion because it might be that you want to find the conclusion. And then you are joining onto things that individually are not that convincing, but that join up. But I’m still interested in it as a hypothesis.

Saloni Dattani [01:06:25]: I think people should donate blood for other people to live longer.

Aria Schrecker [01:06:30]: I thought the other mechanism by which blood donation might work is - big fish have lots of heavy metals in them. If you eat a smaller fish, it’s got heavy metals in it, then your body has no way of disposing of it, so if you are higher up the food chain, you’ll accumulate more of them. And we’re reasonably high up the food chain. We eat things with heavy metals in them, and we don’t really have a way of disposing it except for literally just getting rid of that part of your body.

Ben Southwood [01:07:20]: You don’t replenish the iron straight away, this is one of the underlying reasons why people believe in it, right? So, the hypothesis is something like ‘We were made to just lose a lot more blood’ and so, for one thing is that all the things I’m talking about, women don’t have these problems in the same way that men do, premenopausal women. And obviously they’re losing a lot of blood, and the hypothesis would be that in the past people lost a lot more blood, and they sweat a lot more. So when you sweat, you lose iron through the sweat as well. And so then the people who believe in these things, they’ll attach in saunas.

Now we might be skeptical that saunas extend life, but if you already believe that reducing iron extends life, then you’re very susceptible to believing that saunas extend life, because you sweat out iron when you’re in a sauna. I wanted to ask about another thing which is, so this, I’m interested in this heavy metals theory. So this heavy metal theory gets at one of the core underlying questions; is there an inherent trade off between lifespan and other variables that we care about? Is that just an inherent trade off? Or can you have more of everything? The reason I ask this question is that - one hypothesis about what might be going wrong is that we’ve got things in our cells called lysosomes. If you can’t really process something, it’s going in there. One hypothesis you could build from this is that we’ve got basically a max lifespan limited by our intakes of all of these different things. But that’s a good answer because if we could just find some way of clearing them out with the drug, then we can just solve all our problems. If the main issue was overload, that would be a simple problem. Aria Schrecker [01:09:51]: So I guess what you say actually prompts a slightly difficult question here, which is why aging would be adaptive. If you think about us as this human species, we’re all coordinating together here, whereby if we didn’t age and die and pass on our genes to the next generation, we wouldn’t be able to evolve. We wouldn’t be able to keep adapting and so we should, from the perspective of our genes, value having two children, four grandchildren, et cetera. Those genes also get to be a bit extra selected and each time it goes on. But it doesn’t make sense to me at least why then you wouldn’t defect against the rest of your species almost by living much longer and taking up a much larger proportion of humanity.

Ben Southwood [01:10:47]: It would be intuitive for me if I believe that natural selection operated at the level of a whole species. But given that I believe it happens at the level of an individual gene then I can’t see that at all. Your intuitive thing should be, they want to live as long as possible. So there must be a trade off.

Aria Schrecker [01:11:05]: There might be a little sign here with the jellyfish that I was talking about, where it seems its population in the ocean seems to be increasing quite, quite rapidly. To the point that it is causing problems in it’s own ecological niche. It’s flooding it, at some point it could hit some Malthusian point, but it might only hit that point after the things that that jellyfish eats is totally gone, and its habitat’s totally overrun. So it might cause its own extinction.

Saloni Dattani [01:11:39]: We used to face this trade off and now we don’t.

Aria Schrecker [01:11:42]: So maybe there’s something like that that happens, where this animal might actually just die out. It’s going to take up a massive proportion of its niche and then it’s going to kill its niche off. And that maybe has happened before with other animals. I feel if that were the case, we would see it happen more often, which is why I propose this and walk it back. But this is why I find it difficult to reason about, because you can make up cases for why some things are adaptive and why some things aren’t adaptive, which I find a little bit confusing to deal with.

Ben Southwood [01:13:00]: If it’s a competition of resources issue, then that makes complete sense given what we’ve experienced where we can actually have more of everything. We get longer lived, healthier, but we also are stronger. We’re also taller. We’re also smarter. We seem to be getting all of the variables we care about at the same time over the last hundred years.

One thing I wanted to talk about is are there groups of people around the world who live a really long time that we can learn from? So, I’ve heard of this concept, ‘Blue Zones’. Tell me about Blue Zones. Does anyone know about Blue Zones?

Saloni Dattani [01:14:53]: Blue Zones are the idea that certain groups of people in very specific places live extremely healthy lives. And I think that the examples that people give are Japanese people in Okinawa, and people in Sardinia in Italy. I have heard a lot of debunking of this idea - there are probably people who live longer, but those aren’t examples of them. And the ones that have been given as examples also happen to be places where deaths or birth registration is very poor. They just have bad administrative data, they’re also poor, they correlate with things that you wouldn’t expect to be correlated with longer lifespans. But instead they’re correlated with things that imply that we don’t actually know how long those people have lived and that their ages are inflated because of that reason.

The funniest one that I saw was discussing historical centenarians, people who’ve lived over a hundred years old. And there was one example of this guy, Pierre Joubert or something, some French guy who supposedly lived 113 years in the early 20th century. And it turned out it was two people. It was a man and his son who both had the same name and people just assumed it was the same guy.

Ben Southwood [01:16:32]: There must have been a lot of people in the middle who were like ‘no, this one’s a child’. But by the end, you know, a 60-year-old in 1904.

Saloni Dattani [01:16:38]: I think it was that they found his birth certificate, it was actually his dad’s birth certificate, and then they found his death certificate and that was a son’s death.

Ben Southwood [01:16:49]: I feel quite bad for him now because at significantly younger than 113, everyone thought he was 113. ‘Wow, you are really decrepit, man.’

Saloni Dattani [01:16:57]: This goes to your point where people seem much older than they were in the past. And that I can imagine would also cause this confusion where people are like ‘Oh wow, this person must be over a hundred years old’. And it’s no, they’re 80.

Ben Southwood [01:17:11]: I’m 25. I just smoked a thousand cigarettes every day.

Aria Schrecker [01:17:14]: I once watched a video of teenagers answering some questions- it was school students and maybe 1940. I was surprised at how much like adults all the teenagers looked as well. So I do really think that those teenagers were experiencing being in their twenties, biologically.

Ben Southwood [01:17:34]: It was that more people had to go and work at such a young age. And even if they didn’t have children super early, they got married early.

Saloni Dattani [01:17:43]: Right. They also smoked more, did more drugs.

Ben Southwood [01:18:55]: We used to drink a lot more. I think the drugs question is interesting because I just don’t know. I’m always surprised when I discover people in the past were abusing drugs heavily. Everyone knows that Blitzkrieg, the Nazis, they were all using speed as they invaded Eastern Europe. In the sixties the Beatles were using speed when they were going and playing concerts in Hamburg. I don’t have a good sense of how much drug use there was.

Saloni Dattani [01:19:26]: What was the treatment for depression back then? Wasn’t there something?

Ben Southwood [01:19:30]: There definitely were people using heroin and cocaine in a medical context, in the 1900s, there were certain rich people getting obsessed.

Aria Schrecker [01:19:37]: If the Bell Jar is anything to go on, I’d guess historical treatments for depression were insulin.

Saloni Dattani [01:19:44]: Insulin shock therapy.

Aria Schrecker [01:19:45]: Which seemed a very strange, almost random.

Saloni Dattani [01:19:48]: You could just accidentally put someone into a coma. So people didn’t really know what caused it.

Ben Southwood [01:19:53]: Yeah. We’re still not that good on that one. That would be nice to get some improvements on.

Saloni Dattani [01:19:59]: So I have a question for Aria and you, what is the long-lived strategy by animals that you would take if you wanted to live longer? Out of the ones that we talked about?

Ben Southwood [01:20:11]: I’m obviously a lobster guy.

Aria Schrecker [01:20:13]: You’re a lobster guy?

Ben Southwood [01:20:14]: I’m a lobster guy.

Aria Schrecker [01:20:15]: You want to get bigger and bigger, and bigger, and bigger?

Ben Southwood [01:20:17]: Bigger and bigger. I come back here in a hundred years and I’m taking up almost the entire room. I have to keep working really hard to get good money for food. My food consumption is so high. That’s what I would like to do.

Aria Schrecker [01:20:28]: You have to have an IV drip of just straight glucose so you can keep growing.

Ben Southwood [01:20:32]: I would have to be eating extremely nutritionally valuable foods constantly, like a big dinosaur.

Saloni Dattani [01:20:39]: Aria?

Aria Schrecker [01:20:41]: I think I feel a big kinship with the naked mole-rats. I feel like we’re basically already eusocial creatures as humans. I go into the office and I’m working on my computer doing the very important magazine making part of the social order, and everyone else is doing all the other parts of the social order that come together. I suppose there isn’t a queen naked mole-rat that’s shoving me to get me to do work, but you know I feel I’m basically already like them. I also feel I have no personal temperature control already anyway. I’m just most of the way there.

Saloni Dattani [01:21:15]: I would take the last one, which is to turn myself back into a fetus. Start life again.

Ben Southwood [01:21:21]: How many times would you do it? Would you do it forever?

Saloni Dattani [01:21:24]: Why not?

Ben Southwood [01:21:24]: Yeah. I suppose if you could do that then when you were feeling like ‘Hmm. I think it’s, I think it’s time guys’, you’re on your deathbed and your death bed is actually your regeneration bed.

Saloni Dattani [01:21:36]: That would be great.

Aria Schrecker [01:21:38]: Would you consider that to be like you continuing to live if you just respawned?

Saloni Dattani [01:21:43]: I think I would see it as another chance at a different experience at life.

Aria Schrecker [01:21:48]: I would take it over what we currently have. But I think I consider that just a cheap way of last minute creating one more child.

Saloni Dattani [01:21:56]: I don’t necessarily want to live longer. I just don’t want to die. So this feels like it addresses that problem.

Ben Southwood [01:22:04]: Do you think that getting into a teleporter and then you come out the other side is death or teleportation?

Saloni Dattani [01:22:12]: I think it’s teleportation, because I’ve watched enough Harry Potter movies where they do that and they don’t, philosophically -

Ben Southwood [01:22:20]: But you wouldn’t know from the outside because they’ve got copies of all the memories.

Saloni Dattani [01:22:24]: They seem fine.

Aria Schrecker [01:22:26]: I think copying all the memories is getting - I genuinely think the only people who think the teleporter thing is death are people who have thought about philosophy, they’ve done the architecture thing with philosophy basically, where they’ve looked at too many buildings and now they can only make ugly buildings. They’ve thought about philosophy too much and they can only have clearly false opinions. You’re going to announce yourself as a ‘It’s death; continuity of consciousness is very important thing’ person.

Ben Southwood [01:22:53]: I don’t have a theory about it just on the pure intuition, I think that it’s easy to see that if you put me to a teleporter, but for some reason it delayed for a month, or, if theres a two person problem where I actually come out of the first one. There’s another one there, the other one there isn’t me. And it’s independence of irrelevant alternatives according to normal standards of what is me and what isn’t.

Aria Schrecker [01:23:16]: The other one there is you.

Ben Southwood [01:23:18]: I think that. My personal view is that if you think about it enough, then you’re committed to ‘I die every time I go to bed in the evening’, and since I’m not committed to that. Given that, I think that it would be silly to go to that conclusion, but I’m not a philosopher, so my opinion’s probably very bad.

Okay. I think that we have tackled all of the animal longevity based topics that we’re ever going to tackle.

Aria Schrecker [01:25:04]: I think so, yes.

Ben Southwood [01:25:05]: Thank you very much, Saloni. Thank you very much, Aria, by the time this podcast comes out, there will be an article by Aria in Works in Progress issue 22, telling you in much more detail and with all the facts sourced and all the numbers accurate and remembered because they’re written down about longevous animals and their traits.

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Transcript

[00:00:00] Sam Bowman: I’m an ultra optimist. Almost always when people are depressed about something or think something is completely doomed, I tend to think they’re underestimating human being’s capacity to self-correct and for things to get better. But even I, when it comes to Europe, feel pretty glum. There is a sort of last chopper out of Saigon feeling about Europe where all of the talented people I know who are Europeans kind of want to get out or are already leaving, or have already left. And the people who are left kind of envy them and wish they could get out as well. It’s easy to understand why that would be the case. Europe hasn’t really grown in the last 20 years. Europe has very high energy prices now and the continent seems basically unable to defend itself against what is actually a much poorer and much smaller country, Russia.

[00:00:52] So I thought I’d talk with Aria and Pieter about the state of Europe, whether the continent really is doomed. Why it seems to be in such a bad way and whether there is any hope, whether there is any cause for optimism. Pieter, what do you think?

[00:01:07] Pieter Garicano: Well as a European who moved to America a few years ago, I think I might perhaps be one of these examples you’re referring to, Sam.

[00:01:15] I think in general I am perhaps slightly less, pessimistic in the story you’re describing now. I think we might discuss this in our conversation today. There are some tractable things we can do, kind of win-wins and there are models of European countries I think that are performing very well. And so I think perhaps when you learn from each other, there’ll be things we can copy and hopefully, free lunches at the European level, the national level, they might fix these problems we’re gonna discuss. So overall, maybe slightly more optimistic than you are at the moment.

[00:01:42] Sam Bowman: How about you, Aria?

[00:01:43] Aria Schrecker: I think I’m 50/50, I think in the nineties or early two thousands if you were choosing between living in Europe and America, I actually think Europe’s got a slam dunk win over America; almost all of the gap in wealth is about Europeans working shorter hours, and then you’ve got like extra health, extra longevity, less pollution, less crime.

[00:02:04] Basically I think Europe is a better place to live in the 1990s and 2000s. I think now it’s about 50/50. I think lots of Americans would pay a significant chunk of their wealth to have European health outcomes. But if you just continue looking at current trends, which I think is a good way of making predictions, I don’t think I’d wanna stay in Europe in 20 years time.

[00:02:21] Sam Bowman: There’s a simple and very compelling story. What’s the thing that the US has that Europe clearly doesn’t? A massive technology sector. This is something you’ve written a lot about Pieter.

[00:02:35] Pieter Garicano: People compare corporate performance in the US to Europe. They’ll look at, say, stock market returns and compare the German stock market to the American one. If you’d invested a hundred bucks 10 years ago the American one would’ve returned 400% more in profits. or things like corporate R&D. American corporate R&D is twice as high.

[00:03:05] Corporate investment it’s roughly also twice as high. But then, if you remove a very small share of outlier performers, we can call them superstar companies — just like the top seven companies in America, The Magnificent Seven — then a lot of these metrics suddenly change. The gap becomes basically zero.

[00:03:26] So stock market returns goes from like a hundred percent to barely 5%.

[00:03:31] Aria Schrecker: Is the magnificent seven all tech companies?

[00:03:34] Pieter Garicano: Yes.

[00:03:34] Aria Schrecker: Okay.

[00:03:35] Pieter Garicano: Right. And if you compare like corporate R&D, the gap shrinks about two thirds. If you compare investment, it shrinks away two thirds again. And so the idea is basically that all these huge, huge, enormous outsize metrics or gaps in outcomes are driven by very, very, very few companies. There’s more ways of thinking about this, right? So four companies in America; Metamazon, Google and Microsoft spend twice as much on R&D every year as the entire public sector of every European country combined. And you can also see this in, I think, productivity trends where, again, if you remove software and industry close to software, the gap in productivity growth the last 20 years between, the EU and the US is basically zero with the software industry and adjacent industries, then it’s like one percentage point per year. And so one story you could tell what’s happened in Europe is simply that the gap we’ve preserved in productivity, in returns and in investment is just a function of its software industry. And if Europe could have a software industry, then everything else would be fine. I think this is sort of the thing that people often think of as well, right?

[00:04:51] It’s like why Europe doesn’t have a Google. And I think people, notwithstanding Tesla, compare the American manufacturing sector to the European manufacturing sector and then it’s very hard to make the case that companies like BASF or Siemens or Ferrovial are any worse than the American counterparts.

[00:05:08] In fact, they’re better than American counterparts. And so one story you can tell about the US-Europe gap is that it’s just a software story.

[00:05:18] Sam Bowman: I’m not entirely convinced by that, but let’s stick with that for now. So, the way you framed that, kind of sounds as if it’s like America just got really lucky in having NVIDIA and Google and so on, but the companies that are now in the Magnificent Seven were not obviously superstar companies 10 years ago, some of them anyway. Microsoft was, although before five years earlier, Microsoft didn’t seem like it was necessarily the gonna be this kind of world beater.

[00:05:49] NVIDIA definitely didn’t seem like it was gonna be one of the most, if not the most valuable companies in the world. And yet America just repeatedly has been able to create these like ultra valuable companies. And so I wonder if I kind of think that that argument - and I don’t really know that you actually believe this, but I think sometimes I’ve heard that argument as a kind of excuse for Europe, it’s like “Oh Europe- America just got really lucky.

[00:06:19] They ended up with NVIDIA Europe didn’t. So, you know, tough luck.” But really the story there is two things. One, it’s the nature of these markets is that, I think because they’re IP dominated, a lot of those companies are platforms. They tend towards having a couple of very large, if not one very large player at any point in time.

[00:06:43] I don’t think that’s because they’re not competitive, by the way, but I think that’s for other reasons. So one thing is a single company manages to capture lots of the value in that given market. So in GPU Design, for example, in NVIDIA’s case. And the second is America is really good repeatedly at creating those companies. And so if somebody told us that there will be another magnificent seven, but it will be seven different companies in 10 years, you would be very, very, very well advised to bet that those companies will all be American. Maybe some of them will be Chinese, but like it would be a very good bet that none of them will be European.

[00:07:19] So it might be true that these seven companies have driven a lot of this stock market gap. And I do want to come back to that. But it doesn’t tell us very much. It just tells us “Yeah, there happened to be seven companies that have created a lot of this value.”

[00:07:39] Aria Schrecker: Also, if you compare those companies to their European equivalents, they start off by doing very well in one vertical. Google starts off with search, but now Google has so much more business outside of that. The same thing is true with Meta — Facebook originally. The same thing’s true with Amazon.

[00:07:53] Who would’ve thought that bookstore retail would’ve ended up being the biggest Cloud Compute Services. Spotify, on the other hand, didn’t do something like that.

[00:08:01] DeepMind ended up only the AI lab thing and was purchased. Estonia has something like 10 unicorns. None of them became mega Multi-Tech companies. So there’s probably something, I would guess related to tax, R&D and human capital, about not expanding into other verticals.

[00:08:19] Sam Bowman: Well, as Jack Wiseman, a friend of the show has argued to me, in a way these companies are kind of magic, right?

[00:08:29] They’re like the machines for turning capital into returns. It’s not the case usually that you can just put more and more money into a company and it’ll become more and more profitable, more and more lucrative. Something about, maybe not specifically these companies, but there’s something about the way these companies are run.

[00:08:48] That means that it’s like you can get above market returns fairly repeatedly over a really long period of time just by putting more and more capital into these companies. It might be that they’re really well run, it might be that they have some kind of- I mean I’m not convinced by this, but it might be they have some kind of monopolistic position that sort of allows ‘em to do leveraging.

[00:09:08] That’s obviously the European story, which we might come back to in a second. But it’s kind of unprecedented to have companies where you can just put money in and you would be really well advised to keep investing your money, even though they are several trillion dollar companies now. They’re utility monsters but for capital.

[00:09:29] Pieter Garicano: I think there probably is a lot of path dependence involved. It seems, seeing if you were the god king, you probably wouldn’t have all your tech companies in the Bay Area. The Bay Area seems a pretty bad place for a lot of reasons.

[00:09:47] It’s very hard to live there, the housing’s terrible, it’s controlled by interest groups. I mean, you and I have been frequently and there’s like clearly lots of quality of life downsides to being in the Bay Area. And I think many people perhaps if we all can agree more on this, maybe we’d agree to move it to Texas or Florida or whatever.

[00:10:02] Sam Bowman: Although I will say it’s not that bad, right? It’s very bad compared to what it could be, but it’s also got a great climate if you like hiking, which Americans do. All Americans, especially Californians love hiking. They get up at 5:00 AM and they go hiking.

[00:10:19] Aria Schrecker: That’s because they’re supplied with hiking.

[00:10:20] They don’t inherently love hiking.

[00:10:21] Sam Bowman: No, I think they love hiking. I think they actually have a genetic predisposition to liking hiking. Something to do with-

[00:10:28] Aria Schrecker: Surely California is like one of the most diverse places.

[00:10:31] It can’t be like-

[00:10:31] Sam Bowman: Yeah, yeah, yeah. Exactly. California’s the most bountiful place on earth, so it’s not that bad. Well, that’s all I’m saying.

[00:10:38] Pieter Garicano: Let me phrase it this way, you as a company. Even if you could come up with reasons why you didn’t want to be there, you can’t really defect.

[00:10:45] Sam Bowman: Yeah.

[00:10:45] Pieter Garicano: You can’t like say, “No, no, I’m going to be the company that’s based out of-” Let’s say Elon Musk.

[00:10:49] Sam Bowman: You can’t escape economic geography.

[00:10:51] Pieter Garicano: Exactly. And so that’d be one story for where luck would sort of play a role. The other thing is that if we believe this kind of ‘software outliers’ story is true, then it has like pretty important implications for which factors which knobs are going to dial to fix things.

[00:11:08] If you think the software superstar story is true,then the fact that American public universities on average are better than European public universities on average doesn’t really matter very much. Or then,perhaps you might be less, less concerned about energy inputs because the retail tariff for electricity in California is higher than the tariff for electricity in France.

[00:11:30]

[00:11:30] Pieter Garicano: Right? So a lot of the stories that, even if you think the US is very well constructed to encounter these superstars, I think the kinds of things that allow it to do it are not necessarily the kinds of things that many people commonly think about. Maybe they can think about what Europe is doing poorly.

[00:11:46] Sam Bowman: Some of the story you are telling, I think actually lends itself to quite a robust defense of the European Commission. Which, if you’re not familiar, you have the European Union, which is a kind of the super estate kind of thing that’s sort of layered on top of France, Germany, stuff like that.

[00:12:03] The European Commission is the executive body, it’s like the cabinet of, the European Union. And over the last, say 15 years, but especially over the last 10 years, the European Commission has really focused on big tech. It has really focused on regulating big tech and bringing cases against American tech companies. Overwhelmingly, the fines that are levied are levied against American tech companies, if we look at the actual amounts that are fined. I think that’s bad, but if you believe that the problem that Europe has is that it doesn’t have a domestic tech industry and it doesn’t have specifically a kind of big tech …

[00:12:45] It’s not just that you want lots of little startups. You want actual big Googles. Also if you believe, which I do not, that it’s good to protect infant industries, (Afterall, the most popular view right now in America is that it’s good to have protections for your domestic infant industries) then you need to give them a fighting chance against big competitors from overseas. They usually think anbout this in terms of manufacturing with respect to China. But I think if you believe this then you should apply that logic to other areas as well. So, isn’t there a defense of what the European Commission has done in that a) they want to and probably should want to have a domestic big tech industry and b) there is a really big tech industry from the United States that is stopping that from emerging in Europe. So I don’t really believe that, but the measures that the European Union has brought in are straightforwardly just regulating big tech companies.

[00:13:47] So the Digital Markets Act, which is the big blockbuster tech regulation that was introduced a couple of years ago, essentially, specifically targets the five biggest US tech platforms. So it uses, the size of the company and it uses the amount of turnover that the company has, and only five companies are affected by that. And those are off the top of my head, Google, Amazon, Microsoft, Meta and, Apple. And if you think that the problem is that they haven’t got a domestic industry, then maybe that makes sense. Like maybe you do want to curb Google’s ability to put Google Maps results on Google search pages, which is one of the things that’s happened from the Digital Markets Act.

[00:14:34] They believe that this idea that self preferencing is a really great evil. Isn’t that a fair position? Isn’t what they’re doing completely in line with the general belief, that is widely held now, that protecting infant industries from foreign competitors is a good idea?

[00:14:52] Pieter Garicano: So I think you’re basically right that the intent is from our perspective notwithstanding - if you buy the infant industry story, their intent is the right one and the focus, and they use political capital basically single-mindedly to - suddenly the first one they commission, single-minded lead to focus on the software industry is like really impressive.

[00:15:14] I think one story you can tell here specifically is that the weird way the sausage gets made in Brussels has led the outputs to be much worse than you’d expect. Because what happens , is that the EU makes- it can do regulations which are basically laws, and they can do directives. Directives are legally binding orders from the commission, past the commission the council, and then the parliament, which order the member states to create rules to enforce what the directive says. And all the big things you describe are directives. And so if you read things like the AI Act, the opening preamble of the AI Act says the AI Act exists to have a more predictable, more harmonized, more efficient regulatory system.

[00:16:02] So the whole point of the AI Act, is to create an extremely consistent and level playing field across all of Europe to allow like companies to face a much larger market straight away. The problem is that because of directives, the actual enforcement of a given law is left to the member state and the member states are ordered to create their own regulatory bodies.

[00:16:27] So for example, in the case of the AI Act, every single member state is ordered to have a notifying authority and an enforcement authority. Let’s say each member state’s ordered to create additional, the actual enforcement of the act is left to who can check your hire to be the AI regulator.

[00:16:45] These guys, these different regulators, they talk to each other, but they’re not necessarily forced to agree with each other. So you can have cases where, the Irish,the same story is true by the GPR for DMA, DSA. And so you have cases where the Irish regulations happened with GDPR,the Irish Data Protection Authority said to Meta, this is excellent. You can do X or Y. And then the Austrian and German data protection authorities disagreed and then fine Meta billions of euros. And so, this is a case where the law, even if you agree with the intent of the law, the way it’s currently being executed, which is through directives, makes it so that you’re going to always get an extremely high friction and fragmented regulatory system.

[00:17:29] They currently have, I think the count is between these four laws, they’ve created 270 different tech regulators.

[00:17:36] Sam Bowman: Hmm.

[00:17:36] Pieter Garicano: And that of course has really distortionary effects as well for what kind of basically very large fixed cost. And so if you’re a large company, if you’re a Google or a Meta, you have a thousand guys in your Brussels compliance office and they’re really good at this.

[00:17:48] But if you’re a smaller company, then you actually really struggle with figuring out what the 270 different bodies want you to do.

[00:17:55] Aria Schrecker: My prediction here is also that while there are several people who are thinking like the way Sam has been thinking about we need to create this infant industry, or we need to, we need to create like a mega-

[00:18:05] Pieter Garicano: The way Sam is pretending to think.

[00:18:05] Aria Schrecker: Is pretending to think.

[00:18:06] Sam Bowman: I’m going to give a counterargument to my argument in a second-

[00:18:10] Aria Schrecker: Yeah! But I suspect loads and loads of those people, if you read the journalism about big tech, if you talk to Europeans and British people who are involved in this regulation, they don’t think that at all. They actually do think there’s a problem with the size of these companies and a lot of these policies you would expect to hit any European company that was on the brink of becoming one of these big 10 companies, right? Like you would expect it to dry up venture capital investment. You would expect it most of these companies to say, “Oh, the domestic regulator is not very good. Let me go and run away to the US to build this.”

[00:18:43] Pieter Garicano: Very, very briefly. Before you say your counter argument to yourself,I’m not entirely sure I agree because.

[00:18:49] Aria Schrecker: You know more Europeans than I do.

[00:18:50] Pieter Garicano: No, I just think Germans love that Volkswagen is big and if up to them Volks can be way bigger and the French are so chuffed that Airbus is now like the largest aircraft manufacturer in the world.

[00:19:00] I don’t think it’s an aversion to big companies per se.

[00:19:03] Aria Schrecker: Maybe Brits are the only self-effacing people who throttle their own biggest companies.

[00:19:07] Pieter Garicano: Maybe self-effacing guys. But I actually think that if Google was like called Schmoogle and it came from like Bavaria, then we would have like pro Schmoogle subsidies.

[00:19:17]

[00:19:17] Sam Bowman: There is definitely a strand of thought influenced by the Neo-Brandeisian, the kind of Lina Khan, Tim Wu type people in Brussels at least that does think that big is bad. And yes, the German public would love to have, you know, Degoogle, and a trillion Euro search company would be great if it was based in, Berlin or something like that. But, you know, Margaret Vestager or other people like that who are more influenced I think by slightly more sophisticated, although I think wrong, theories of competition and antitrust, do have a sense that it’s bad to have big companies and a really well-functioning market is where you have lots of little companies and you have lots of entry and that’s how you get the kind of churn that you want from competition’s like that.

[00:20:06] An example being the European Commission blocking the merger of Siemens and Alstom, which make trains. And the justification for that merger was that there are gigantic, Chinese companies that have like scale that these two companies cannot have by themselves. And if they can merge, they’ll get massive economies of scale and so on.

[00:20:29] This is called a national champion theory of like why you would want to allow this, and she opposed it on I think like pretty standard ‘It’s bad to have a giant single company making all the trains in Europe.’ I actually think she’s probably right on that one.

[00:20:46] Can I make an argument against myself? So I think in fact, the infant industry’s argument is wrong and, basically not a very good argument. I’m not convinced it’s true in manufacturing, and I’m definitely not convinced it’s true in tech. And I think the timeline in recent history around technology makes this point, I think really, really well, which is; it was a few weeks after the Digital Markets Act came into force that ChatGPT launched right? By a company that didn’t have any prior OpenAI, didn’t have any prior services. It didn’t have any existing user base.

[00:21:20] It wasn’t connected to one of the big tech companies. It had some investments from them, but it wasn’t like part of Amazon or Google or something like that. And yet it was able to become the fastest growing consumer tech product ever. Anthropic another example of now an extremely successful company that came after ChatGPT had reached significant scale, Claude took quite a while to become as mature as ChatGPT was. And obviously Anthropic was a much smaller company having been founded by people who left at OpenAI. Both of them are now really, really, really important players. And again, both of them are American.

[00:21:58] You know,I think that that to me is a really strong argument that the kind of diagnosis that the European Commission and the European Union made of how the tech sector works was really, really broken because they assumed that you would only get kind of incremental change and it would come from the incumbents. And by far the most important technological change of the decade came from two new entrants that had no prior user base. That to me, really upends the kind of infant industry’s argument, at least as it works with tech, because it suggests that you don’t need to have a domestic, you don’t need to have like protection, you don’t need to have a certain amount of scale, if you have a good product. And it also implies that it’s not actually incremental. You know, that the main competitor for Google search is not DuckDuckGo or another search engine. It’s ChatGPT, obviously,and that’s important. It’s also, and again kind of cutting against the narrative I gave earlier.

[00:22:58] I think important to note that with the GDPR — I don’t think there is a plausible argument that the GDPR was done in order to protect European tech companies. The actual effect of the GDPR has been, in the same way as the point you were making about the AI Act, to raise fixed costs massively. They have made it really difficult for small, new entrant companies to do things with data. Incidentally, it makes it really hard to use data for training of AI, so they’ve hurt themselves there as well, by accident. But the GDPR — which most people probably associate with cookies, banners — but those actually predate the GDPR but are now part of it.

[00:23:37] Like the really important part of the GDPR is to say you may not use data that you’ve acquired via, or like for the purpose of A, for purpose B. Yes. So you can’t cross pollinate using data that you’ve acquired,which is totally unheard of really in America. You know, that there’s some state level regulation in California that somewhat approximates it, but by no means as strongly. And that really, really holds back scale because it stops any company that has success in area A cannot use that to build up products in area B, and I think that’s been a massive, massive, inhibition to the development of companies that do the sorts of things that Big Tech does in Europe.

[00:24:20] Pieter Garicano: So, Sam, I think you’ve, you’ve convinced me, that both antitrust and GDPR are like problems and the things worth fixing and they, it seems. You can reason through the kind of micro, the price reasons why it would have a bad effect on, investment in tech and why it would tell people from entering and from trying to build big companies.

[00:24:46] I think if we’re trying to explain the lack of superstars in Europe, it kind of presents with a bit of a timing issue. And the timing issue is because Vestager and the the antitrust school kinda, she enters in 2014 with the second younger commission. And, in the case of GDPR, that is passed I think in 2018.

[00:25:08]

[00:25:08] Aria Schrecker: About then.

[00:25:09] Pieter Garicano: And so the point is that at this point,if you look at 2014, take that as a cutoff, at that point Europe is very far behind. There are no competitors in Europe to google.

[00:25:21] Aria Schrecker: It happens in response to America already having these like superstars.

[00:25:24] Pieter Garicano: That’s exactly right. That’s exactly right. It’s a response to America’s having superstars. And in fact, if you look at when should we actually, look at the divergence? it’s like in the nineties. It’s like 1995 roughly. It’s basically the moment you see software emerge in industry, that’s when Europe starts falling behind.

[00:25:41] And between like 1995 and 2005, there’s three times more capital investment in software in, the US than Europe. Well, it’s in ICTI which is software because also hardware counts as well here. And so if we want to have a first order explanation, we should try to think of something that was already a divergence in policies back in the nineties.

[00:26:02] And I don’t think antitrust or excess EU tech regulation applies there. I don’t know if one thing we get into here is culture, which I think people point to. I don’t have very strong views on whether culture matters. Maybe Aria you do?

[00:26:17] Aria Schrecker: Well, I was gonna throw out two other guesses.

[00:26:20] I suspect, tax rates and the amount that the single market is integrated versus the US market being integrated, I think the kind of investments that create that kind of tech, you basically expect to spend a while doing R&D or at least you expect to be the kind of investor who bets on lots of little things. So you’ve gotta have a lot of capital available and for that hit to go really big.

[00:26:43] I think this is a big part of the reason potentially why Estonian companies have all basically left Estonia, and they’ve gone to either Britain or other parts of Europe with slightly bigger markets or they’ve gone to the US. Which is that you’ve built something, you’ve got your market and if the regulation is slightly different from place to place, you’ve actually gotta have a new team, and scaling is much more expensive. Whereas if you create like a software company in the US, I think you can basically expect to be able to sell your services in every US state.

[00:27:09] So the returns of something that’s IP heavy are probably much greater in the US. And then with simple things like capital gains tax being slightly lower, you would expect the value of investments to be much higher as well. So I think that could probably explain almost all of that difference.

[00:27:24] Pieter Garicano: I think the single market explanation- I’m I think personally somewhat skeptical that it matters as much as people point to it. There’s I think two different ways we’re thinking about this. If we think of the best performing countries globally at R&D or cutting edge tech, they don’t often have a very large domestic market, right?

[00:27:46] Countries like Israel, countries like Singapore, even if you think of very advanced economies in East Asia countries like-

[00:27:54] Aria Schrecker: South Korea, highest number of patents in the world.

[00:27:55] Pieter Garicano: South Korea, Taiwan. these are like not very large markets. These are Netherlands sized markets or Sweden sized markets.

[00:28:02] They don’t necessarily need a very large domestic market to be able to have a very successful export oriented, tech industry. And so if I were representing the view of the Dutch or Swede or Danish kind of tech policy maker, what they tend to tell you is that they don’t really need a very large internal market to sell goods into.

[00:28:30] Because they think it’s basically if you’re a Swedish or Dutch - think of Sweden right? So they have Spotify, Spotify sells globally. Spotify doesn’t really live or die at whether like they’re selling very much in the Balkans. Their position basically is that they want to have a single market for capital, a capital markets union.

[00:28:49] This is something they think is lacking. So they wouldn’t be able to raise money from all of Europe, but they actually don’t really care about selling that much into Europe. Now the second thing I’ll say about the single market is that you often see tossed around, nowadays these statistics about how much of an internal tariff the friction single market represent.

[00:29:14] The common stat you see is 44% tariff equivalent for goods and 110% tariff for services. But if you actually look slightly under the hood, that specific estimate is sort of dodgy.

[00:29:26] Sam Bowman: It’s very dodgy. Actually, having cited it myself in the past.

[00:29:28] Pieter Garicano: I have cited myself as well. It’s extremely dodgy.

[00:29:30] Basically, they use a gravity model. So a gravity model, the way they calculate it is they try, basically they predict how much trade has been between you and a neighbor. If the only friction was distance, and then they calculate how large of a tariff you should have to achieve that, to actually explain the level of trade you have.

[00:29:52] Sam Bowman: But it doesn’t factor in differences in language preferences, differences in tastes. Exactly. It’s all it’s doing really is inferring how big the gap in trade is. It’s not actually saying that there is a tariff; the total barriers between, or a total gap between like perfect trade, perfectly frictionless trade and reality is this much. I think it’s a total misnomer to describe that as a tariff. And I, and I’m embarrassed because I have actually cited that myself in the past. because it comes from the IMF.

[00:30:24] Pieter Garicano: And if you actually look at like other estimates. More rigorous done like-

[00:30:28] Aria Schrecker: I guess you can do things that control for how willing people are to move across that barrier as like an explanation of like cultural-

[00:30:34] Pieter Garicano: Yes, exactly. And so if you actually look at the gap in like the cost of goods and the core - other thing by the way is the IMF stat is like they basically treat all of the EU as one block despite like countries like Croatia, Poland having joined very, very late. But if you actually look at the core EU countries, the ones which were there and like the very start with the coal steel community, the differences in price of goods in any case is like no greater than the difference in prices of goods between US states. And in fact the traditional example of like where like you had big single mark fixtures was cars because very strong national car preferences,the French drive renaults and peugeots and the Italians are fiats. Even there now, the price across borders basically the gap is zero. There are some areas in services where there are frictions, particularly in like old school occupations where you have licenses.

[00:31:19] 20% of Europeans work in industries where you have an occupational license that is like national.

[00:31:22] Aria Schrecker: Yeah.

[00:31:23] Pieter Garicano: Hairdressers, gymnasts and that kind of stuff.

[00:31:25] Aria Schrecker: Doctors.

[00:31:25] Pieter Garicano: Doctors, that kind of thing. Yeah. but it’s very case by case. And software incidentally is not one of those licensed areas. Right? Basically the licensed areas are usually ones with like very strong traditional like labor interest groups. And so for example, if you’re doing consulting or high-end service consultancy, it’s an EU wide market.

[00:31:40] Aria Schrecker: Banking as well. Right? People have like a strong national preference for banks.

[00:31:43] Pieter Garicano: That’s a capital markets union. That’s the separate thing.

[00:31:45] Aria Schrecker: Yeah.

[00:31:46] Sam Bowman: Even on let’s say the border between Austria and Germany where they speak the same language, in theory like a single market should mean that it’s just as easy to do business.

[00:31:56] If you’re a German company in Austrias in Germany, even like really basic things like tax reporting and stuff like that where you have to report your income to a different authority will just inevitably create frictions that don’t exist. Or maybe they do actually exist to some extent in the US but maybe to a lesser extent.

[00:32:13] Can we get onto, so Pieter, you’re building up to your grand theory - and I like your grand theory, so I want you to lay out, okay, so what is in your opinion, if the pointed divergence is in the nineties? And this very much undercuts the things that I want talk about around energy and around, financial regulation.

[00:32:36] So you’re really pulling the wool out, the rug out from under me, which is good. What is the proximate cause do you think?

[00:32:44] Pieter Garicano: After it’s like slashing and burning the other bogies.

[00:32:46] Sam Bowman: Yeah. Yeah, because you have a, you have an article in the next works in progress setting out this theory.

[00:32:50] So this is a good time to set out your store.

[00:32:53] Pieter Garicano: Basically. It’s mostly a labor market story. Let’s frame it through the timing, which is what happens in the nineties and what characterizes software and what makes it different compared to all the other areas where tech innovations happened previously, manufacturing, car making, combustion engines, even something airliners.

[00:33:13] The kind of innovation was taking place up until the 1990s was very incremental and because it was very incremental, it was relatively low risk. And so the companies that were rewarded are companies that are established, that are incumbents, that have workers, that have tons of human capital. They basically don’t have a very high risk of failure. Software has extremely high turnover. We see with, even biggest and most successful companies, that they have gotten egg on their faces so many times. Think of Meta and the Metaverse or Google with Google Hangouts.

[00:33:53] Sam Bowman: The Microsoft Windows Phone.

[00:33:55] Pieter Garicano: The problem in Europe is that very tight employment protection and employment protection is basically what governs whether you can, whether you can fire someone, let someone go means that risk taking is extremely costly because every time you could basically, every time you spin up a new division, you make a new investment and it fails? You have to presumably either let the people go or redeploy them internally. And those steps in Europe are overwhelmingly with a few exceptions to talk about in a second, or we can talk about in a second, is much, much, much more costy.

[00:34:29] To give you a sense roughly of of how this works - and the US almost without exception, you can fire someone at will. You decide one day this person’s no longer employed with us. There’s three big exceptions, but like the fact that you can do this everywhere. In Europe it’s almost never the case.

[00:34:44] There’s a few, basically the Germanic countries have exceptions to this. Scandinavian countries - overwhelmingly there are like extremely specific circumstances we can fire someone. You offer to show like a business need to do so. You have to be able to prove to the judge, say in France, or in Germany that in fact there was some reason why your company had to let someone go. So that’s a cost. And then once you can let them go, you have to pay them much more money. You have to pay them money in terms of severance fees, you have to pay them money oftentimes, perhaps to avoid a lawsuit, basically pay them off. You have to pay obviously your own lawyer’s fees. There’s often a waiting and negotiation period and all this, these various expenses add up to roughly forming a five to seven times increase in the cost of letting a given worker go in, let’s say Germany versus, the US.

[00:35:35] So to give you an estimate from two gentlemen, two Frenchmen who’ve worked in this very much and are pushing this issue in Brussels, [NAMES?] they basically, look at big tech restructurings or big company restructurings in Europe and US the last five years. And they say in the US on average, it costs you roughly if you’re a big, big company, seven months, of employee compensation, permanently let go.

[00:36:00] So you say the average seven months of average wage per person let go. In Germany costs you 39 months.

[00:36:06] Sam Bowman: 39 months?

[00:36:07] Pieter Garicano: Okay. And in France costs you 41 months. This crucially applies only to big companies I think, policy makers are aware of the problems this causes. And so they’ve been very nice about carving out, if you’re a smaller company, if you have say below 50 employees, you have to have like no restructuring obligations.

[00:36:33] If you’re below 250, you might not need to do like a works council, which is a special employee board. Above that, you do have to do that. But from our story, which is like success is driven by these big, big superstars doing things and growing the fact that you exempt small companies doesn’t help you.

[00:36:48] In fact, the only thing it does is basically puts a huge implicit tax on growing.

[00:36:52] Sam Bowman: The other point which you’re alluding to is that when you start a tech type startup, when you like most startups that are kinda venture capital funded, your goal is to be big.

[00:37:06] Like you’re not trying to make a company of 200 people. You’re trying to make a company that is worth billions of dollars or billions of euros. And you look at what it’s like to run a company worth billions of euros in Europe or wherever you are or in the United States, and if the environment is significantly more or less favorable in one place or another, you look at that and you say I don’t want to do this if there are other reasons to be in other jurisdictions, but the fact that a company will be heavily regulated or will be miserable to run in one jurisdiction if you actually succeed at what you’re trying to do, must be a deterrent or must be a nudge.

[00:37:47] One of the facts I think is very, very important when people talk about kind of culture being the reason that you don’t get much entrepreneurialism in Europe is that you do get loads of entrepreneurialism from Europeans they just do it in the US. Like one in 10 startups in the US has a European co-founder. And That’s been growing over the last decade. I think this is also true and I’m not gonna beat the antitrust horse too much, even though it’s like one of my favorite horses. But Europe has always had a concept called abuse of dominance that does not exist in US law, which says there are obligations on you, if you are a large, dominant company, there are obligations on you as to how you treat your suppliers how high your prices are. Really quite exacting and demanding rules that just do not exist in the US. In the US antitrust law is about the process of competition. And as long as you’re not frustrating the process of competition, you can do whatever you want.

[00:38:46] As a big company, you can charge as high prices as you like. You can be nasty to your suppliers and so on. Europe does not have that, Europe does not have that attitude. European law has the attitude that big companies have social and economic obligations. And I think that must be a thing that people look at.

[00:39:04] I don’t know how strong a factor that is. And the counter argument is like nobody thinks like that. People, when they’re setting up companies just try to think about the next five years, and they’re not thinking about what if my company is a trillion dollar company or not? I’m not convinced by that, but-

[00:39:21] Pieter Garicano: Two data points, right? One is that, I know of a big Dutch startup called Bird. It’s a messaging company. It’s like Slack, basically. It’s worth like billions of euros. It was like one of the biggest Dutch startups. They, in the Netherlands’, a law which is if you have more than I think it’s, 350 employees, you’re obliged to have a works council, which is like your employees get together and they have the right to decide certain things and basically inform decisions. And you have to negotiate them with the restructurings. And many Dutch startups don’t have them, they just ignore the law, and the government doesn’t really enforce it. But if you as an employee start suing, then of course they have to do it.

[00:39:55] And so last year an employee was ‘We have like 800 employees. Why don’t we have a works council?’ And then like within two months, the founder closed the Amsterdam office and moved everyone to Dubai and Bangkok. And that’s a small data point, but I think a telling one.

[00:40:13] Sam Bowman: Could you just explain exactly what a works council is? That’s not really a concept that is well known outside of Europe.

[00:40:22] We don’t have them in the UK and I’m certain they don’t exist in the US. So what’s the difference between a works council and a trade union, for example?

[00:40:32] Pieter Garicano: So a works council, and a trade union can coexist. Most companies have both.

[00:40:40] Sam Bowman: Mm-hmm.

[00:40:41] Pieter Garicano: The difference is that a works council, has the legal right to either be informed of certain decisions or has the right to veto certain decisions and these often are decisions around around employee compensation and restructuring. Now it varies very much by country and the country’s most famous for it’s works councils is Germany. And this example, I’ll give - the works council thing only matters, really, really matters in Germany much more so than elsewhere. because they have something called co-determination, where not just the works council have to be informed that you’re gonna do things with notice periods and heads ups and the like. But they also have to have the right to agree. Basically it’s for the company to do certain things like a change to pay scales or down factory restructure or to shut down a factory.

[00:41:31] The works council has to agree and if they don’t agree, then you get a process where you appoint an independent arbiter and it goes through the legal system. But importantly, the works council also gets a voice on the board. In the case of Volkswagen, for example, half the seats on the board are actually works council seats.

[00:41:48] Sam Bowman: Volkswagen is the largest company in Germany by revenue.

[00:41:51] Right. So it’s a very important example.

[00:41:53] Pieter Garicano: It’s also the largest employer in Europe. And that, of course distorts your incentives in a very important way because primarily you’re running the company to some degree, for the benefit of the people who currently work there. And so you saw, for example, Volkswagen, has had a jobs guarantee since 1994. If you, were hired in a German factory or if you’re a German employee of Volkswagen, you basically could never be let go for economic - you could only let me go if you like personally did something in violation of the rules. They guarantee to you there’s never going to be a reason why you’ll be made redundant.

[00:42:33] Aria Schrecker: Mm-hmm.

[00:42:34] Pieter Garicano: And so, last year Volkswagen wanted to close four factories because they’re facing very strong competition from China. And the works council just refused. The trade union in coordination with works council, threatened to do strikes, and de facto, they extended the jobs guarantee, for another, I think five or six years until 2030.

[00:42:53] Aria Schrecker: Yeah, so I guess it basically means a serious proportion of, I guess most European, big companies, their decision making is done by people who don’t own shares, right? So they’re not really profit motivated at all. They want the company to continue existing.

[00:43:06] Pieter Garicano: No, they’re salary motivated.

[00:43:08] Aria Schrecker: They’re salary motivated, which obviously massively changes the incentives of how businesses run.

[00:43:11] Sam Bowman: And also the workforce as a they have duties to their specific workforce. So even if you did a restructuring and you, the remaining workers were better off because the company was more successful-

[00:43:24] Aria Schrecker: -or even the extra workers that they hired were better off.

[00:43:26] Sam Bowman: Right.

[00:43:27] Aria Schrecker: Yeah.

[00:43:27] That wouldn’t matter as much.

[00:43:28] Sam Bowman: The duty is to the specific workers who are there right now, which is very much not aligned necessarily with the kind of long-term success of the company or even, future workers.

[00:43:40] Aria Schrecker: I’m not endorsing the East Asian model here, but it sounds a little bit like Europe is trying to do the sort of South Korean or Japanese like tribal kind of thing, where you have these large companies that are like kind of in bed with the government.

[00:43:52] I think the government in those countries, like in Singapore as well, they massively preference those companies, but because they’re so productive, because their workers are so good, because they export loads of stuff to the world, everyone kind of accepts that as being part of their economic system.

[00:44:07] Sounds like in Europe we want those companies to have those pro-social duties, but without the kind of government kickback element where they’re massively supported by the state as well.

[00:44:18] Pieter Garicano: I’d say in their defense, this system, I mean the people who came up with this probably was (unsure).

[00:44:28] But there are strong reasons why you might want to do this, which are that the theory behind like having the workers councils and having the duties towards your employees is that basically allows you to do way more human capital investment because you know that someone is almost certainly not to go be poached.

[00:44:45] Aria Schrecker: Yeah. If you train someone up for five years-

[00:44:46] Pieter Garicano: Exactly.

[00:44:47] Aria Schrecker: You get them for the rest of their careers.

[00:44:48] Pieter Garicano: Career. Exactly. Exactly. And so the theory for a very long time, and of course it’s like this was the explanation for why for a long time, and it’s even now, many European in companies that are incremental innovation industries like car making are just much better than American counterparts.

[00:45:04] The European like combustion engine is a 20th/21st century miracle. In fact, every single year, without fail, the Volkswagen guys would do a press conference and say “we’ve squeezed out an extra kilometers proficiency out of this thing.” And it’s tiny. And so the idea was that, as long as the patient, incremental, efficiencies were gained, then this system is working. And it kind of did work. The problem is with taking big risks.

[00:45:27] Aria Schrecker: This strikes me as the explore, exploit, trade off, basically like with current technology, if you knew that we were never going to invent anything else ever again. And actually this is like a very reasonable system. You just want like the best human capital. You want people to have very stable lives. But, I think you could have predicted quite easily that we were going to keep inventing things and having a very stuck economy, was a problem. Like I remember having this argument like 10 years ago, I think before, before it was quite clear this was a crisis that you could predict this was gonna be a problem.

[00:45:55] Sam Bowman: Yeah, and people have been highlighting the problems with European labor market laws for a very long time. It’s, it is not an original thing to say that these are a problem. What is original or what has changed is that certainly when I was first getting into the game, the big problem was unemployment rates in France and Germany, especially in the two thousands.

[00:46:18] The big story was France and Germany have persistently high unemployment rates, especially among young people. And this is because it’s difficult to hire people, it’s difficult to fire people, which makes it difficult to hire people. Right. then you kind of also think, okay, maybe this functions as a bit of a tax where, in exchange for safer protection, things like that, you get paid less.

[00:46:41] All of those things equilibrate in a way that’s sort of maybe not perfect for the worker, but shouldn’t have like really massive long-term effects. What I think is interesting about what you are saying and what I find very compelling about what you’re saying is it’s actually much less of a kind of static issue and it’s much more of a problem in this dynamic way because It’s actually stopping the companies from changing. And like that, that fits very nicely as you are arguing with the idea that there was actually a long period where innovation was not the hallmark of the global economy. In the post-war era, being able to build really great cars was like not particularly driven by massive amounts of R&D or massive amounts of experimentation.

[00:47:24] It was driven by like really incremental, just like engineering, human capital accumulation, things like that. And then your point is something actually fundamentally really changed. We moved from the kind of tangible economy where human capital maybe was like the tale of human capital manage that mattered a lot. And just like having good people in your company was really valuable to a much, much, much more outlier dominated model where like a couple of companies doing really well and having the best people working for them could just explode and become what are now trillion dollar companies?

[00:48:01] Pieter Garicano: The best argument in favor of this explanation is that there is a huge amount of variation in Europe in terms of labor market policy. In this area, Europe is misleading because it’s not a EU-level thing at all.

[00:48:20] The labor market policy in Sweden and Spain couldn’t be more different. And what you see is the countries that have much more flexible systems. Have much motivation, right? So if you were to name to me what you think the most like innovative countries in Europe, every single one of those would be have a very flexible system.

[00:48:38] Countries like Switzerland, countries like Denmark.

[00:48:41] Aria Schrecker: This was what I was gonna throw in where, so like we’ve said, we talked about the tech story and that that actually doesn’t explain like some of the difference. And now, this story I think explains some of the difference.

[00:48:50] But as far as I can tell, and like only in the past few years has the UK started to develop this kind of like European style labor market. But, still not completely, but we’re starting to see the first signs of it.

[00:49:04] Sam Bowman: So I’m obviously talking my book here, but I don’t think labor market laws so far matter that much to the UK story.

[00:49:13] I think it’s much, much, much more of the kind of standard line that I always give about not building enough houses, not building enough, infrastructure. Energy supply, stuff like that, which I do actually think coincides pretty neatly with the rise of software and with the fact that we do have some really high productivity places.

[00:49:34] They just haven’t been allowed to grow. But we talked almost exclusively about technology for good reasons. You set out the reasons, Pieter, but it’s also the case that, the Buc-ee’s, the convenience store kind of gas station pays managers like $150,000 a year. Now I’m told by the way, that being a  Buc-ee’s, manager is a horrible job, it’s really hard.

[00:49:56] They stretch people to their absolute limits and the turnover is massive. So It’s not actually necessarily indicative. And like gas station managers and other companies get paid a lot less, but probably have like less demanding jobs. So  Buc-ee’s, has a very particular business model.

[00:50:10] Pieter Garicano: I don’t know if you’ve seen a  Buc-ee’s, but these things are enormous. They might have 200 employees working for you. Like you’re a pretty big boss.

[00:50:16] Sam Bowman: Yeah.

[00:50:17] Aria Schrecker: I have another example that I recently saw, which is Taylor Swift’s dancers get paid 150,000 a year. And that’s like normal for dancers in the US.

[00:50:24] Pieter Garicano: It’s a lot or little.

[00:50:25] Aria Schrecker: I think that’s a big salary.

[00:50:27] Pieter Garicano: Taylor Swift’s dancer. I mean-

[00:50:29] Aria Schrecker: You’re at the top of your game.

[00:50:30] Pieter Garicano: Talk about a superstar returns.

[00:50:32] Sam Bowman: I don’t think comparable West End performers  get paid, anything like that.

[00:50:36] Aria Schrecker: I was going to say, I have a friend who’s on the West End, she gets paid like 40K..

[00:50:40] Sam Bowman: But the point is that even if we take out the technology sector, doctors are much more- Basically every major city has much higher wages than London does, for example, or Paris does, or Berlin does. Any comparable part of the US does significantly better than a comparable part of Europe or Western Europe.

[00:51:09] Let’s exclude the Eastern block for obvious reasons. Like even if we’re comparing, I don’t know, there are probably pockets of the US like the Rust Belt and so on where that isn’t true. But kind of generally speaking, almost anywhere you go, people are better off than their counterparts in Western Europe. And that can’t possibly be explained by, Technology. I think you’d have to tell an incredibly strong story about diffusion of technology which I just don’t think actually matches with the reality of what these places are for that to matter.

[00:51:50] So why is it that, let’s say South Carolina, why is it that like people who live in Charleston, South Carolina are significantly richer than people who live in Brittany in France, or people who live in, Tuscany in Italy? That is not explainable by the rise of the software industry, I don’t think.

[00:52:12] Two examples that occur to me are, and these do coincide pretty well with the divergence, not since the 1990s, but since mid-2000s, are energy and financial regulation. So. in the early 2000s, electricity prices for business users and industrial users were roughly the same.

[00:52:34] In Germany, the us, France, Spain, Britain, they’re basically the same in in the US and Western Europe. Italy is a weird outlier. Italy’s had like really high electricity prices for a really long time. But the other countries-

[00:52:46] Pieter Garicano: Do you know why it is?

[00:52:48] Sam Bowman: No, no. In the two thousands, a few things happened.

[00:52:54] The price of gas and oil rose significantly around the Iraq war. The US has quite significant domestic reserves of those things. Europe has not tried to exploit whatever domestic reserves it has. It may have domestic reserves of gas via shale, but it just hasn’t exploited them. So the price of gas rose significantly, which basically I think co coincided with, energy prices rising in Europe.

[00:53:21] But that can’t be that big a part of the story because the price of gas in nominal terms, so not even inflation adjusted terms was lower in 2015 than it was in 2005. So over that 10 year period, the price of gas was falling while electricity prices were rising in Europe. And roughly flat in the US, it was slightly rising, but basically just in line with inflation.

[00:53:44] Aria Schrecker: How much does that vary between European countries? Because my guess is Britain doesn’t exploit its natural gas and also makes a bunch of policy choices to not import very much, but the story is that Germany was importing loads and loads of natural gas until Ukraine.

[00:53:56] Sam Bowman: Yeah, so Europe does actually have basically a single market in gas.

[00:54:03] Pipelines exist between Britain and Norway and Britain and France. I think, there, there, there is essentially a single price for natural gas in Europe. Electricity obviously is not just determined by the price of gas, it’s the price of gas is a component of the price of electricity, but, It’s less for a third of the overall price.

[00:54:26] So one, so one part of the story that is important and I think is really, I’m not trying to downplay, is that the price of gas rose quite significantly in the two thousands. However, as it was essentially flat or even falling electricity prices kept rising and rising. And when we talk about, and this is one of my big complaints with the Draghi report, which we haven’t really mentioned, but if we - most I think most Europeans having this conversation would start with the Draghi report and sort of, okay, well Mario Draghi’s made all these interesting observations. There is some really interesting data in that. But actually I think it’s a pretty incomplete report. And one of the things I think is really incomplete is the stuff that it has on energy because it takes the kind of important moment of divergence as being the Ukraine war where Russian gas supplies dried up.

[00:55:11] We all know that electricity prices and gas prices spiked massively. we all know that they rose gigantically at that period-

[00:55:19] Aria Schrecker: Four times or something.

[00:55:19] Sam Bowman: Yeah. And I mean, anybody who lives in Europe will have personally felt that in a way that is actually pretty unusual except for, petrol prices to actually feel like macro effects in your electricity bill.

[00:55:33] So my view and my kind of somewhat, I guess, controversial claim is that it was Europe’s taking climate change much more seriously than the rest of the world, and building that into policy much more responsibly, you might say, than the rest of the world. That has been one of the big drivers of the rise in energy prices.

[00:55:53] So, something like 80 gigawatts worth of coal production plans have been shut down. There’s been a huge shift away from coal towards, mostly towards, wind and solar, but obviously to some extent towards gas. Because you need gas. If you’re building wind and solar. Now that might be a good thing to do.

[00:56:13] Coal is, coal is awful. Very, very few people want coal. Even if you were a climate change like skeptic.

[00:56:21] Aria Schrecker: You don’t want the little particulates in the air.

[00:56:21] Speaker: Yes. Coal is terrible for

[00:56:22] Sam Bowman: people’s health. It’s dirty. It’s unpleasant. but it is cheap. Right? And one of the, and one of the effects of moving away from coal, to wind and solar and gas has, I think, been a very, very high increase in, electricity prices.

[00:56:38] Related to that is the emissions trading scheme. So Europe is basically the only jurisdiction that like actually prices carbon. And China has a carbon price, but it’s mu, it’s a fraction of what it is in Europe. It’s like a fifth of the level that it is in Europe. Obviously the US doesn’t have a national carbon price, but it does have kinda state level attempts at doing carbon pricing.

[00:56:59] Europe also has net zero laws. Every European country has a, Europe has a net zero law, which requires that everything that the government does be in line and like be part of a long, of an overall strategy to get to net zero, emissions reductions by 2050. And I think it feels very, very likely, although It’s really hard to say these things with any certainty by the way, as very, very likely that the high increase in energy prices in electricity prices in particular in Europe, has been driven by.

[00:57:32] I think climate minded laws, which may be good laws, are difficult to sustain if you’re the only person doing them. The question for me is how important is that? And how much does it actually matter, if you’re a continent like Europe, to have high electricity prices? That’s what I’m un unsure about.

[00:57:51] Pieter Garicano: I think, because this often the high energy prices obviously matters a lot for like very energy intensive industries. the kind of paradigmatic country here, of course is Germany, which has like a generally very elevated level like manufacturing GP for a country, if it’s like wealth and if you look at the German economy, it makes sense to date the slowdown 2022.

[00:58:16] I mean, COVID, I mean they certainly didn’t recover from the COVID shock very well. But through 2020 until then, the German economy is, I think you would be hard pressed to make the case they was performing very badly. They were growing at 2% per year. They were growing much faster than Southern Europe.

[00:58:31] They were basically diverging despite being like the frontier. And so Germany’s your energy intensive country, it’s the one where price rise the most. It’s hard to say that pre, pre Ukraine war shock that made such a big difference.

[00:58:46] Aria Schrecker: Yeah. How do French energy prices compare to, the rest of Europe?

[00:58:49] I would assume much, much cheaper.

[00:58:51] Sam Bowman: Well, they’re a bit lower, but they export a export lot of electricity.

[00:58:54] Speaker: Exactly. Yeah. This

[00:58:56] Sam Bowman: is, I think that’s actually quite important because, I don’t think that it would be better if France had autarky for electricity prices.

[00:59:04] Because the implication there would be that you should subsidize your electricity prices.

[00:59:07] Pieter Garicano: Yes.

[00:59:08] Sam Bowman: So this is a point that, Ben (Southwood) and Samuel (Hughes) and I have made in the past, which is the question shouldn’t be ‘Why is France struggling economically?’ It’s obvious why France is struggling economically, right?

[00:59:19] Like it’s a very, very, very heavily regulated economy. We’ve already talked about some of those regulations. It’s very highly taxed; for a worker to bring home a comparable amount of money in Britain versus France, so about 60,000 euros. In Britain, the employer will have to pay a total of about 97,000 euros, in France the employer will have to pay a total of about 137,000 euros.

[00:59:41]

[00:59:41] Aria Schrecker: That’s insane.

[00:59:42] Sam Bowman: So, absolutely, yeah, gigantic, because social insurance contributions are absolutely enormous, in France, compared to the UK at least. So they have a very low retirement age. they’ve only raised it very, very recently.

[00:59:57] Pieter Garicano: They’re going to bring it down again. Unwinding reforms.

[00:59:59] Sam Bowman: They’re probably going to bring it down again.

[01:00:00] Aria Schrecker: But young people don’t work.

[01:00:02] Sam Bowman: They also have very, very high, rates of unionization. They have lots of strikes as we know. But they’re roughly as rich as the UK is. Right? And this could be a real repudiation of the idea that economics is true.

[01:00:20] It could be well you could do whatever you want and you could still be roughly as rich as each other. Why wouldn’t you have a highly regulated economy with everybody retiring at the age of 62?

[01:00:32] Aria Schrecker: What’s really galling to me is how many- if you go down the sort of world’s richest people, there are so many French people before you hit a British person.

[01:00:40] It really upsets me.

[01:00:41] Sam Bowman: Well, France has some amazing companies actually, but, the argument that we make is that they can afford to do all those things because they get the basics right. Because they have built much more freely, they have millions more homes in France than the UK does.

[01:01:00] Aria Schrecker: I guess you would say, in the places of France that are most productive as well.

[01:01:02] Sam Bowman: Not- yes.

[01:01:03] So Paris has like significantly grown since the war compared to London, which just has not grown since the war. Paris has tripled in geographic extent since the 1940s whereas London just hasn’t changed at all. they built vastly more motorway. they toll their motorways, so they’re free flowing,all the, all the things like that.

[01:01:25] They build much, much, much more, mass transit infrastructure. People all know, everybody know about. Yeah. French trains are great. Roads are great. Houses are great. they’ve built like 27 Tramways, I think in the last 30 years, whereas like the UK has built three. And obviously as we wrote in a good Works in Progress article a few months ago, they nuclearized to absolutely like an astonishing degree.

[01:01:48] They, France gets something like 65%, 66% of its electricity from nuclear. It built 50 reactors in 10 years, in a period between the 1970s and the 1980s. This was a state led program, by the way, I’m not telling a kind of, oh, France is a free market country kind of story. Yeah. the point is that they actually built this stuff.

[01:02:07] They actually got this stuff. And our argument is that this sort of allows them to spend down, this has given them loads of wealth that they have chosen to spend down via having heavily regulated economy and stuff like that. France does also have some really impressive companies, like Air Airbus is to a large extent a French company.

[01:02:29] Pieter Garicano: I was going to ask, which is that if you look your French people rich list, if you look at what they actually do-

[01:02:34] Aria Schrecker: I they’re mostly the inheritors of fashion houses.

[01:02:39] Pieter Garicano: No, but that’s important, right? The very rich French people are in industries which are very heavy intangibles. All their wealth intangibles. And in this case, it’s not ideas to like and tech, it’s like brands. Brands are like the ultimate form of tangibles. It’s quite surprising actually, that this kinda like very material input story notwithstanding the way you have this like really crazy French long tail and where they totally trump Britain for example.

[01:03:03] Aria Schrecker: That’s got to be culture.

[01:03:04] Sam Bowman: Yeah, and history, right? Like France for a long time was the like superpower of Europe. They also have an incredibly bountiful land, they have lots of different climates. They have incredibly fertile farmland, France is an amazing country especially if you are in a kind of pre-industrial world.

[01:03:22] France is an amazing country and for a really long time, all of European culture was downstream of French culture. Italy is another example of a country that is spending down like the Renaissance or maybe even the Roman Empire, there is a huge amount of accumulated, inherited capital, human capital, whatever.

[01:03:40] In some cases It’s like literally the land is the way it is and is beautiful because there have been people there for thousands of years and they’ve been relatively rich for thousands of years. Like Florence obviously is just like a thing that is left over from the Renaissance and it’s still an amazingly great place and productive place and culturally important place.

[01:03:59] But anyway, yes all this is a kind of getting away from the point about energy where, remember that most of the energy intensive industries that people talk about use gas, not electricity. Like energy intensivity usually means you are gas reliant and gas prices did only spike around COVID, and around, not COVID actually, but sorry, the Ukraine war.

[01:04:24] Like there it is correct that the spike in price coincides with the Ukraine war and the Draghi report does have, I think, some pretty like incredible charts showing certain industriessteel and like very energy intensive industries have had like gigantic contractions since the beginning of the Ukraine war.

[01:04:46] The question for me is electricity, which has not tracked gas prices. Electricity has been rising and rising and rising for 20 years. And there, I think there’s a plausible story that electricity is a very important input to everything; electricity is a thing that all businesses require and like often spend quite a lot of money on them.

[01:05:04] Like they spend it on air conditioning, they spend it on just general activities. And there I can imagine like a fundamental input that every business is reliant on, although not relatively energy intensive businesses being something that rises and rises and rises in cost over this period - that being an important factor. But actually, I don’t know. I don’t think there is good evidence as to like how important electricity prices are to growth or to output.

[01:05:32] Pieter Garicano: I think especially if you’re comparing like Charleston to Lille.

[01:05:37] Where it’s I can’t imagine that spending on electricity is more than like low single digits of GP.

[01:05:45] Sam Bowman: Yeah.

[01:05:45] Pieter Garicano: And so I’m hard pressed, even if it doubles or I think in Britain’s quadrupled the last 20 years is my understanding, but even if that quadruples, it’s like it’s not going to explain the - I wonder if - one story you could tell is - story would be something - a syncretist story would be that for some parts of the US there is a big priority to gap.

[01:06:07] But actually if you’re comparing like Charleston or Savannah or Dallas to Lille, there, you’re actually, if you adjust for purchasing power and then adjust for like hours worked, you actually end up with a remarkably similar economy. That would be my intuition.

[01:06:23] Sam Bowman: One. So one other, theory before we move on to I think kind of, so what is to be done?

[01:06:30] What’s actually, what, what is to be done is one that I heard from Tyler Goodspeed, who’s an economist in the US and his argument is that, the culprit or the smoking gun in terms of timing is after the financial crisis, the Basel three, the Basel three Accords, which are a series of financial regulations that are applied globally by all developed countries, sign up to these bit in a much more important way in Europe than they did in the United States.

[01:07:01] Because what these did was say that larger banks have to be more prudential about how they lend. And that mattered a lot more in Europe than it did in the US, because number one, Europe has much more large banks. It’s got a much more consolidated banking sector. The US has like thousands of local banks as well as some really big national banks.

[01:07:23] All the store European countries have like a handful of big banks. By the way, as a kind of consumer, that’s much better, right? Like the US banking sector is notoriously primitive and terrible, horrible to use. You have to send checks to your landlord to pay your rent and stuff like that. People using credit cards, to like do basic transactions and the credit card margins are huge and stuff like that, blah, blah, blah.

[01:07:45] Whereas in Europe, it’s really easy to do cash transfers between people. Venmo doesn’t exist. There’s nothing like Venmo in the US in the UK because we just don’t need it.

[01:07:53] Aria Schrecker: We just don’t need it.

[01:07:53] Sam Bowman: We just do bank to bank transfers. Yeah. so that’s one part where you just have more big banks.

[01:07:59] So the regulations bite on a much larger fraction of the banking sector. The other is that, much more lending or much more business financing in Europe comes from banks than it does in the us. So in the US a much smaller fraction of lending is kind of clamped down on and made to be prudential than in Europe.

[01:08:19] In Europe you get much, much, much more, a much bigger share of like where businesses get their money from becomes cracked down on. Now. I think this is a really interesting argument. I don’t know, I’m not able to assess it in terms of like how big the effect size is, but I think it’s like quite interesting and I do think that the one thing it really has on its side is timing. It does seem to coincide like really nicely with the, I think your point is well taken, Pieter, but it’s pretty clear that Europe, if we were sitting here in like 2004, we’d be talking about France and Germany’s unemployment problem. We wouldn’t be talking about-

[01:08:54] Pieter Garicano: And in Britain talking about the incredible growth story. 3% growth would be remarkable.

[01:08:58] Sam Bowman: Exactly. We wouldn’t be talking about the massive productivity, slow down. Certainly not that Europe was experiencing.

[01:09:02] Pieter Garicano: No, and the bank story is striking. Right? I think 35% of all, European savings are in current accounts.

[01:09:09] Sam Bowman: Yeah.

[01:09:09] Pieter Garicano: Which is just, really remarkable. And the other remarkable thing is that, policy makers kind of treat the fact that more money isn’t in these current houses a problem. Right? So the dragging report has a sister, a forgotten sister called the letter report, by Roberto Letter. another big, European grandee, and the letter report’s about supposed to be a single market.

[01:09:31] It generally contains like less information, interesting information in graphs than Draghi. So that’s why it had no impacts. But one very telling section is that, in the preamble it talks about the fact that, Europeans have 300 billion euros. I think it’s roughly 1% of European savings.

[01:09:49] No, should be less than that, but 3 billion Euros exposed to the American equities markets. And rather than being like ‘Wow, this is great that you still like get to transfer over some surplus and the returns flow back to Europe’, this is like a big problem. He’s like ‘This is a big issue. Why are the savings flowing to the US versus, staying here?’ And so I think both the actual regulation, also the attitudes of capital markets are really alien. If you see this as like an American, where you think like it’s excellent to have lots of exposure to capital markets and have a very unfettered capital.

[01:10:20] Aria Schrecker: I wanna synthesize our conversation of what the problem is, where it seems we are basically on the same page. I think if Europe had only made one of these mistakes, it wouldn’t be so big of a deal.

[01:10:34] But it’s the regulations in general mean that it’s harder to develop tech. The labor markets mean that it’s harder to take risks. The energy markets mean that manufacturing is punished, but also probably lots of other businesses are punished. There’s there’s an attrition of like several different things which together have combined with like a slowdown over the past, three decades or so.

[01:10:51] Pieter Garicano: Yes. And certainly if you look at the last like 10 years, there has been like a huge proliferation of like European rulemaking, which must impose significant drag. And firms report this, right? Firms also report your energy story a lot.

[01:11:08] Sam Bowman: Good for them.

[01:11:09] Pieter Garicano: It’s remarkable.

[01:11:10] If you asked founders about my - when I asked startup founders about my lead market story, they’re like ‘No, it doesn’t really matter. It’s mostly culture. People don’t wanna work very hard,’ but they’ve had a problem with firing anyone.

[01:11:21] Sam Bowman: Yeah.

[01:11:21] Pieter Garicano: And inversely, your energy story shows up - you get every year you have a survey, what’s inhibiting investment? And like a 6% all company survey in Europe, no matter the size, literally could be, not even manufacturers of 6% all coming surveyed, report high energy costs are inhibiting investment.

[01:11:38]

[01:11:38] Aria Schrecker: What are we gonna do about it?

[01:11:40] Sam Bowman: So there two questions actually. One is what should be done? I think a more interesting question because I can tell, I can infer from what we’ve all been talking about, what we think should happen. I am more interested in why nothing is happening.

[01:11:56] Like I am very, very confused. And this is a general point. We’ve spoken entirely about economics for this conversation, but if we were talking more broadly, we’d be talking about immigration, we’d be talking about Islam and Europe. We’d be talking about maybe freedom of speech, things like that.

[01:12:13] All of which are like very important live issues in Europe. The Ukraine war is another one, where large parts of the electorates of these countries are very much out of step with the mainstream political elites and political parties.

[01:12:29] Pieter Garicano: Maybe not Ukraine War, but the other ones.

[01:12:30] Sam Bowman: Maybe not Ukraine War.

[01:12:31] What I find constantly very confusing is why it is or why it appears to be the case that, European leaders seem to be either paralyzed in the face of all of these problems and we can just stick to the economics. Because we haven’t gone into the other issues at all in this conversation.

[01:12:54] Like, why do they seem totally paralyzed here? Or even oblivious, it’s not even clear to me that they are aware of the problems as we believe that they exist. do you have a good story for that?

[01:13:08] Pieter Garicano: So, one extremely simple story you could tell is it’s just a representation gap story, or a firewall story.

[01:13:18] The Brandmauer. The Brandmauer basically is the commitment of European center right parties to exclude the far right from governing. And this is a commitment for like very, I think sensible and understandable reasons, which you might have lots of reasons why you disagree with the far right and think they are both not just that they often hold, bring reprehensible views, but also that like they’re just not, haven’t shown themselves to be very competent in governing. And so you just basically exclude categorically and that basically means that you as a center right party, which might have perhaps slightly like more like derogatory instincts, are committing yourself to perpetually govern center left not nec- doesn’t mean that like not, and it doesn’t just mean oh, your, your policy -

[01:13:57] You get like a weighted average of your views, but like you are negotiating hand going into that it’s greatly weakened if your counterpart knows that in the end it’s take it or leave it.

[01:14:09] Sam Bowman: Yeah.

[01:14:10] Pieter Garicano: So that’d be one story. But I think the reason why I don’t think this works for the EU overall is because in countries where you see a kinda grand coalition form of governing very consciously - like Germany, like much Northern Europe now, is that you actually love paralysis.

[01:14:30] Like the net result of putting together like the center right and center left is that like they count each other out and nothing happens. But for the EU I think the story doesn’t work as well because the story of the EU for the last 10 years is that they’ve been insanely productive. People love to tell like how oh, the Americans have these checks and balances paralysis by design.

[01:14:49] But like the American system is like basically extremely like majoritarian. It’s almost like 50 plus one compared to how the EU is designed. We have to like align the European Parliament with the council, which represents for instance the governments of 27 different sovereign member states,

[01:15:07] Sam Bowman: All of which have a veto right?

[01:15:08] Pieter Garicano: All which to a veto. Yeah.

[01:15:11] Aria Schrecker: And yet it’s still able to throw directives out all over the place.

[01:15:14] Pieter Garicano: They - five times higher - This is a stat from driving reports kind of dodgy, but they basically say it’s like four times more relative acts per day compared to the US

[01:15:23] Aria Schrecker: This I guess implies that, European elites are actually much more aligned than you would expect their equivalent American counterparts to be.

[01:15:32] Pieter Garicano: So I think it just happens to be the way the Brussels system is designed.

[01:15:36] Aria Schrecker: Okay.

[01:15:36] Pieter Garicano: And last thing I say about the Europeans, which even more surprising is the Grand Coalition in the EU is like four parties ranging from the greens, the liberals - it’s so unwieldy and they’re constantly doing things. So, and this in the EU story, it’s quite interesting and this, I don’t think something was widely understood or known is that the formal way laws used to get made is that the commission proposed something and then the council and parliament go back and forth in four different rounds with like public votes where you have an amendment, it’s like basically the way you expect the house to work or the parliament to work.

[01:16:10] You have different readings and then at the end everyone publicly votes in the final package. That’s the way it’s supposed to work. But since the crisis, they’ve adopted the financial crisis, a system known as a trialogue. The trialogue is basically that you as the parliament, empower a person rapporteur to represent you.

[01:16:28] The council empowers the council presidency, which is a country which rotates randomly every six months, empowers a representative and the commission sends their team. And what happens is that these three people meet in a room, none of them have necessarily very strong incentive to press on the breaks because in the commission - the commissions don’t have very much power anyway.

[01:16:48] So the only way you can do things is make new laws. It doesn’t have much money to spend. So if you’re a commission civil servant, your incentive is law making. The council presidency only has six months. And so ,basically it’s your only chance to affect this issue. And so you’re much better off like doing - you also want to have a big win.

[01:17:06] Usually the council president is represented by a civil servant. So it’s just some guy who would like to have a big win on his CV. And the parliament, the person who becomes rapporteur, is almost always someone who really cares about the issue and has been selected through by a specific committee and the people on that committee are the people who really care about the issue. Why did the German CDU vote in favor of banning all combustion cars in Europe by 2035? It’s hard to imagine. The reason is that the EPP people —the CDU people who are on the environmental committee — happen to be much more out of step with the rest of the party. And the incentives for the people who are actually making the laws are just the incentives faced by the parties back home. And then, the final step of the sausage making, is when the bill is created. When it comes to parliament for a vote, the Grand coalition dynamic matters a lot.

[01:18:16] Because what you say, when you come back to your fraction, to your parties who say, look, this is the best deal we’re going to get. This is a deal between us, the center right, the center left, the greens, the liberals, is extremely fragile. And it’s take it or leave it. It’s like you, the CDU might not want to do combustion car ban, but if you don’t vote for this, you’ll never get anything else.

[01:18:36] Aria Schrecker: So your story here is something like the policy makers are extreme technocrats and also single issue people who really care about things. So we end up in a sort of ‘everything is a thing where you get the privacy people get their GDPR, the green people get all of their little habitats regulations’ and they’re like, right.

[01:18:57] Sam Bowman: It’s like government by hobbyists,

[01:18:58] Pieter Garicano: Government by hobbyists. Yes.

[01:19:01] Sam Bowman: So that’s pretty depressing. That’s pretty bleak, because I don’t see how that changes. I want to be optimistic.

[01:19:10] It is worth noting a few things, a few reasons to be somewhat upbeat about Europe. First of all, and it’s easy to forget this, Europe is much richer than almost anywhere else on earth, right? Like its growth rate is not that good, but its level of output is really, really, really impressive. It is much, much, much richer than almost anywhere else.

[01:19:29] That’s really important. People,

[01:19:31] Aria Schrecker: I’m still on the fence about whether I’d rather live here or America.

[01:19:33] Sam Bowman: Yeah. I mean, okay. That’s great. I think that’s a really important point actually. Sorry, I’m being, I’m being jokey. European cities are much safer than American cities are.

[01:19:46] The level of squalor that you get in American cities is much worse than it is in European cities. And the cities themselves, the towns and cities in Europe, because of when they were built, often are a lot more beautiful, a lot walkable, a lot more livable, stuff like that. Europe also has really, really, really precious valuable things like, basically very strong rule of law. Basically very strong private property rights. Basically very strong freedom of speech rules, despite the problems that it does have, I think with freedom of speech, it has things that are really hard to will from nothing. And if you’re looking at somewhere like a Latin American country, for example, all of those things are a lot weaker and a lot harder to build.

[01:20:27] Although, there are people who are trying to build those things, but it’s much harder. It’s an uphill struggle to do that. Europe also has some really impressive companies, right? We’ve got a piece coming soon on ASML, which is essential to the, global semiconductor industry.

[01:20:42] It has Airbus, it has the most impressive and important airline manufacturer, which you mentioned earlier. there are some impressive tech companies, especially if you include pharma and biotech. We don’t need to go into them. DeepMind is based in London, which is sort of in Europe. There are like plenty of -

[01:21:02] Pieter Garicano: It is in Europe. Britain’s moving away...

[01:21:05] Sam Bowman: well, I think the UK is a special case, but yes, it’s geographically in Europe for sure. And it’s adopting European labor laws, which is great. So there are all sorts of things that I also, by the way, think as as a video gamer, as a self-identified gamer, I think it’s notable that European video games are really good.

[01:21:28] Like Baldur’s Gate three, just on the games that I play personally, Europa Universalis V, brilliant. Baldur’s Gate three, brilliant, Belgian game, Kingdom Come Deliverance Two, brilliant. The Witcher three, the Witcher series, even Cyberpunk, which is a bit of a disaster- Europe in one area of tech, European companies do absolutely brilliantly and I think are at least as good as, if not better, collectively than their American and East Asian counterparts. So like it isn’t completely a dead zone, it’s just that these are pockets of success around the continent rather than being the sort of big giants that we talked about.

[01:22:10] Pieter Garicano: And I think these things are probably going to become more important over time as we become wealthier. The people, these things are basically things that are like luxury goods that we demand as we get more free time.

[01:22:25] Sam Bowman: Your argument is that Europe should just become a holiday destination.

[01:22:27] Pieter Garicano: No, no, no, no, no.

[01:22:28] My argument is that like you- the lower bound-

[01:22:32] Sam Bowman: Yeah.

[01:22:32] Pieter Garicano: The flaw is set by the fact that worst case scenario, everyone in the world will still wanna come here. And many countries don’t have that. Don’t have that to say for themselves. Right. Basically as a iron law since the dawn of modernity, basically as people have more free time, they just spend more time in Europe.

[01:22:49] This started with the British going to Greece,, the grand tour, the Americans in the eighties and nineties. And now of course, we’re recording this in London and you see lots of people from all over the world coming here and that’s gonna stay.

[01:23:03] Sam Bowman: Okay. So on policy, what, if anything, is the reason to be optimistic? It’s hard to imagine Europe performing its labor laws.

[01:23:12] Aria Schrecker: I think the consensus on nuclear power is probably going to break at some point. I think like the-

[01:23:17] Sam Bowman: The anti nuclear power?

[01:23:17] Aria Schrecker: The anti nuclear power consensus.

[01:23:19] Yeah. I think France’s success compared with, data centers and people, everyone does want data centers in their country, and I think people are going to start to make policy decisions that make that happen. I think that probably means like we are going to get more nuclear power across Europe.

[01:23:34] Not every country.

[01:23:35] Sam Bowman: I actually suspect that it’s more likely on energy for what it’s worth, that, one of the consequences of the populist right of the far right come to power is that there is a big shift towards fossil fuels again, because the cultural like valence of gas at least, and maybe coal is like it’s anti-woke basically.

[01:23:56] And I suspect that that’s more likely than nuclear, but we’ll see.

[01:24:00] Pieter Garicano: Interestingly, the Dutch, right and far-right are very pro-nuclear. It’s a huge thing for them. They love nuclear and they wanna build 10 new power plants. I think my answer would be that it’s extremely - it’s gonna be very member state dependent.

[01:24:14]

[01:24:14] Pieter Garicano: I don’t see why - what the Dutch want or the Swedish want, the Nords want basically is for the EU to set the basic punition in place to protect a single market, to create a single amount of capital. And I think in those countries specifically, I don’t think we have that much evidence that the ability of policy to self-correct is as broken as it is, for example, in Britain. And we see now the Dutch recently received their version of the Draghi report. The Wennink report, the former ASML CEO wrote, published last week his report for how the Dutch should fix the country.

[01:24:47] Sam Bowman: So many reports!

[01:24:48] Pieter Garicano: But the coalition agreements, the incoming government agreed with all the recommendations.

[01:24:54] Yeah. They just want to do it.

[01:24:55] Sam Bowman: Yeah.

[01:24:56] Pieter Garicano: I think members of a members state it’s very different. I think French endowment’s much worse. The other story, which is worth mentioning is that there are like some like win-wins here on labor markets, for example. There are models which exist that protect the workers or at least compensate the workers in the case of insecurity, but also allow for much more flexibility on public companies.

[01:25:14] Denmark has more complex system where you are insured with a union, an ‘a-kasse’, you pay some fixed fee every month, and then if you are let go — and the Danish employer has the right to let you go for basically any reason at any time — you receive up to 90% of your income for up to two years. And along with that come really strong requirements from the Danish government for you to find new work. They spend roughly 2% of GDP on what they call active labour market policy, which is where they basically match you and then subsidize future employers to hire you. They subsidize universities to take you on as a student. And the net result is that Danish workers are still very protected and very compensated, but also, Danish companies are much more agile. And like other countries — the Swiss, the Austrians, and to a lesser degree the Dutch — have variations of this. And that might be, for example, the kinds of policy we can think of.

[01:26:10] If we think of things that are both going to protect the European social model, which people clearly want, is very important, but also might add the necessary dynamism we need to innovate.

[01:26:22] Sam Bowman: Well, I-

[01:26:24] Pieter Garicano: Your answer?

[01:26:25] Aria Schrecker: Yeah. What are you optimistic about?

[01:26:26] Sam Bowman: What am I optimistic about?

[01:26:28] I’m not really that optimistic, to be honest. I’d like to say that I was, I think that the idea that you could kind of flex security in some places, that sounds great. I feel like the kinda near term political prospects, for Europe just feel very- the thing that I feel when I look at the UK or the US there are like clusters of people who are very actively working, trying to change things and I think they’re doing, relatively well actually, at spreading good ideas and things like that.

[01:27:07] Now, possibly because I’m only an English speaker, but I see that much less in Europe and I’m much less like aware of who those groups are in Europe. And so maybe it’s just because of who I am. Maybe it’s just because where I’m standing. I just don’t see as much kind of energy and urgency around changing things in any specific groups. And the people I do know in Germany, for example, feel pretty desperate and I feel like pretty glum about the situation. I could be totally wrong. I think I am a lot less pessimistic about Europe in terms of the actual level, I don’t think the place is gonna fall apart. I don’t think there’s like a European civil war coming on or anything like that, but I think that it’s much harder to imagine any major European country doing like a massive course correction the way I think like the UK might do a massive course correction, or the way I can see America kind of trying to with not a lot of success so far has to be said.

[01:28:12] To me, it feels like Europe is still at the kind of denial stage. There is a fairly cliched point that I think is true, that countries need like external threats to get their act together. And you look around the world and a lot of the most highly functional states are countries that have a scary neighbor that is threatening them. And even the US during the Cold War, I think is an example of that, where like the external threat does really help you focus the mind. Doesn’t always work, didn’t work for Poland for or for the Polish Lithuanian Commonwealth, but it does help and the more Europeans feel that from Russia may be the more impetus and opportunity there is for the reformers to get things together.

[01:28:58] Aria Schrecker: So on that almost optimistic note...

[01:28:59] Sam Bowman: On that nearly optimistic note, thanks guys. This has been very interesting. If you’re watching at home or listening at home and you want more conversations like this, check out the Works in Progress print edition. Our next issue has a piece by Pieter on the labor market rules that he was talking about. And we also have in a forthcoming issue, a really interesting deep dive into ASML, which is probably the most important company in Europe right now, and certainly one of the most important companies in the world. So thanks very much for listening or for watching, and see you next time.

Ben and Pieter sit down with economic historian Mark Koyama and discuss the fallout of historical inflation crises from the Roman Empire to Weimar Germany. Ben reveals his hidden libertarian 'Gold Bug' tendencies.

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You can find Jesús on Twitter where he tweets about on economics, history, and demographics, and read about Korea’s fertility crisis in the new print edition of Works in Progress

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Transcript:

Sam Bowman: Our guest today is Professor Jesús Fernández-Villaverde, who’s Professor of Economics at the University of Pennsylvania. Jesús is one of the most wide-ranging economists in the business today, but today we’re going to focus on the economics of fertility and falling birth rates. Jesús, I want to start by asking you, from an economics point of view, why should we care about declining birth rates, given that we don’t think that smaller countries are necessarily going to be poorer than richer countries? Why do we think that declining birth rates are a problem?

Jesús Fernández-Villaverde: Like everything in economics, low fertility is a complex phenomenon that has good things and it has bad things. I don’t want to give the impression that everything is bad; there are also some good aspects to it. But mainly, when you have fertility rates that are really very low – think about South Korea around 0.7, China slightly above 1, Spain or Italy around 1.2 – what you face is a big demographic cliff: a fast decline in population unless you have large flows of immigrants. That has consequences for total GDP growth.

There are many important aspects in society, such as social security payments or ability to service public debt that depend on the total size of GDP. It’s not as much that we want to have a large population per se, but that we have made commitments in the past in terms of social security benefits and in terms of public debt that depend on the total size of the population.

Sam Bowman: Imagine if we were a country without debt or a country without the kind of social services or social security networks that basically every country does have. We can talk about those, but I think that those problems are relatively intuitive. If we didn’t have those commitments, do you think that there would be a reason to worry?

Jesús Fernández-Villaverde: To some degree, yes. The first reason is what I call the basic accounting identity: that total output growth is equal to labor productivity growth plus labor growth, the amount of hours worked. If you are in a country like, let’s say, the United States around the year 2000, labor productivity growth is around two percent a year. That has been roughly constant for over a century. There are fluctuations from year to year, but on average it’s two percent. The growth of the labor force, of the hours worked, is around one percent, which means that you grow at around three percent a year.

However, if labor drops by around one percent a year, because you have very low fertility for a long time, even if productivity growth is still two percent, you are going to grow at most one percent a year. Is growth of one percent a year a problem? To some degree, it is not, but it requires that society adapts to it along many different dimensions. The second concern is that big population drops are not uniform across space.

Imagine that you’re in a country like Japan where you lose ten percent of the population. This doesn’t imply that every city and every town loses ten percent. What it means is that places like Tokyo still actually increase their population – this is a phenomenon called sponge cities. Other places lose 30 percent or 40 percent of their population. When you’re in a city or a town that loses 40 percent of its population, you need to close the local high school, you need to close the local college, you need to close the local hospital. You may need to close many of the local supermarkets. Those are costly decisions that have non-trivial consequences. I think that people sometimes do not fully appreciate that those types of changes are going to be quite disruptive in the lives of many people.

Pieter Garicano: The paradigmatic case that we think about used to be Japan, now it’s South Korea. With 0.7 total fertility rate, we should expect each to be roughly a third of the size of the one before. But despite this, if we look at macroeconomic indicators, South Korea is still doing relatively well. Its working age population has decreased by roughly two million in the last six years. But its output growth is still quite high. Its government debt is still quite cheap. The bond yields are lower now than they were in 2018 or 2019. Has the market just not appreciated what is happening?

Jesús Fernández-Villaverde: South Korea is doing well, but much worse than in the past. South Korea is a country that was clearly converging to the frontier, that was technologically dynamic, and used to grow five percent, six percent. I was just in South Korea in August, so I spent some time looking at their aggregate numbers. By now, a more regular rate of growth for them is between two percent and three percent. Remember, this very low fertility in South Korea started later than in Japan, which means that I’m really talking about the problems they are going to have in the 2030s, not the problems that they are going to have now.

Let me go back to the second point: are the markets under-appreciating what is happening in Asia? I actually changed my mind recently about that. I saw a very interesting presentation by Selahattin Imrohoroglu on Friday at UCLA, and he was talking about the very deep and aggressive reform of the social security payments that Japan did in 2004. Japan has been able, by introducing a sustainability index correction to social security payments, to stabilize their debt and to correct many of the imbalances that demographics are causing.

This goes to the point that East Asian societies, being very cohesive societies with a lot of consensus, may be able to handle these situations in ways that are much better than what other societies will be able to do. I have made the point in many of my presentations that, when people say, ‘well, Japan isn’t doing so badly’ that, in some cases, Japan is the best-case scenario. This is a country that has a lot of social consensus and a country that sacrifices a lot for the future. And yet, Japan has not been doing that great. Multiply the problems of Japan now by 10 by calling it Mexico. Good luck trying to get the consensus that the Japanese did with their social security reform in 2004. I think that’s what markets understand. Markets understand that Japan or South Korea, at the end of the day, are going to be able to more or less muddle through these problems. Will Spain, Italy, or Mexico be able to muddle through these problems? I’m somewhat less optimistic.

Sam Bowman: You have pointed out in your research that although Japanese GDP per capita has flat-lined for decades now, if you look at Japanese GDP per worker or per hour worked, they’ve actually done reasonably well. The point you’re making is that it isn’t actually that Japanese workers have stagnated in productivity terms. They may have grown less quickly than they’d like, but they haven’t flat-lined as much as the headline numbers would suggest. It’s that the composition of Japanese society has moved to being much more tilted towards old people who aren’t in work. This actually reconciles a phenomenon that I’m sure many people who visit Japan will experience, which is that it feels pretty rich even though it’s poorer than Britain, for example. Britain does not really feel like a rich, prosperous, successful country. I’m sure there are other reasons for both Japan feeling that way and for the UK feeling that way. But I do think that it’s quite an interesting reframing of Japan’s problem away from the idea that they basically just never recovered from the 1990s.

Jesús Fernández-Villaverde: I fully agree with it. In fact, this research agenda of mine started precisely because of it. A very famous economist, which I’m not going to disclose his name, came to Penn to give a talk. It was one of those talks about how Japan has never recovered from the financial crisis of the early 1990s and ‘let me tell you some wonderful monetary policy I’m going to propose that is going to fix this problem’. I tend to be a skeptic of the idea that if you appoint someone very, very smart as a central banker, you are going to produce miracles. My view of the world is that usually a very good central banker avoids disasters, and that’s already enough to justify their wage. I raised my hand and I said, look, the burst of the bubble was like, what, 1992, 1993? We are in 2019. This was like 30 years ago. To put this in perspective, this will be like talking about the New Deal during Nixon’s time, that has the same amount of time that has passed by. This cannot be. We had what I think in England you guys call an honestly refreshing conversation for the next 10-15 minutes. I started thinking about what may have happened to Japan, and the idea that Japan may be suffering from these demographics issues came immediately to mind. I remember because I opened FRED, one of those databases that economists use. I had a computer with me in the seminar and instead of dividing GDP by total population, I divided GDP by population between 15 to 64, which is kind of a rough approximation of the total number of workers. I realized to my big surprise that suddenly Japan didn’t look worse than most other countries. It still does a little bit worse than the US, but it doesn’t really do worse than Germany or France or Italy. Then I figured that this was something that I needed to look at in more detail. It seems to me a sad indictment of much of the macroeconomics profession that we spend a lot of time thinking about a super complicated model to think about some explanation for some phenomenon, but we don’t spend a lot of time just looking at the basic facts. Even recently, another extremely distinguished economist mentioned that with better monetary policy, Japan today would be 70 percent richer, which is absolutely crazy. It would basically imply that productivity growth in Japan should have been around 4 percent a year for the last 30 years, which is nothing like anything that we have ever seen before in the data. That’s exactly what I think reconciles your point: that you go to Tokyo and it looks like a prosperous city and that the society works.

We may also want to remember that East Asian societies are different from Western societies in the sense that a lot of poverty is kind of hidden. One of the things that is salient about the United States and to some degree about the United Kingdom is that a lot of the worst areas in the country are in the big cities, while a lot of the poorest parts in East Asian societies are hidden away in very remote rural areas where tourists rarely go. When you look at it in that perspective, that changes things a little bit. But I will say that’s just a nuance to your statement. I think that, by and large, we have a very negative view of Japan that doesn’t correspond to reality because we were looking through the wrong lenses. The wrong lens is to think about total GDP and not a measure of GDP produced by our work.

Sam Bowman: As a side note, do you have a good reason why poverty in East Asian countries is not in cities the way it is in the West?

Jesús Fernández-Villaverde: I think that part of it is linked with ethnic homogeneity. I think that a lot of very dire poverty in, for instance, in the U.S. is linked with ethnic diversity. For instance, think about the ghettos in the northeast cities. Those were created by the migration of African Americans from the South to the North starting around the 1920s, and, of course, the enormous amount of discrimination that happened at that time. Those African-Americans moving from, let’s say, Mississippi to New York or from Mississippi to Philadelphia – there are actually a lot of people in Philadelphia who are originally in Mississippi – are concentrated in the cities for a number of reasons. While in California, in some continental European cities until recently, and in East Asia, you didn’t have a lot of these inflows of migrants from either other areas of the country or from outside the country, and poverty tended to be located in rural areas. That gives you a different view of society. If you go to a big city in China, you go to Shanghai, you go to Nanjing, you go to Beijing, and you are going to have a different feeling of how the average Chinese person is doing than if you go to a rural area in the middle of Yunnan. Rural areas in the middle of Yunnan still really feel like a poor country, while if you walk through Shanghai, you will think you are in a rich economy.

Sam Bowman: I’ve been to rural Yunnan and I agree with you, it’s very different to the coastal cities. In a way, what you’re saying is that South Korea and Japan, which we often think of as being the future that the Western world has in front of it, they’re actually not canaries in the coal mine because they probably can, or to some extent at least can, address the big worries that you have about social security commitments and debt overhangs. Whereas your supposition is that the Western world might not be as good as those countries will likely be. I’m curious if you have anything else to say about the cost of borrowing for a country like South Korea or for Japan. They’re still borrowing at rates that are pretty low, despite the fact that Japan has a very, very high debt burden, and they have, as we have talked about, far fewer workers to pay that back. What gives? Is that really just that they did excellent restructuring, or is there something else going on?

Jesús Fernández-Villaverde: There are two forces. The first one is that they have already undertaken that very deep and painful restructuring. Coming back to this paper I saw by Selahattin Imrohoroglu, what he actually does is project social security payments over the next 75 years. Japan is actually in a very good shape. It’s in a very good shape because they have already indexed their social security payments to the demographic conditions of the country. I think that markets understand that. The second issue is that the interest rates at which I can borrow as a country depend on two components. Component one is some sense of the international interest rate and the second one is kind of a country-specific premium. One important observation is that the real interest rates on the planet are very low. There is a lot of research about why this is the case. A lot of people have talked about the safe asset shortage. I have written a few papers making this point. Somehow the amount of places to invest in the planet with respect to the amount of savings in the planet are very small. So if the real interest rate is only 1, 1.5 percent at the world level, the fact that you are borrowing at 3 percent already implies a 1.5 percent implicit default premium, which is quite big.

In that sense, it may be slightly misleading to just say, ‘South Korea is borrowing at whatever rate they are borrowing right now, and saying this doesn’t imply any risk’. Yes, it may imply risk because it can be the case that, and I’m talking always in real terms, forgetting about inflation, of course, those get baked in the nominal rates, the real interest rate of the whole economy right now is very, very low. That may be very different in 20 years as the whole planet moves through this demographic transition. When the interest rates start going up, it may be the case that South Korea and Japan start to need to pay much higher interest on the debt.

Pieter Garicano: You had a recent slide deck where you identified that even relatively pessimistic projections for country populations are too high. We’re seeing an unprecedented decline in fertility rates, both in the developed world and also in the developing world. One critique you hear of this is that this could just be a shift in the timing of births, and that the completed cohort fertility rate—the actual amount of children that a single birth year will have across their lifetime—might still be unchanged. What’s happening is people are delaying having children. How do we know that’s not true?

Jesús Fernández-Villaverde: We need to be humble and we need to recognize that, as the old saying goes, until the fat lady sings, the opera is still going on. There is a chance that completed fertility may be quite different. Something we can do to try to gauge this possibility is to look at what has been the historical differences between completed fertility and measured TFR in countries that in the past have undertaken similar strong delays. These countries are like Scandinavian countries, where there were similar big delays in childbearing in the ‘70s and ‘80s with women getting into the labor force and with women becoming professionals. We can observe differences between TFR and completed fertility of around 0.3, 0.4. So when I say that a country like the United States has at this moment a fertility rate of 1.62, it may be the case that completed fertility goes as high as 1.9.

It’s very hard to see in the data any example where the difference between the two measures is bigger than 0.3, 0.4. The reason for that is purely biological. I can delay fertility a little bit, but this is facing in some moment the limits of fertility in life. We need to remember that fecundity – your ability to get pregnant – especially if you have never gotten pregnant before, drops very, very fast after 28. A lot of women who are thinking, ‘no, I’m trying to complete my PhD in chemical engineering, I’m going to have kids a little bit later’, are going to find that it’s going to be very difficult, even using IVF or any type of very aggressive medical procedures. The second thing is that we can already look at people looking at women in their early 30s. Completed fertility is not yet visiible, but the amount of children they will need to have when they are 35 to 40, the cohort as a whole, is so high that we have never seen that before. I don’t see a lot of 35-year-old women saying, I’m going to have four kids now. As I was saying before, this is a pure timing issue. That tells me that an upper bound scenario of differences between completed fertility and total fertility rate is probably between 0.3 and 0.4. In South Korea, we mentioned that the TFR is 0.7. This puts the best case scenario at 1.1. It’s not as catastrophic as 0.7, but it’s still extremely low.

Sam Bowman: We should say, for the sake of clarification, TFR isn’t a measure. We’re talking about two different statistical concepts. Completed fertility is actually how many children you have had by the time you reach, let’s say, 45, or the age at which it’s generally considered that it becomes very difficult to have children after. TFR is an estimate based on, in recent history, how many women at that age have had children. You can get these sort of whiplash effects and you can get this sort of undercounting.

Jesús Fernández-Villaverde: I was assuming perhaps a little bit more background in demography than is reasonable, but you’re absolutely right. In the country where I know fertility rates best, which is Spain, we have had fertility between 1.3 and 1.1 now for 25 years. There is no way our completed fertility is ever going to be above 1.5 for the next 50 years. There is just no space in the data. We are getting to the level when you are looking at women that are 40, they are at zero kids, and you are saying, well, but you still have four years. Theoretically, you can have four kids. But it starts to be a little bit tricky to deliver that. It’s like when you are in the football game, it’s minute 85 and you are losing one three and you say, oh, but I still have five minutes; I can still win this game. Maybe, but it’s becoming increasingly unlikely. In the case, for instance, of the United States, now we are at 1.62. I think the US is going to arrive at a completed fertility closer to 1.7, not to 1.6.

Pieter Garicano: In the conversation about fertility it’s common to speak about developed countries. You mentioned, for example, the case of the lady finishing a PhD in chemical engineering. I think the surprising shift over the last few years is the fact that collapse is relatively universal regardless of rate of development. US fertility is higher than that in Mexico and much of Latin America, which are much, much poorer.

How do we explain that the developing world is seeing, in some cases, a more accelerated decline in fertility than in rich countries? Our traditional model is that people delay childbirth because they get richer, and that there is a quantity-quality trade-off where you have fewer higher quality kids. What is going on? Why are Chad or India seeing this huge decline?

Jesús Fernández-Villaverde: When I’m giving talks to the general public, I always get someone who asks, ‘oh, you are just one of those economists who are very worried about the Western world. There are enough kids around in developing countries’. I say, no, actually, I’m not very worried about the US. The US is still at 1.6, maybe with a completed fertility of 1.7, plus a little bit of immigration. The US is not a big deal. The real problem is a country like Mexico. My favorite question when I ask people or give this talk is, especially when we are in campuses, I say go out to the middle of the campus, stop the first 10 people that look like a professor and ask them which country has a higher fertility rate, the US or Mexico. I will pay you a nice dinner if you find more than one that says Mexico. And yet, Mexico now has a lower fertility rate than the U.S. In fact, to put it even farther, because sometimes people ask, non-Hispanic whites in the U.S. have a higher fertility rate than Mexico’s. This is absolutely mind-blowing.

I’m actually working now on a paper where we try to make the point that demographic transitions in emerging economies are faster than in advanced economies. That is, the speed at which fertility is going to drop in an emerging economy today is going to be much faster than when it dropped in an advanced economy 20 years ago, 30 years ago, 50 years ago. And that the level at which it’s going to stabilize is actually going to be lower. There is going to be overshooting. There is a good chance—and again, it’s a chance, and I want to be very humble and recognize that in 50 years, I may be completely wrong—but there is a reasonable chance that in 50 years, the countries with the highest fertility in the world will be rich advanced economies like the United States.

Why is this happening? I think that part of it is that the type of new economy in which we are moving in, an economy that values a lot of skills, very abstract thinking, requires an enormous amount of investment by parents, especially in terms of time. Those investments are particularly costly for people living in emerging economies. And they are also particularly costly for relatively poor people or lower income people in rich advanced economies.

Let me tell you something that I don’t know if you are familiar with. Historically, if you look at the US or the United Kingdom for roughly the last 200 years, there is a negative slope between income and fertility. People living in a rural area in Yorkshire had on average more kids than people living in Kensington, London. Over the last 20 years, it has inverted for the first time. Now you see that richer, higher income people have more kids than poorer people. It’s very striking. You just walk through any major city in the Western World and you can tell. You see these very well-dressed families, they get out of the Range Rover and they have three kids. You see the poor mom walking in a not so good neighborhood in Philadelphia and she has one kid. It’s happening already, not only at international level, but within countries. Another possible explanation for that is that we are seeing family and household formation becoming more and more of a luxury good. A lot of the dissolution of traditional social norms related with marriage and long-run partnerships affect people with lower incomes much more, and that aggregates in poor countries into lower fertility rates.

Finally, and this is more speculative, is that there is a little bit of dualism in social norms. In a lot of developing economies, you are going to have a lot of women that have aspirations to the lives and the social norms of women in advanced economies that they have seen through social media. They look at how women live in London, how women live in Paris, and they say, I want the same type of life. Their potential male partners are still stuck in very traditional gender roles that do not fit very well. I think we are seeing more and more evidence that this is a real problem. You have ladies in Mexico that want to have the life of someone in an advanced economy and men who still want to live in a very patriarchal household. The outcome is that those marriages are not being formed and the children are not being born.

Sam Bowman: How much is that attributable to cultural effects like social media versus those women just having more economic bargaining power because they can work now? Especially in East Asia there’s been a huge transition of women into the labor markets and a huge increase in female reservation ability to not get into marriages that might change their lives in a very dramatic way.

Jesús Fernández-Villaverde: I think that both mechanisms are important. I have changed my mind a little bit over the last five years or so, and now I’m a little bit more inclined towards social norms, which I know puts my PhD in economics in danger and may lead my tenure to be revoked. The reason is because I’m looking at fertility rates in the Muslim world. There is a drop of fertility all across the Middle East and North Africa that is quite amazing.

Pieter Garicano: Do you mind quantifying how steep this has been?

Jesús Fernández-Villaverde: Egypt used to be around 3.9, 3.8, and I apologize because I’m quoting from my head, but it was in that order of magnitude. In 2025, they are going to end up around 2.3. And at the speed at which they are going, the TFR in Egypt is dropping at around 0.1, 0.2 a year. That may tell you that Egypt may be below replacement rate by 2027 or 2028.To put this in perspective, the United Nations in their World Population Prospects 2022, was not forecasting that TFR in Egypt was going to be at 2.1 – below the replacement rate – until the year 2100. So we are talking about a tremendous, incredible change. Let me give you some more examples: Morocco is already below replacement rate. Tunisia is already below replacement rate. Those are countries where women are still not joining the labor force and where they don’t have a lot of independence. You could argue that if in Morocco or Egypt it was also the case that women had access to the labor force, instead of being at 2.3, it may be the case that Egypt was already at 1.8 or 1.7. So that mechanism may actually matter as well. I’m not dismissing it in any way. But the drop in fertility in the Muslim world is quite amazing

.

Let me give you one last example. I’m going to try to be careful because, given the current events, this one is always a little bit tricky. It’s the comparison between the fertility of Muslim and Jewish women within Israel. First of all, the data I’m going to use is the data as reported by the Israeli National Institute of Statistics, which is Israel, the frontiers of 1948, plus Jerusalem, plus Jewish citizens in the West Bank. This does not include Gaza and this does not include most of the West Bank. In 2021, for the first time, the fertility of Jewish women passed the fertility of Muslim women. It used to be the case that the fertility of Muslim women was much, much higher. That was the cause for a lot of anxiety within Israel about whether or not Israel could be a country that in the long run would have a Jewish majority. But the fertility rate of Muslim women has been dropping very fast, while the fertility of Jewish women has stayed roughly constant.

Israel is very interesting because they also report the intensity of the religiosity of the mother. This is not just due to very conservative unorthodox Jews. Even secular Jews have a high fertility. Since 2021, the fertility of Muslim women is below the fertility of Jewish women. Since then, for the first time since the creation of the State of Israel in 1948, the percentage of children born from Jewish women is higher than the percentage of Jews in the population. That tells me there is probably a very strong social norm change within the Muslim population in Israel that is probably accounting for a lot of what is happening.

Pieter Garicano: You have a paper titled ‘An Economic Model for the Rise of Premarital Sex’. The model you describe there is that people’s behavior is determined by the expectations set for them by their peers. In turn, those peers set their preferences based on what technology sets as optimal for them personally. The existence of birth control means that premarital sex doesn’t have the same kind of externalities for people around you that it did previously. And so expectations change. Is there a similar technology-driven story we could tell for what is happening now?

Jesús Fernández-Villaverde: I always joke that every economist is a right-wing Marxist. Karl Marx has this view of the world where technology determines everything. He calls it the forces of production, but fine, that’s just technology in modern terms. He says, ‘look, you have a technology and that technology percolates into some social structures’. As an economist, I tend to fundamentally agree with that view, that technology is the ultimate decider of social structures. Having said that, the problem, and that’s what I was trying to do in this paper that you mentioned with Jeremy Greenwood and Nezih Guner, is that the way in which technology transforms itself into social norms may be very complex and it may take several generations. So maybe what is happening is that we have modern contraception technology and it takes three to four generations to work its consequences through the population. The first generation is already socialized in a situation where contraception is not available, but now suddenly it’s available and that kind of conflicts. It may take two or three generations to work that through.

Maybe what we are seeing right now is the consequences of the invention of the pill in the 1960s, except that it takes 80 years to have its consequences. If I may make a small aside, I have been very critical of a lot of modern empirical economics. The reason why I have been critical is because they tend to look at very short-run effects. People say, ‘The National Health Service introduces free contraception technology; let us look at the consequences across the next five years and write the paper and get it published in American Economic Review’. My argument is that this is not very interesting or very relevant. The women who are using free contraception have been socialized in a very different environment. What we really want to know is what is going to happen in 80 years, when you have two generations that have passed by and they don’t have any memory of past socialization. That was the point we were trying to make in the paper. To really look at the consequences of big, deep changes in technology, sometimes you need to wait 80 to 90 years. Maybe what we are seeing right now with a big collapse in fertility in 2025 is the consequences of the social revolutions of the 1960s, of the sex revolution, of the change in the equality of men and women. It just takes 60 years to work through the system.

Sam Bowman: Janet Yellen’s argument is that once abortion becomes available or normal, or whatever kind of status it roughly has in most Western countries, it means that a pregnancy stops becoming the trigger for couples to get together. Previously, you would get a lot of shotgun marriages. Obviously, the contraceptive pill reduces the number of pregnancies, but abortion also reduces the number of pregnancies that have to lead to that kind of coupling. One of the things Alice Evans emphasizes is that it isn’t really that couples are failing to have enough children; it’s that you aren’t getting that many couples, or you aren’t getting as many couples in the first place. It’s the extensive rather than the intensive margin, as you have put it, Jesús.

This general point that this is a technologically driven phenomenon implies that it is tractable. Now, many of the policies that that might imply are not acceptable for liberal reasons or for other reasons. Maybe the trade-offs are too high. But it is, I think, a good starting point to kind of say, ‘this isn’t completely outside the realm of change’, even though personally I am very pro contraceptive pill and very pro available abortion. Getting on to what we can actually do about this, if we can do anything. It’s first interesting to know, can we do anything? Is this completely amorphous cultural trend that it’s really difficult to get our heads around, or are there much more material factors at play here?

Jesús Fernández-Villaverde: Let me start with the beginning about the extensive versus the intensive margin. Yes, I’m a big believer that this is very, very important. The idea is that the forces that may induce you to have at least one child may be different from the forces that induce you to have three instead of two. This whole area of research says that whether or not I have at least one child may depend on whether or not I have a partner, while whether I have two children or three children may depend on how expensive my local school is. If my local school is relatively cheap, I have a third child. If my local school is relatively expensive, I have two children, or my housing. While the zero versus one or more may be more about, can I find a partner? What do I want to do with my life? Do I want to be a chemical engineer versus who knows what? The type of policies that we may want to address may be quite different. What Alice Evans and myself have argued is that a lot of what is happening right now is that more women are deciding to stay at zero. Coming back to this example we were using before, this is about a woman who moves on to do a PhD in chemical engineering and finds a great job for British Petroleum as a chemical engineer, and is doing great in her professional career, and decides she never wants to get married, or even if she gets some type of partnership, she’s never going to have any children. This is different from what we were saying before, which is whether I have two children versus three.

It may also be the case – and I think that in the United States, at least when I walk through the streets, I can see it quite often – is the fact that there is a non-trivial amount of men who are undateable. I want to say this in a very specific way, because every time I say this, I always get one or two misunderstandings. For a number of reasons, the educational system in many countries has failed a non-trivial percentage of the population. That non-trivial percentage of the population has an over-representation of men and of boys,

We have introduced a lot of changes in our educational system. Some of them are good, but some of them are not so good. I think that men have suffered more from those bad consequences than girls, for a number of reasons that we can discuss in another moment. You basically have now 20-25 percent of boys at the very bottom of the distribution that spend their days smoking dope and playing video games. This is not very good marriage material. And women who are not high in the distribution themselves in terms of qualities as partners, they say, well, between marrying a lousy husband or staying at home single, I’d rather stay at home single. As you were mentioning before, this is something you can do in modern life, because being a single woman, especially in an advanced economy, is perfectly fine.

If we want to think about how to increase that percentage of women being married, and having children – by married here, I don’t mean just legal marriage; it can be some type of long-term cohabitation – maybe what we want to think about is the supply of potential partners and about policies to increase the supply of potential partners. Or coming back to the example of developing economies, maybe it’s not that these 25 percent are at home smoking dope and playing video games, it’s that they still have a very patriarchal understanding of a relationship, and maybe we need to convince them to move towards a more egalitarian understanding of relationships. In that sense, I think that Alice is absolutely right. But there was also a second aspect of the question: if this is related to issues like technology, can we have technological solutions to it? I’m a little bit skeptical. The reason I’m a little bit skeptical is that the history of the 20th century should make us cautious about the idea that we can be social engineers, moving one gauge in the dial and getting things. Things that we know work relatively well in many countries, like better and cheaper housing, better and easier education, capping part of the educational arms race, which plays a big role in East Asia, will probably put us to a much more reasonable level of fertility without having to do any kind of crazy policies

Sam Bowman: One thing I like about this podcast and about our listeners is that they are, I think, unoffendable. Whereas on another podcast, I would be very careful and worried about terms like ‘the supply of partners’ ‘and ‘undateable men’. I know that Works in Progress readers and listeners do not care and are absolutely interested in the core concepts.

Jesús Fernández-Villaverde: Let me give you an example. I talk with some young people and they tell me how easy it is to get dates now in New York. They say, if you are a single male and you are 28 and you do not have any major physical defect, you can have as many dates as you want. Basically, time is the constraint. And you look at the percentage of single women in New York. It’s very clear why this is happening. As I was saying, if you have taken out 25 percent of ‘the competition’ who are at home playing video games, then this is a fantastic market. When I try to explain this to the undergrads, I need to be careful in case some people don’t like it.

Although, to be honest, things have improved a lot over the last two years. I have found that over the last two years, undergrads are much more willing to use this language again and be less offended. They are not looking for reasons to be offended anymore.

Sam Bowman: On this point about social engineering, I think it’s obviously a good point. To give one example, you’ve alluded to what some people call the ‘fuckboy’ problem, which is men who string women along and who kind of use them for sex by dangling the prospect of a long-term partnership. Some women are perfectly happy with short-term partnerships, and that’s great. But many, I think, relative to men, are looking for more durable relationships. Right now, there’s a huge asymmetry. Something I had thought was, well, maybe we could create social stigma for men who do this. Maybe we should make this a really big thing where if you kind of get involved in some way, in a casual way with women, then there’s a big social expectation that you settle down with them.

Our colleague, Ben Southwood, who’s very bright, pointed out that this could easily have the backward effect of just deterring men from having relationships with women at all, including short-term casual ones that lead maybe by accident or unexpectedly lead to long-term ones. Men do have alternatives, although they’re pretty unpleasant, like pornography or AI girlfriends, although I’m a little skeptical about that. As you say, it is very difficult to think of a clean intervention, even putting aside concerns about individual liberty, which are very important. Even if we pretended that that didn’t matter, it’s very difficult to be confident that any kind of intervention doesn’t have unintended consequences. Except the kind of no-regrets policies where we should do this anyway because we think these things have good outcomes. If they bring, let’s say, coupling or fertility benefits as well, that might be kind of just an extra bonus.

A really obvious example, one that I’ve written about a lot, is housing. Clearly, I think both empirically and anecdotally, limited housing supply, especially in wealthy areas, means that people have fewer children and delay having children and overall have fewer kids than they would like to. One of the reasons that I think that’s a very attractive area to focus on is that it probably won’t solve the problem, but if it does nothing, it will still be a good thing to do. What other areas are there like that where the risk of unintended consequences is lower?

Jesús Fernández-Villaverde: In my slides, housing is number one. There is quite an amazing paper that I always cite. In Brazil, they have public housing. Don’t think about the public housing in some of the shady areas of London. This is actually decent public housing.You apply for a lottery, because there are many more people who want public housing than public housing units available. What the authors show is that people who win the lottery – and that kind of takes care of the selection bias because everyone applies – and get early access to public housing have 0.5 children more on average. It’s a gigantic effect. As you say, even if you win the lottery and you decide you are not going to have children, what is the cost of it? I’m actually giving you housing, which is something that as a society we should aspire everyone has, right? I’m a big defender of the idea that we need plenty of new houses in the world. There is a point related to it because this was a little bit of a discussion I have had in the context of Spain. A lot of people tell you to look at the stock of housing in proportion to population. It’s actually not at historical lows in Spain. But remember that the average household is much smaller. When we were small kids, it was my mom, my dad, all four brothers of us, and we actually had a living aide living with us. There were seven people living in the house. Now it’s my dad living alone and it’s the same house. He hasn’t moved. If you measure effective units of housing, we need many more effective units of housing.

Sam Bowman: There’s an economist in Vancouver, Jens von Bergmann, who has tried to estimate this doubling up effect. This is people either living with their parents as adults or people flat-sharing or house-sharing, perhaps not with strangers, but definitely not with romantic partners or people they would actually choose to live with. He estimated how many more homes you would need in each of Canada’s major cities to not have anybody doubling up. It’s absolutely gigantic. The lowest city in his set is Quebec City, which has, I think, about 12 percent extra units. But once you get up to Toronto and Vancouver, you’re talking about 40 percent of extra units. And this, unlike most estimates of housing demand, which tend to look at the desire to migrate into the city from the rest of the country, just looks at people who are already in those cities. I’m keen to get that work done for the U.S..

Jesús Fernández-Villaverde: Canada is pretty big. Anyone who has flown over Canada, there is more than enough space over there to build houses. I was flying over Texas the other day. When Texas brag about Texas being big, they are right. I was just looking out the window. I was like, oh my God, this is a gigantic state. The idea that there is any type of land constraint is just absolutely crazy. Even in Philadelphia, there are so many beautiful areas to build, and they are completely abandoned because there’s a railroad area that is no longer used. All manufacturing places that are no longer used, areas with very low density that could be increased. You can easily double the stock of housing in Philadelphia if you wanted to. And the city would actually look much better. It would be a more livable city. In that sense, I fully agree that housing should be dial number one. As you say, it’s a no-regret policy. We are going to be better off no matter what, even if this doesn’t lead to even a single more birth. A second idea I’m becoming more keen on – and maybe this is even controversial for your own listeners – I think we are over-educating a lot of people right now. The internal rate of return of a degree in the humanities is probably negative. Now, Pieter knows me a little bit better. He knows that I love philosophy and I love history. And if your goal in life is to dwell on Kant and Hegel and Martin Heidegger, sure, of course, you want to do that.

Sam Bowman: Well, if your goal in life is to dwell on Hegel and Heidegger, maybe not. Maybe Hume.

Jesús Fernández-Villaverde: Okay, fine, John Locke and David Hume. I’m going to pander to the British in the audience. But the point I’m trying to make is that I don’t think that the average person getting a degree in these fields is doing it because they really have a passion for David Hume. It’s not that they are against philosophy. They may find it mildly interesting, but in some sense, they have been moved into college or even graduate school as the path of least resistance. By over-educating a lot of people, we are delaying family formation and we are actually putting them into lower income paths than they would have otherwise been. In fact, I think, if you look at a lot of the unrest that happened in US campuses between 2020 and 2023, most of the leaders of those unrest were precisely from those fields that have very bleak job market opportunities. We don’t really need that many people going to graduate school. We don’t really need that many people doing masters, in particular in fields in humanities and social sciences.

If we could think a little bit about how to push these people more into professional or trades, I think that will be better for the economy. There is a big shortage of a lot of specialist workers in many, many fields of the economy, and it will be better for family formation. That, to me, will be another example of a no-regret policy. Let me come back to a policy recommendation I gave to the Korean government, when all of them looked at me and probably thought ‘why are we paying him a consulting fee?’ One of the real problems that they have is that if you don’t make it into what they call the SKY universities – which I think is Seoul National, Korea National University, and Yonsei University – your life is not going to be great. That creates this enormous pressure, this competitive educational race that is limiting fertility in a very radical way. Even forgetting about fertility, I don’t think it’s good to have such high status gains so early in life. Because a lot of people bloom later in life. This may depend a lot on your social background. It kind of makes the system too much of an all-boys club. Something that I proposed was to have, like now, a national entry exam to college, but to set up a minimum threshold – say 8 out of 10. What we do is we agree that if you score 8 in that exam, it means you have the IQ necessary and the background necessary to succeed at Seoul National. Then, among everyone who has scored 8 or higher, we are going to run a lottery. What is the point about that? Well, first of all, you only want to get to 8. You don’t want to encourage overstudying. At the end of the day, does it really matter that you are 9.1 versus 9.2? No, it doesn’t really matter. It’s pure randomness. It’s pure noise.

We stop this insane level of competition. The reason why this is good for society is because there is a kid who got 9.9 and should have gone to Seoul National no matter what, because he’s a super genius. He gets unlucky in the lottery. He will go to the next university. The next university is going to probably not be that much worse, and that will create a much more open set of options. You will have more of a gradient of quality of universities than this cliff, that either you made it into Oxbridge like Pieter, or you don’t make it at all. And I think that’s good for society in any case.

Sam Bowman: Korea is an interesting story when it comes to fertility rates. What’s less well known is that the Korean government for a long time actually deterred people from having children and pioneered anti-natalist policies. If listeners or viewers would like to learn more about this, there’s a brilliant article in the new print edition of Works in Progress about this. It’s partly about the history of Korea’s anti-natalist policies and also a surprisingly optimistic view of the attempts that the Korean government has made to raise birth rates. If people want to get that and everything else that’s in the new print edition of Works in Progress, they can get it for $100 a year for six issues at worksinprogress.co/print.

Pieter Garicano: It seems to me that in South Korea, it’s clear this behavior is quite rational on the part of the parents and the students. The college wage premium in Korea is extremely large, especially if you go into these four top universities, and they’re stuck in this destructive state for their total welfare but for each individual optimal zero-sum arms race. However, that doesn’t seem to be true for the kind of students who are pursuing a humanities degree at a lower-ranked Anglo-Saxon university or European university, where clearly it’s not in the individual’s material interest to pursue this. You might say that in Europe there’s subsidies and hence distortions. But there aren’t any subsidies, at least not very large ones, for private universities in the United States. If we’re good liberals, why shouldn’t we let them just do this if they so desire? And, how can this kind of inefficiency, if it’s so personally prosperity-destroying, persist?

Jesús Fernández-Villaverde: Let me start with the beginning of your question. Even in the U.S., when you go to universities, you are actually getting a huge subsidy. If you go to Ohio State or you go to Texas Austin, these are public universities. You are paying tuition, but a lot of it is also paid by the state. It may be the case that most of the people you know in life, Pieter, went to Chicago or went to Columbia, but they’re actually very rare. I don’t remember the exact numbers, but once I did the computation of the likelihood of the ten closest people to you in life, five or more having a degree from an Ivy+. It is infinitesimal if there was perfect random mixing in society. And I look at my own case, and of the 10 closest people to my life, I had like six who satisfied this condition. We tend to forget that a little bit.

There is an implicit subsidy going to a public school in the U.S.. But even if you go to a private school like Penn. The way to think about Penn’s budgets – and this kind of also puts in perspective some of the current financial difficulties – is that one third of Penn’s budget comes from tuition, one third comes from endowment, and one third comes from federal grants. Those federal grants implicitly are paying for part of the undergraduate and graduate education. So if you go and decide to do a PhD in philosophy at Penn to write that breakthrough dissertation on Martin Heidegger, you are probably going to have package aid from Penn, which basically means your stipend and tuition, and that’s implicitly paid by the federal government.

Second, I’m a strong believer in people making good rational decisions when they go and buy bananas. What do I mean by that? You go to the supermarket the first day and you buy a banana and you don’t like it. You think it’s a bad banana or too expensive of a banana. Tomorrow, when you go to the supermarket again, you buy an apple or you buy an orange. You go to another supermarket that has the best bananas.However, in life, there are decisions like going to college, going to graduate school that you do only once in your life. There is a lot of uncertainty about the parameters involved in making that decision. And that you are going to make that decision in part influenced by objective facts and information, but in part, yes, by social norms or trends or facts.

This is not based on abstract thinking. If I had a time machine and I could find myself at 17 years old, would I tell Jesús—this will be like in 1990—to do the undergraduate degree that he did? No. I think I picked the wrong undergraduate degree, and I think I was a relatively highly rational agent that looked at this thing carefully. Or even in graduate school, did I always make the right decisions in graduate school, even with ex-ante information that was available for me? The answer is probably no as well. I can perfectly see a lot of students not making the right decision, and it doesn’t cost me a lot of effort or contradiction within my standard framework of a maximizing utility economist. I think that most high school students are not very aware of these internal rates of return, for instance. This year, at the beginning of the semester, someone has actually calculated the internal rate of returns for different majors at Penn. Actually, just for fun, I had one lecture going over those internal rates of returns with my undergrads, and I asked them, and I would say most of them were completely clueless. And we are talking about seniors majoring in economics at Penn.

Sam Bowman: This is also a very no-regrets policy, to just make students or young people aware of the rates of return from various degrees. I can’t imagine any possible argument against giving information. It doesn’t cost anything or it costs almost nothing. I can hardly imagine it being a costly thing for people to know true facts in this case anyway. I’m curious to ask about baby subsidies. My take is that one of the really big problems that all pronatalist policies like that have is that they really struggle to target babies that wouldn’t have been born versus babies that will be born anyway. So if you imagine a really successful policy that increases birth rates by 10 percent, you’re still spending above 90 percent of that money on babies that are being born already. Given that the goal here is to raise birth rates, you’re wasting a gigantic share of that. That means in practice that most of these policies, if they would work, are still just unaffordable. Not necessarily because the money that we spend on the babies that wouldn’t have been born isn’t worth it. It probably is worth it. It’s that we’re spending so much on all these other babies that would be born anyway that it just becomes unaffordable. And so the actual amounts spent are tiny and unsurprisingly don’t end up really observably changing behavior that much.

What I am really interested in is whether there are ways to target babies that wouldn’t be born in a better way. For example, if we know that couples that do have children average at two children each, rounding to the nearest whole number, then maybe giving a subsidy for the third child that’s born. Or for example, if we know that people who have children earlier tend to have more children, then maybe we try to subsidize children being born under a certain age. I can think of pretty easy political ways of making that possible. You need to get a bigger car if you have three children. If you’re under 25 and you have kids, you need to have certain support that over 25s don’t need because you’ve got less money, whatever it might be. That’s something I think about a lot. Do you think there is any mileage in this idea of just paying people to have kids?

Jesús Fernández-Villaverde: First of all, the idea that by giving 5,000 pounds to every child you are going to make much of a material impact is crazy. I think that a lot of the facile criticism of pronatalist policies is based on this type of evidence. As you say, 90 percent of people or 80 percent of people who are going to make this decision are probably not affected by this type of subsidy. In economics, we will call this inframarginal, which means you are not pushing the person over the margin. It’s a waste of money.

I agree with you that an important margin is two to three. This is true in the US. I suspect it’s probably true in other countries, but I have not looked at the data myself – I want the listeners to have that caveat in mind. In the US, a lot of the change in fertility over the last 40 years has been the reduction of families from three to two. You used to have many more families at three than now you have, and most of these, we have seen them moving to two. That is a little bit of a nuance or a qualification of the discussion we had before between zero and one. We have more people that used to be at one or two at zero. We have more people at three going to two. I fully agree with you that pushing people from two to three will make a big difference.

I don’t think that 5,000 extra pounds will make a big difference pushing people to go from two to three. But things like if you get to the third kid, college tuition is free for all three kids will make a huge difference. If you go from two to three, parental leaves are going to be convex in the number of children you have, things like that. I would need to sit down and think exactly about what can be done in every particular country. By the way, I think this is one of those situations where the one-size-fits-all approach that economists always have may not be the best approach. The type of policies that you may want to do in Finland may be different than the type of policies that you may want to do in Poland or in Portugal. But pushing people to two to three, I think, will make a big difference.

And, since you have given me the green light that our listeners are not going to be offended, we want to be sure that the best people have kids. The ‘best people having kids’ doesn’t imply they are the best people because they are the most handsome or the ones we like the most. But, conditional on someone having three kids, it is probably much better that we have a highly educated, successful professional woman having a third kid than having a poor single mom without any education having a third kid. This sounds bad, but I think it makes sense. And thinking about subsidies that are a little bit biased towards these outcomes, I think will also make a difference. What I really want is my neighbor who is a very successful lawyer who has done very well in life and who is going to be a great mom to think about having the third kid. How can we help her to push her over the line of that decision? I think that that will be good for society as a whole. As you say, it’s probably going to be one of those no-regret policies that even if it doesn’t make much of a difference, we are not really losing much anyway.

Sam Bowman: One doesn’t have to prefer higher skilled parents to have children. Just wanting a neutral system could lead someone to still not want subsidies, which relatively have a much stronger incentive effect, if they work at all, on people on lower incomes, which is distortionary.

Jesús Fernández-Villaverde: That’s a good way to put it.

Sam Bowman: Which is one reason. I am unconvinced that childcare subsidies do a great job – but maybe they do. If they do, then you want to do it via tax deductibility by making the reward scale with how much you earn so that it’s sort of an equal share of your income, wherever you are on the income distribution. You don’t need to take a position on who you want to have kids. In not taking a position on who you want to have kids, you end up needing it to be neutral and doing it via tax deductibility. I think that’s quite important, and actually has led me to think that childcare subsidies as we do them are pretty bad and a pretty distortionary way of trying to support parents compared to tax deductibility of childcare fees.

Jesús Fernández-Villaverde: That’s a much better way to put it. I think that your formulation reflects my underlying thinking much better than the way I put it. I fully agree with you on that point. And, to emphasize this once more, I think this also needs to be done by keeping an eye on the complete tax system of each country. Tax systems are very complicated, and they have a lot of subsidies and hidden situations. What I would recommend in the United States may be very different from what I would recommend in the United Kingdom, just because of this very complex structure of the whole tax system.

Pieter Garicano: Given the importance of this issue, I’d like to come back to a question we were discussing at the start but never finished, which is how do we get a better understanding of why this is happening. You mentioned that economics as a field has some structural reasons for why it’s not dealing very well with this. But it also seems to me that finding the answer could be relatively capital intensive, perhaps because it requires a lot of surveying across many different countries. What’s an experiment we could design – if we had unlimited funds – that you think would be the best way to try to gain as much information as possible on the reasons for why we’re seeing decline in birth rates and perhaps also the pathways through which we could incentivize people to make slightly different choices?

Jesús Fernández-Villaverde: Let me answer that in two steps. The first one is I would like to have much better data. Much, much better data. This is not even about asking people why they are not having children, because who knows how people answer questions. But if you actually look at the data, you will be quite surprised that except in a few countries, our understanding of who is having children and their demographic characteristics is quite limited. We are in the situation where we are making important policy decisions blind with just wild guesses. So having a much more detailed demographic information about who is not having children would be a very fundamental point.

I’m extremely critical of the World Population Prospects of the United Nations. I think it’s a little bit of a scandal how bad that data is. When I wrote something for a British magazine, there was some organization in London that fact-checked my statements. It’s actually still online. And they basically say, ‘oh, we fact checked you against the United Nations and your numbers are wrong’. I said, ‘well, okay, fine, maybe it’s the other way around’.

With respect to the type of things we can ask people, you will need to talk about that with people who have been thinking a lot about how to design good surveys like Yuri Gorodnichenko at Berkeley or maybe Stefanie Stantcheva at Harvard. These people have been thinking a lot about how to design good surveys and how to elicit truthful answers. So maybe they will answer better.

But, going back to the point before, are they aware of probabilities? As I was saying before, if you are going to major in philosophy, what do you think your career path is going to be? Are they getting this right? Maybe they do want to spend the next 40 years of their life reading David Hume, and they are fully aware that they are going to be poor.But maybe what we realize is that a lot of people are not.

And that will tell us that maybe giving them a piece of paper with information before they go to college will be important. Coming back to the no-regret policies, imagine that we can agree on a five-page summary of professional outcomes based on college majors. Before letting you enroll into college, you need to sign that you have actually read this thing. That would be useful.Asking them about, are you aware of how quickly fecundity decreases after 28? Are you aware of the advantages and disadvantages of having kids? So that would be what I would do.

I’m a little bit more skeptical about designing experiments. First of all, I’m on the side of economists who think that experiments are a little bit less informative than what the consensus of the profession now thinks. I think that a lot of that has to do precisely with the timing issues that we brought up at the beginning of this conversation. Even if we design an experiment, since we will need to wait until completed fertility, it may take us 20 to 30 years, and that may not be the best way to make decisions in real time. Now, if this is only about the scholastic satisfaction of understanding what is going on, then we can wait 30 years, but probably by 30 years from now, we will know anyway. So in that sense, I think that a combination of the pure raw effort of getting data right and asking well-designed good survey questions.

I’m quite concerned that one of the main problems that the economics profession right now suffers is that we do not value enough data construction. If your goal in life is to become, you know, super duper endowed chair of economics at Penn, super duper endowed chair of economics at London School of Economics, you are going to write a fancy model, or you are going to write fancy empirical work. But if you actually spend 15 years of your life putting together a super useful data set, you are not going to end up being the super duper endowed professor at a top university. I think that’s wrong.

Sam Bowman: Professor Jesús Fernández-Villaverde, thank you very much for joining us. If listeners want more, I recommend your Twitter account. It’s very good. You tweet very interesting insights. The other day you did an interesting one on Twitter, inspired by Dan Wang and Joel Mokyr, who is one of my heroes and one of the Works in Progress’ leading intellectual lights, which tried to draw out a potential synthesis of their ideas, which I thought was really interesting and people should check out. Thank you very much for joining us.

You can watch and listen on Apple Podcasts, Spotify, and YouTube.

To read more about some of the things they talked about:
How Madrid built its metro cheaply
How France achieved the world’s fastest nuclear buildout
The Housing Theory of Everything

Transcript

Sam Bowman (00:00):

Hello, welcome to the Works in Progress podcast. My name’s Sam Bowman. I’m an editor at Works in Progress.

Pieter Garicano (00:05):

And I’m Pieter Garicano, another editor with Works in Progress.

Sam Bowman (00:09):

You might’ve seen that we’ve got a new print edition. The print edition is coming in November, but you can subscribe to it now. It’s $100 in the US, £80 in the UK, and subscriptions will soon be available in Europe, Canada, Australia, and some more countries as well go to worksinprogress.co/print to subscribe. Our guest today is Congressman Jake Auchincloss. Congressman Auchincloss is one of the most thoughtful congressmen working on issues like economic growth and speeding up technological and scientific progress. And he joins us today to talk about a whole manner of issues. But I wanted to start Congressman by asking you, is there value in building new cities? I know this is something you’ve talked about. I tend to think of the value of new homes as being that they’re close to existing cities that are close to existing economic activity. So what’s the case for building a new city?

Jake Auchincloss (00:58):

Thanks for having me on. Yes, there’s value in building new cities and Americans used to build new cities all the time. Much of the story of the 19th century was that Americans would go south or west and they would bump into a river and they would found a new city wherever they hit a river. And that is a major part of the dynamism and economic development of the United States over the last 200 years. We stopped doing it, we should do it again for at least three reasons. One is affordability. When you build new energy, when you build new housing, when you build new transit, you are unlocking production and you’re putting downward pressure on the price of those social goods. Number two is agglomeration. When you are clustering people, you’re going to get more innovation and more economic activity. It’s a super linear phenomenon so new cities are not just adding production, but they are actually increasing the pace of economic output, which has tremendous returns for standards of living. And then finally, as experimentation, there are new modes of living that we should be embracing as Americans. Again, in US cultural history, how many different ways have we tried to do things and how many different ways have we tried to live together?

There has been a stultification and homogeneity that has fallen over our society since World War II with the domination of car-centric infrastructure and in how we congregate. I think it’s been much to the detriment of civic cohesion, of small business development, of the climate of public health. So it would be fun to experiment with car-free cities and with cities that are centred around the human, not around the vehicle. And you’re starting to see some of those experiments at places like Edge Esmeralda or California Forever or cul-de-sac, which is a firm that’s developed in Tucson and we want to propel that work.

Pieter Garicano (03:07):

So historically the way in America you got built was through local government and low governments were in favour of expanding. And you have the commissioner’s plan for New York where they set a huge grid and there’s huge buy-in from residents towards building new and more houses. And nowadays American YIMBYs seem to have given up on that. It’s either a strategy of preemption where the state government’s going to impose housing targets or, in your case, we’re assuming we start from scratch and we have to go somewhere else and build a new city, a new institution. I’m wondering why isn’t it possible to build more housing through local politics? What changed about local politics that people used to be in favour of building houses nearby and now they seem to be against it?

Jake Auchincloss (03:49):

We need to do both. They’re complimentary. I’ll use Massachusetts as an example. It’s the state I’m most familiar with. Obviously I was a city councilor here in Massachusetts and on the land use committee I’m now a congressman, so I see it from all angles. Massachusetts is roughly 250,000 units of housing short over the next decade. We will suffocate our middle class here if we don’t build about a quarter of a million units of housing. And our governor, much to her credit, is going after NIMBYism at the local level through a bill called the MBTA Communities Act, which basically says to localities, which in New England have a tremendous amount of autonomy over zoning, “If you’re next to public transit, you’d better make it possible to build that missing middle housing.”

For the workforce’s affordability, that’s adding 2 to 20 units. We’ve got to make ADUs much more accessible.

I think we should be making changes to building permitting, particularly single staircase for up to six stories because modern apartments are very fire safe, don’t need two staircases, but it takes away a lot of the livable space and adds a lot of costs. Parking minimums are anathema to affordability and to walkability. So we have to do a lot of work on our existing built environment, but I think that is conducive to and complimentary to also developing new sites. I’ll use Massachusetts as an example. We’ve got two state owned properties within a 45 minute commute of Boston. Both are decommissioned military bases. One is a former naval air station, the other is a former army base, and they both have a tremendous amount of horizontal infrastructure. They’re both reasonably well connected to the city of Boston, though they would need more transit connectivity and they don’t have any local zoning and the state has the potential to step in and zone at the state level for a lot of density and issue basically an advanced market commitment to private sector housing development.

Sam Bowman (05:34):

So I can understand what you have in mind. It sounds like what you’re saying is we should be building new cities but building them adjacent to existing economic centres of gravity. The big concern I have, so we hear about new towns in the UK and one of the big mistakes that was made with most of the new towns that were built after the war in the UK was that they were built with no anchoring to any local economic geography. They thought if we set up a new town somewhere we could magic an economy out of thin air. And more often than not, that didn’t happen. And the few places that it did succeed was when they built these new towns along existing railway lines. So it was really easy to get from somewhere like Stevenage to London or Milton Keynes to London. Is that what you’re talking about? You’re saying we should be building adjacent to existing cities but outside the city boundaries so that we’re not constrained by the local zoning laws that stop house building within those rules?

Jake Auchincloss (06:30):

Yes, although I think in the United States we probably have the ability to do both. The short answer is: I think we should be leaning more into the agglomeration economies, so near existing hubs. And my co-author on the paper about starting new cities, John Gruber – who’s the chair of the MIT economics department – I think he would be a hundred percent in agreement with what you are saying, which is that this is only going to work if you do it within the 30 minute transit envelope of existing labour centres. I think in the United States though, as part of a federal infrastructure project, there could be discrete opportunities to do new developments in less developed areas if they were done in synchrony with a ship building enterprise or other bootstrapped enterprises where the federal government was able to issue really strong demand signals for a certain type of good. I think that’s more ambitious. I think that would require more federal muscle, but I don’t think I would take it off the table directly just because in the United States we have a lot of land and we shouldn’t ignore that land any more than in the 19th century. The railroad should have ignored that land.

Sam Bowman (07:42):

That was going to be my next question. Is this a uniquely American proposal or maybe Australia and Canada could do this as well in the English speaking world, but I’m struggling to imagine building a new city in England or in the Netherlands where Pieter’s from. But, I mean, there is still a lot of space in those places, but I wonder if you need that frontier idea, the idea that really land isn’t scarce in any way in large parts of America for this kind of idea to have resonance.

Jake Auchincloss (08:12):

No, I would actually push back pretty hard on the idea that this is about a scarcity issue with land.

There is actually no more efficient way to get human beings to live together than with a city. It’s by far the most efficient way – from an energy and land perspective – for humans to live. And there’s not a shortage of land anywhere in any country, I would posit, for municipal development. What there is a shortage of is political viability. What actually strangles this concept is not capital, it’s not developable land, it is vetocracy – the number of veto points webbed throughout the network of operations. And the UK has struggled with this as much as the United States has.

Pieter Garicano (09:06):

How have the voters responded to the new city’s idea? Do you talk about it on the campaign trail? What do they think? Do they think it’s exciting? Do you think it’s plausible? Are there hesitations? What’s the response?

Jake Auchincloss (09:17):

It’s the single idea that I get the most unsolicited warm responses to. I’ll put it that way along with probably the other one would be my thoughts on social media.

But this idea, building new cities is probably the one where I most get people coming up to me unsolicited and saying, “Hey, I heard you talk about this. I thought this was really exciting.”

It’s clearly the one that sticks with people. Now there’s probably a lot of people who think it’s a silly idea and don’t come up to me and say that, so I’m a biased instrument here, but it is definitely something that when people hear it, it sticks in their paw a little bit.

Sam Bowman (09:54):

Could you get into the details? Could you talk us through, let’s say congressman, you are president for the day or in this domain you are given the powers that you want or the bill that you want to pass or whatever or project gets passed that you want to see happen. What does the next year look like? What does the next five years look like? What do the next 10 years look like for a given city that you imagine could be built?

Jake Auchincloss (10:20):

I don’t think you’d have to be president. I think it’s more of a governor thing actually here in the United States. And what I would say is it’s a public private dance and it’s a question of how you crowd in private capital. Because again, there’s not a shortage of capital to build housing and infrastructure. Actually in the United States there’s a lot of capital that wants to go to work. What there is is a shortage of a political envelope in which it can do that. So I think the number one thing you do is you zone. You take that state on site and you pick a couple of the righteous fights and they are fights. Let’s be clear, I’m not sugarcoating this. You are going to anger a bunch of NIMBYs and various municipalities around this site and you’re going to get a lot of objections.

So it takes somebody at the corner office to do this. This has not happened organically, I think at a town level and you zone it. And then what you do is you de-risk some of the initial capital for infrastructure, whether that’s done through a state infrastructure bank or whether that’s done just through low cost loans or securitizing private sector loans. Basically you are taking away some of the risk from that first capital in for infrastructure and then you are opening it up to private sector mixed use development. But what I would do is not just have it be a traditional free market mixed use development where every developer is focused solely on their own plot. I would want to have a vision for the entirety of the site and that vision to me would be centred on car-free zones. I often talk to people here in America. As you guys know, we absolutely adore our automobiles.

And I personally think every politician should have at least one unpopular opinion to keep ourselves honest. And my unpopular opinion is America’s way too car-centric in terms of our urban design. And it’s actually been much to our detriment over the last 70 years on a host of different sectors, how much we rely on the car. I often talk to people when I’m trying to make this case, I say, close your eyes and imagine where you would want to go on your vacation and picture yourself in the sweetest moment of your vacation. Now open your eyes and tell me whether there are any vehicles around you. And people are always picturing themselves hiking with their friends or eating at some Parisian cafe and it’s always a pedestrian or a car-free scene. And I think humans don’t realise this because we are so used to and inured to the reality of vehicles in our life, we don’t realise how delightful it is to actually have a pedestrian only or a cycling only landscape. And I would deliberately and politically make that the case.

Sam Bowman (13:15):

So I completely agree that something like this would need to be or want to be well planned. I was just at a place outside Austin, Texas called The Domain and it was really built about, I think about 10 or 12 years ago as an attempt to build a second downtown. It’s about 12 miles outside of central Austin. And it’s not bad, it’s a bit like an outdoor strip mall, but it’s got housing, it’s quite dense, it was pretty busy, it was reasonably well planned and you wouldn’t get anything like that if it was a free for all, if you had no rules about what could be built. But it does strike me that there’s a bit of a tension between agreeing that a new city should be quite well planned and a master plan in this way.

Jake Auchincloss (13:55):

We should be trying to fix those functions for local government, which is what a lot of states and cities throughout the United States are doing. Massachusetts, California, Wyoming, Montana, Texas. And, not to veer into politics immediately, but I would argue, the most successful grassroots element of the Democratic Party in the last decade has been the YIMBY movement. The Yes in My Back Yard movement where in places like Cambridge, Massachusetts that went 85, 15 for Harris over Trump in 24, they just passed a hundred page zoning bill where 90 of those pages were cutting regulations. It’s a progressive Democratic city that is deregulatory, right? So it is at the vanguard of the reinvention of the Democratic Party has been getting localities to deregulate in order to unlock production of housing and thereby lower the price and improve walkability. But I am glad that you raised this question of planning and what the right area of focus is for it,

Sam Bowman (14:53):

But also the fact that they had to walk everywhere. They didn’t have the technology or they couldn’t afford horses obviously. I do wonder though, I mean, maybe this requires road pricing, which I think would be really great and would solve a lot of problems and might get us to that happy medium between road use and walkability.

Jake Auchincloss (15:13):

So what I would do instead would be yes, I’m a supporter of congestion pricing. I’m a supporter of it in New York and I would be a supporter of it in Massachusetts and obviously it’s worked very well in London as you know better than me in America. The politics of that are incredibly challenging and probably a better and more politically feasible way is to go after the parking, the minimum parking requirements, the subsidised price of parking are really their backdoor ways of subsidising driving. And if you go after the parking, I think what you do is you simultaneously address the congestion pricing problems and you also I think open the door towards pairing autonomous vehicles with walkable developments in a way that can be really beneficial. And you’re seeing cul-de-sac, the developer in the United States do that.

Sam Bowman (16:08):

What’s a politically viable way to go after free parking?

Jake Auchincloss (16:15):

So I was a city counsellor in Newton, Massachusetts and I used to rail against the overabundance of parking. And I will tell you, there is nothing that unites the American public more than their love of free parking. It is political kryptonite. It is the social security of local politics.

Sam Bowman (16:32):

I was going to say, I bet that made you really popular. Yeah,

Jake Auchincloss (16:36):

So the short answer is you don’t talk about the price of parking, you talk about the availability of parking. I am a Shoup-ista, I’m a – may he rest in peace – a big disciple of Donald Shoup. And what Donald Shoup would always say is, it’s not actually that parking is too expensive or too cheap, sometimes too cheap actually and sometimes it may be too expensive actually, and sometimes it may be too cheap. What you want is on any given block for there to be two open spots at any given time. And so the key is to find the price that clears the market at two open spots on a given block. And when I frame it that way to people they say, “yeah, that sounds nice. I want to be able to find a spot anytime I’m looking for one.”

And then I’ll say, “okay, so the way to do that is for that spot right in front of CVS on Saturday morning not to be a dollar an hour, probably needs to be more expensive in Newton, Massachusetts, but that 12 hour long-term parking that’s a five minute walk away that employees of these businesses are going to use, probably that should be free actually.”

(17:44):

You actually want to reduce the price of that. It’s about clearing the market for two open spots on any given curb. And there’s some pretty cool curb management companies like Automotives and others that are trying to work with cities to actually effectuate this.

Sam Bowman (17:59):

There’s an idea that I’ve heard that I think is quite intriguing that says that we should attach congestion pricing and maybe also some parking rules to autonomous vehicles and assume that the overwhelming technological and economic logic that autonomous vehicles eventually will just become everything will overwhelm the cost of doing this. But right now there might be a political window available that says most people don’t care if you do taxes on autonomous vehicles. They might even like that because they’re a little bit scared of them or a little bit suspicious of them. I wonder if that might be a way of graduating some of this stuff in such that in 10 years it applies to almost all vehicles.

Jake Auchincloss (18:40):

I think that is a hundred percent right in general moments of policy opportunity happen at tech shifts because a new coalition and a new interest hasn’t yet been formed and cohered. And so that is the moment to strike. I a hundred percent agree with that and I think you could widen that argument a little bit to make it about curb management more broadly. That’s why I brought up some of these curb management companies. We have a couple of things happening. We’ve got the rise of micro mobility, right? The scooters and the e-bikes. You’ve got the radical increase in e-commerce and thereby e-commerce deliveries. You’ve got the radical increase in ride share and also the use of delivery apps. And then of course you’ve got autonomous vehicles. And the common feature across all those things is that they’re competing for curb space But they’re new entrants into the mobility marketplace. They don’t have the incredible political lobby behind them that single car storage otherwise known as parking does. And so as all of these new entrants compete for curb space, now is the time to start doing curb management proactively and doing it fairly because none of them yet have cleared the decks or stacked the decks in their favour.

Pieter Garicano (19:57):

What happens if we go back to a world of very high economic growth and there’s different ways you can see this happening. I think AI is perhaps the most obvious one. And when you want to think about what are examples of the United States going through such a period of extremely high 3/4%+ per capita GDP growth every year, through back 130 years to the late 19th century. It’s a period in America’s history, which is I think commonly much maligned, right? The Gilded Age is what some people call it. It’s seen as a very bad time in a way. But I think from our perspective, it’s also a time when America’s incomes per head tripled in 30 years. And so I’m wondering whether you think, are there any lessons we can draw from the periods when America did grow a lot and was very dynamic and what are the things you think we should be actually copying and perhaps revisiting?

Jake Auchincloss (20:46):

I agree with your point of view on that and the way I’ve tried to frame this is cost disease. This is what I think the Democratic economic agenda should be, is treating cost disease, cost disease otherwise known as the Baumol effect, describes industries that because of low productivity growth and labour intensivity, inflate faster than the overall economy. And a lot of times when people today talk about the problems in the American economy, they look at those sectors that have gotten very expensive housing, healthcare, utilities and they say, oh my goodness, they’re so expensive. What are we going to do about it? Much more interesting to me actually much more illuminating is to look at those sectors that have gotten very cheap and ask, what happened to those sectors that got very cheap? How did that happen? And the answer is they did three things.

(21:37):

They cut regulations that were holding back production, they adopted technology and they took on special interests. And in particular that technology was technology that automated human labour. And so you see the 19th century story that you’re describing to a large extent is a story of the automation of agriculture. Food was cured of cost disease, right? Food used to be really expensive and then it got pretty cheap. And a big part of that was the automation of agriculture. And the question now is how do we do that same thing in healthcare, in housing, in utilities, in these sectors that now consume huge chunks of the middle class family’s budget.

Pieter Garicano (22:23):

You might think that part of what causes cost disease is actually surplus being transferred from sectors which are seeing very large productivity growth to sectors where you don’t see very high productivity growth. You might think of it as the actual mechanism, classic Baumol mechanism is that workers in low productivity growth sectors – hospitality, healthcare, education – you might say have better bargaining power because wages rise elsewhere and that maybe cost disease if driven by regulation is a bad thing, but cost disease, if it’s just that people in the sector without productivity growth can charge more because their outside option is better. Is that a problem? Is that also something that’s an issue?

Jake Auchincloss (23:01):

So you’re raising an excellent point. Let me try to frame it a little bit differently, but you tell me if I’m still addressing what you’re talking about is the Baumol effect is always going to exist in the United States economy by definition there will always be sectors that have experienced less productivity growth than other sectors and thereby will have a higher degree of inflation than other sectors. And so it’s not actually, you don’t wave a magic wand and you’re like “I cured the Baumol effect across the United States economy”. It doesn’t work like that. What happens is you are systematically squeezing each sector of cost disease and then naturally it moves into another sector. So a hundred years from now, some politician will be on a podcast complaining about how haircuts suffer from cost disease because they’re non-automateable, labour intensive, low productivity growth and haircuts will consume 50% of the middle class family’s budget.

That is the economic trend line that we’re heading to. And so the question is from a policymaker’s perspective, how do you rank the social goods that should be cured first of the Baumol effect, and my answer would be you broadly want to look at Maslow’s hierarchy of needs. You want to start the bottom – physiological needs, social needs – and move your way up. So it’s a problem that healthcare and housing suffer from cost disease. That’s a problem because those are pretty low on Maslow’s hierarchy of needs. But if where we ended up was that personal grooming became the sector most afflicted by the boma effect, then that is progress as a society, right? Then we have gone higher up Maslow’s hierarchy of needs and the next politicians can complain about that.

Sam Bowman (24:38):

Yeah, and also the other factor is that we’re often talking about two very different phenomena when we talk about cost disease. The classic example is the string quartet where as we get richer, the number of people performing in string quartets does not rise or can’t scale with our wealth. So we spend more and more and more on string quartets, but really the sectors of the economy that we spend the most money on via this effect are things like education and healthcare. And it’s not really because they’re inherently resistant to automation. The way arguably string quartets are, I mean I know Spotify exists, but string quartets in person might be a bit different. Really Education and healthcare, they’re so labour intensive and they’re so resistant to automation often for regulatory reasons. It’s often because especially in something like healthcare, there are lots and lots of rules and the market structure of these sectors is such that it’s almost impossible to move away from heavy reliance on people.

Jake Auchincloss (25:36):

That’s right. And this is where I think democratic deliberation and judgement is so critical is deciding which are the sectors that we think benefit inherently from human connection and thereby we are making the decision that we do not want to try to cure them of cost disease. Whereas which are the sectors where we want the cost benefits, we want price deflation, and we’re willing to sacrifice the human connection. My argument, and I think this should be a debate, is that in housing and healthcare, I think the American public would be fine to see a lot more automation and a lot lower prices. I think in education they would not. I think the idea that somehow we’re going to do agentic education for all of our children and we’re going to just sync them up to AI chatbots to learn is really going to rub parents the wrong way. And if in fact, 50 years from now you looked at American GDP and, because we had automated so many elements of our economy, our standards of living were much higher, but we were spending 60% of gross domestic product just on educating the next generation, that sounds super civilised to me. That actually sounds like a really civilised society, one that dedicates much of its discretionary income towards the cultivation of the next generation. Right?

Sam Bowman (26:55):

Interesting though, because I would think almost the opposite that even if parents didn’t want that, the runaway competitive arms race that can take place in education means that you may be much, much more happy for your children to be taught by a human educator, whereas I am a ruthless cold-hearted guy and I’m putting my kid in front of an AI instructor and presumably he’s getting some gains from this. If not, then maybe I wouldn’t do it. But if he does, then you have no choice but to keep up even if you don’t want that. So maybe what you’re describing is only achievable via regulation and in that case that might be a problem because we may be leaving really, really valuable gains on the table.

Jake Auchincloss (27:42):

I mean that’s what happened to China, right? They ended up with a massive arms race and they basically had to cancel the entire edtech sector to prevent it. I would also say we’re even presuming now that the actual arbitrage opportunity for your children is education. Whereas my biggest concern is that it’s going to be in utero genetic engineering. That is where we are heading, right? Is where you’re going to start to see parents with the means and the intention to try to genetically engineer children that they think are going to have higher fitness to succeed. And that is going to be a major issue for us to grapple with as a society.

Sam Bowman (28:23):

So going back to the 19th century, you made this point about the automation of food production being one of the really big factors here. Do you think that people get this era wrong? The Gilded Age is seen as being a very unfair age and it’s seen as being one where the term, the Gilded age is used quite ironically as far as I know. But at the same time we were in fact looking at gigantic improvements in living standards. Huge numbers of people were being able to leave basically serfdom in Europe for the United States for much better lives. And obviously economic growth was very, very high over this period. Do you think that the modern interpretation of this period is wrong or are there things we can learn from it that we’re not learning at the moment?

Jake Auchincloss (29:10):

I think the modern interpretation of it, and tell me if you agree, is that the price of rapid economic development in the Gilded Age was inequality. That inequality became antithetical to the American sense of democracy and the reaction to it was the progressive era under Theodore Roosevelt and really culminating ultimately in FDR and the New Deal. And to me that is actually probably overall a hopeful message in that this system of government is able to digest that type of economic development and ultimately make it work better for the American people because we’ve seen a tremendous amount of inequality growth in the last 50 years. I think it is antithetical to the health of our democracy and we are going to have to address it with new modes of governance. It is interesting that you’re focused on the Gilded Age right now. I actually don’t think politically that’s the best analogue to the moment that we’re in right now. I would actually go back another 40 years and talk more about the 1830s and 1840s, which is actually where I see probably the best map for our political moment. Even though economically things were very different.

Pieter Garicano (30:24):

Why is that? Sorry, what about that period makes it a relevant example rather than 40 years later?

Jake Auchincloss (30:30):

What was going on in the 1830s and forties was that Andrew Jackson had created the second political system in the United States along with Martin Van Buren. Andrew Jackson was a demagogue, a tribune of the common man, who railed against economic elites and mocked elitism, who claimed and grieved a stolen election, who tapped into evangelical fervour, who managed to pair the working class with the extreme wealth and property interests in the country, and who made immigration – they didn’t call it immigration at the time. It was more about Indian removal – who basically made the demographics of the country a major political issue. And all of this should rhyme with what we’re seeing now with the MAGA movement. There’s a reason that Donald Trump had the portrait of Andrew Jackson in his office in his first term. There are really a lot of ways that Andrew Jackson’s Democratic Party was the forerunner of the MAGA movement. And what’s fascinating to watch about that era, the 1830s and the 1840s is how politicians tried to figure out how to counter Andrew Jackson and all the mistakes that they made and the Whig party ultimately figured out how to do it in the 1840 election, but it required them experimenting it and losing, frankly, a lot of times I think the modern Democratic Party would be wise to take those lessons.

Sam Bowman (31:57):

What do you think those lessons are?

Jake Auchincloss (31:59):

There’s a lot of them. I’ll give you one in particular, which is, and I raise it only because it’s I think a little bit contrarian. There’s a big vibe in the Democratic Party these days that we should avoid cultural issues and let everyone do their own thing on cultural issues, but instead unite under the banner of some version of economic populism. And what’s interesting is that the Whig party, when they finally won and when they actually had electoral success, they did the exact opposite actually. They were insistent that at the national level defining the Whig party nationally, they had a couple of cultural through lines. It was the importance of public morality, basically the way that the American public should expect people to carry themselves. They were always saying Andrew Jackson was a disgrace to the office. It was about the rule of law. It was about the primacy of the constitutional system over the prerogatives of an executive power. And in fact, they let many different modes of economic governance run right across the country. Whigs were not prescriptive in one way or the other about the right format of economic development, but they did try to have some level of cultural alignment with their national party, the exact opposite of what I think many Democratic strategists would advise today.

Sam Bowman (33:14):

What do you think? I always think it’s interesting how ignored American history is by the rest of the world. American history is a huge, huge field in America, understandably. But what do you think say a European listening or somebody in India listening can learn from this period of American history

Jake Auchincloss (33:32):

For people who don’t live in the United States? I think a really important takeaway about the American form of government and American history is that we’re a union, not a nation. People think about America I think from overseas and they think of the president and they think of like, “oh yeah, Americans in America”. And the truth is we’re at least 10 to 15 different ethnolinguistic subgroups and federalism runs very strong in the United States. And actually this rise of a very strong federal government is a very modern phenomenon and a big part of our democratic resilience has been how fractured and balkanized political power is throughout the United States.

Pieter Garicano (34:14):

So I guess one of the responses you hear to the current political challenges is that you need to go back to America’s federal roots and the people should be free to choose how they live and politics has become too nationalised. But it seems to be in tension with the fact that everyone consumes the same media and watches the same TV channels and is on the same Twitter timeline. And when I meet people in San Francisco and people in London, we’ve all seen the same six tweets. And so it seems that it is perhaps this very federal devolved system just a function of the technology you have available at the time very narrow span of control and it’s actually inevitable that as we get technology more advanced, we’re going to have increasing large political units and much as we’d like to go back to more federal system, we’re just restricted by the technology we have today.

Jake Auchincloss (35:03):

I think that is absolutely a trend line. And it’s one that I think is an emerging cultural fault line – not just a trend line. On one side, mass technology platforms that in various versions and formats are merchants and miners of digital dopamine and are creating tribes at the national and even international level, versus the virtue of localism and in-real-life community. I think this is a really big emerging cultural fault line I think democrats should choose. I think we should make clear that we are on the in real life side of that and in fact become a party of localism and become a party of in real life effort and over an economy of endless scrolling online because it makes us more democratically resilient, but two, because it’s really important for our epistemological wellness as a country and because it’s really important for our civic cohesion. People are angry and isolated and lonely and that requires an in-real-life connection. There is no substitute for it.

Sam Bowman (36:09):

I’d quite like to talk about the capital A: Abundance Agenda, and I’d quite like to talk about whether you see that as being a kind of electoral, in a mass politics environment, as being something that can win on its own merits or whether you see that as something that within the party debates of the Democratic Party about what it should try to do when it’s in government. If it’s more something like that inter-elite debate or if it’s something that you think has a pull with normal voters and resonates with them.

Jake Auchincloss (36:47):

There’s an old joke that a robot is what you call something that doesn’t work yet and when it starts working it’s just like a dishwasher. And abundance is like that to me. And I joked about this with Ezra and Derek in that, the great service that they have performed and it’s a magnificent book and truly important service, they explain supply and demand graphs to the Democratic Party. And I’m not going to go out there and campaign on supply and demand graphs, right? I’m going to campaign on how we make your rent cheaper. How do we make your health insurance premium cheaper? Does abundance and that book and do supply and demand graphs have really important things to say about those problems? Absolutely. Do voters want to hear the premise as well as the conclusion? They absolutely do. And by the way, it’s very condescending when politicians think that all voters care about is talking points or quippy conclusions and they don’t care about your thought process or how you got there. That’s not true. Voters do care about that, but I’m going to do it on issues that are specific to what a middle class family cares about. I’m not going to try to campaign on an economics textbook.

Sam Bowman (37:58):

One of my favourite politicians of the 20th century is a guy called Roger Douglas who was kind of the Margret Thatcher in New Zealand, but he came from the Labour Party. So he’s quite an interesting figure and he always used to say, you have to let the dogs see the rabbit, which is a dog racing analogy which says, yes, voters do want to hear what you’re going to do, but you also need to show them they also need to feel economic growth and growth begets growth because voters, once they can see it, they can say, okay, fine. What you’re saying actually makes sense and it isn’t just the empty promises that they’re quite used to. And that makes me think, and – I am building up to a question here – I think that that argues for very, very targeted, almost stealthy. I don’t mean that in a clandestine way, but just try to find boring ways to do big reforms, try to beget a bit of growth. And when you have that growth, use that to create more political momentum and a bigger political constituency in favour of the bigger reforms that are harder to do in a stealthy way. Does that ring true to you? Do you think that that makes sense in America, which has had much more economic growth than Europe where I am? Or do you think that there’s some merit or no merit to it?

Jake Auchincloss (39:14):

I think there’s merit to it, and in fact, I think you’ve seen that with the YIMBY movement on building more housing and how its successes beget more momentum. I think you’re seeing it increasingly with energy, which to me is the second great project for this type of thinking, which is to say if we want to have a 1.7 Celsius increase by 2050, if we want to have clean energy dominance as a country, right? If we want these big, bold, ambitious goals, we’d better build a heck of a lot more clean energy generation and transmission than we’ve been able to do to date. And that requires a lot of permitting and process reform and that can beget its own momentum as well. But yes, you’ve got to paint the end state for folks, and I think you also have to tap into some righteous populism as well.

I think a big part of this is being a productive disruptor of the status quo. The American public doesn’t like the status quo. Democrats too often find ourselves defensive of the status quo. And what we need to say is, whereas MAGA was asking some of the right questions and giving very empty and self-dealing answers, we’re going to try to ask the right questions and actually deliver on the answers. We’re the party that you can trust to actually deliver on good governance, and we haven’t been doing a good enough job of that. To me, one of the great episodes that demonstrates that was the school closures during COVID in too many blue cities and blue states, the schools were closed well past when the social and epidemiological evidence was clear that they should be reopened. I think we lost a lot of trust with voters. I think that we have yet to grapple with that failure and we have yet to offer a solution to the tremendous academic and socio-emotional detritus that’s been left behind.

Sam Bowman (40:58):

And why was that? Because teacher unions wanted it?

Jake Auchincloss (41:01):

A big part of it was the interest groups, not just teachers unions, but I would say very narrow slices of the electorate that had outsized voices at that time. And also I think candidly, it was a fixation on process, an interest group process over the outcomes that mattered to families, but also it was a condescension and this is something that Democrats have to scrub clean from how we engage with the electorate or else we will lose elections. People hate being lectured, people hate being patronised. And there was an element of that in the school closures of, oh, we know what’s best and you don’t.

Pieter Garicano (41:40):

So let me ask a question. Coming back to the abundance thing – I too enjoyed the book. I thought it was very interesting and it was great that it got such good traction. One thing I found quite surprising about it, I found quite surprising in general, when I speak to my neighbours and friends about abundance in America, the explanation for what went wrong is a very national explanation. To put it very glibly, the story you have is the backlash against Bob Moses and very bad car-centric urbanism and a backlash against the Cuyahoga river being on fire and environmental damages. And basically a very specific set of things happened in the United States 1960s that led in the 1970s to huge proliferation of laws that engender paralysis and sclerosis. That’s the story you hear here. What I find surprising about that is that it seems that the same problems we’re having in the United States we’re having everywhere else in the developed world. We can’t build houses in Canada. We can build houses in America, in Britain, in France and Spain. The same sclerosis story that you could tell about the United States, you could tell about every other developed country. And so I’m wondering, first of all, what is the explanation that allows us to say why everything broke everywhere all at once and second of all, what does it imply for the kinds of solutions that seem viable, that the story isn’t actually a national one, it’s an international one.

Jake Auchincloss (42:57):

Yeah, I don’t think everything broke everywhere all at once. In fact, I think the way through this is in fact rather than to bemoan the failures of OECD countries is to look at the success spots and try to replicate and port them over to others. So why is it that Madrid can build public transit at one seventh the cost of the United States, right? It’s not because they don’t have public sector unions, it’s not because they have fewer environmental regulations. They’ve just got much better project management than we do here in the United States. Alright, let’s do it that way, right? Why is it that France was able to build, what is it? I think they do like 70/80% of their energy grid is nuclear power. Let’s build a lot more nuclear power here in America and figure out what are the things that made it possible for the French to do it.

And the actual answer when you dig into it is in fact it was really more of like a decade of good governance in France that allowed them to do it, and we should try to have that same decade of good governance here in America to do it on housing. There are some places that have done a really good job on housing cities here in the United States. Austin, Texas comes to mind and see what they’re doing. Tokyo Japan has done a great job with housing and the short answer with housing is stop prescribing to people how they have to live and instead provide them tons of options and people will self sort for what makes sense to them.

Sam Bowman (44:15):

A partial answer to, I agree with that model. I mean that’s very much the kind of thing that we’re interested in at works in progress and learning from and copying models that work feels to me like a wildly underused model of doing things. It happens all the time in the private sector, but for whatever reason in government and in public policy, people could be very parochial and very focused on their own country. But it is interesting that I think that American cultural dominance also can be American political or policy dominance. I think around the environmental movement, a lot of what happened in Europe to me is actually directly influenced by what was going on in the United States and I toy with the idea of making the case in Brussels that basically we’ve imported these crazy American laws, this crazy American approach to building things and it’s completely European.

It’s all about hard laws and hard rules rather than consensus and the consensus-based approach to doing things that Europeans tend to prefer and want, but actually isn’t how things work in getting things built. But thinking more recently, something we haven’t really talked about at all in this conversation is immigration, and I am very interested in your thoughts about how the Democratic Party and how the abundance movement should think about and talk about and should act on immigration, but I’m also really interested in whether you have any thoughts on why things seem to have gone wrong. At least as many voters would see it in the United States and in Europe and in some other countries outside of those two places roughly at the same time, post COVID. All of these countries in the developed world seem to have very similar problems at a very similar time and a very similar response as well, which I find very, very puzzling and I haven’t been able to figure out why there was this sort of collective decision that many, many voters have judged to have been a big mistake.

Jake Auchincloss (46:25):

Yeah, I agree that immigration in the West, both for Europe and America has been probably the defining political issue of the last 20 years. I don’t fully agree that it’s been the same in both areas or at the same time. I think Europe is actually five years ahead with its immigration politics because of immigration from both North Africa and the Middle East following the Arab Spring and other events. Whereas in the United States, we actually have a much stronger track record than Europe does of both assimilation of immigrants and of public support for immigration. This is a very easily elided fact these days given the politics, but in fact, Americans like immigration and what they don’t like is when 5 million people cross the border in the space of 12 months with no process or documentation. What happened with immigration in America, at least I’m speaking about America, is a failure of the Biden administration.

It’s not a failure of the American public. People don’t like it when there’s no plan and just literally caravans of hundreds of thousands of individuals that just come in and start costing – here in Massachusetts – taxpayers billions of dollars for emergency shelter. Here’s what people do like. I criticised the Biden administration but I’ll give them credit here. They like programmes like Uniting for Ukraine or programmes like what we had for Haitians and Venezuelans where there was sponsorship ahead of time, from both a housing and employment perspective, and these individuals. They had housing. They had a job. And they were able to immediately start to contribute to the economy and assimilate with them and their family. Obviously we have significant pockets of xenophobia, but overall Americans are quite welcoming of immigrants. But what happened was the American public got very rattled by the open borders of 2021 and there’s been significant backlash that Donald Trump has demagogue off of and taken advantage of, but he is now. He is now dangerously close politically to going way overboard. The American public does not like mass ICE raids. They do not like the performative cruelty that they are seeing. They do not want to see an internal police force commanded by the president that seems to be divorced from due process and he’s going to be punished for it politically just as Joe Biden was.

Sam Bowman (48:46):

So then, okay, rather than asking you what went wrong in every country, what went wrong in America, why did the Biden administration allow the border to become so porous?

Jake Auchincloss (48:56):

It got captured by a bunch of hard left groups that convinced them to do it. I mean, it was some misplaced sense of compassion during COVID maybe, I don’t know, but it was patently bad policy.

Sam Bowman (49:10):

So then given that there is a lot of public anger about immigration and yes, I take your point, polling says Americans are broadly pro-immigration but just very unhappy with uncontrolled borders and very high rates of immigration. Is there a best-of-both-worlds position for an abundance-pilled Democratic Party or even for moderate Republicans on immigration where you get to keep the immigration that’s really valuable to America but you still allay people’s concerns?

Jake Auchincloss (49:52):

Yeah, and I mean I’m a co-sponsor of bipartisan legislation to do this. I think it starts with secure borders, right? You’ve got to demonstrate to the American public that we control our southern border and our northern border. I think it is a pathway to citizenship for those 10 to 12 million undocumented immigrants who are in this country. They pay back taxes, they pay a fine, they demonstrate that they have learned English, and then they get a pathway to citizenship. They don’t cut the line, but they are able to provide themselves and their families with stability. And then I think it is a visa and asylum system going forward that is much more streamlined. It is clear, for example, that the asylum system is not fit for purpose anymore. The standard probably needs to be raised and the enforcement mechanisms need to be rationalised. The thing I would push back on though is the concept that Americans only like one type of immigration, high-skilled immigration versus low-skilled immigration.

I think it’s really important actually as Americans that we be clear that the circumstances of your birth should not determine the condition of your life. There are many brilliant, hardworking people who did not have the opportunity for education in the places that they were born, but they should absolutely have a chance to come here and build new lives. They got to do it the lawful and orderly way, but they should be able to come here and build new lives as my great grandparents did, because only allowing high-skilled people deprives American culture and the American story of its next chapter,

Pieter Garicano (51:26):

There has been a divide between how the Americans and how the Europeans have viewed tech. The Europeans for a long time have been very interested in breaking up the tech companies that they’re too large, they’re too concentrated, too powerful. The American approach would be more or less fair. We let Google have a 95% market share and such. And now in 2025, it seems like the American approach has actually led to huge amounts of investment in new R&D right? We see that yes, Facebook’s making huge amounts of rents selling advertising space through short form video to all kinds of Americans, but in exchange they’re investing all of that into what’s the biggest R&D in CapEx boom the world has ever seen. So I’m wondering whether you think that that level of concentration in profits, the same way that we think the pharma industry is great because it can make money reinvest into R&D, whether we think that the tech industry and the American approach has been vindicated and is good, they have made this money which they can reinvest in R&D and in data centres.

Jake Auchincloss (52:18):

So I’m a market Democrat, right? I believe in the market’s ability to allocate resources. I believe in free enterprise, and I would not want to adopt the European system of tech regulation. What I would say though is that the American system of regulation is not fit for purpose either because it is focused on antitrust fundamentally, which is to say, is your scale preventing you or rather giving you the ability to raise prices on consumers? That is wholly inadequate to questions about social media corporations because in fact, their scale is enabling them to radically increase the amount of consumer utility that they’re offering, the amount of consumer surplus that an individual receives because again, a network affects business where the more people that are on the more people enjoy that service. So antitrust is just the wrong question. None of my constituents care about this recent court case where Google has to offer some information to Bing.

I can’t even keep track of it. What we should be doing is talking about what we actually care about and what I actually care about, and I’m very confident that my generation of parents are with me. I care about the integrity of the developing brain, and I want Meta and Google to invest in R&D. I want to beat China on the tech frontiers. They do not need to attention-frack my children to do that, and I want to see strong labelling, regulations, guidance, science informed laws that give our kids the freedom to be with one another and not be productized by these corporations.

Sam Bowman (54:07):

I agree with your point about antitrust. So many of the complaints people have about the internet are much better thought of as consumer protection problems – counterfeit goods, fraud – things like that. If anything, scale reduces those problems because there are huge reputational costs. And it seems to me to be a really bad diagnosis of the problem – there are many problems on the internet, there are many, many things that people would like to see fixed – but assessing this is a problem that gets bigger as companies get large is just working backwards, either from an outcome you want or from a tool you have and really badly suited to most of the problems normal people seem to have with the internet.

Jake Auchincloss (54:54):

I think that’s exactly right. And it also, by the way, could create a bunch of case law that could come back to bite us when a bunch of relatively small and nimble AI chatbot startups start doing a bunch of stuff that we don’t like. And then they’re going to say “wait a minute. We’re the competitors to all the companies you said had gotten too big and didn’t have enough competition.”

You’re going to be like “we don’t like what you’re doing either.”

And what we should actually do is just say what we want these companies to do. How do we want them to behave? It’s analogous to, in the biotech industry, where I want things that are safe and effective, and sometimes that’s going to come from a big company. Sometimes it’s going to come from a small company. But if a small biotech creates a cure for ovarian cancer, I’m happy. But also, if a big company creates a cure for ovarian cancer, I’m not any less happy. I just want it to be safe and effective. The scale is not what’s important. What’s important is that the product meets the standards established by the American public.

Sam Bowman (55:50):

Are there any policy areas or are things that you would like to get over the goal line that you think are really underrated compared to how important they are?

Jake Auchincloss (56:02):

There are a few. I will stay in the science theme for one of them, which is changing the way the Congressional budget office scores biomedical R&D right now. They score it on a 10 year timeline and they score it relatively small c conservatively. They don’t take into account a lot of the positive spillovers, I think exist changing how the CBO scores that would have massive leverage improving R&D. But I think that’s probably going to be pretty standard fare for this audience. I think people will agree with that. I’ve long advocated for doubling R&D to 6% of GDP and making curing Alzheimer’s our nation’s flagship scientific endeavour. Towards that end, any amount of government work on creating a biobank for the brain, for neurology, and for learning how the brain works, and mapping the brain, would have tremendous impact.

Pieter Garicano (56:49):

Why Alzheimer’s?

Jake Auchincloss (56:50):

A few reasons. One 15 million Americans are projected to have Alzheimer’s by 2050. Each one requires three caregivers. So you’re talking about something like 60 million Americans sidelined either medically or as a caregiver by this disease with just a staggering emotional and financial toll. And number two is because it’s so hard that it’s a little bit, and this is such an overused analogy, I know, but we got semiconductors in part because NASA was like, “we want to go to the moon. It’s so hard. We’re just going to, and because we’re taking on the absolute hardest challenge, we’re going to ratchet up a bunch of other associated technology and science with us”. And by trying to cure Alzheimer’s, I think we would be astounded by the number of other really smart and cool things that happen along the way. “Oh my goodness, we accidentally cured ALS too. That’s the kind of thing that happens when you take on the absolute hardest problem.”

Sam Bowman (57:47):

Congressman Jake Auchincloss, thank you very much for joining us and if people want to get more from you, they can go to your substack. Simple but Not Easy. If you want to hear more from us, go to worksinprogress.co. And if you’d like to subscribe to the print magazine, go to worksinprogress.co/print. Thanks for listening.

You can watch or listen on Apple Podcasts, Spotify, and YouTube.

If you liked this episode, you’ll enjoy our first episode on The Great Downzoning. (Apple, Spotify, YouTube). And you’ll definitely enjoy the Works in Progress magazine, now available in print. Like a development planned by Create Streets, it’s beautiful, dense, and pragmatic.

You can watch or listen on YouTube, Spotify, or Apple Podcasts.

References

• Flowers of Fire: The Inside Story of South Korea's Feminist Movement and What It Means for Women' s Rights Worldwide Paperback by Hawon Jung

• The clan and the corporation: Sustaining cooperation in China and Europe by Avner Greif and Guido Tabellini

• The Swedish Theory of Love: Individualism and Social Trust in Modern Sweden by Henrik Berggren and Lars Trägårdh

• Drunk: How We Sipped, Danced, and Stumbled Our Way to Civilization Hardcover by Edward Slingerland

Transcript

Sam Bowman: Hi, welcome to the Works in Progress podcast. My name’s Sam Bowman. I’m one of the editors at Works in Progress.

Aria Babu: My name’s Aria. I’m also an editor at Works in Progress.

Sam Bowman: Our guest today is Dr. Alice Evans. Alice is a social scientist at King’s College London, and she also writes the excellent Substack, The Great Gender Divergence. And I wanted to start, Alice, by asking: what is The Great Gender Divergence?

Alice Evans: Thank you, Sam. So The Great Gender Divergence is about why the entire world has become more gender equal, and why some societies are more gender equal than others. Over the past century, women in some parts of the world – like Latin America, East Asia, Europe – have made tremendous strides in terms of gaining status, running parliaments, working in high-end careers, and also gaining protections from male violence.

But in other places, women continue to be very much suppressed and their mobility is limited and they continue to have low status. So the question is: why? What I’ve been trying to do, rather ambitiously, is study the cultural evolution of every single society in the world, going back thousands of years. And I’m the first person in the world to do qualitative research pretty much across all world regions. So I’m trying to cobble together this massive jigsaw.

Aria Babu: Is there anywhere in the world that is less gender equal now than it was, say, a hundred years ago?

Alice Evans: Aria, that’s a great question. I think a hundred years ago, before the advent of state institutions and modern communication technology, there would’ve been an enormous amount of cultural heterogeneity. So there may well have been some matrilineal tribe where women had high status in their village, and maybe that could have gotten suffocated, say by the Iranian Islamic Revolution, right? So there’s lots of heterogeneity, lots of things moving backwards and forwards. But I think for the most part, most parts of the world have seen improvements in women’s status and protections from violence.

Sam Bowman: What accounts for that being such a straightforward trend everywhere?

Alice Evans: Economic growth. So job-creating economic growth is a powerful engine of social change because, one, it motivates parents to invest in education. Two, when there is contraception and other kinds of technology, it enables women to reduce their fertility, control their time, pursue education, pursue careers.

But it’s mediated by culture. So in cultures where male honor depends on female seclusion, women don’t necessarily seize those jobs. In authoritarian countries where women are heavily repressed in terms of what they can say and organize, it’s harder to mobilize and persuade at scale.

Sam Bowman: Is your view that growth enables empowerment of women by providing resources for their education, and by creating incentives for it?

Alice Evans: Absolutely. I have this theoretical framework called the honor-income trade-off. Let’s suppose in South Asia and East Asia, they’re both concerned about male honor, but they also value income. So which one do you value more? And if you value income at all, if you value upward mobility and economic prosperity, you’ll be like, yeah, sure, okay, it’ll hurt our face, say in East Asia, a little if we send our daughters to the factory. But when the returns are so great, when there are labor-hungry factories and the recruiters are saying to the rural villages, “please give us your daughters,” those Chinese fathers sign the forms and send their daughters off.And when all the girls go, then you have a collective action change where you shift the equilibrium and it becomes normal, totally accepted, and a normal part of adolescence. And then women go into the cities, they gain careers, they become journalists and scriptwriters, and they tell their own stories. And this is a crucial process. It’s not just about individual women having jobs, but about reshaping the script and persuading people at scale and then mobilizing for stronger reforms.

Aria Babu: This might be too strange of a subculture, but with ultra-Orthodox Jews, or maybe just Orthodox Jews in Israel, the men basically seem to spend most of their time on religious study, but the women actually work. They still seem like they’ve got a very conservative gendered culture. Is that actually not the case? And they are much more liberal in ways that don’t fit my understanding of liberalness? Or is that actually just one of those exceptions that happens throughout the world?

Alice Evans: Great question. I’m very fascinated by Jewish culture. Ultra-Orthodox Jews tend to have six women per child. 80% of ultra-Orthodox women work. And I think there it’s important to recognize that high rates of female labor force participation don’t necessarily translate into status. So across Sub-Saharan Africa, for example, women can be toiling in the fields, but men may still be allowed access to the community governance circle. So it’s still the men who are doing the specific Hasidic rituals, only the men who are studying scripture, and that’s a high-status activity. So here it’s really important to have the qualitative insights to understand what actually gives status, because it may not be work.

Aria Babu: And I guess there’s also secluded work that women have done throughout history as well, like grinding wheat – as we talk about in a Works in Progress article – and stuff like that.

Alice Evans: Yeah, absolutely. Throughout human history, women have always done work. So the next question is: what actually gives women status? Women have always been grinding or doing drudgery at home, and that’s important for household survival. But then we have a separate question about what leads to people being revered, their words carrying wisdom, acting as religious authorities, creating community governance. So that’s separate from work.

Aria Babu: Okay. Should we get talking about East Asia?

Alice Evans: Yes.

Aria Babu: I think the first really interesting thing about East Asia is that when I see, primarily through your work, the way people talk about digital feminism in East Asia, it actually seems remarkably similar to our online feminism. You’ve talked about this on the Chinese Little Red Book social media, about how you’ve got ‘girls support girls’ hashtags, which seem very similar to me to the ‘girls’ girl’ TikTok trend. You’ve got the #MeToo movement in East Asia as well. All of that seems very, very similar. And yet actually, when you dive into what their cultures are like, they seem to be much more misogynistic. Is that because this feminism is actually much more marginalized than it is over here? Or is it just that it’s interfacing with a very different kind of culture and I’m only seeing the bits that are most intelligible to me?

Alice Evans: I think everything you’ve said is a hundred percent correct, Aria. So yeah, over the past 20 years we’ve seen this acceleration of technological connectivity. Let’s take the example of China, because obviously there’s heterogeneity within East Asia. In China, the CCP heavily moderates and suppresses any criticism of the state, but citizens are still allowed to criticize other Chinese people. So as long as it’s not organized, as long as it’s not a threat to the state, you can still be critical. So men on Baidu Tieba may bitch about women and call them like ‘tanks’ or whatever. And women on Little Red Book may show solidarity or sympathy with other women. So when they’re posting about gender-based violence or, again, it’s the idea of selfless sisters, certainly women can speak out and show empathy and solidarity. And that’s hugely important because throughout history – and our history has always been very patriarchal – men ruled the script, whether that was through state power, with Confucian literature, or here in Europe with very patriarchal literature. But now women can show alternatives and show empathy, and that shifts people’s expectations about the pathways to status or getting ostracized or actually respected. So online literature is hugely, hugely important in emboldening people to test out alternatives and changing ideas of prestige.

That said, there are important differences. One is that East Asia was always much more patriarchal. It had strong pronounced patrilineal systems, pronounced son bias, but also hidden elements that people might not recognize unless they’ve done qualitative research comparing around the world. So for example, one thing I was very struck by in my fieldwork in both Korea and Hong Kong and my many interviews with Chinese people is this idea of collective harmony and of extreme discomfort with being an individual troublemaker or speaking out. For example, one time I was sitting down for an interview with a South Korean professional woman, and she said to me, the first thing she said to me is, “Are you a feminist?”

“No, I’m just a social scientist. I’m interested in East Asia.”

And she was like, “Good. Because feminists are too outspoken, too assertive, but the gender problems here are very real.” And then she proceeded to tell me these very heartfelt stories about how she’d been discriminated against at work, how she’d been passed over for promotion, about how her male colleagues went to a lap dancing club and invited her. And then another woman, again, was saying, “Oh, there are these feminist protests here and I don’t like them.”

And I was trying to understand the problem. And again, it was this emphasis on assertion. In Japan there’s a saying: ‘the nail that sticks up will be hammered down.’ And so I thought, let’s do a little role-play exercise. And I said to them, okay, let’s suppose you are uncomfortable with the drinking culture at work. And suppose in your work office you put up your hand and say, “I’d like to propose that we don’t have company after-work drinks anymore.” And the minute – I was trying to be my most diplomatic, charismatic self to the best of my ability – and instantly her lips recoiled in horror, and she goes, “Well, I think that’s very...” She was totally uncomfortable with that kind of self-assertion.

There’s lots of Pew values survey data on this: if you have this culture that reveres collective harmony, then any kind of disruption or self-assertion, especially if it’s twinned with something which is already kind of subversive in your culture – i.e., feminism – it can cause a bit of disruption. So I think you were a hundred percent correct that there is this online literature that is tremendously important in pushing for protections against male violence. For example, in this year, 2025, South Korea has just announced an anti-harassment law. So that is super, super important, but people will react in a different kind of way.

Aria Babu: Are men also less supportive of feminism there? I guess my perception of the West is that maybe until very recently, most men were also basically feminists. And it’s potentially only a very recent backlash, and even then I’m not sure about it. Whereas it seems like men in East Asia – and this is obviously speaking in major generalities – are actually very hostile to feminism and a lot of their online culture seems incel-y in some way.

Alice Evans: Okay, brilliant. And I will respond in three parts.

First of all, I think the vast majority of men in Europe and America are very supportive of gender equality. They believe that women should work, believe that women should be leaders. And we see that both in surveys and genuine voting. I would say that’s a little bit different from supporting feminism.

So if you look at Pew data, men might say gender equality is fine, but I don’t want feminism. That’s a pretty normal response in the US. That said, you are a hundred percent right that men are more supportive of gender equality in the West than, say, East Asia. East Asia has had a culture of patrilineality whereby men perform the ancestral rituals. The son is the most prized child and celebrated, while girls are just an afterthought who are going to marry into another family. So a hundred percent there’s that cross-national difference.

And I think another factor that’s underestimated is that the West got very lucky in the timing of our feminist revolution. It occurred in the 1970s, when our media was much more shared and we had much more in common. So when there were higher barriers to entry, there were fewer firms, fewer outputs. We were all watching similar shows, whether it’s BBC News, Friends, or The Simpsons. So we’re all on that shared cultural journey. In Sweden, for example, they only allowed private media, private TV stations in 1989. Before that, everyone was getting indoctrinated with hardcore egalitarianism. Now, as we see this intense personalization and individualism in social media, that’s what East Asians and Latin Americans are getting right now. So women, of course, will opt into feminist media, right? Because it gives them everything they want. Yes, status is great, yes, you can be independent, yes, you can live your own life. And there are all kinds of female vlogs where they’re celebrating their independence after work, for example. But why would any man want to watch that, right? So by virtue of technological backwardness in the 1970s, a bunch of guys were watching pretty egalitarian stuff, or Cheers or whatever. But East Asians today can opt out.

Sam Bowman: I’m not sure if I actually think this, but Korea seems quite susceptible to Western memes in a way that I think Japan doesn’t. North Korea is the most communist country the world has ever seen. Christianity is most popular in South Korea, and they do it in quite interesting ways – the Reverend Moon’s church and mass weddings and things like that. Feminism seems to have caught on much more as a sort of ideal. I’m sure it’s not widely accepted, but there are subcultures of feminism much more there. And this sort of men’s rights ‘MRA’ thing has sort of caught on.

So is it possible that what’s going on in Korea is they have some sort of cultural openness, say, to Western memes and Western ideas in a way that Japan doesn’t and China doesn’t, and these are sort of wreaking havoc? It’s almost like a virus in the New World, where they just don’t have a kind of immune system to resist either, depending on whether you think these things are good or bad. But like inceldom, feminism, Christianity, communism, whatever it might be, is it possible that Korea is just very, very vulnerable to weird ideas?

Alice Evans: I think that’s an interesting hypothesis, and I will take us back in time to the 1870s when Japan had the Meiji Restoration. When they were being attacked by foreign ships, they thought, ‘We need to rapidly industrialize for our defense.’ And so many intellectuals went on tours of the West, Europe, the US. They’re like, we’ve got to bring back these ideas. And if you go to Japan, you see lots of European-style architecture, massive reforms of education, and many of the leading intellectuals are like, we’ve got to have these secular scientific projects. We’ve got to destroy the samurai. We’ve got to have massive reforms. So certainly within Japan’s history, they’ve taken on many commercial and cultural adoptions of Western culture in terms of dress, in terms of clothing.

So that said, I think what might be different in Korea today is they’ve managed to build – and this actually goes back to Christianity – a more militant labor movement, which then gave birth to democracy, which then gave birth to this feminist activism. So I would see a slightly different, more contingent story. I don’t think Japan has this necessary immunity to European memes.

Sam Bowman: But when the Japanese did it, it basically worked really well. I mean it worked really well until World War II happened, but it isn’t that they went over and just got their brains washed by Prussian militarism. They thought, ‘This one works well. We like the strength of the army in Prussia or in Germany. We like the way the English do their schools. We like the way the French do their financial system.’ And they brought these things back in a selective way, like a conscious way.

Alice Evans: Totally.

Sam Bowman: Korea doesn’t feel like that. Korea doesn’t feel like they are doing well out of the Western ideas that are going there and being adopted there. They feel like they’re victims of those ideas.

Alice Evans: Well, I think that, like I was saying, I, as a social scientist, will be careful about normative claims. So whether something’s good or bad is not for me to say. But I would say that the South Korean feminist movement has been very successful in many ways because there have been waves of protests and organizing in a distinctly Korean way. So for example, one fun little aside, if you go to a Western feminist protest, you’ll see that often each woman would wear her own style of clothing and she’ll have some groovy slogan, some hilarious thing, like, ‘Patriarchy sucks, but my boyfriend does even more.’

It’s something a bit quirky, but in South Korea, all their feminist protests, they’re all totally color-coordinated with all the same banners and all the same slogans because I think this reflects their strong culture of collective harmony and strength and unity and no one wanting to stick out. So certainly they’re doing feminism in their own way, but it has been incrementally successful in emboldening other women. And just this year they’ve got this anti-harassment law, and for example, feminists were part of the anti-president, anti-military rule thing. So I think there have been some important strides for women’s welfare and status and protections from male violence as a result of feminism, without any normative claims.

Aria Babu: This would explain another strange observation of mine, which is I think it’s so bizarre that K-pop has groups instead of having any individual stars.

It makes total sense to me that they have special schools where they train people from their teen years to become celebrities, and it kind of makes sense that the companies that do this want to invest across a bunch of different personality types so they can tap into lots of different audiences. But the group ... that seems so strange because obviously over here our biggest celebrities are basically all solo acts. Like, Beyoncé had to leave … Destiny’s Child ... I think? Taylor Swift, obviously.

Sam Bowman: Yeah, Destiny’s Child. Come on.

Aria Babu: It’s before my time!

Alice Evans: I think that’s a brilliant point, Aria. Absolutely. I think there is this strong reverence for the group and we can get into the history about why that might be. I totally agree.

Aria Babu: Another thing that I was thinking could be the reason why the feminist backlash seems quite big in East Asia is their dating markets are so, so skewed. So they’ve got the history of sex-selective abortion, but what I didn’t realize is obviously because you have a norm that men are older than their girlfriends and wives, because they’ve got such a low birth rate, it’s even more enhanced because you’ve got a smaller generation below, and then also you have the queuing effect. So you’ll have groups of 30-year-old men waiting to see if the next set of younger women want to go out with them. So that seems like, even if you have like a 100% coupling up amongst women, something like 15-20% of men would be permanently single. I can see why men in that position are less open towards, I guess, respecting women’s complaints.

Sam Bowman: Could you unpack that a bit? Why would a hundred percent of women coupling up not lead to a hundred percent of men coupling up?

Aria Babu: You’ve got more men than women.

Sam Bowman: Because of sex-selective abortion?

Aria Babu: Because of sex-selective abortion, yeah.

Alice Evans: So, yeah, a hundred percent. South Korea historically had skewed sex ratios because parents preferred sons: they were going to earn more, and also they brought prestige and status in the family, and they do the ancestral rituals. Although South Korea no longer has that sex ratio, certainly the existing chunk of men in their twenties and thirties face the world’s worst dating market. But here is where culture again is really, really important: because then men go onto online message boards and they vent. They vent about that personal experience of being ghosted, ignored, and they may be in a pretty crappy job and have pretty low status in a hierarchical firm where the bosses treat them like crap. So your life is pretty crap in many, many ways in a culture that is incredibly status-oriented.

So in South Korea, you really have to be in the top decile to feel a much greater degree of happiness. So South Koreans are usually pretty miserable unless they’re in the top decile and that’s why East Asians are much more unhappy than you’d predict from their level of GDP per capita because they’re only happy if they’re at the top. And so if you are a man in the lower deciles, one, you are demographically doomed. Women won’t give you the time of day. Your bosses treat you as incredibly inferior. You’re constantly bowing and kowtowing and doing all this nunchi. And then on top of that, you go to these message boards and you say, ‘Oh, women are awful,’ and everyone is agreeing with you because you’re in this very single-sex-oriented environment.

And that’s an important underrated point: that South Korea has a very strong history of single-sex education or single-sex classes. So a lot of young men won’t spend that much time with women.

Aria Babu: And they don’t have sisters.

Alice Evans: Great point. So I think this is really, really important – that male-female friendships can be a really important part of building empathy and understanding. Just in this conversation, look how Sam is building empathy with this perspective. He’s being transformed in this moment and becoming this radical feminist. So if we talk and share and discuss ideas, that can help build commonalities and understanding. But if you are just constantly separate, you’re an only son, you’re going to a school with other boys, then you’re ranting on a message board with a bunch of other men, sharing your perspective … And those message boards are not just showing solidarity with you, but also – I mean, you’ve read Hawon Jung’s wonderful book Flowers of Fire, and it’s all about this vitriol and this sense of vengeance and humiliating and getting revenge on women. So your whole cultural environment is totally saturated with pretty steep misogyny. And then you get all these feminists protesting on the street, which is like this attack to all your ideas of your expectations of how you should be treated. Then it triggers this counter-reaction.

Sam Bowman: At a personal level, how much does this affect the ability of men and women to couple up? That kind of thing probably is somewhat relevant in the West, but I don’t think it’s deterministic. You sometimes get misogynists and feminists in relationships together. It’s not the most determining factor. How big of an issue is that in somewhere like Korea?

Alice Evans: I think that there are many prior constraints to coupling up. So for example, this more gender-segregated environment where you don’t have so many male friends, where people are much more work-oriented. For example, if we look at Pew surveys and what people value, it’s all about money and work rather than, say, family. So it’s certainly a shift in values about what people want. So when young people are left to their own devices and not forced into arranged marriages, they pursue what makes them happy, which increasingly seems to be economic advancement. So those seem to be prior constraints. When I interviewed Koreans on precisely this point, they’d often say that the people on the message boards are crazy extremists, but the people that they meet in ordinary life are not like that. And obviously they could be consumer taste. So I think the online radicalization might be downstream of other things, though it’s certainly going to be a friction if you internally perceive men as against you.

Aria Babu: How do young East Asians date? Do they have dating apps?

Alice Evans: So in my interviews in Korea, people prefer to do blind dates where your friends are setting you up. And I think that’s partly associated with networks of trust and also ideas of propriety. East Asia has always had a much stronger culture of idealizing female chastity. So the idea of just meeting up with a man who you’ve never met and no one in your network knows, it’s a pretty crazy, it’s a pretty radical view. So you’ve got this one-shot interaction with no motivation to be nice afterwards because it won’t affect your future interactions and a state that sort of allows impunity for male violence. That’s a risky, maybe potentially disreputable thing to do. So people tend to set their friends up.

Aria Babu: I guess if people then have largely – and this might be the core of the problem – gender-segregated schooling and friendship networks, does that mean that some people don’t have friends of the opposite gender?

Alice Evans: It’s going to create some friction. You might have some cousins, some networks from work, for example. But also another really important thing, and maybe this is something we want to get onto later, Sam, is how many of the evening activities heavily involve a lot of alcohol, which isn’t necessarily a fun, conducive, welcoming environment for women. So if we go out in Britain … making social environments more welcoming to women, women will be more likely to want to socialize with you.

Aria Babu: So did they used to do arranged marriages?

Alice Evans: Yes. Oh, totally.

Aria Babu: So when did that finish?

Alice Evans: Great question. East Asia is patrilineal exogamous, which means that descent is followed through the paternal line, but you marry out, so you are not marrying within your immediate circle of relatives, and instead you are forging business relations with anyone. And so over the 20th century, as we’ve seen rising education and urbanization, young people flocked to the factories or to do office clerical work, and they increasingly mixed, mingled, built their own networks. And families were more permissive of this because that exogamous culture doesn’t motivate you to stay within the group.

Sam Bowman: Exactly the same as in the West, then. Western Europe has exactly the same kind of tradition right up until to the present day, basically.

Alice Evans: Western Europe never had arranged marriage though.

Sam Bowman: But it does have the pattern of descent through the male line and exogamy. So it has not clan-based business relationships, not clan-based marriage. You’re marrying outside of your family and you’re creating businesses outside of your family. So it is very, very similar to Western Europe, right?

Alice Evans: I wouldn’t say so. I’d say the patrilineal emphasis is much ... if you look at clan structures in East Asia, you might find that only the men are named. Whereas I can study my entire family history going back several hundred years and every woman will be named. So every woman is recognized as an important part within a family lineage. In Korea, maybe a hundred years ago it might be seen as disreputable to say the woman’s name, the wife’s name. So this idea is much, much stronger. I mean, in Europe, women could still inherit property. You might want a male to do it, but women could still inherit property.

Sam Bowman: Interesting. Because it is striking though that it’s unlike a lot of patriarchal traditional societies, where they are very clan-based and they are very much based on the family as not just the family unit, but the economic unit, and the extended family as being like that’s how trust goes. It’s really striking that according to your work, at least East Asia doesn’t rely that much on the extended family or as much as, let’s say, the Middle East does.

Alice Evans: Well, I think this happens in conjunction with economic growth, right? So if you have low economic growth and everyone is living in their village, then you have this very strong patrilineal clan structure, and then you have the ancestral halls. In China, since 1536, commoners could build their own ancestral halls. So you have these very strong clans, especially in the rice-growing regions of southern China, where you need lots of people to collaborate, building irrigation, et cetera.

So you are all cooperating within the unit. You might be building club goods together, you need a bridge, you build it within your clan. There’s this wonderful paper by Greif and Tabellini all about how people are collaborating, building these club goods. You might even build for defenses or something like that. You do it all within your clan.

But then when you get economic growth, there’s an incentive to go to a city. There’s an incentive to build all these diverse networks and you can build guanxi, which is the idea of mutual relationships of reciprocity and trust and taking care of one another, with almost anyone. So it could be a schoolmate, it can be a guy you met on the street. You can build guanxi with anyone in China, and that’s very radical from a more endogamous like cousin or clan marriage system.

Sam Bowman: Why do you think that’s happened in East Asia, but not in North Africa, the Middle East, maybe South Asia?

Alice Evans: Right. Great question. I think that could be primarily due to state power and prestige. So certainly in the Song Dynasty, it was actually illegal to marry someone within seven relations, and that’s similar to how the Catholic Church in Europe banned cousin marriage, whereas in the Middle East, North Africa, as Arab ... well, I should be careful as we don’t have genetic data, so I don’t know precisely when the Middle East adopted cousin marriage. That said, one hypothesis is that the Bedouin camel-riding Arabs always idealized cousin marriage because they were lactose tolerant, so they could ride their camels and drink lots of milk without getting sick. But the camel-riding Bedouins were at the top of the social hierarchy. They’ve got camels, so everyone thinks they’re great. So other Arabs adopted this system because you’re getting this special lactose tolerance. Then the Arab Islamic armies were incredibly successful in conquering and they became the ruling group.

Then everyone is adopting the Arabic language, Arabic customs, so all those regions that were once under the Umayyad Caliphate now have cousin marriage. Is that a coincidence? I welcome a geneticist who goes back to 400 CE and tells me whether they’ve got cousin marriage. But I’ll tell you one little exciting bit of evidence that you will like, Aria. We do have some genetic data from Central Asia and they find that in, for example, Uzbekistan, precisely the time that the Uzbeks started settling as opposed to being nomads, that’s when they started adopting this more endogamous marriage system. So it’s possible that as they started living in towns when they also simultaneously adopted a bunch of Arabic practices, they’re like, oh, this is the cool prestigious thing to do. So I think in my analysis of history, what I do see is this conjunction between state power, the ruling elites: they use wealth and extraction to create whatever they think is prestigious, and when they spread, you’re like, ‘oh, yeah, a bit of cousin marriage!’ and then it becomes culturally celebrated. If you meet someone, you might say your father’s name, you might be able to recite all the people that were in that lineage. At wedding celebrations, they’ll talk about their entire lineage and they’ll be tremendously proud. And this idea of being so proud of your clan and wanting to have that loyalty and build up your clan ... You get this sort of cultural persistence through pride and children’s socialization and loyalty.

Sam Bowman: So the answer might be that those regions have a strong cultural fashion for cousin marriage, which East Asia doesn’t have, in quite a higher degree.

Alice Evans: Totally. If you ask a Chinese person today, they might say it’s unlucky to marry someone with your same surname.

Sam Bowman: Yeah.

Alice Evans: So these things can get a bit sticky.

Aria Babu: When did East Asia start to become monogamous?

Alice Evans: Great question. Elites all over the world have always enjoyed a bit on the side, a bit of sexual variety and concubines, and East Asians were no exception. But around, I think, 1900, you’ll see more modernizing reforms, some stipulations against having concubines and against polygamy.

Aria Babu: So they had concubines but not multiple wives?

Alice Evans: There would’ve been some variation, but certainly concubines would be more common. But again, this is only an elite thing, not so common for the majority.

Sam Bowman: And when does this begin to fade away or break down?

Alice Evans: Over the 20th century, I think we’ve seen the rise globally of monogamy, even in the Middle East and Egypt. It became very uncommon over the 20th century to have multiple wives, and that may be partly fashion, partly finances.

Aria Babu: How do people treat casual sex in East Asia? It seems that the average marriage age is about 30, but from the polling I’ve seen, the average age of losing your virginity is like 20 or so. So clearly it’s happening somewhat, but they seem like a much more prudish culture.

Alice Evans: Certainly there’s always been this very strong ideal of female chastity in particular. If we go back to Confucian literature, it’s certainly elevated. There are even these stories of ‘exemplary women’ from the Tang Dynasty, and there’ll be stories about women who threw themselves off a cliff rather than be raped, the woman who cuts off her nose so a man does not assault her. The greatest woman in the world is one who preserves her chastity. So you are elevating it in status and you’re saying it’s very, very bad because if you’ve got a patrilineal system, you want to retain everything within the male line. And so in marriage markets, you would seek women who are signaling their chastity.

Fun story – in South Korea, they even had this little game of seesaw where women would jump on their seesaw so they could see over the wall to their house because that’s how secluded some of the samurai elites were. That’s how much they valued seclusion. Some of those samurai elites even practiced a form of veiling.

Sam Bowman: What’s married life like in an East Asian culture like South Korea for both men and women compared to single life, if they’re not at the bottom of the social pecking order, let’s say?

Alice Evans: If we look at nationally representative data, certainly we might see a big gender gap in terms of share of care work like cooking and cleaning, with women doing much more. Also, we might see a sense of women working at high rates, but often earning less. So you’re likely to see a woman in a lower-status, lower-rung job in her career. She’ll be set for the non-managerial track and doing a larger share of care work. And I think a really crucial part of East Asian culture is even though they’ve increasingly celebrated this idea of female independence and freedom and careers, their ideas of romantic love and emotional compatibility and deep devotion to each other are still much weaker. So Western Europe has had these very strong ideas of romantic love for maybe 250+ years. And if a man does not love his wife, if he’s not devoted to making her happier, then maybe he doesn’t have that sense of empathy that she’s at home doing the washing up while he’s out partying with his mates, drinking, and then he comes back drunk and expects her to deal with it.

So I think that expectation in terms of a sense of duty – ‘I do my duty and that’s her responsibility’ – is slightly different. And that sense of limited care and compassion may actually discourage some people from going into marriage. If you don’t think you’re going to be loved and treated and revered as an equal. That said, of course there’s huge heterogeneity. I’ve interviewed Chinese women and this one young woman said, “My husband, he cares about my dreams.” And he was willing to move cities so that she could pursue the job that she wanted. And romantic love is such an important and underrated driver of gender equality because a man who wants his wife to be happy, wants to support all her ambitions, really makes a huge difference.

Aria Babu: Something that’s noteworthy to me is that East Asian women in America are three times more likely to marry a white person than they are another East Asian. Why?

Alice Evans: My suspicion, though I haven’t done research on interracial relations in the US, would be that if white Americans score as much more gender equal and with more ideas of romantic love and sharing and compassion, then women will get a better deal out of marrying a white man.

Aria Babu: That’d be my instinct as well. I guess. Does that mean that ... are you familiar with the concept of passport –

Alice Evans: By the way, I should say the reverse could also be true – that if men want patriarchy, then you might get it more from marrying an East Asian woman. So it goes both ways, right?

Aria Babu: Yeah. There are happy and sad reasons for it to be happening, I guess.

Sam Bowman: One hypothesis I’ve heard about East Asia’s general problem with declining birth rates, and I’d love you to grade this hypothesis, is that over time the status and wellbeing of women outside of marriage has risen. They are more likely to be able to get good jobs, they’re socially more celebrated, they basically – it’s a much better thing now for a woman to be single than it was 50 years ago in a lot of East Asian countries. Whereas relatively, the status and wellbeing of women in marriage has not risen at the same rate. So the trade-off is much larger than it used to be. So women are much, much more reluctant to give that up and go into a marriage where, in some cases, as the way you’ve described it, they’re kind of almost slaves. They’re toiling away doing housework, they’re not getting any support, they maybe have to give up their jobs. And who on earth would want to make that sacrifice, especially if there’s no romantic love involved? They defer marriage, maybe they don’t marry at all. And the natural consequence of that, because very few people have children outside of marriage in those cultures, is you just get far fewer children. How accurate is that story, first of all, and how compelling do you think that is? How complete is that as a story about declining birth rates?

Alice Evans: Firstly, I totally agree with this idea of thinking about trade-offs. ‘What are my options?’ So 50 years ago there was massive stigma of being left on the shelf as a spinster, right? Even the CCP used to demonize and vilify these women 10 years ago as ‘leftover women’ because it was really trying to disparage them. This is a great example of how state power can be used to change the prestige of something. And that’s clearly changing. On Little Red Book, women celebrate and glamorize this sort of single life of doing independent things and enjoying their freedom. So a hundred percent, I’m with you. I’d also add that entertainment now increases the desirability of having fun by yourself. My only resistance would be not to say that married women are slaves. I think that would be going too far. It’s a more gender-unequal marriage, but not at that level. So I broadly agree with that freedom, that framework. Totally.

Sam Bowman: And in terms of... as a share of explaining the... at least East Asia, the level effect of East Asia, they have very similar problems in some ways to the Western world, but obviously South Korea has a much worse birth rate problem than most Western countries.

Alice Evans: Yes.

Sam Bowman: As a share of explaining that gap, do you think it’s sufficient? Do you think it’s a big part of the story?

Alice Evans: Oh totally. There’s a wonderful paper, Jisu Huang, who is a genius. She shows that as South Korea has seen a rise in unmarried women, it very closely tracks their decline in fertility. So a lot of the difference is a rise in singles. In fact, it was reading Jisu Huang’s paper – I read her paper, I did all my interviews in Hong Kong and Korea, and I was like, wait a minute, this thing is global! And it was by looking at a study in East Asia that I started putting all the dots together. I’m like, wait, marriage is declining in Turkey and Iran and the US!

Sam Bowman: So talk about this a bit more.

Alice Evans: Everyone is talking about why fertility is plummeting all over the world in the past 15 years, and many people on the left will blame house prices, cost of living, and all those things are true, right? As we all migrate to primary productive cities, housing’s very expensive. That’s a problem that policymakers should address. But is it the primary reason why people aren’t having kids? I’m skeptical because people have always done things that cost money. It really just depends on their priorities. And then when I looked into the data more, I found that it’s not just about people remaining as couples and not having children. It’s primarily that marriage rates are just dropping pretty much all over the world, with the exception of, say, Sub-Saharan Africa and South Asia, and it’s this rise in the US. 55% of people under 35 are still unmarried, uncoupled.

And this is happening across Latin America. This year, I was doing a month’s fieldwork in Brazil, then I was over in Costa Rica; two years ago, I did a month in Mexico. It’s happening all over the world that many people are staying single. So people are putting the cart before the horse when they’re talking about baby bonuses. So let’s look at Sweden, fantastically glorious social democracy, wonderful supports for working mothers and nurseries, but 60% of Swedish households are single adults. You’re not going to get many babies if people live by themselves.

Sam Bowman: I will disagree on the baby bonuses point to some extent for two reasons. One, there’s not very much opportunity cost between that kind of policy and let’s say a pro-coupling policy. Maybe there is if we have a fixed amount of spending and we could spend it on getting married. We could give marriage tax breaks or things like that. But two, I think actually the best way of spending money personally is on marginal babies. And I would not spend money on giving people money for their first baby. And my interest here is I have one baby, so I would be the beneficiary of that! But I think it’s about looking at where people are most likely to have an extra baby but are not having an extra baby. That way you can take a given amount of money and concentrate on a much smaller number of babies. Because the big problem is that for any baby bonus, we’re spending a lot of money on existing babies who will be born anyway. And what we care about is babies who will not be born if we don’t do this.

Alice Evans: Totally, totally.

Sam Bowman: So effectively, where is the most ‘elastic’ baby, to use a very strange bit of terminology! Yeah, they’re very elastic, very rubbery! I think that is third or fourth babies. And luckily, or maybe unluckily, third or fourth babies account for a tiny share, like one sixth or one tenth, of total babies. So we can give six times more for just rewarding the third baby you have, or ten times more for just rewarding the fourth baby you have than if we were giving you money for the first baby you have. That’s basically it. I just want to make a defense of baby bonuses.

Alice Evans: Let me clarify. I apologize. My resistance to the baby bonus is only the status quo current amount. All I’m saying is a descriptive claim that currently the amount of money offered doesn’t seem sufficient to increase Finland’s … China just this year has announced that they’re going to give the equivalent to like £500 per couple, per baby, per year. That’s not enough.

So I’m sure macroeconomists can work out what is the best way to increase ... We can think about babies as a positive externality. Parents hugely invest in the child’s care and education, and in return, we get this future worker that gives the rest of us pensions and that’s great. And so we should work out, as economists, how do you internalize this externality? How do you incentivize parents? And then this could feed into marriages because if there is a greater economic incentive to have babies, then you might be more likely to want to couple up.

So the only way to potentially rethink your ideas, if we see male loneliness as a problem, you might want to motivate marriage, and you might not do that by motivating the fourth baby. You might also want to give people a reason to get married in the first place. So there could be different things to think about. And I leave that to the macroeconomists to work out.

Sam Bowman: We’re now getting onto what I love talking about, which is tax. But another thing you can do is joint filing. Most married couples treat their income as a single pot. Most married couples probably do keep some separate income, but they mostly pay the same mortgage. They pool their income when they need to. They maybe pool their income permanently. So it’s very economically irrational to not treat them as a single economic unit. It’s very economically irrational, for example, to say that the man has a personal allowance of this much and a standard allowance of this much, and you, as a woman, have this much and this much, because they’re not acting in that way and they’re not making any economic decisions in that way. And then when they make decisions about who should work and how long they should work for, they’re not thinking in terms of themselves as individuals. They’re thinking in terms of a single economic unit.

The sort of tax system ... If you wanted to be more in line with the way people actually act and think about their finances when they’re a married couple ... and this is actually I think a really significant reason that marriage should be the way you do this, and not long-term unmarried relationships. Because they often don’t pool their resources. Marriage is often the trigger because basically legally you do pool your money when you’re married. Allowing joint filing and allowing for single pooled tax allowances, single pooled benefits and things like that would be I think economically efficient. It wouldn’t be a subsidy in the sense I consider a subsidy. It wouldn’t be about bribing people to do anything or rewarding people for doing anything. It would be about removing what is currently an irrationality in the tax system that basically says, do this thing that you would never do normally if you were able to just ignore the tax system. So allowing joint filing would be a really, really significant way of going with the grain. It wouldn’t be distortive, it wouldn’t be a big subsidy. It probably would cost a bit, but it wouldn’t cost that much, and it would recognize the way people act in marriage with their finances. So I think... I know what you’re going to say.

Alice Evans: Swedish 1970s tax reform!

Sam Bowman: Okay, great. We’ll get onto their transaction tax after this. There’s so much. Swedish tax history is surprisingly interesting. They did a wealth tax that they got rid of. They did a transaction tax that they got rid of.

Alice Evans: So this book that I would really recommend is The Swedish Theory of Love, and it’s basically about the cultural evolution of Swedish values. And one of their arguments is that Swedes have this strong culture of prizing independence. And what the Social Democrats did over the 20th century was state-enabled independence. And in the 1970s, feminists really pushed for individual taxation and they said this is very, very important that each person should be in control of their own income. So I just want to push back and say there is a huge amount of cultural variation and the way that we understand our incomes even after marriage could vary globally.

Sam Bowman: Yeah, I’m talking about the UK and the US. I don’t know how it is in other countries.

Aria Babu: It’s a bit more extreme actually. In Britain, we have two stages where you are penalized for getting into a stronger relationship. So if you’re receiving any kind of benefit, if you move in with your partner, that means that your benefits will be assessed jointly and they’ll probably be taken back. So that’s probably one way in which some people are stopped from getting into relationships with each other.

Sam Bowman: Although I think that is how it should be. So my argument is that once you move in with somebody, you are in fact a single economic unit. But keep going.

Aria Babu: Yeah, that’s fair. I guess. Yes, we do do that. And the other case where we do that is also the same problem: at the upper end of the income distribution, if you are two property-owning people who get married, you then have to pay capital gains tax on one of your homes if you sell them. So I’ve got one friend who’s getting penalized for this. He owned a flat, his wife owned a flat, they moved in together, and now he has to pay capital gains tax on his original flat.

Sam Bowman: So in fact, you’re completely right about this benefits point, certainly in Britain. And I think the US does have some joint filing. It doesn’t have full joint filing.

Aria Babu: My understanding is this is actually much more extreme in the US, but it’s harder to tell a coherent story because they’ve got so much variation state by state. But you can have very severe penalties for moving in or marrying someone.

Sam Bowman: In Britain, we treat benefits on a household basis, including things like childcare subsidies. So for example, if you are an unmarried woman with a child and you move in with the father of your child, your collective income, or in this case, if one of you earns over, let’s say, £100,000, your childcare subsidies go away. All of the childcare benefits we calculate on the basis of you or your live-in partner. We don’t do anything like that for tax. So all the money we give to people we calculate on a household basis. I think that’s correct. I think that’s rational. I think that actually reflects how people are and act. Although I disagree with some of the specific applications that I’ve mentioned. The fact that we don’t do that for taking money away, it’s really just a revenue-raising thing. There’s no rationale for that. There’s no economic rationale for that at all.

Alice Evans: I think there’s an interesting question about how big a financial incentive would need to be in order to motivate marriage and fertility. And I think it’s important to go back to your previous framework, Sam, of these trade-offs. What are people’s options today? And clearly, many women are willing to take a pretty mighty economic hit – if you just move in together, you’re saving on rent or mortgage. So people are already willing to take a huge, huge hit to their incomes in order just to stay single. So whatever your tax incentive would need to be, it would need to grapple with that reality that people are so entertained, amused, that they’re willing to go it alone.

Sam Bowman: I’m interested in what the potential cultural countercurrents to what we’re talking about are. Scott Alexander has written about this, others have written about this. There is a very, very persistent trend where whatever becomes fashionable among middle classes becomes unfashionable among the most high-status people. They want to show that they’re not like – not the middle classes economically, but people I call ‘upper normies’, people who like Radiohead and people who go to small plates restaurants and things like that. If you are more sophisticated socially than those people, then you want to show that you’re not like them.

Right now, among that kind of the lumpen elite, among people who have superficially sophisticated views, but actually not sophisticated views – like Radiohead is the sort of pinnacle there. Or maybe they think like Drake or Kendrick Lamar, they think Kendrick Lamar is really, really cool or something like that. The people who are more sophisticated than them who want to show off that they’re different to them will want something. So right now, among that group, not having children is very, very, very popular. Right now, your average university graduate is going to have children very late. If they live in a big city, if they’re culturally conscious, they’re going to have children late. The people who are above them, the people who are genuinely cutting edge and genuinely trying to show off that they’re really, really sophisticated, now, I think have some kind of desire. And I actually do perceive this to be happening, to show off that they will have loads of children and to show off that they are very pro-family and that they have big families. And I perceive the kind of nascent green shoots of it becoming high status now to have a big family, if you’re rich and culturally elite and culturally sophisticated, and I wonder if that might be something that is a countervailing trend to everything we’re talking about.

Alice Evans: I would push back. Name me one Hollywood film that features a family in the past 10 years, past five years.

Sam Bowman: Hollywood is downstream of what I’m talking about.

Alice Evans: But in terms of what we culturally celebrate, what we give prestige, where do we see families being celebrated?

Sam Bowman: I see a lot of mommy blogger type content on TikTok. I think you see a lot of, I don’t think this is particularly culturally elite, but there are subcultures, there’s the whole kind of weird trad-wifey type stuff. I don’t want to say that’s weird. There’s the whole trad-wifey stuff.

Alice Evans: So there are some very charismatic people who make bread. I totally agree. But that hasn’t led to any ... no labor market data seems to be suggesting that’s actually a trend. You can find anything in the world, there’ll be a couple of people who are very charismatic at doing it, whether it’s dancing with orangutans or whatever. But as a social scientist, I want to look at the data and see if there’s any evidence of it. And that doesn’t seem to be catching on. Now if large families become more popular, that’s all for the good. But I think that the question is going back to this framing of trade-offs. Now, in a world where women have reproductive freedoms, which we all strongly support, how can you make it for men and women that that’s a more desirable, attainable ideal compared to the alternatives? And so macroeconomists need to work out what are the right economic incentives. And this could be through the tax system. So some countries are experimenting with ideas that give people a tax rebate for having more children because then that’s one way of ensuring that you’re motivated to earn money, not keep a secluded housewife, and also have more children. And how can you make sure that schools are much more family-friendly? I do work in Brazil, in Indonesia and Malaysia, and all these people are suffering from the fertility crisis, but their schools are running from eight till one. No woman in the world is going to say, ‘yeah, sure, I’ll have the afternoon of having to manage my kid because then I can’t get a job. I can’t do fun things. I can’t have a pathway to status.’ So we just need to make our entire society much more family-friendly.

Sam Bowman: If it’s true that the job-child trade-off is important, do we see maternity leave and flexible working and any of those policies having any effect on child-rearing?

Alice Evans: I just want to go back to one more thing before I move onto the maternity leave. I was in Indonesia for a month and I did this one interview with this woman. I always start my interviews with very innocuous questions. And she tells me that she’s married. And I say, “Oh, do you have children?” And she says, “Yes, I have two children.” And immediately started crying. And I was like, “Oh, I’m so sorry.” And I tried to console her and she shared this very strong sense of FOMO. And she was like, “On social media, I see all my friends who are doing much more exciting things, and I’m just stuck at home with these kids, and it’s so boring and tedious and I have no life and I have no friends.” And one kid was like two, another was five. And in Indonesia they only really start school at age seven, and even then it’s only the morning. And she just felt that her entire life is now just drudgery. So Betty Friedan famously wrote about this in the 1960s saying “the problem that has no name,” that all these baby boomer mothers were trapped in drudgery and they were being schooled into thinking this is fulfillment and glory, but actually it was mind-blowingly boring.

And she herself is having this sort of Betty Friedan moment that it’s just grim. It’s just totally grim. When you see on social media that people are posting their pictures and they’re adventuring and they go into the city and they’re being glamorous and she just feels like an unglamorous loser supported by a husband that doesn’t really care. So I feel that we need to empathize with men and women’s perspective. And here I think we should be very careful to recognize that it’s also men who are stepping back from marriage and family. And so often the discussion is, oh, why aren’t women having more babies? That’s always the complaint from the far right. And I’m like, wait a minute. When I do my interviews in Brazil, in Latin America, and even in the US, there are lots of, if you look at Pew survey data, half of US singles saying, I can’t really be bothered to date. And lots of Latin American guys don’t want the responsibility of the family. If you think of it, marriage is a big responsibility for men. The idea that they’re supposed to hand over their income and get all these kids when now they too have these trade-offs. Men too have these alternative ways of spending their time. Call of Duty is pretty fun. So you’ve got all these fun things you could be doing with your time.

Sam Bowman: And also, of course, men don’t have the biological clock, so they have much less pressure to have children young. They have much less pressure to couple up with women their own age. So there’s much, much, much more freedom. And the downside risk for men is much lower. They can leave it until they’re forty and then change their mind and say they do want to have kids, which women find it much, much more difficult to do.

Alice Evans: And there’s also a collective element, and I think this is really important. So if your group of friends all have kids, then it could be great fun to be a dad because you all go to the seaside together, you’ll have a picnic, you all have fun and you share the care work. Everyone makes a dish of sausages or whatever, but if no one else... yeah, Aria, if no one else has a kid, then what do you do?

Aria Babu: I was just laughing at your idea of men hanging out, making sausages together, as the default activity.

Alice Evans: Oh, let me tell you, wait a second. I want to defend my men and sausages thing because actually, so I did fieldwork in small-town Alabama and in small-town Alabama... No, I want to take you there. So in small-town Alabama where I have my little green bicycle and I’m cycling up all these hills and I’m going to Baptist Bible study and I’m hanging out with all these families and they do a lot of barbecues and all the other families come round and it’s great fun, and they do all these layers upon layers of different dips and barbecues and everyone brings their kids and dads are hanging out and talking about trucks.

Sam Bowman: That’s true abundance by the way, when I talk about abundance, that’s what I’m talking about.

Alice Evans: Sausages, babies, right?

Sam Bowman: Yeah.

Alice Evans: So everyone’s having great fun and it’s a normal part of the community that everyone enjoys. But if you are not in that kind of community, if you don’t have those kind of club goods, then, one, there’s less fun to having your own baby. Two, you don’t feel like a loser. Now – oh, do you want to talk about being a loser?

Sam Bowman: I want to talk about what you’ve just said because I think this is where housing constraints are important. So housing constraints are important in one way because they drive up costs, but with my housing theory of everything hat on I’ll say is they’re much more important because they constrain and limit agglomeration – people’s ability to locate around each other. Normally we think of agglomeration in terms of economics and what jobs you get.

But agglomeration is hugely important when it comes to living near your friends, living near people your own age, living near people in similar life places as you. The more constrained housing supply is, the more difficult that becomes, the harder it is to coordinate with each other. So what you’re talking about I think is completely true. People are much more likely to have children if other people physically close to them have children. Remote work, by the way, doesn’t change this. People often think remote work will eliminate housing shortages. It won’t. If you can locate, as people in Alabama can, cheaply and comfortably around people like you, the same age as you, with similar interests to you, who also have kids or are also on the brink of having kids, it’s so much easier to collectively share the cost of having kids and kind of collectively raise the kids. That is how I think housing shortages drive the shortage of children much more than I think housing costs by themselves do.

Alice Evans: The town where I was doing my fieldwork actually had seen a growth in population. People were coming in because they thought it was a fantastic place for families. You can buy a house and everyone else has kids and it’s a wonderful safe environment, which is great for everyone.

Sam Bowman: Yeah, people Aria and I know have talked about finding a town accessible to London but far away enough that it’s cheap for them all to move to. It’s so difficult to coordinate and do that. First mover disadvantage is enormous. If three of you go and everybody else says, you know what? Actually I decided I didn’t want to do that, you’re screwed. Right?

Alice Evans: Yes.

Sam Bowman: It’s incredibly hard to fix that problem. It’s a coordination problem above all. It’s really easy if everywhere in London, where basically the cost of going there and other people not following you is low, because you’re centrally located, you can get to your job easily. This is true in all major cities. I think this is one really, really big and underrated reason that housing constraints do, I think affect people’s ability to have kids and the drudgery of having kids. When you have kids alone in a big city, it’s very, very difficult. You don’t have parents nearby, you don’t have grandparents, you don’t have people your own age. So you are completely correct. By the way, I completely agree on all things...

Alice Evans: The...

Sam Bowman: Housing shortages are not the determining factor by any means, but I think they are underrated as a factor by people who have thought about this a lot and who have a lot of understanding because I think they think on the economic margin, but they don’t think on the agglomeration margin. I want to slightly, and if you’ve got more questions in this vein, that’s fine, but I really want to get onto this question of business relationships and both how different, but also how similar in many ways contemporary East Asian gender norms are within businesses. You’ve already talked about women being invited to strip clubs with their male colleagues and being humiliated for not enjoying that.

Alice Evans: Yes.

Sam Bowman: Obviously we know that the kind of drinking culture of going out really late, drinking ridiculous amounts, maybe staying out all night, sleeping on the side of the road and stuff like that ... Can you talk about that a bit? I’m also kind of interested in how similar it feels to me to Western norms up until the sixties or seventies.

Alice Evans: Yes. Okay, so I’m going to rattle off a couple of books which I think are really fabulous. So Ed Slingerland, he’s got a wonderful book called Drunk, and it’s all about how feasting, banqueting and drinking lubricates social relationships. We all relax, we have a good time, we build these bonds. And I think especially in business cultures like Japan or South Korea, where everyone has to be incredibly reserved, incredibly careful about what they say, then businesses actually value an opportunity where everyone can loosen up and say what they really feel because that’s – what does this person really think? If all day you’re so guarded, you need to know, well, can I trust this other person? Another important element, and I’ve done so many interviews on this with Chinese businessmen, is if the state is a primary party of the economy with state-owned enterprises, their products are not necessarily the most competitive on price or quality.

So how do you get other people to buy your products? You send them little gifts, you take them out on evenings to build up social trust and rapport. It is so interesting. I interviewed this guy who worked for a major car company and he says, “Yeah, when I was working at the state-owned enterprise, we were having to go drinking every single night.” Because it’s like you’re plying your clients with more and more drink to build up that rapport. So there are a bunch of reasons why it goes on. You enjoy it, it’s fun. You give these gifts, you build up rapport.

And going back to the 1960s and 70s, we built up this institutional, we built up this resistance against it. And people started complaining about it ruining your weekends and evenings, Sam. And then we decided as a culture, we should try to reduce this. So for example, at universities, it would now be uncommon for academics and students to go out drinking together because we might see that as a dangerous environment where people do things they don’t really mean. There’s also lawsuit potential. South Korea hasn’t developed that resistance and institutional reform. So yeah, there’s been an institutional divergence certainly.

Sam Bowman: But I do wonder how much is lost. Clearly what you’re describing is excessive. Everybody knows that feeling when you’re on a work trip and you go back to a hotel room for like five minutes, then you have to go back out or go drinking with your colleagues, who may be wonderful, but you’re just tired. You just really wish you could sleep. Everybody knows that feeling I’m sure. But there is a lot of value to that, right? There is a huge amount of value to, as you’ve mentioned, maybe not getting drunk, not blackout drunk, not getting completely shitfaced, but losing your inhibitions, showing that you are willing to lose your inhibitions with each other. There’s a lot of trust building there. It’s fun. You get to share in a fun experience, and I am kind of interested in how much is lost by that kind of culture becoming riskier and riskier, not through any individual’s fault, but for example, for men on a night out there is just much less risk of them assaulting each other, for example. There’s much less risk of them having extramarital affairs with each other – depending on who they are – but probably there is less risk than if it was two women and two men of the same age, let’s say. Not because any of them is a bad person necessarily, unless assault is taking place, but one of the costs or one of the downsides of a much more gender-equal workplace is that that kind of interaction is much more difficult to have. And I’m curious about whether there are benefits to the East Asian approach that maybe we neglect or maybe we ignore.

Alice Evans: That’s a great question. I will reply threefold. So first of all, I make no normative claims about which culture is best or worst, and I a hundred percent agree that opportunities for men to spend time socializing together, enjoying, relaxing, building bonds, is hugely important. Richard Reeves makes this point that male bonding is super, super important and we all want to combat male loneliness because that has massive, massive ill effects. That said, for many of the men I interviewed, like the one I previously mentioned, it’s just excessive. If you combine this with a hierarchical firm where it’s the boss saying that you’ve got to drink – it’s not that necessarily people are going on these work trips for fun. They go because the boss is encouraging you to drink. It’s a hierarchically ordained thing. It’s not a fun thing that people are doing for their own enjoyment. It’s a pressure coming from the top in an incredibly hierarchical environment.

In South Korea and Japan, people bow. In Japan, you bow to your company bosses. I interviewed one guy, he said his Japanese firm, people had different colored lanyards, and if you don’t have the right colored lanyard, you’re not allowed to speak at a work meeting. Very, very hierarchical systems.

Suppose one person doesn’t want to drink. I gave the example earlier of having the work meeting and saying, “I think we should stop.” But you can’t resist individually. So, one, it’s not that the men are necessarily doing this for their own fun, for their own leisure. On top of this, it actually creates a number of gender inequalities in the workplace. And this is something I think is totally underexplored, but I certainly see it in my own interviews. The companies of course select, when it’s sales work, strictly business-to-business interfacing, you select for the guys, for the people who are going to be able to drink the most, right? And who is that? Men. But it’s the sales jobs which are often paying more because that’s how you’re bringing home the bacon for the company.

So the companies are often advertising these sales jobs specifically for men. And even if women are in those environments, imagine it’s a 90% male environment, where they’re drinking very heavily. It’s not a nice environment for any women. And many women gave me these terrible horror stories about how they were being groped by their bosses. But in a culture whereby there’s impunity for male sexual assault and harassment and whereby individual self-assertion is strongly condemned and a woman wouldn’t feel that she’s supported, it’s very difficult to speak out. So then of course these men feel they can do it with impunity and add to that the people are drunk, so they’re not really thinking rationally about it anyway. So it creates a very toxic workplace in terms of gender inequality and I don’t think that many men enjoy it. So actually the Chinese government sees this as a problem and over recent years, especially since COVID, they’ve massively, massively cracked down on it, really trying to reduce the drinking. They think it’s excessive. So while I’m with you that male bonding is great, many East Asian governments think of this as a little bit excessive now.

Sam Bowman: So I’m not really saying that male bonding is great, by the way. I’m also not saying that this is good because it’s fun. If I was running a company, if I was a pure profit maximizer, didn’t care about the wellbeing of my employees or anything like that, I would want my employees to have very trusting relationships with each other.

And I think one way of getting those trusting relationships is these kinds of drunken experiences together, perhaps. Anyway, I don’t know if this is actually true, but it’s possible. I don’t think it would be possible for them to have those kinds of experiences in a mixed gender environment. I think it would be, as you say, it would immediately lead to harassment or assault, which would be unacceptable for a number of reasons, even as a pure profit maximizer. So if that’s right, then one of the costs of a gender-mixed workplace is that you cannot sustain those kinds of very, very close bonding experiences. And so you lose that kind of workplace trust building, not because the women are making anything less trustworthy, but because you just can’t have that kind of experience. It leads to assault, it leads to extramarital affairs, it leads to drama, basically.

That feels to me, basically true. That feels to me like it rings really true. And it seems like, and we don’t need to get too normative and say one is better than the other, but it seems like it’s maybe an underrated advantage of the East Asian approach relative to Western approaches. I also kind of wonder if this doesn’t need to be a male thing. I mean, you could have nights out of women together. There’s no particular reason it has to be men going out drinking together. It’s just once you add men to that, it basically becomes a completely different dynamic and one that no workplace wants to encourage. I think it’s hard to measure. I think it’s probably difficult to ... I’m certainly not saying that that cost outweighs the benefits of gender-mixed workplaces, but it does feel like maybe a cost that people don’t recognize.

Alice Evans: Okay, I will refer to a wonderful book by my friend Robin Dunbar, How religion evolved, and let’s go back to chimps. Chimps build their strength as a group by having more chimps. You want as many chimps as possible so that if you are attacked by a predator, you can be big strong chimps and attack them. Now the problem is as your group of chimps gets bigger and bigger, you have a problem of mistrust because who is that chimp over there? What are they up to? I don’t really know them. I don’t really hang out with them. So what they do is they build trust and reciprocity through grooming. Very calm, lovely grooming, like one stroke per three seconds, and this sensual activity bonds the group. And Robin Dunbar argues that throughout human history, maybe going back 200,000 years, we’ve always developed these collective synchronous rituals as a way of building trust within a community. So it could be choral singing, it could be religious trances, it could be shamans doing their thing, getting groovy. It could be going to church, it could be some kind of away day thing that maybe you do at Works in Progress – I don’t know what you get up to!

Aria Babu: Women still groom each other as well, right? That’s actually quite common bit of female bonding that you’ll do each other’s hair or something like that.

Alice Evans: Yeah, so there’s been very cool experiments where they look at people both on a rowing bike and they measure their exertion and they find that if you do the rowing bike together, you actually are much happier and higher dopamine. You know, check out people’s brains, check out their biceps, and find out that we love doing sports activities! When people play sports together, there’s sense of esprit de corps, of team spirit. So there are other ways – send people out for a game of cricket, Sam. So I think there are alternative ways that humans have always built a strong sense of national pride, local pride, without necessarily involving alcohol. Alcohol is just one means of building something that we all value.

Aria Babu: I would definitely rather drink with my colleagues than groom or ritualistically dance with them.

Sam Bowman: We’re talking about the median company and I’m really interested in this from a historical perspective. I think comparing Chinese steel companies with Western tech companies doesn’t really tell us very much. I am curious though about what has been lost or what is lost when workplaces generally ... I mean the point of Mad Men is that this is not a good world. The point of Mad Men is superficially nice, but actually it’s miserable. Everybody hates each other and themselves. And yet, there are elements of that world and there are elements of the world of a hundred years ago, where you had much, much, much more basically gender-segregated socializing and gender-segregated business dealings that facilitated trust building, facilitated maybe disagreeableness among men, for example, that seems to have been lost and isn’t really recognized as such. It’s not widely accepted that disagreeableness within companies I think is much, much, much lower now or it’s much less tolerated than it was even 30 years ago. And I don’t really have a strong, I don’t think there’s a strong policy conclusion there. I think the benefits almost certainly outweigh the costs there, but it is interesting that those costs maybe are there.

Alice Evans: I think that any form of creative disruption has costs though my only caveat on your claim would be that a hundred years ago, it wasn’t so much gender-segregated, as very patriarchal, in that all the ways of gaining prestige, whether through work or politics or religion, were dominated by men. Women were left to the lower-status grunt work of raising a family.

Aria Babu: I have two slightly contradictory thoughts on this.

Alice Evans: Go for it.

Aria Babu: The first is that I definitely agree, there are certain things that I feel like you can only really say if you’ve been drinking, that could be helpful in a workplace. Did I actually do that well or were you just being nice to me? Am I actually a good manager? Things like that, where it’s much more comfortable to ask those questions when you’ve got your inhibitions lowered.

But the other thought is if they have this really hierarchical structure where it’s actually quite difficult to be candid with your boss, then it seems like maybe they lose a bunch of those advantages that you might get from the drinking.

Alice Evans: So what I would say is that if we want a work environment where people are open, where Aria can say to Sam, “Sam, I’m really not sure about this business decision.” Or if our goal is to have a situation where Aria can say, “Sam, I’m not sure about this decision,” there are ways of making workplaces more inclusive and liberal. And here I think that liberalism is incredibly important – that we show tolerance for dissent. And for example in Scandinavia, which is incredibly egalitarian and consensus-oriented culture where the boss might be cycling to work, not in a corner office, but hot-desking with everyone else, if you create a more open egalitarian environment and you signal willingness for dissent, et cetera, then I think then you are able to hear from all voices.

So many company leaders will want dissent because they want to identify those problems. They want to know what’s working. So you can signal that you at the top, let me hear from all these kind of critical people. It’s very important to recognize these trade-offs and for liberals to be seen as recognizing these trade-offs. Going back to your point about disagreeability, if I was sat here as a feminist and said, “No, Sam, you are outrageous and you should never say that,” then we can’t have those conversations. But any kind of process of social change does come with costs and disadvantages. And then you want people to express them openly so that we can think, okay, Sam does have a point that we do ... Any business, any organization wants people to share their concerns, share their frustrations. So if you’ve got some people who are very sensitive to that level of disagreement and are likely to take it badly, what can we do to have the best of both worlds?

Is it to encourage the more disagreeable men to express themselves more carefully? Some of us can just be very diplomatic. So this is something that I try to learn, to express some of my criticism in a more measured way. But also for the people who are much more sensitive not to take it to heart. So if your colleague says this, run it through one of the LLMs, see if that’s passive aggressive or not. So I am fully here for having open expressions of dissent. And that’s how we build a better society..

Sam Bowman: Okay. People often say that’s one of my real strengths at work. Incidentally, I’m often praised for my ability to disagree with somebody without them realizing that I’m disagreeing with them at work. It’s said to be a real strength of mine.

Aria Babu: Oh no!

Sam Bowman: You wouldn’t agree with that?

Aria Babu: Well, I haven’t observed it, but I’m worried now that I’m being manipulated.

Sam Bowman: No, no, no. Works in Progress operates in a much, much more open way. We don’t have the disagreeability problem. I don’t think.

Aria Babu: I think we’re all a little bit disagreeable, probably, is basically it.

Sam Bowman: But when you’re in a large organization, you obviously are dealing with people who don’t have that culture and who are in fact from a different culture. They’re from California, one of the most alien cultures west of the Tiber. And you have to be as respectful of that culture as you would be of any other.

Well, that was very, very interesting and luckily if you want to read more, you can go to Alice’s Substack at The Great Gender Divergence on Substack, or you can wait until 2027 and read her book, The Great Gender Divergence, which is coming out then. If you want to hear more from us, go to worksinprogress.co and thanks for listening.

You can order his new book here, read his annual letters on China here, and check out London's best Suzhou noodles here.

If you want more from Works in Progress you can read the magazine here or listen to our episode about land in East Asia here.

You can watch or listen on YouTube, Spotify, or Apple Podcasts.

Transcript

Sam Bowman: Hey, welcome to the Works in Progress podcast. My name's Sam Bowman. I'm one of the editors of Works in Progress.

Pieter Garicano: And I'm Pieter Garicano, another editor with Works in Progress.

Sam: Our guest today is Dan Wang. Dan is the author of a new book, "Breakneck: China's Quest to Engineer the Future." And I also recommend that listeners look up your annual letters, which are some of the best writing full stop, but by far the best writing that I regularly see on China. They're absolutely fascinating, incredibly insightful, and your new book brings together so many of those insights, so many more. It's really well written. It's a great read and I think it's going to be one of the most important books of the year.

Dan, I want to start by asking about the different factions within Chinese politics and the Chinese Communist Party. We're often used to thinking of the CCP in the West as a kind of monolith, but in your book you go into some of the different factions and some of the different ideological battles that take place within China. So can you start by talking to us about these?

Dan Wang: My simple model for thinking about the Chinese Communist Party is that it is a Leninist technocracy with grand opera characteristics. So it is obviously Leninist because it is led by a core cadre of professional revolutionaries that see their job as heaving the population into journey. And then it is technocratic because it has this heritage of the examination system that has been administered since Imperial times, that has really been boosted by the Communist Leninist system.

It has grand opera characteristics because it is pretty practical until it collapses into the preposterous. And one of the points I make in my book is that there's a pretty thin line between rationality and irrationality. You can be enforcing pandemic controls, which are making sure to break the chains of transmission, making sure that not too many people are dying all the way until you get to a lockdown of 25 million people being unable to leave their apartment compounds over the course of eight weeks, which is what happened to Shanghai in 2022.

So within this framework of Leninist technocracy with grand opera characteristics, I think what we can have is some people who are a little bit more into the technocratic elements. And I would say that there's a core part of the Communist Party since Deng Xiaoping brought China back from the brink from the Mao years, who are simply very interested in growth. These are people who perhaps have more training abroad who have spent some time in Europe and the US who have a pretty keen sense that Japan, Korea, Taiwan, have grown much more quickly than the People's Republic have. And they're really interested in just trying to drive a lot of growth forward.

And then you have parts of the Chinese Communist Party, which are a little bit more into the grant opera tradition. This is where I situate Xi Jinping. So every couple of years he will have a major celebration of the death of Karl Marx and you can see this giant portrait of Karl Marx hanging in the Great Hall of the People. There's a lot of flags, giant red flags where it is garlanded by the central committee.

And then if you take a look at some of the video footage of the Party Congress, which takes place every five years, it really feels like a Wagnerian opera. Without all that noise, the political downfalls might well be greater. And so Xi Jinping is someone who I think has a very keen sense of pageantry. He has a very keen sense of the apocalyptic, he has a very keen sense that growth is not the only thing there is. There has to be some centralized campaigns of inspiration that really drive the people forward, really manage the propaganda well, really discipline the party.

And so you can try to create these sort of factions of here's a Beijing faction, here's a Shanghai faction within the Communist Party. The way I think about it is there's this tension between Leninism on the one hand and economic growth on the other.

Sam: And this is something that I find you talk about people being forced to study Xi Jinping thought, and I'm really curious what actually is Xi Jinping thought? How would a scholar of Xi Jinping thought try to summarize it for somebody like me who is almost completely unfamiliar with it?

Dan: Some people study Xi Jinping thought because it's their job. I study Xi Jinping thought because it's fun. My simple encapsulation of Xi Jinping thought is that Xi Jinping is trying to achieve the centenary goal, which is encapsulated by the Communist Party, which is to achieve the great rejuvenation of the Chinese ethnostate by the year 2049, which is the centenary of the Communist Party's founding.

And within that, what Xi Jinping wants to do is to try to have about a dozen different goals, some of which include poverty alleviation, discipline in the party, economic growth, having a strong military, and you can stuff a couple of more things within this capacious framework. But I think the general framework that I would have for Xi Jinping thought is at its most simple, it is to make China great again under the leadership of the Communist Party.

And maybe the emphasis should really be placed on Communist Party leadership rather than the great rejuvenation of the people. Because if Xi has to choose, I think he will choose the party over the country, but he would like to have the Chinese people feel rejuvenated, whatever that means, but has to also be under the leadership of the Communist Party.

Sam: And does this include prescriptions about means or is this focused on ends and pragmatic about how China is supposed to achieve these ends?

Dan: I think there has been a shift. Xi is the third great ruler of China over the last 70 years. First great ruler of China was Mao Zedong, who ruled from 1949 to 1976 when he passed away. And I think Mao was first and foremost a poet. He was second, a great warlord and third, a murderous dictator who plunged the country into all sorts of catastrophes over his years in this role.

And so for Mao, I think the project of the ethnostate, the project of the rejuvenation of the Chinese people was first and foremost an aesthetic project. A lot of what he tried to do was to create some sort of beauty as he understood it in this sort of very bizarre literary theory lens of how to view the Chinese people.

So Mao was first and foremost a poet and then a warlord. Deng Xiaoping was a lot of these things as well, but he was much more focused on economic growth. He was very much interested in maintaining the primacy of the Communist Party, but he was able to relax a lot of these dictates and really try to focus on making China as rich as possible.

And I think Xi might be somewhere in between. He cares about economic growth, he understands that growth is really important for the Communist Party in order to establish its legitimacy. He understands that growth is really important because that gives China much more space for maneuver in all sorts of things. He doesn't want to go back to poverty, but there is this again, grand opera element here in which he cares about the way that China is achieving growth.

And so I think there is an end of achieving the great rejuvenation of the Chinese nation, but the means also has to be there as well. Where there has to be leadership by the Communist Party, there has to be some commitment to Marxism-Leninism, there has to be some commitment to the Confucianism that is endemic to Chinese history and he really cares about the way that China grows rich.

He doesn't want China to grow rich through the way that America has grown rich in the last 20 years, which is substantially driven by financialization on one coast with Wall Street as well as tech on the other coast, a lot of consumer internet represented by Silicon Valley. He wants China to grow rich by investing a ton in heavy industry in much more of a Soviet way. So there is a means that Xi prefers.

Pieter: So a lot of your book is about the training that the leaders have had in the People's Republic. You make a big point of them all being engineers and Xi himself is also a chemical engineer by training. But I'm kind of curious, how rigorous are these degrees that these leaders took? How highly should we actually think of Xi's cognitive abilities given that he studied engineering?

Dan: Not terribly rigorous, especially not rigorous when Xi studied engineering, chemical engineering in the years that he was in Tsinghua, which was at the tail end of the Cultural Revolution. So Xi grew up as the son of one of China's most important state leaders who ended up being the party Secretary of Guangdong Province, drove a lot of liberal reform. But Xi's father was at various points out of the good graces of Beijing.

And so he was sent away into the countryside and Xi himself didn't have a very happy childhood because his father was purged for various reasons, but he managed to get into China's top science and engineering university on the basis of being a worker-peasant-soldier programme. And so I think he was classified either as a worker or a soldier, I think probably more of a soldier.

But this was a time when you didn't really have to get really good grades in order to get into China's top university. Later on, he had a degree in I believe Marxist economics. And so this is what his doctorate is in, so we have to call him heir doctor professor Xi PhD. But this isn't in the sort of engineering of the sort that you and I love.

So I think a lot of the training of engineers in China's public bureau is frequently perfunctory at best. Many people who had engineering degrees never actually did any engineering projects. I believe Hu Jintao, the previous general secretary of the Communist Party did actually help to build a dam and his premier who had training in geology actually did some geological work.

But it is a little bit unusual and not all of them have done any sort of real engineering. But the way that I want to take this still a little bit seriously is that I want to say that the engineering culture, the engineering spirit is at least somewhat endemic to the Chinese political culture that stretches back into imperial times. So the emperors starting from basically 0BC in the first Chinese imperial dynasty, the Qin dynasty, they had barely hesitated to conscript a lot of people to build great walls or to build grand canals. These are fortification systems. These are hydraulic systems really to try to conscript the population into building a lot of these really big mega projects that took centuries really to achieve.

And a lot of these emperors also didn't really hesitate to completely restructure a peasants' relationship to land. And so I think that China has been practicing a form of absolutism way before any European monarchs with the idea in the 17th century or the 18th centuries. And so they had been really practicing a sort of absolutism.

And I also feel like China hasn't had the chance to develop very much of a liberal tradition in part because the Imperial exam system determines the status of a lot of the intelligentsia in China. And so you don't get really far trying to advance through the court by advocating for constraints on the emperor generally. There has been some of a liberal tradition in China, but it hasn't been very vibrant. And that's in part because the court has completely captured the intelligentsia and this is why we also have just very extensive meddling in the lives of people over a very long period of time.

Pieter: But how important is traditional Chinese culture to Chinese elite today? Are they embracing the heritage of the Qing? Are they reading the books? Is this like the Soviet Union in the 1940s when they re-embraced it as part of a new nationalism? How much do they care about what happened before 1949?

Dan: Very difficult to try to establish that with any sort of objective truth. I think that it is certainly the case that the Communist Party talks extensively about how great and wonderful various Chinese imperial dynasties were in the past. And I think for the most part it is more than just paying lip service to the glories of past Chinese culture.

I think there is some sense that the party wants to maintain the heritage of Confucius, maintain the heritage of Mencius and all of these other Chinese philosophers. I think there is a sense that they really do celebrate some of these great books from China in the past, and I think it is a little bit more than just any sort of lip service to past glories because if they don't refer extensively to past glories in China, what are they going to do?

Talk about this German philosopher who is really important in the 1870s who has this giant beard and who had carbuncles on his face. Now that sounds really, really weird. Why would they be celebrating a kind of an imperialist foreign ideology, a sort of Marxism that they, I would say barely practice themselves anymore? They have to draw something more fundamental to that and they have to draw on some sort of traditional Chinese culture in order to establish some of their cultural legitimacy.

Sam: You talk about in the book, I guess a sort of intellectual movement that you call the industrial party or that are called referred to as the industrial party. And there's really a line that really sticks out in my mind and you kind of say there sort of backwards inventing fascism. I wonder if you can talk a little bit about who these people are, what they believe and how this fits into the sort of intellectual heritage of both pro-communist China and also sort of pre-modern or pre-contemporary communist China.

Dan: The industrial party in China is not a formal political party. The Communist Party of China has a de facto political monopoly over all political parties in China. Technically, if you take a look at the People's Republic, there's also eight other parties including something called the Democratic Party or something. And these are all obedient and very loyal to the Communist Party. So the Communist Party is not the sole party, but it is above all of the other parties.

The industrial party is more of a meme-based movement that was organized through the Chinese blogosphere essentially through the 2000s and it still persists today to some extent. So these are a lot of people who are organized under a couple of core blog posts. The Chinese are just like us, they think about blog posts quite a lot as well.

And so a lot of the industrial party is, I want to be clear that I'm just caricaturing a lot of these views, but the view is that heavy industry solves all problems. There is no problem that heavy industry cannot solve. And so a lot of what they're trying to do is to advocate for organizing the state under the pursuit of science and technology projects.

It is very dismissive of the financial sector, it's very dismissive of service sectors at large. It is to say that China needs to build steel, China needs to build semiconductors, China needs to build, build. Now, I think there is a popular encapsulation of this view that perhaps more folks have heard of and that is the "Three Body Problem." The author here is Liu Cixin. He wrote this trilogy of the Three Body Problem. He also had another big book that's called the "Wandering Earth."

The "Wandering Earth" is one of these books that have been adapted into a movie over the last couple of years, and this is one of these big blockbuster movies that was really popular in China. And the core premise of the "Three Body Problem" and "Wandering Earth" is that humanity is under some sort of alien threat, some interstellar threat. And what the state really needs to do is to organize the entirety of society, band together under a technocratic government and defeat this foreign threat.

In both cases and in the books, it is actually kind of successful in the "Three Body Problem." The Chinese end up working pretty well with the US and they have some sort of world government in order to defeat the big alien threat. And so this is one of these core texts that I think is one of these big or texts that a lot of the industrial party is organized around.

But there is a pretty vibrant movement here where Liu Cixin is not the only author. A lot of this is organized under this still a sense of fierce nationalism that China was defeated first by the European imperial powers second by this brutal fascist invasion by Japan. China hadn't been defeated, but it had been kind of close and China was suffering very extensively under Japan's invasion throughout the thirties and the forties.

And the core diagnosis of a lot of the industrial party is that China was invaded, China was humiliated because it did not have science and technology. And so I look at this discourse and I think, well, isn't this a straightforward reinvention of fascism in the 1930s and the 1940s?

And I take a look at some of these texts by especially the Italian futurists in the 1930s, they produced some fantastic art. It is very geometrical. I really enjoy looking at these sort of fractured prism based art of aeroplanes and trains and in some cases wonderful pieces of machinery.

And they had a very strong aesthetic sense that technology is political and technology can be very beautiful and I think this is what a lot of the industrial party is. They would never say that they're trying to invent fascism, but having a technocracy administer a state bent on pursuing science and technology, I don't know if there's other ways to describe it.

Sam: It is funny you mentioned that on Instagram I get a lot of aesthetic building accounts. One of the things I'm interested in and the other day up popped in my feed a post about Italian rationalism, which was a movement according to this art aesthetic account that flourished in Italy in the 1920s, thirties and forties before declining.

And I thought, wow, that's an interesting one to pick out, but you are right. The aesthetics are really, really interesting and much more so interestingly than anything Germany did over that period. The focus on futurism and the focus on the aesthetics of technology and so on is very, very striking from Italy in particular in that era and interesting. And I was not aware that that was such an important part of, or that was an important part of this kind of group or this memeplex in China.

Coming back to this industrial party question, how niche is this? Who's engaging with it? Is this part of this kind of more extreme like right wing blogosphere, is this something that it's widely read and consumed are the younger cadres reading it?

Dan: For the most part, the industrial party texts are pretty mainstream in society and one might even imagine that this is actually a central guiding movement for the central committee and the Politburo of the Communist Party even today.

So almost everything would be extensively censored in China. The government censors everything - they have censored at times the first line of the Chinese national anthem "Arise who do not want to be slaves," which is something that the Shanghai residents were sharing extensively during the Shanghai lockdown. They censor all sorts of independent journalism. They've censored my website in China as well, but there has been kind of one movement that hasn't suffered very extensive censorship and that is the industrial party.

And one can even say that some of the core ideas of the industrial party, namely that China was defeated by the imperialists and the fascists due to a lack of technology, which I think is not too controversial of an idea, broadly speaking even among everybody else who looks at China. And then the second big idea that modern China today really needs to be organized to pursue a lot of advanced manufacturing.

One could say that this is a part of the ethos of the Chinese state, not just under the communist regime but also under the Taiwanese government, which has also felt a lot of these urgent needs to improve technology as well.

And so if you take a look at a lot of these texts in China, the industrial party hasn't been very extensively censored. Every so often you see that they have visits from high ranking members in the Communist party. A lot of their texts are actually sponsored by think tanks that are directly affiliated with the state. And so these people are kind of thriving.

Now, every once in a while someone will say something odd. There has been one member of the industrial party who has been one of these big blogosphere members who has been pretty supportive of Ukraine's fight against Russia. His remarks are occasionally censored, but for the most part I would say that the industrial party ethos is now baked in.

Pieter: And more broadly, if you are someone, if you're in your early twenties and you decide that your goal in life is to become general secretary, what do you do? Who do you hang out with? Where are you and what are the choices you're thinking about making in the next 10, 15 years?

Dan: Pieter, you're a young, ambitious person interested in politics in your twenties. Are you asking because you're interested? Well, here's what I recommend that you do.

The first is that it helps to have a family member who is high ranking in the party. So Xi famously is part of what people would call the Princeling faction because his father was one of the, at times one could say one of the 10 most important members of the Communist Party under Mao Zedong and also under Deng Xiaoping.

And so it helps to have a high ranking member in the party, but that hasn't been a requirement traditionally, even now there are still a lot of smart folks who are able to get into the senior ranks of the party without having illustrious family heritage. In part that is because the communist party has been relatively meritocratic.

The Imperial Chinese state is famous for administering the exam system and that I think has produced a measure of aristocracy that one doesn't necessarily find in many other countries. It would help if you dedicated yourself to studying Marxism Leninism. And now Xi Jinping thought - the Chinese are really looking constantly at selecting for the brightest kids in school and also encouraging them to become members of the Communist Party.

If you're a bright young thing in elementary school, starting in elementary school in China, people might be given what is just a red silk scarf in which you are identified as a very smart young person. Your name would be a red pioneer. And starting from that point, your teachers would be looking out for the red pioneers and constantly encouraging them to go to the right schools, join the party, and then doing the right thing.

In universities, if you do in fact join the party, maybe get an engineering degree in university, then you might be selected to test into the civil service system in China. And the traditional path for getting yourself raised throughout the party is first you have to know where the political winds are blowing. The party state talks endlessly about itself. You can watch the daily newscasts, you can read the daily newspapers, you can read the monthly Party theory magazine, which I did when I was living in China, which is a fascinating fun magazine to look through called "Seeking Truth."

You read all of these texts, you try to figure out what Xi Jinping's next objective is. Xi Jinping is changing his mind quite a lot. He cares about poverty alleviation one month. He cares about environmental issues the other month, science and technology the month after that. And so you kind of want to know where the winds are blowing and then you dedicate yourself really to serving the party and serving the people.

So one of the features of the Chinese communist state is that for the most part, you're not allowed to administer your hometown or the region that you're from, the province that you're from. And so you don't have these phenomena like in the United States where Joe Biden was from the Pennsylvania, Delaware area, these two states are right next to each other. And Joe Biden spent his entire political life representing Delaware before becoming president. In China, you're not allowed to administer your home province because starting from imperial times, they have been nervous that you could develop some factionalism within your own state. And so if you're from the Northeast, you would be rotated to govern a state in the southwest.

So you start from the village level, you try to get promoted into a third-tier city. So say if you are 25, if you're just out of university, you'll apply for a job with a party and they'll give you a village to run. Is that how this works?

That's right. You're probably being sent to the villages. That is a sign of trust within the system that you're expected to administer some of the poorest places in China. And that is where you prove your chops to be able to develop your life. And you can't run the party, you can't run the country without having some experience in a pretty poor part of China. That is true for Xi and his predecessor Hu Jintao as well.

So you start on this party level, you might get into a third tier city next, and then you might be asked to be the party secretary of a state-owned enterprise. So this is a telecoms company, an aviation company, an energy company. You might be tasked to run perhaps a think tank. One of the all think tanks are of course subservient to the communist party. And so maybe you'll be expected to administer a think tank, administer a party school, and then you're off to the big leagues to run a city as important as Shanghai or Shenzhen. And then you might be inside the central committee by the time that you are in your forties or fifties. And then after that you might have a chance to be general secretary of the Communist Party.

Sam: How much and how does the CCP tolerate or encourage useful dissent and debate internally? I don't mean questions about whether the CCP should run the country, but I mean questions about which taxes should we raise or should this dam that we're building be this large or this large or should we be investing in solar or should we be investing in nuclear or hydro? How do they encourage that and how much can they encourage that given that it's quite difficult to have a debate about anything that doesn't end up leading to lots of other questions that they might not want to have asked?

Dan: That is framing the question exactly right, because where is the line between technocracy and politics? That line could shift very, very easily. And one of the problems of autocratic systems is that you never really know where that line will shift. And so at a first approximation, I would say that the 24 men who run the political bureau of the Communist Party, the politburo, are at a first approximation, perhaps the only 24 people in the country who are allowed to do politics. Everything else is about the efficient administration of their will that they will transmit down after they have settled matters of politics and ideology.

And so a lot of these other things, I think China is broadly pretty meritocratic and also pretty broadly technocratic. You can't build a bridge, you can't build a subway system, you can't build a high-speed rail system without a considerable degree of rationality and a lot of technocracy, and this is for the most part, I think Chinese are pretty good at this stuff. The subways work really well.

Obviously the fascists have a legendary way with trains. And I would say that the high-speed rail system in China works extremely well. Cities work very, very well. I am very, very fond of Shanghai. Shanghai has these big leafy boulevards, it has cafes all over the place. You're never more than 15, 20 minutes away from a subway stop.

Shanghai had about 500 parks in the city in 2020 when I was living there. And by the end of this year it plans to have about a thousand parks in the city. And so a lot of these ways China is administered really well when it comes to a lot of technocratic energy policy.

A lot of their plans make a lot of sense to locate solar where it is, where the sun is most plentiful in the west, locate a lot of wind production there as well, build a lot of ultra high voltage transmission lines and build that into the coasts in a way that you have all sorts of these strange issues that are preventing rationality in the energy production systems in the UK and the US that you don't really run into these issues in China.

The problem, as you point out very well Sam, is that many things implicate politics and you never really know where the line is going to be. It might be that you work on kindergarten education policy, which year should children really start kindergarten, you might think that doesn't implicate politics at all, but then maybe that runs into some sort of a demographic issue and you don't really know where these sort of lines are.

And I think one of these challenges and ambiguities in autocratic systems is that yes, you try to be technocratic in general. I think that China does a pretty good job, but politics pervades and you never really know when you fall into the pit.

Pieter: Sorry, you mentioned the solar. They seem to be doing well transmission, they've built big infrastructure projects, but why do we believe that they are allocating capital effectively? Why isn't this going to be like every other centrally planned regime in history, where over time they'll make more and more mistakes and Xi Jinping has to decide whether to bet on computer vision versus LLMs and over time will make more and more mistakes and it's going to slow them down. Why isn't that happening here?

Dan: The first thing to say is that China has gotten a lot of things right. I would say that what is really important is to get a lot of things, get a couple of big things, and then you can make a lot of other mistakes. And even if they pile up, that's not so important.

And so I really enjoyed the document that Sam produced about the comparisons between the UK and France. And so even though France looks politically much more dysfunctional than the UK at the moment, they got a lot of things right which is to build a lot more housing and to build a lot more energy systems. And so you get a couple of big things right? And you have the ability to make a lot of other mistakes.

And if you take a look at the history of China over the last 40 years when it's really gotten rich, I spent a lot of time thinking about how they did get a lot of big things right in terms of how to finance the industrialization, in terms of managing the political economy, in terms of motivating the cadres, in terms of encouraging private enterprise when they should have been encouraging it.

So these are things that a lot of other developing countries haven't really figured out. It is pretty clear that China has grown much more decisively than India has over the past. Right now that's no longer true, but over the past China has grown much better than India has, much better than Brazil has, much better than Indonesia and Mexico have as well.

And so I think the first thing to say is that the political leadership has been able to do a lot of good things well. The other thing that I would add is that China has not only a very strong state, it has also a lot of very strong entrepreneurs.

There is this fierce churning dynamic entrepreneurial sector in China where things are kind of messy in a lot of different ways in I think highly positive and salubrious functions for society.

There is just kind of this messiness in Chinese society where as much as the party state breathes down your neck, a lot of people simply don't listen and they try to look for ways around the dictates. And that is I think a distinguishing feature of Chinese people that is kind of like Americans as well, where they just kind of see what they can get away with in a way that I think doesn't really characterize a lot of Europeans nor a lot of, let's just say Japanese people where they tend to be a little bit more faithful to what the state really wants them to do.

And so you have a strong state, you also have a lot of dynamic spirit. The state isn't always aware, maybe isn't even mostly aware of what the people are trying to do, of what companies are trying to do. And the state has the adaptability I think much more so than the Soviet system of understanding when it has a success on its hands, like DeepSeek. And then really trying to co-opt that and to say, well, good job DeepSeek, now you're part of us and we're going to try to support you in many different ways.

And I think the other part that I would mention here is that maybe central planning will not work over the longer run. Perhaps that is even the most likely scenario. But if you are able to just stay on your feet and not collapse in any sort of a big way, maybe you can hope that your adversary collapses more quickly than you can.

And so Napoleon's great phrase here is that the game goes to he who does not lose, and Napoleon mostly won his battles and then he lost five big ones and that resulted in total defeat. And so I think one of the big hopes of China today as well as Russia today is that, well, maybe we will eventually implode, but let's hope that our adversaries in the west implode faster than we can because they have all sorts of problems themselves. I think that is a hope, that's not a strategy, but we can't always assume that it is going to be the central planning autocratic power that will fall first, maybe others fall first.

Sam: This is one of the really central themes of your book that the sclerosis - and you focus on the United States, but I mean clearly Europe has this sclerosis even more so than the US does - of the West, which is something that most of us are used to talking about in fairly insular terms. We're usually used to talking about the problem with housing supply being constrained in California being a problem for Californians or more broadly for Americans or people who'd like to move to California.

The book really refocuses that and puts this in terms of great power competition between the US and China. And I think it's a very, very interesting and novel frame on what is called the progress studies or abundance agenda type debate.

In looking at China and looking at what China gets right, did you come away with or have you come away with new feelings about how to solve some of these problems in the western world or do you think that there basically isn't anything we can take from China, it's just too singular to China itself, and we can't really take any leaves out of their book or wouldn't want to take any leaves out of their book?

Dan: I think I want to split the west into let's say two different blocks. The first block is the United States and the second block is Europe, UK, and maybe I'll throw in Japan as well - untraditional choice for the West I grant. But what separates the West just not by democracy, I would say, is that the Americans are dynamic, they know how to grow and the others do not. And so that is my rough and simple measure for thinking about things.

In the first page of my book, I say that Europe and Japan are made up of these mausoleum economies, and I think that what really unites Americans are the Chinese, and I think these are the two most alike people in the world. These people look for shortcuts. They have a sense of the technological sublime, they have a sense that they are great powers and that every other country needs to fall in line. They have pretty strong states, but also states that can't really control what's going on in their own borders - the Chinese not very well to say nothing of the Americans.

And so I think that the Chinese and the Americans are both really dynamic peoples. And the other way that I think the West should be split between the US and everywhere else is that I think the US used to be an engineering state itself. And I think certainly it is the case that Europe and Japan were engineering states, but I have a sort of a sense that the Americans have more ability to achieve engineering once more.

And so the US had these two great growth spurts in terms of physical construction. There was a big growth spurt in the second half of the 19th century when the elites really built a lot of infrastructure, transcontinental railroad, all of these different canals, skyscrapers in Chicago and Manhattan. And then there was another big growth spurt during World War II and after World War II when they knit the country together further with highways and then the lawyerly society took over in the 1960s.

And one of the things I'm really interested in is to say, well, is the US able to have a third growth spurt after the first two? And one of the things I also want to be very clear about is that I think the US doesn't have to imitate China.

It doesn't have to copy China wholesale, it doesn't have to get to Chinese levels of construction cheapness. It doesn't have to get to Chinese levels of construction speed here as well. I'll praise the Europeans a little bit. I think that it would be good enough for the US to get to French or Spanish or Japanese levels of construction because they are able to build high-speed rail systems and subway systems at pretty high quality and you don't hear of massive trampling of human rights issues out of Japan or Spain.

I think that is where the US needs to be, but I'm much less optimistic about the Europeans at large because I don't think that they will really have this dynamic spirit that the US has some shot of achieving.

Pieter: If I may add to that, I was very struck because if I think of the engineering states in Europe, it's like Spain, Italy and France are the three countries where I'm aware of that the leadership almost all have engineering backgrounds and in many ways they've proven pretty good at public works, Spain, great rail networks and good highways.

But we think about which economies in Europe are still dynamic and still innovative. I think of the Danes, the Dutch, the Scandis, the Brits of course, within Europe I'd say are probably the most dynamic ones out there. What do you think explains that, Dan?

Dan: I think there are certainly some engineering states in Europe. Maybe it is the case that the Netherlands are an engineering state because the country has been under sea level for a very long time. And so they have been, there's this term by a 1950s historian in the US named Karl Wittfogel called Oriental hydraulic Despotism, that you have these giant states that are organized to manage water issues. So maybe we can throw in the Dutch as western hydraulic, whatever it is that have a hard time managing their water issues, though they're doing it quite well.

I think it is definitely the case that Spain and Italy and France are pretty good and they're pretty technocratic at building quite a lot of stuff, though they're not very dynamic. I think it's really interesting that you bring up the Danes as a potential success here. I just came out of a month in Denmark, which I had a really good time and I thought it was actually really amazing how well they were building. They're building more subway networks, and you can see this because they have a label of the year that their new subway station opened and some of these new subway stations took place in 2019. And I thought, oh, wow, you're able to build subways after 1919. That's actually pretty good to have something done this century.

The subway systems in Denmark are super clean, they're cleaner than China, maybe they're even cleaner than Japan. They're fully automated. Trains come every two, three minutes or so. And so this is kind of a really functional system.

On the other hand, I wonder to what extent the Europeans are able to achieve anything beyond excellent provision of public infrastructure because the continent as a whole, both of which are so much better than the US, hasn't done terribly well in terms of a lot of dynamism.

Over the course of my month in Denmark last month, Novo Nordisk lost about 30% of its market value when it had a lower revenue guidance, but it has been kind of outcompeted by the US Ozempic competitor with Eli Lilly and other great European successes, I'm not sure are on very good footing. ASML is doing very well in the Netherlands, but they're suffering a lot of these geopolitical headwinds controlled by the Americans and perhaps rejected by the Chinese.

And the other issue broadly with European stock market is that a lot of it is held up by French handbags. And I wonder if the Asians stopped buying all of these wonderful French handbags to what extent European market values will collapse.

And so here's actually something that I'm really interested to get both of your thoughts on because both of you have thought much more deeply than me about the causes of European stagnation. Now, I know both of you have used that Europe is a bit of a hand basket. The UK especially is even more of a hand basket. But I really want to try to steelman the case that I wonder if the Europeans could actually rouse themselves and be very dynamic there. What is the possible case here?

Because I see Europe as being completely buffeted by these two other great powers. The Chinese are actively industrializing. Europe has been a big sense in the US that the Chinese will industrialize the Americans. But actually if you take a look at the data, China has been much more effective at deindustrializing Germany, Japan, South Korea, which are much more competitive on these industrial goods that the US isn't even actually producing for the most part anymore.

And I wonder if the Europeans will also be comprehensively outcompeted by the Americans, whether that is in the biotech sector or frankly anything else in terms of the financial services or tech. But I'm really trying to find a silver lining here for Europe to become much more dynamic. So far, I don't see it.

After the latest round of the trade war, the China suspension of rare earth magnets sent a lot of German automakers panicking. I was thinking that, oh, maybe this one, these crises moments is really going to kick their efforts up a notch to really try to compete. But then that panic has sort of subsided again. And I think all of us have lived through these 20 crises moments, which we really should have, which really should have roused the Europeans. But what do you think is Europe and the UK really going to get their act together?

Sam: One thing that you talk about the US as being a country of lawyers, and you are clear that there are some advantages to that. And I think that the comparison with Europe is quite a good way of seeing those advantages because you take an issue like freedom of speech, which isn't primarily an economic issue, but does have some pretty important implications economically.

And the European approach to many issues is what I would call basically a regulatory approach where you have a single technocratic body. It isn't focused on some sort of growth goal the way maybe a Chinese equivalent would be, but it is focused on having a bunch of experts, supposedly experts resolve on a situation, collect evidence, and make a decision, and for that decision to be basically unchallengeable.

Whereas in the US adversarial system where there are courts and where there's a constitution, that in practice tends to be very, very extensive. And the constitution in practice does in fact constrain the government in quite significant ways. You end up with outcomes that are much more liberal for want of a better term, or much less prone to sclerosis than Europe has. So in that sense, the lawyerly based society does have a win on the other Western block, if not on the Chinese approach, which has its own disadvantages that are pretty obvious, I think.

What is the best possible case for European dynamism? So, I think the case for Europe is twofold. The first is that a lot of the advantages Europe has are really, really hard to get if you don't have them. Europe is a very, very low corruption place. It has very, very strong relatively to the rest of the world, private property rights. It has very, very, very good respect for the rule of law.

It has not perfect freedom of speech, but it has much better freedom of speech protections than most countries and most areas in the world. All of these things are very, very difficult to create if you don't have them. And Europe does have them.

Where Europe really struggles, and this is part two of the reason to be bullish on Europe, is on things that are really stupid and really, really self-inflicted wounds.

So I think of Europe's problems as being maybe kind of three or four really big ones. Number one is especially in the last 20 years, energy prices. And I think that has been largely self-inflicted by Europe's very, very enthusiastic embrace of what you might call degrowth environmentalism.

I think there are versions of environmentalism that involve more electricity output, more abundant energy and can go hand in hand with economic growth. But Europe has instead gone for a version of environmentalism that has involved less electricity output, higher energy prices, and less overall industrial production.

Europe also, despite its claims to having a single market and being this gigantic economic block actually is not nearly as well integrated as a single economic market as the US or China. Europe really is much more like a collection of 27 economies that have quite a good free trade agreement with each other than it is like a single country.

So there's much less cross-border trade within Europe than you would expect from looking at it if the US was the same size in terms of its economy or population or China. So there's actually much less trade within the European Union than you would expect if it was genuinely a single market.

Third is something that Pieter has talked about, and I want him to field this, but Europe's labor market regulations I think are its really, really fundamental economic regulatory problem. I talk about housing shortages as being the really, really big problem that the US and the UK have. And I think that's true.

I think that Europe does actually have some housing shortage problems, but much more important is how difficult it is to fire people, which makes it very difficult to hire people and makes it very difficult for companies to take bets, and that makes it much harder for them to be innovative.

And then the fourth hypothesis that I'm less sure of, but I think there is quite a lot too, is that Europe has sort of inadvertently ended up with a much more highly regulated and much more constrained financial system following 2008 than the rest of the world, even though the whole world adopted quite similar financial regulations.

Now, I heard Tyler Goodspeed, an economist make this argument a few months ago, and his argument is that the structure of banking markets in Europe is such that we have, most countries in Europe have a couple of big banks, whereas in the US you have thousands of small banks. And what this has meant is that all the banks in Europe have been held up by the strictest financial regulations intended to avoid another financial crisis.

They may be very prudent, but they've made it much harder for those banks to lend to startups, to growing companies and to innovative companies. And also on the demand side, on the company side, businesses are much more dependent on debt financing and on borrowing from banks in Europe than they are in the US. Something like 80% of European financing, of financing of companies in Europe happens via bank lending compared to something like 30% in the United States.

So these kinds of rules interact because companies are much more dependent on bank lending and because banks are much more constrained by them. Now, I don't think these four factors are all of the problem by any means, but I think that they're probably the biggest problems. And the reason to be bullish on these things is that most of them are pretty straightforward to fix. It's challenging from a political point of view, but there isn't a mystery as to why European economies are so sclerotic. It's really just a question of how do we design policies to fix these things. Pieter, do you want to add to that?

Pieter: I subscribe to everything that Sam said. I think the two things I'd add on Europe, one slightly serious, but still important is Dan, you mention that they're dependent on selling handbags to the developing world as it gets richer, but there's a more serious underlying point here, which is basically for all of human history, at least the last 200 years as a country has gotten richer, its inhabitants have decided to spend less time working and more time in Europe.

This is true with the Chinese middle classes. This is increasingly true with the Indian middle classes. And if we think of - especially we think of the very optimistic cases around AI and people having lots of free time - the Amalfi Coast, at least for the foreseeable future can only be had by coming to Italy. And so I think if you think of the Baumol cost disease kind of world, Europe has the very unique position of being able to be the string quartet where even though your productivity does not rise, you get to eat many of the productivity rises that happen abroad.

Of course, that's not a very nice future, appealing future to many Europeans, but it's one I think which certainly places a pretty strong lower bound on how bad things can get.

The other point I'd make is that if you actually look at levels rather than levels of change, Europe's economy - Italy, which is conventionally seen as one of our Europe's worst basket cases, still has a GDP per capita which is three times China's. So despite, and if you look at adjusted for hours worked, the gap is of course even larger.

And so despite what we say about Europe's economic problems vis a vis the rest of the world, it's still extraordinarily productive, has tons of human capital, and that seems like a success which shouldn't be ignored.

And this is something I also wonder a lot with China, which Sam and I were discussing before this call, which is if China had 300 million habitants, would we think of it as this great success story or this great challenge? It's no richer than Russia is, and we don't think of the Russian economy as a particularly impressive achievement. Could we just say that perhaps China's story is primarily one of scale or is there really something to admire there as well?

Dan: Well, I think there is something to admire in all cultures, even the culture of the Amalfi Coast. But I think you're right that scale is certainly a very big part of China's success. The US had this big freakout over Japan in the 1980s, which looks pretty silly now. Japan is a third of the population of the US and the ratio is growing smaller now every single year. But if Japan were three times bigger on par with America scale, there would be something more to worry about.

I think the big worry that I have, which also flows into the European discussion, is that China is really big and it continues to gain in technological sophistication all the time. I've just had a piece come out in this month's issue of Foreign Affairs, which I point out with my co-author Arthur Kroeber, that China's technological engine still has a lot of juice to run. If you take a look at China's advanced manufacturing, pretty much their two big areas of weakness are semiconductors and aviation.

I think they're making pretty good progress on semiconductors. They're making less good progress on aviation. But if you take a look at industrial robotics, if you take a look at drones, all sorts of automotives, China is basically on par with I think South Korean levels and will get to German and Japanese levels quickly enough, and they are going to be producing much more cheaply at 60% of the cost of an equivalent German product.

And so this is where I also feel it's about the trajectory, it's about the growth rates. It's not just about the levels. And this is where I'm still wondering whether there is a bull case for Europe, and I'm having a little bit of fun here poking you too to make the bull case for Europe. And so I'm sorry about teasing you, but I think the worry that I have continues to be that Europe further deindustrializes.

We've already seen this a little bit in the data that China has waged a far more successful trade war against Europe than it has against the United States so far. A lot of its most dynamic companies continue to fall. Amalfi coast is great, but not all European countries are really enamored of tourism. We've seen a lot of tourism restrictions out of Barcelona in particular where it seems like the local residents just want to grab the violin and smash that string quartet. They're not really happy about this string quartet playing all the time.

And there's quite a lot of European cities. I wonder if this is still the case in London where average incomes are lower than average monthly rent, and I wonder how long these sort of things are going to persist. It's pretty clear now that the populist parties in Europe are all leading in the polls. Perhaps they can't all form governments. Perhaps none of them will form governments, but populism is now pretty baked into the continent.

I'm not sure that these populists will really have the sort of technocratic solutions that are going to produce the energy or eliminate the labor restrictions. I don't see them doing that. And so is there still a bull case for Europe given that politics are kind of challenging and that economically it seems like they're just getting outcompeted in all sorts of ways as well?

Pieter: So Dan, let me ask you about the deindustrializing point. You make this point that China is going to converge on Germany and Japan very soon in certain manufacturing technologies. I find it hard to reconcile that with the actual stated level development that people say China has - $13,000 GDP per capita. South Korea, which is another East Asian manufacturing powerhouse, is actually at parity in terms of output per head with many European countries.

And so how do we reconcile this idea that somehow China is going to eat our lunch, it's going to surpass us technologically, but also by most metrics of income, consumption and levels of individual wealth, they are still much closer to a middle income country than they are to their East Asian neighbors. How do you explain that?

Dan: To answer the paradox, I think we have to determine what value we assign to manufacturing. And I think one could be kind of an economist, I'll just say to use a derogatory word and say that manufacturing isn't very important, which I think has been kind of the consensus among the profession for a while.

And I take the opposite view that production is really, really important, and I think this is something that the engineering state is more correct on - that manufacturing capacity per se is pretty important and the manufacturing sector is not very large. It is not very large in China. Manufacturing value add of GDP, I think is something like 31% or so. For the US it is something like 13%. And for the UK it's just single digits. Let's not even go there.

So if you think that manufacturing is important, which I do, if you think production and productive capacity is pretty important, then even though it is pretty small, the country that has a lot of it is going to be in a pretty good place.

So even for highly industrialized countries like South Korea where manufacturing value add is pretty high, perhaps on par with China, so I have to double check the figures, they are under a lot of threat from Chinese manufacturing. I think that China is simply climbing the same ladder of industrialization that South Korea climbed in terms of producing a lot of steel, producing a lot of ships, chemicals, semiconductors now and once South Korea deindustrializes it is going to be looking not so good anymore.

And so a lot of what I've written about in my Foreign Affairs piece is that even if consumption in China is fairly limp, even if they are not going to be a financial powerhouse, even though they're not going to be a cultural powerhouse like the UK, they're going to have a lot of productive capacity.

And that is going to matter economically as well as geopolitically mostly for what it does to other countries because they're going to deindustrialize, their economies are going to weaken, their organized interest groups are going to get more pissed off and the politics will also get weaker as well.

Sam: Is your view, could you talk a bit more about the economic model or the economic rationale of what you've just said? The geopolitical point I completely accept, or at least I completely understand, if you don't have the ability to make aeroplanes and tanks and battleships, then you will find it difficult to fight people who do. The economic rationale there doesn't seem as clear.

Dan: I want to first acknowledge that the advanced manufacturing is not going to save any economy. I think the economic rationale for pursuing really advanced manufacturing is not necessarily very, very high in some critical industries like semiconductors. What is the global employment of semiconductors? Well, it's probably on the order of 1 million to 10 million people on a very generous definition of taking a look throughout the entirety of the supply chain.

And yet these one to 10 million people are producing a really critical industry. And if you don't have something like a semiconductor industry, then a lot of other following innovations are also not possible within all sorts of digital devices in the world.

And so I think what is important here is that China is able to have decent growth. Right now it is growing at 5%. There are some who allege it to be lower. I don't really want to get into a discussion of Chinese GDP, but I think China still has sufficient compelling growth and part of what gives the Communist Party political resilience has been building a lot of stuff.

If you are living in a Chinese village off in the southwest in the mountains of Guizhou where I spent five days cycling in 2021, Guizhou has about 50 of the world's 100 tallest bridges. And the Communist Party has been building all of these amazing bridges where villages feel much more connected to each other, cutting down travel from let's say a day into a matter of half an hour. And that is real. And people feel really good about having these sorts of achievements, call it propaganda of the deed.

But if you build a really gigantic dam, some people look at that and they feel, wow, this is amazing. Call it propaganda of the deed. But if you have these drone shows, which I find a little bit silly, but people really like these shimmering drones at night, which are kind of a replacement for fireworks.

Sam: I love those by the way. I think they're incredible, just for what it's worth.

Dan: I think they're kind of lame, but whatever floats your boat.

And if you're living in a city, even a third tier city in China, you're getting more parks, you're getting cleaner air, you're getting better subway systems, you're getting connected to high-speed rail, you're able to travel to other big cities, you're able to travel to these villages and that all feels pretty good.

And so I think maybe the case for advanced manufacturing is not very clear, but it is great if you have it. And it is even better if your adversaries don't because again, this is where kind of politics gets in the way of technocracy.

We take a look at a lot of European Union spending. A lot of it is subsidies for agriculture. How important is agriculture? Well, economically not that much, but politically, extremely so. A lot of it is trying to manage the automotive sector's feelings for when they're being defeated by the Chinese. Those people have a lot of political power.

And so if the organized interest groups get even more organized and get really complaining about a lot of these sort of things, they do present more political problems than economic challenges.

Sam: So talking more about the actual economic upside here, you write a lot both in your letters and in your book about the importance of process knowledge and something which the Chinese have been very good at attaining and perhaps is one of the explanations for why American firms have been falling behind. But why does the market kind of undersupply this? Why if it's so important, do Intel or Boeing not do the thing they could have done in order to not start falling behind? What's the market failure that you think is at play here?

Dan: Process knowledge is not valued by the market because it's not very easily measurable. So process knowledge is the name I give to the residual of everything about technology that we can't really capture very easily.

So technology is the tools and the equipment to produce, let's say a piece of semiconductor. It is also the written knowledge that consists of the blueprints and patents for how to design an Intel chip. But then if you actually want to make chips, there's 1,000,001 things that's impossible to write down and that also isn't encoded in the instructions.

And so you really have to know how to store the wafers, how to manage the lighting, how to manage the electrical charge that separates a good fab like TSMC from a bad fab.

Let's just not even get into these names here, but I think the process knowledge is really important. It's not very well measured by the market. Here's where I am a little bit more critical of the sort of letting your economy be driven by the mandates of stock investors, which I think is a little bit more true of the US and perhaps the UK as well.

In China, as Mike Bird recently noted in our recent episode here, economic growth has been pretty good, 8% to 9% on average over the last 20 years. And then its stock market has been completely flat. And what's going on here? Well, the Communist Party isn't that enamored of the stock market. It's a little bit weird that this communist system has a stock market in the first place.

And I think what is also true in China is that they have enormous amounts of redundancy that track down profitability. You have state-owned enterprises that employ far too many people. You have a lot of redundancy in all sorts of equipment. You have all sorts of people doing the same thing all the time.

And where the system really proves its worth is in the middle of a major pandemic like what we saw in 2020 in which the US and much of the west couldn't make masks and cotton swabs and the Chinese were able to because they were able to retool their supply chain super, super quickly. You don't have just in time production, you don't have slogans from Tim Cook saying inventory is evil, rather you have just a lot of capacity to do stuff.

Pieter: So I just came back from a trip to India and the Indians are fascinated with China, both as a development story but also as a kind of icebreaker which is testing relations with the West as a newly empowered Asian country. One thing that was a common refrain is that the US' relationship with China and the problems Americans have with China today are because America simply can't suffer a rival of a similar size.

They it does not have so much to do with ideology or with security interests. There's just no space for another major power on the world stage. Do you think if the Chinese Nationalist Party had won the Civil War in 1949, do you think America would have the same challenges with Chinese growth that it has today?

Dan: It might well have far greater problems with China because there is a case that the Nationalist Party could make China much stronger and richer than the Communist Party has done so far. And so with the KMT, the Nationalist Party has succeeded in making Taiwan relatively rich and also an advanced manufacturing power. And I suspect that if the Nationalist Party was administering China right now, I think they would be equally nationalistic nursing its grievances against incursions by imperialist powers and Japan and very intent on making civil society much stronger than it is and making China a much greater technological power than it is.

I think one could make a case that Washington DC is very proud and very paranoid. I think it is definitely the case that the freakout about Japan in the 1980s looks pretty silly. Not only in retrospect, but at the time they were their treaty allies. And should America really have been super scared that the emperor could sell his land under his palace and then somehow buy the state of California because that was what it was worth? No, all of that looks pretty similar. That looks pretty silly in retrospect and maybe even so at the time because Japan was so much smaller.

Now I don't really care to defend the Washington DC viewpoint, but the security threats that they fear could be treated in several buckets. It could be the case that Beijing decides to launch a military conflagration over the island of Taiwan, in their words liberate Taiwan into socialism. And that could be a pretty big fear for the US because perhaps Beijing will move on to the Philippines and Japan next. Specialists discuss and debate in the community whether Beijing really wants to seize the Philippines and Tokyo. But that is one of these fears of DC that is really hard to put to bed.

One could fear that China will do unto Vietnam and Malaysia what it has done to the Cantonese in Hong Kong, which is to say that all of China's near neighbors must come to Beijing regularly and kowtow for the general secretary's pleasure. And to the extent that threatens American or Western interests, that is a discussion point that you don't want the entirety of East Asia and perhaps the Asian Pacific under the sway of the Chinese who are not very nice to a lot of its people in Tibet or Xinjiang or Hong Kong or really anywhere else I would say.

And the other big fear I think has to go back to this manufacturing, the question of advanced technologies, part of the reason that the Americans reacted against China's Made in China 2025 programme, which is this big industrial plan to say, we're going to dominate all the industries that you Americans and you Europeans and you Japanese are really good at. We're going to do unto the semiconductor industry, what we have done to the solar industry. The Americans said, what we don't really like that we lost and completely lost the solar industry first to the Germans and now to the Chinese. And we rather like to keep Intel and Boeing. Thanks.

Now, the Americans haven't really run Intel and Boeing very well. I might say that they ran them very badly indeed, but for the most part I think it is right for these countries to defend their interests. So there is this sort of geopolitical question of not letting the world be administered from Beijing. There's this economic issue and there is also this security issue. Again, specialists can debate to what extent the US should really be motivated by all of these things, but I don't think that all of them are illegitimate concerns.

Sam: We are coming up on time. And so with that, quite chilling from that quite chilling point, I want to ask something completely different, which is Dan, you and I are both great lovers of Chinese food, you know a lot more about it than I do. The world has moved on from associating Chinese food equals a version of Cantonese food. Some people know Sichuanese food, maybe a few other regional cuisines.

Can you talk about where you think an intrepid food lover should be looking at within China? What regions, what types of dishes that people might not be aware of? And also where, if anywhere can they find those in the West, in the US, in Europe, wherever.

Dan: My soul is very much sympathetic to the southwest. So these are the three provinces of Sichuan and Guizhou as well as Yunnan. This is where my heritage is. This is the land that James C. Scott referred to as Zomia Highlands, Southeast Asia. And in these mountains you have a lot of chili peppers as well as fermented foods. And you hop across a different mountain range and the food could be quite substantially different.

So I think most of the world now knows Sichuan food. Sichuan has these two big cities Chengdu and Chongqing, it lies inside this big basin. Both of these two cities are inside this big basin. And so the first thing I would say is that Sichuan has quite interesting food in these little mountain villages. And that is true for Guizhou as well. And I think that is especially true for Yunnan where I think there is no possible similarity that could unite something into a cuisine called Yunnanese food. When the north is historic Tibet, it's purely Himalayan and the South is raw jungle because it feels quite like Thailand. So how do you come up with a cuisine that encapsulates snow mountains as well as jungle?

And then I think the other big region that I would think a little bit about is this region of Anhui, Anhui province, which is in eastern China, that's next to Shanghai. And this is quite a region that is also pretty mountainous. It has been poor up until the recent past. Now Anhui is actually producing quite a lot of China's electric vehicles, but for a while it was better known for just sending a lot of its migrants out to Shanghai to work.

Anhui food is kind of not very well known, I would say even in Shanghai where it's not too far, the food is really stinky, it is really pungent. It could be pretty salty again because mountains produce fermentation and all sorts of salty food.

So those are the places that I would think about. Now, I think it is a little bit challenging to imagine that these foods could be recreated overseas. It would always be a pale imitation because even in Beijing and Shanghai, we have pretty pale imitations of Yunnanese food. Yunnanese food is characterized by a lot of herbs. It's characterized by a lot of mushrooms and these things don't ship very well even across the country.

And so usually when I'm in wonderful food cities like London, I try to eat all sorts of, I don't know, Indian food or these other foods that I've been quite excited about when I was in London recently. Most of the time I don't eat a lot of Chinese food abroad, but something I was surprised by was that in London's Chinatown I saw recently a restaurant, I believe it's called Dumplings Legend. You can put that in the show notes, but this is Suzhou noodles. It is a really wonderful broth and it has a lot of crab roe inside. And so I believe this is the first outpost of this big Suzhou restaurant chain that decided to put it in London. And so that's something I was really happy to see when I was there recently.

Pieter: Oh yeah, I remember reading in preparation for this episode, your most recent post again on your blog about your last trip to Shanghai. And you mentioned that you think that the food, while still brilliant, has gotten worse somewhat as it's becoming more made for influencers and pictures and it's less to be savored. What I thought was a very striking image.

And the really striking image is that Chinese people, especially younger people, if you go into a restaurant in China, almost all of them are looking down at their phones all the time there. Why is that? Why is influencer culture so much stronger in China?

Dan: It's a good question. I'm not very sure. If you just go to a lot of East Asia, people on average are just absorbed into their phones on average, much more than Europeans are. It's almost socially acceptable for people to be just staring at their phones even when they're eating with others. People are on their phones all the time when they're in the subway, not really speaking to other people.

A lot of Chinese cities are now built to be photographed. This is something called Wang Hong culture, which refers to just essentially famous on the internet. And this is just everything is meant to be Instagrammed or Little Red Booked. And this is just something that I find really bizarre about East Asia in general and maybe China in particular, where I feel it is a little bit worse even than the rest of East Asia.

Pieter: This is going to be a big area of disagreement between me and Sam because he thinks Tiktokification is a good thing. But perhaps this is a Europe bull case, is the fact that over 10, 15, 20 years, their brains will be slightly less fried if they manage to avoid this.

Dan: That's right. I think that is one of these big, nice European bull cases. I think on average Europeans have much better mental health than Americans. They may even have better physical health than Americans. I've married an Austrian and I think there are all sorts of good things about just the sort of lifestyle in Europe, but still I am pretty concerned that a lot of things will break because the populist wave will hit once the deindustrialization sinks in further.

Sam: Dan, thank you so much for joining us. If you want to read more from Works in Progress, visit worksinprogress.co. Thanks very much for listening.

Image credit: ‘Xi Jinping portrait 2019' by Press Service of the President of the Russian Federation / Roman Kubanskiy, via Wikimedia Commons (https://commons.wikimedia.org/wiki/File:Xi_Jinping_portrait_2019.jpg), licensed under CC BY 4.0. Used and modified.’

You can preorder Mike's book here and read more about land readjustment in Works in Progress Issue 19.

You can watch or listen on YouTube, Spotify, or Apple Podcasts.

Sam Bowman: Hi, welcome to the Works in Progress podcast. My name's Sam Bowman. I'm one of the editors at Works in Progress.

Ben Southwood: And I'm Ben Southwood, another editor at Works in Progress.

Sam: We're joined today by Mike Bird. Mike is Wall Street editor at The Economist. He also hosts their Excellent Money Talks podcast and he's the author of the forthcoming book, The Land Trap: the History of the World's Oldest Asset. So what is this book about Mike?

Mike Bird: So this book is basically something that I've been thinking about for years, particularly living in Hong Kong and Singapore, but also you guys know I've been interested in land and housing issues before then. When I was living in London, what I wanted to do was look at land from the sort of financial asset side of things. I always think about land as it's got the land use, the actual material sort of use of land, which I think is very well covered by you guys and a number of other people.

I think what you probably read less about is land and its development as a financial asset. I started out with a few sort of theses about this book, mostly about Hong Kong and Singapore and Asia, and sort of got down to brass tacks over time and decided this was a story that most people hadn't heard about. It starts 300/400 years ago in colonial America with these struggles to use land properly as a financial asset, which a lot of colonists to then Colonial America subsequently the US struggle with.

I think it's an enormously important asset for all sorts of reasons that intersect with housing. It's a huge driver of inequality. There's huge amount of credit attached to land in the form of mortgages. In fact, lion's share of bank credit works that way and in Asia it's been enormously important to the sort of development story. So that's in Hong Kong and Singapore, but also in Japan, in mainland China, in Taiwan, all over the place. You see these land related stories, how land has been used both well and sometimes poorly to aid in development.

I wanted to write something that sort of covered all of these things and over time it broadened out into this sort of hopefully general financial history of land and why it matters so much both through history and why it matters so much now.

Sam: Does it have a boiled down, if you were trying to summarise it in one line for the Economist, does it have a thesis that you could summarise? Is it just land is very important or is there something deeper than that?

Mike: I think land is very important, is probably the right way of framing it. I think it's very important in lots of ways that you don't understand. There's lots of things that happen in the world that you wouldn't associate as being to do with land or having a land related element, which actually have a huge land related element.

One of the people who I sent it to have a look at, he's a friend and also an author, Matt Campbell said it was really a sort of history of the modern world told through the lens of land, which I think is a nice way of putting it.

Ben: Because you mentioned Singapore and Hong Kong. I want to talk about something that served particular interest to me, which is different kinds of land ownership. So nowadays in the UK in particular, but I think around the world, the US etc, we mostly think about standard freehold land ownership, which essentially you kind of own basically the land and everything under it, usually going down pretty much to the earth's core and you own it with no respect to anyone else.

Sometimes you have property tax or something that you have to pay and sometimes if you want to extract minerals out of it you've got to pay someone, but essentially you own it and all of every bundle of rights with respect to it, you pretty much own.

But as we have learned from previous guests on this podcast and also I've read about, so Hong Kong and Singapore still have leasehold, so they still have a kind of feudal tenure where people kind of own it. You give them the right to occupy and use a piece of your land for a given amount of time, but at the end they give it back and this is existed in lots of countries, but in Singapore and Hong Kong, this is still a major thing, right.

Mike: Totally. Yeah, and I think it gets to something even deeper than that when we talk about leasehold and freehold is one of the things I think people don't always grasp about land. So people like us often talk about there being features that land has that other assets don't have. It's difficult to create more land, it's difficult to move land around, but one of the other ones is that it's extraordinarily long lived, right?

If you think about almost any other kind of capital investment in machinery or intellectual property or really anything either physical or intangible, these things age they depreciate land doesn't really depreciate. So I think that's an important thing and when we talk about freehold and leasehold, you can own a company for a thousand years, but if the company doesn't change, it will be worthless at some point much sooner than that. That's not necessarily true with land, obviously depending on where it is now.

Singapore and Hong Kong both have their leasehold tradition originating in the same place. They're both British colonies, British trading ports, and that's the history of the leasehold and basically the British War and Colonial office starts funding those places, these new crown colonies through land sales land auctions, which in the early 19th century is an extremely good way of funding port a trading city.

You have merchants who want to use the space on your islands as go downs or for warehouses of all types, all sorts of other things. You don't need to tax them with an income tax or any sort of sales tax, which would be difficult to administer. People would get around it and if it was too high, they'd find somewhere else to do their work and somewhere else to be based.

But with the land sales, you can pretty much guarantee who is operating on a given portion of land. These aren't big places. You just need a sort of a map and a series of people to administer where the sales are being made. So it's administratively simple. The better the city does, the more you can make from these land sales.

So basically these things fit extremely well and Stanford Raffles, when he gets to Singapore, he's basically responsible for instituting this system through the East India company. He's sort of obsessive of this. He's tried it in the very early 19th century in Java already where it was a sort of catastrophic failure, but he tried his best to make this system work of land sales and he had this idea that the land sales wouldn't just be a good way of raising revenue, but they'd break these sort of feudal social structure of some of these places, which I think he basically gets from Adam Smith.

It's not enormously clear through his memoirs where he's getting these ideas, but he was a big fan of Adam Smith. Adam Smith, obviously a sort of land tax advocate. Basically Singapore and Hong Kong still have that residue from the early 19th century.

Hong Kong didn't become independent. He was still administered by the UK and now administered by the People's Republic of China. Singapore became independent and hung on to the system in large part because it worked very well for them and also I think because it was the government rather than some other landowner that was the primary beneficiary from this. Since the end of the WW2, they've really headed off in different directions that we can talk about a bit. But yeah, the fact that they've retained it I think is down to those original British colonial roots as port cities basically.

Ben: What is it that gives the land value originally before settlers, a colonists have arrived there, why would they want to buy land and go there in the first place?

Mike: Sure. So like Raffles and the founders of Hong Kong made them free ports, right? So nobody's going to tax you on the way in or out. You can trade very freely from these places. It's under the auspices of in Singapore of the East India company is a sort of protector.

So basically the propensity of people to turn up in these places and start establishing operations to start trying to trade is enormous. And in fact, if you read through the memoirs and the papers written by the people who were the original colonists in these places, your Pottingers, your Raffleses, they're constantly surprised by how quickly people turn up, particularly people from the southern Chinese coast who just the second you say, I'm setting up a Freeport, they're on the junk boats and they're heading towards you.

It was a sort of immediate thing where there's this constant level of surprise how rapidly the population rises, basically anywhere you set up a Freeport in that part of the world because taxes elsewhere, pretty onerous governing systems are pretty poor. So it, it's enormously advantageous if you're a merchant in that part of the world.

Ben: And so the people buying the land are locals or from China and Southeast Asia or are they from Britain in this case or are they from Europe.

Mike: Initially? They're mostly from Europe. There's a few people who sort of specialised in trading in what would've then been the near East. They're mostly British companies and they're mostly the old sort of in Hong Kong you have the first land auctions, really the Hongs that we now know, and some of these companies are still going like Charlie Matheson, Swire, big East Asian trading companies, British and origin, but run by families that have been in that part of the world for centuries where their real focus is on trade in and out of China.

Those are the biggest purchases of land initially. And then as time goes on, you see local big companies emerging, particularly in Hong Kong in the middle of the 20th century, you see this huge transfer of business activity going into the sort of ethnically Chinese Hong Kong businesses. So that changed enormously. Mostly it's British sort of traders to begin with.

Ben: So these governments are selling leaseholds that is the right to occupy and use land for a period of time and pay a ground rent of what, 99 years or something. So will we see the original leases expire around the same time as handover or would they sell in for 10 years? What happens when the leases come back? Is there widespread acceptance that the government will resell the land on the best possible terms or are they expected to renew existing arrangements? And by the way, why did they do 99 years rather than 100? I've never understood that.

Mike: You know what? I've not grasped why they did 99 years and rather than a hundred and in fact in Hong Kong you saw the leases change quite a bit, right? So the original instruction that goes out both in Singapore and Hong Kong is that the administrations are to basically sell land for as long as it takes for it to be productively used for people to invest in it and want to invest in it and make a profit, but basically no longer than that and people settle around 99 years.

But there are some land leases in Calhoun, I think that were several hundred years. Some are short, it's 50. So people have sort of varied around a lot. I'm not exactly sure why 99 years ended up being landed on, but it did.

The question of what happens when they're renewed is an interesting one, and I think it's one of the biggest criticisms of this model in general is that you come under significant political pressure as lots of leases are ending at the same time, particularly when it's residential housing, to basically just renew them for close to nothing for the people living in them.

I should say in Singapore, the system's quite different. It's the one in Hong Kong now because of the way things have headed off in separate directions. So I think the best way to think about it is in Hong Kong by fiat, the government owns all the land At the time of independence in Singapore, the government owned a large amount of land but spent a long time acquiring land at wildly expro prices, incredibly low prices that the government was acquiring land for by fiat in Singapore and they used a large portion of that land for the housing and development board, which is to build this sort of unusual housing in Singapore. Singaporean own the leases for these, but they're extremely restricted in terms of what you can do with them from a western perspective. As a Singaporean, you can own one and only one.

You have extremely generous terms in terms of getting a mortgage from the compulsory Provident fund in Singapore. But acquiring lots of properties in the private market by borrowing to get them is extremely difficult. The amount that a bank can lend you to buy a private property in Singapore is extraordinarily restricted, and as you buy more, it's even more and more restricted to the extent that if you're buying a fourth, you've basically got to pay up in cash. You effectively can't borrow to get this.

So in Singapore they've used it very differently. They use that for all sorts of things. The fact that they have this system allows them to do this incredible management of individual estates where they determine the racial mix of a HDB estate. So if there's too many ethically Chinese or Tamil occupants of a given estate, they'll basically say to anyone selling on their HDB that it has to go to someone of one of the less represented races, which is sort of fascinating. Singaporean, the sort of cross between laissez fair and absolutely extraordinary social management that Singapore has, I find to be really interesting and unique, and I think that comes across in the way they use land quite a lot.

Ben: So this model of selling leases to fund the ongoing expenses of a local government hasn't gone away because one of the things we've talked about from your book before that you've told me about is that this is how Chinese local government funds itself. Am I right in thinking that they sell 70 year leases to developers to fund how they worked? Can you tell me more about this? That's all I know.

Mike: Absolutely. So basically this begins kicking off the seeds of this start in the 1980s, right? Deng Xiaoping is reforming China. He's doing this very steadily because the sort of political coalition building to go from a sort of command economy into a more market oriented one is difficult to build. He spends a long time doing this.

There's a sort of grand irony in where the rules come from. So China, essentially Chinese reformers want to copy the model that Hong Kong has. So they want to use, they hear that Hong Kong owns a hundred percent of the land in Hong Kong and they lease it out to people. If you're a Chinese communist, this is understandably quite an appealing thing.

So the communist constitution in China says that the state owns all the land, so no change required there. You just sell land use rights, you're not selling the land, so you get to keep parts of the existing system. So it's mostly copied from Hong Kong when it's adopted, it's adopted very steadily in the 1980s, you have these test cases. Shenzhen is the first place where there's a test case of auctioning land for use mostly by foreign manufacturers, foreign businesses. It's a way of raising enormous amounts of money, especially when you are otherwise quite worried about foreign capital, foreign investment, borrowing from foreigners. Certainly and effectively this system sort of starts to kick off late in the 1980s.

What really fuels it, which I know you guys have written about before in works in progress is this 1994 change to the Chinese tax law, which basically means that local governments, which previously had been responsible for a huge amount of the revenue accumulation and a huge amount to spending start to be responsible for the same amount of the spending, but all of the revenue that they make from ordinary tax routes goes to the central government first, and the central government decides then how much to reallocate to the local governments. So they're enormously s struck. This is a difference between, I think the region of it goes from 30, it goes from 70% of their spending being funded directly by their own taxes to 30% overnight. It is a huge, huge change, and the way that they make up the difference here is with land sales, which don't count as the revenue that has to be remitted to the central government. So they're given this enormous incentive.

The flip side of that is that Chinese households don't really have anything else good to invest in. You've got nothing that will provide either decent income or capital accumulation. Go and Google a chart of the Chinese stock market performance over the last 30 years. It's amazing that you're in a country that has been growing at sort of seven 8% GDP per capita over that period that the stock market's done basically nothing.

So anything else you invest in is going to be wheedled away by financial repression and all sorts of things. So there's enormous demand on the household side and enormous interest in supplying from the local governments, which is basically fueling the entire thing.

But the grand irony in all of this I find, is that they're essentially taking the British War and colonial office model. They're taking what raffles brought to Singapore and what the administrators of Hong Kong brought from the uk. I think largely not very well known by the people implementing the system that they're pulling on a thread that goes all the way back to the management of the British Empire almost 200 years earlier. So I find that all really, really interesting.

Sam: Is there a common thread as to why this is happening in Asia in particular? Is this like an Asian thing or is it just coincidence that this thread runs through all these different countries?

Mike: So I think the answer to that, and I've been thinking about it for years now, why does this happen in Asia? And also if you look at house price to income ratios, there are some measures of this in cities across East Asia that are just absurd places that make London and San Francisco and New York look astoundingly cheap, including in China, cities that almost nobody outside of China knows about. You're talking about second and third tier cities where housing is inordinate expensive.

I basically think it comes down to that financial repression model that comes through with East Asian development states. If you have capital controls, you won't let people invest overseas and you don't provide a sort of financial market that's based on returns for ordinary investors, that it's oriented towards funding either state backed companies or particular export oriented industries, and everything is structured around getting them cheap funding. You are going to repress the financial activity, the ability to make returns among households.

Then land is always going to be a great thing to invest in only so much you can sort of smother the returns to it's either valuable or it's not in a way that you can fiddle in lots of ways with what happens with a private company. It's much more difficult to do that with land, and I think that's basically the answer.

It's true in Japan after the second World War. It's true in Korea through parts of its history. It's true in China now. It's actually true in Taiwan to some extent. I think that's the thread that runs through it.

Ben: Do we need to introduce a Brit ISA in the UK so that we can fund our noble, homegrown British land rather than sending our investments into useless foreign stock markets?

Mike: Yeah, that sounds like a great idea. Just there's a bit of financial repression for the UK would do wonders.

Ben: One thing that might, well, that might help though. So I'm very interested in, so on the one hand you are saying, and I by the way believe you, that these Chinese cities are because of their incentives that they can only generate revenue by selling leases to build property and because everyone wants to invest in property, the only thing they're allowed to invest in that work can't be robbed from them very easily in the future. There's a massive oversupply of housing, but also that property prices as relative to income are extremely high.

But is it also true that rents relative to income are extremely low? So the properties have very low yields, but very high prices.

Mike: Properties in China have extraordinarily low rental yields. You're talking about very, very low single digits. Often the most popular cities, you're talking about less than 1%, right? So in a country that's growing, I mean now it's growing 5% per annum or whatever, but it was once growing at 10, 11, 12, and you're getting a sort of sub 1% yield. Honestly, rental markets in a lot of Chinese cities are very small as well. They really don't exist. These are home ownership oriented places.

I think there is, I loathed to bring this up with some people who, like me generally believe quite strongly in efficient markets, but there are some sort of obvious speculative behaviours going on. There are people in China who will save and save and save to buy a second and a third and a fourth property if they can get their hands on it. These are not rental properties. They're left vacant, and these are in families where the family structure is getting smaller and smaller with every generation. They're not to pass on.

I think it is a case of both a historical attachment and the fact that there is really nothing else to invest in. Also, lots of Chinese buyers completely rationally got the idea for a very long time that for political reasons, despite the fact that it's not a democracy at all, that for political reasons, the Chinese government would simply not allow house prices to go down, that this was part of the social compact and that they wouldn't permit it to happen. And if you believe that, then obviously it's worth buying property at almost any price. If you believe the dynamic is that the government must ratchet the price up, then it doesn't matter how expensive it's or how low the rental will yield is because it's one way travel. So it's not a totally irrational thing, or at least it wasn't for a very long time. The last few years have sort of questioned that premise pretty aggressively, but I think it was pretty sensible of them for a very extended period.

Ben: That sounds like then that basically, it's very interesting coming from a perspective where we talk about all the time we're thinking about housing supply. The problem is we don't have enough housing supply. If our local governments were given the right to print money by selling off leases, this would be like a gangbusters policy reform for the UK because right now that's the kind of thing where we are very much not in the situation of only having houses to invest in. We just don't have that many houses to invest in. So that's very interesting.

One thing I've heard about is that despite all of this, Hong Kong has a housing shortage, and that sounds reasonable when you think like, oh yeah, okay, Hong Kong's just this tiny island with loads of islands on it. But then I discovered that about 95% of Hong Kong is unbuilt and loads of that is farmland and lots of that farmland is not even farmed. Can you tell me what's going on here?

Mike: Yeah, it's a great question, and I think just on the previous one, one of the things that the best explanation that was ever given to me on this was that China manages to exhibit all the worst symptoms of both a housing glut and a housing shortage all at the same time. So extraordinary waste in absolutely rampant building and places that nobody will ever live at the same time as like 20, 30 times price to income ratios are quite common. Threading that all together is complicated, but it really is a pretty awful system in lots of ways.

In Hong Kong, the relationship between the government and the developers I find enormously interesting. So you've basically got to go back to the 1960s to I think start this story. The Hong Kong population is absolutely booming, partly because the cultural revolution, partly because people have lots of children and it is a space constrained place. You're right that there's actually a lot of place space that you could build on, but it is a space constrained place and house prices and rents are going crazy in Hong Kong.

You start to see these local players emerge and they're taking over from the honks. These are people like Lee Ka Shing. There's a handful of major real estate developers. There's a system that's brought in which transfers development rights from farmers in the new territories of Hong Kong, which is essentially you have Hong Kong Island that everyone knows Calhoun, the new territories go all the way up to the border with mainland China. They're at this point, mostly rural, large parts of 'em still are, right? They have interesting sort of clan rights to the use of that land in some places.

But basically the idea is you can get these farmers to sell the land to the developers and they'll be able to use it. What happens is you get these letters, these transferable rights, letters A and letters B, and the letters B. These real estate developers accumulate in enormous numbers. Again, I don't mean to be too market inefficient. A lot of these farmers are functionally illiterate and they're selling something and they really don't have a good idea of the value of it. The real estate developers start accumulating them.

A lot of the battle now in Hong Kong between the developers and the government is around the use of these development rights. So the developers say the government has made it too expensive to convert what the existing agricultural land they have, and they have the development rights, but you still have to pay the government to convert it into residential or urban space. The developers say it's extraordinarily expensive to do this, it's too expensive, and that's not why we're not doing it. The government says the developer's being greedy, et cetera, et cetera.

But I think the real reason behind this is that the Hong Kong government's incentives are a bit mixed up now when it comes to land prices. So basically all of the investment spending in Hong Kong is meant to be paid for by land auction revenue. As such, you need land prices to be high to some extent, and this has led to what is called in Hong Kong a high land price policy. This is both the government now it's the government under British rule as well. It got this nickname in the seventies, and it's basically just never changed.

That would be the sort of high land price policy model for why you don't get all of this land released for house building, and it's because the Hong Kong government incentives run in the wrong direction. Whereas in Singapore, they've run towards having a 90% home ownership rate. The Hong Kong government has focused on revenue maximisation in a way that hasn't necessarily led to the most houses being built.

Ben: Very interesting. I've also heard, and this is maybe as too much for rabbit hole, but it's intriguing. So you told us that Hong Kong owns all of the freeholds of Hong Kong. Still the Hong Kong government does, but it sells off leaseholds. But I've heard that it has an extraordinary power that no other freeholder has, which is that it can arbitrarily decide to resume its freehold at any point and pay off the people. Now, why doesn't it do that with, I know most buildings in Hong Kong are pretty tall, but they're not all massive skyscrapers. Why doesn't it resume the leaseholds and kick all the people out? Is this just a political issue?

Mike: That's exactly it. That's exactly it. I mean, it's funny because I think a lot of people struggle with this, especially when they live in a democratic system hearing about it, and Hong Kong's not a democratic system really. It has limited local democracy powers, but the government could trample people in a way that you couldn't in a western country, that there is still immense political squeezes on them.

The families that live in the new territories are enormously political powerful. These are sort of the original Hong Kong residents, the clans that have lived there for hundreds and hundreds of years. It's actually really difficult to expropriate these people essentially, which I think the government in lots of sense would like to do.

I also think there's something in the Hong Kong government, which is that they genuinely have been very successful by being less, say fair. If you look at the post-war period in Hong Kong, Hong Kong charts this path that almost no one else in the rest of the world is taking, right? Everywhere in the rest of the world is all, let's say fair is dead. Industrial policy is here, we're going to intervene in every market. We're going to have welfare states, we're going to have everything. Hong Kong says, absolutely not. We're not doing any of this and prosperous through in large part not doing it.

So I think there's a deep vein of dislike of intervention in general and people who just don't want to do it. Whereas in Singapore, you have that sort of unusual blend of active industrial policy in some areas, extraordinarily interventionist policy and land while actually being quite sort of liberal and pro market in lots of other ways.

Sam: So we've talked a lot about China, Singapore, and Hong Kong. Now I have some questions about Korea, Taiwan, and Japan. So one thing I'm aware of is that Korea, Taiwan, and Japan all had massive post-war land reforms, right? So all the land in the country got taken from the big landowners and split up. If I recall correctly, in Japan there was a maximum landholding size imposed after the war, and it was like an acre or three acres or something like that. So an astonishingly inefficient spread of everyone as though we were going to be like mediaeval subsistence farmers across the entire country of Japan.

And yet soon after that, Japan has an agricultural revolution, becomes very productive across everything, has massively growing cities. How is this possible, and tell me what happened in the other countries as well.

Mike: Absolutely. So I would say that these three places, Taiwan, Japan and South Korea have these sort of unique political circumstances that allowed this to happen. It's why there were dozens of attempts to do this in other parts of the world, none of them anything as sort of comprehensive as in these three places.

Basically Japan goes first, it's 1945. Japan is materially devastated, and MacArthur General MacArthur wields more power in Japan than probably any American has had over anything ever, right? He's essentially got the powers of a king, right? He's the only American king ever.

And he becomes this enormous land reform proponent. There's a guy, Wolf Ladejinsky, who works at the Department of Agriculture. He specialised in Japanese land and he's become obsessed with the idea of land reform, of redistribution from large landowners to tenant farmers. And basically he sells MacArthur on this. MacArthur doesn't need much pushing, but he becomes a bit of an obsessive.

So MacArthur forces the Japanese government to bring to him a law expropriating the large landlords, and handing the land out, and MacArthur sends it back and says, you're not doing anything like enough. We need to expropriate dramatically more middle-sized landholders. And so they do this and land reform happens and it's one of the biggest sort of redistributions ever really outside of a communist country, which I suppose isn't redistribution in the same way, basically a huge amount, I dunno the numbers to hand, but as you say, these are pretty small parcels of land. Often they're not economic to run at all.

Now if you look at Taiwan and South Korea, you have similar stories. Taiwan not governed by America, but at the end of the Chinese civil war in 1949, Chiang Kai-shek, the leader of nationalist China, arrives in Taiwan. He imposes martial law soon afterwards. He's got no Taiwanese power base, right? He's brought with him several million people from the mainland, including the remnants of the nationalist army. He doesn't have to accumulate political support in what remains of Taiwan. He's repopulating a large part of this country, and in rural Taiwan, he has no power base really, it's extremely limited. It's mostly urban Taiwan where the people from the mainland move to.

And in rural Taiwan, you can actually gain quite a bit of support by giving tenants all of this land. Again, this is supported by the same cast of characters from the US who arrange the land reforms in Japan. Wolf Ladejinskyi is in Taipei. There's also a bunch of other people in DC who are very in favour of these policies. Something very similar happens in South Korea as well.

And in all of these places, the huge fear is that you either do this, you either make this payoff to a huge number of peasants or you get communism. And when you're the government of South Korea or the government of the Republic of China, that threat is not an abstract one anymore, right? They're doing land reform in North Korea before they collectivise everything they give land away to peasants. So you have to sort of follow this just to politically keep up.

So they had these enormous schemes, but these extremely unique political circumstances that allow them through in this very, very brief period when the landfall movement trickles out across the rest of Asia, everyone's trying in Southeast Asia, they're trying India dramatically less successful.

And there's an argument about what the sort of economic impacts of these are as well. Some people very, very positive about the economic impact in Japan. It's a really good recent paper that looked at the Taiwanese impact and found positive economic impacts from only the first stage of land reform at later more expropriate stages as you didn't have the sort of positive impact you were looking for. The idea being there that an individual tenant farmer has more interest in maximising the use of the land that they're given. But yeah, this was not a success anywhere else. These three places really sort of lasting, sustained and embedded land reform. It's basically just there everywhere else in the world it was at least messy and often just a total disaster.

Ben: This dovetails with another thing I'm very interested in and have been interested in over the last few months since I discovered it, is there's a policy invented in Germany in the 1890s by the mayor of Frankfurt who also invented zoning, had the first zoning system called Land readjustment and what in Germany, the purpose of this was for taking inefficient plot sized farms and turning 'em into larger ones, either just to be better farms or to be used for housing. They were in inefficient plots. And we, we've all seen, I mean if actually we've all seen this probably exaggeration here, if you like me, spend a lot of time going on satellite views of different cities around the world, then you'll have seen interesting town shapes where the plots of the mediaeval plots called burg plots, the long thin plots, the mediaeval plots have determined what the city looks like. And so the most extreme cases are in Poland, but basically when you combine roads with thin plots, you get a bunch of houses on these little attachment roads to a main road and you never get any grids or a sensible logical village shape anyway.

In Germany, they use this policy called land readjustment. What's really interesting about it is that you have to get a double majority. So you have to get two thirds of landowners by number and two thirds of landowners by landholding, and then they reorganise the plot. So it's more efficient. And in Germany, they did this to, I dunno, a hundred million hectares, like 40% of all German farmland after the second world war went through land readjustments. And there's a sad side about this I don't like to talk about, which is that they got rid of most of their hedge rows through this because they were like, no, not efficient anymore. And I'll be very, very sad if someone did this to the English countryside. But anyway,

I understand that. Interestingly enough, Japan in 1916 liked the German system, copied it into their planning law. And then when Japan invaded and colonised Taiwan and South Korea imposed it on them as well, and they kept it later. And so all of these countries had a tool which allowed them to deal with the worst excesses of land reform. And I wonder if this was one other reason why land reform was uniquely successful in these three countries and not elsewhere.

Mike: I think that is reasonable, and it's Annie Martin wrote a wonderful piece for you guys on the experience of land readjustment in Japan. You guys know as much about this as I do, but the handing out of land to very large numbers of people and the fact that a lot of the plots were really not economical in a meaningful way at all. That combined with the extremely rapid urbanisation that was happening in Japan, obviously these are to some extent two sides of the same coin allow for this to happen.

So you see not just that, but all through the second half of the 20th century, or at least the first 30 years, 40 years after the end of the second World War, you see this huge transfer of land owned by households in Japan to companies. And this is a large part, an urbanisation story, but it's this enormous sectoral transfer. I, I'm really interested in this because it's an important question for large parts of the rest the world as to how this is done. Well, and I wanted to ask you actually, is there anything about the sort of German or Japanese systems, anything that you've seen given a lever that you would apply to the western world, apply in the uk, apply in the us basically, what do you think these systems have that has made this sometimes successful that has been missing in the rest of the world?

Ben: Well, so as a tiny little tidbit. I happened to discover recently that the process of enclosure actually used the land readjustment model. So in Britain in like 1500, about 30% of land was common land. Now the common understanding of common land is that everyone could just graze their people there, graze their animals there. That's not true. You had to have other land, you had to be a landholder in your own right to have a share of common land. And usually you had a share of common land that was in proportion to your share of the, you had rights to common land that were in proportion to your share of the other land. So in fact, all the landless labourers, which were like say 40% of the people in the 1700s had no right to this common land at all.

But interestingly, when they enclosed this land, which has turned it into individual private plots, shared it out among people, they used the system initially you had to get a hundred percent approval, so everyone had to approve, and they basically only got it going in giant landholder areas where one guy could send his goons, obviously the other guy's houses and say, you're going to approve of this, you can have your, but later on they got it to an 80% system. And so 80% of people had to petition parliament.

So this kind of system, same kind of system used in Taiwan, Japan and South Korea today and over the last 50 years, and the same system used to reorganise German farmland is what was used in the UK. But the UK actually has efficient plots of land now most of the time. And we have good mechanisms for making them more efficient. And that's not a big worry for us, unlike in Japan.

The thing we don't have I think is our system for deciding who is allowed to build what in a particular place is very confusing with loads of overlapping rights and the wrong incentives and so on. And so I would like to learn a system from land readjustment where you can use that same mechanism of letting the majority decide not what gets done. Because if it was just permissions, then it wouldn't necessarily oblige you to use those permissions, but letting the majority decide, okay, let's find out what the best thing for everyone is on a smaller scale than across the whole country or across a whole council area. And I think that you could do that through giving people the right to up zone their own street with a super majority, I reckon like in land readjustment.

A question I wanted to ask you. Ben, before you do that, can you actually explain what land readjustment is for people who don't know?

Ben: Yes. So land readjustment, the original form in Germany, basically a bunch of landowners get together or a local government or the national government comes to them and says, we want to reorganise land in this way. And so usually the reason for farm land readjustment would be because farms are in inefficient plot shape. So in the mediaeval era, if you're a villain, then you would have a bunch of strips of land that you would have hereditary right to farm, spread around a big farm in your manner, and there'll be a freeholder, which would be the lord of the manor, and then you would be this villain who could farm those strips and they were spread out. So it was quite inefficient. You spent a lot of time moving your plough from one thing to another. And this happened in lots of different countries, but on the plus side, you had a fair share of all the different fields. So if there was a bad crop in one bit of the area, then you wouldn't necessarily die, which is a good reason for it. And over time, everywhere wants to rationalise into these into more efficient farm shapes and enclosure did that. That's one thing Enclosure did in the uk. And land adjustment is another mechanism for doing this.

Basically the same thing. You go around and say, we are going to turn it into, instead of you having eight plots spread across all these different places, we're going to merge them together. And this is roughly the same value. We've got a committee together who's judged that's roughly the same value. Everyone gets the same value farm out of the other side, but in fact, you raise all of the value in total higher because you don't have to move your plough between all the different places. So that's classic farmland, readjustment.

You might also do it to turn farmland into better building land. So if you want to develop a plus land and it's got a hundred different plots, it might be really hard to get everyone to agree and then you might have to build this pockmarked weird shape development that's much less efficient than if you could just get everyone to agree. And so that land readjustment, which is the kind that was built most of the houses in Germany on greenfield after the second World War and built 30% of Japan's urban areas is where you agree, okay, we're going to consolidate all our land, build a development on it, and then give everyone a share that's the same as their share in the value of the land as it was beforehand. And usually you have to pass a majority, which is two thirds of the individuals who have land agree. And also two thirds of the value of land is voting for yes, in practise. Many countries have required higher thresholds to do it because they didn't want public blowback. But that's the basic principle behind land readjustment.

And that exact think system applies now and is important in Japan, Taiwan, and South Korea and versions of it exist in lots of other countries like Spain and Germany, but for various reasons it's not used as much in some countries versus others due to quirks of their various systems.

But the question I wanted to ask Mike is I was really interested that you haven't yet mentioned an ideological reason except for a brief one where you said that the Chinese communists were happy to use it because it seemed consonant with their ideology. But you haven't mentioned like a deliberate ideological mechanism. But I'm aware of various American cities that were inspired by the ideas of Henry George and they thought, I'm going to do what Raffles did for what sounds like pragmatic reasons that I'm going to set up a new town and then sell leases to it. And so effectively people are just paying me in land value because the idea was a land value tax.

So am I right in thinking that you don't actually have a ideological, you don't think there was an important ideological reason why Singapore, Hong Kong and China and then maybe these other countries had lease spaced tax raising?

Mike: Certainly it's not from Henry George that these parts of the world end up having it, but there is an influence there. As I said, I think at the beginning, if you look through Raffles, memoirs and documents that he wrote and letters that he sent people, the sort of admiration for classic political economists like Adam Smith is quite clear. Adam Smith, obviously a land value tax advocate.

Now interestingly with Lee Yu, who was a big, essentially land value tax guy, or at least someone who said very clearly and publicly many times that basically the uplift in land value should not accrue to private landowners never actually really said anything about Henry George specifically. But the idea is that there's a thesis that he picked up some of these ideas when he was at the LSE before he was at Cambridge from sort of Fabian economists who were teaching there at the time, people like Harold Laski, there's a thesis there. So some of these ideas might have germinated that way, but it's mostly, I would say a sort of slightly more practical thing.

Oh, I would actually say one difference there is that Sun Yat-sen founder of the Republic of China, then Taiwan did encounter the reading of Henry George when he was in the West, when he was still in exile and became really an actual Georges, if you read the things he wrote, he was very, very clearly influenced to that extent. It's the reason why Taiwan is, I think the only country in the world today where land value tax actually constitutionally embedded. It's actually in the founding documents because Sun Yat-sen was a personal obsessive with this stuff, but I think it's mostly more incent based and more that these systems have worked over time for the places that they're in.

Henry George I find really interesting precisely because he's not really like the Adam Smith view of this is a efficient working tax. It is difficult to avoid. It's not distortive of other behaviours, that sort of classical economic view of land taxes. Henry George is a pure ideologue, right? He's like a lay preacher more than an economist. I think his economic thinking is interesting. Some of it I think is close to some of it, especially on the exact dynamics I think are quite muddled.

But he's basically a sort of, yeah, he's a firebrand. And what he did more than any of these other figures was he created this enormous national movement backing him. He sort of proselytises very religious terms that he uses when he's talking about the inequality and the sort of injustice of concentrated land ownership and land monopoly.

And it's the perfect time in America to do this as a sort of political entrepreneur because the frontier is closing at this point. So you have a country, a continent that was defined by its immense richness in land. The fact that land was extraordinarily plentiful in America and this period of time is basically ending just as Henry George arrives with his thesis, you're having these American cities that are booming in population, they're seeing sort of urban problems that you would've associated with Europe previously emerged for the first time. You're seeing slums, you're seeing massive overcrowding, people who want to be freehold farmers in the west, there's no longer any land for them to have. They have to buy it from someone. They can't just turn up as they had been doing for hundreds of years.

So George I think ends up in this sort of fascinating period and he becomes, I would say in the late 19th century, the sort of most prominent and influential political theorist of any type, right? He's running this extraordinarily broad social movement that takes in people in working class social movements, sort of burgeoning trade union movement in the us. It has a huge appeal internationally, particularly in the UK where land ownership is much more concentrated than it is in the US at this point. So it spreads internationally.

And then as you guys know, but maybe not everyone else does, and maybe not everyone's heard of Henry George, this all disappears incredibly quickly by the sort of middle of the 20th century. It's gone. And frankly, by the end of the first quarter of the 20th century, it's basically gone, having been at the end of the 19th century plausibly the most sort of, well, the most popular liberal or progressive theorist and bundle of ideas and ideology that there was anywhere in the western world and within the space of a few decades, it's completely gone. So yeah, some of the book is about this, and I find this all really interesting.

Sam: What talking about I think is really, really a completely forgotten vein of history, not just in terms of the intellectual history that you're talking about. You already mentioned Sun Yat-sen being heavily inspired by Henry George, but this was a factor in revolutions and nationalistic movements throughout the entire late 19th and early 20th century.

So you can go to the Irish independence movement, which was preceded by a land reform movement that was directly inspired. I mean, Henry George was a journalist in Ireland for a part of his career and had kind of deep links with Ireland. You can see a guy called Michael Davitt who basically everybody who studied history and I'm an Irish school, will know the name of his very, very prominent land reformer in Ireland, who quotes Henry George at length in speeches that he gives. He goes around both Ireland and England speaking to audiences of people quoting this.

But even if you go to Russia, we ran an article on Stolypin, and I don't know if anything that Stolypin did was directly inspired by George, but the problem was the same, which was that you had huge amounts of land holdings that were being worked on by peasants who didn't own the lands that they were on. Russia obviously among European countries was very late to change this and to reform its land holdings like this and ended up actually only really doing it via the Russian revolution doing did it in a peaceful way. That was even long after serfdom had been officially abolished, the peasants in Russia were still effectively living as serfs as tenant farmers of their landlords.

Stolypin developed a kind of vote based system, which we wrote about, which is a really interesting piece to allow peasants to basically effectively decollectivise their farms and either gain some of the land or free themselves from the land and move into the cities. But again and again, you see this, it's only with the Russian revolution and the Stalin biography that, how have I forgotten the name of the guy?

Sam: If you look at Kotkin's biography of Stalin, his story of the Russian Revolution is really that there are two revolutions. There's the one that we all know about the revolution where the czar is killed and where the communists, the Bolsheviks take charge of the cities, but also there's a revolution in the countryside, which is a almost separate revolution. It's this that enables the Bolshevik revolution, and this is peasants rising up and taking ownership by force of the land that they're working on.

And then you have the problem that land readjustment in investment in Germany was intended to address, which is you have incredibly fractured land ownership and you have this declining output of farms because extremely fractured land ownership is not very effective, even though they have the new economic policy which could have preserves markets in the countryside, Russian output is falling. And so part of the motivation for Stalin's collectivization of farming, which ends up killing many millions of people, is this idea that you can consolidate land holdings and mechanise, and that will then generate the revenues that Russia needs to industrialise.

The same thing happens in China, the Maoist Revolution. So all across Asia, the communist revolutions are driven not by proletarians in cities for the most part, they're driven by peasants in the countryside who want land, and they are repeatedly promised land. And then a couple of years later, as in China, they've given the land, they killed all the landlords, and then five years later they say, oh, you know what? This isn't actually working very well. We need to consolidate this land holdings via collective farming. And then in China it's case you get the great leap forward and many, many tens of millions of people die.

But it's interesting that what you're describing, all of these roots of Georgism, even land readjustment, which is in some ways a peaceful democratic way of doing what Farm Collectivization tries to do completely unsuccessfully by basically every standard, but all of what you're talking about is kind of forgotten today. We just don't really think of land as being this really, really important driver of political change in recent history. But it is.

Mike: So I absolutely agree with that. And I think the Russian revolution is the right hinge point to identify for a number of different reasons. The first of which is that in the grand scheme of things, Georgism is sort of firebrand movement and it's expressed in these sort of proselytising Christian terms, but ultimately it's pretty soft, right?

Effectively it was usurped by a much more hardcore political system where if you started believing what Henry George says about land, Henry George has this very sort of hard line. All of this is true for land, and I'm a complete sort of free trading market liberal for everything else. This is actually a very hard ideology to sustain among a large group of people that are much less committed to the specifics of it than you are.

So you end up with Henry George essentially being the handmaiden of much further left socialist movements in the US both before and after the Russian Revolution. And essentially the movement is completely ert either by people who say was sort of much more sceptical about redistribution now because we're anti-communist and we're not into this anymore. Or by people who say, okay, well Georgism was all very good, but I actually prefer being a communist now. Right? I'm much more left wing than that, and Henry George is right about land, but also, let's apply that to literally everything else. The government should own all of it, or all private ownership should be taxed at a rate of effectively a hundred percent. That's basically what happens. So it collapses in on itself very, very quickly. It's already weak in the run up to the Russian Revolution, but the Russian revolution is basically the death. Now for this,

I'd also say it interacts with the land reform movement quite a lot in a way that I alluded to earlier, which is someone like Wolf Ladejinskyi, one of the most prominent land reform advocates ever, and a driving force behind it in all parts of East Asia. He'd been born in the Ukraine, and he had seen the Russian Revolution firsthand, and he'd seen exactly the promise that you're talking about, Sam, which is communists coming in and saying, we're going to take the land away from the landlords, your eternal oppressor, your ancestral foe, and we're going to give it to you.

And they do this very briefly before they collectivise everything and ship everyone after wherever they wanted to send 'em in the first place. And Ladejinskyi saw this and he said, there's no way the sort of democratic capitalism has an appeal to a landless tenant farmer working for someone else, they're always going to go for the communist option here. You need to give them something else on top of that. As I say, in most places it's tried not particularly successfully, but that's basically his thesis. You can either have land reform or you can have communism, but these are the only two options open to you, and if you don't go for land reform, you'll get the communism eventually because these people, these sort of hucksters will convince the peasant class in lots of different countries to do this. The revolution will come from the countryside.

He thought this because he'd seen it happen himself, right? His family are all grain barons essentially. They were the sort of focus of this. Now he's not a crow landlord person. He basically thought if you don't have more equitable distribution of land, you would end up with political entrepreneurs, violent left wing, political entrepreneurs winning in the end.

Sam: Are there any countries today that still have this question unresolved or did the world just via communism basically resolve in a very unsatisfactory way this problem?

Mike: Well, there's lots of countries. There's a sort of pivot after the peak of excitement about land reform towards ideas which are more oriented towards land as an asset and secure property rights. So you guys are very familiar with Hernando de Soto and all of that. He captures this wave of interest later in the 20th century.

There's still a lot of that going on. There's still a lot of parts of the world where the ownership of land is actually not very clear and the rights to use it for all the sort of financial means by which you might use land for loans or anything like that are not very clear. So that's still a big deal in large parts of Asia and Africa.

What I think is equally interesting is the fact that some of the land reform impetus is killed by the Green Revolution, which basically exactly as you said, Sam, in terms of communists thinking that collectivised agriculture would be much more productive, that you could invest more, that the use of machinery would be more extensive. Basically, the green revolution arrives in the post-war decades and sort of sixties and seventies onwards and suddenly starts to make land in the form of very small individually farmed small holdings look lots less attractive because the yields you can get from these new, but at the time, relatively expensive strains of genetically modified crops are much, much higher and they lend themselves much more towards larger farms.

And Norman Borlaug who invented the dwarf wheat that basically saved hundreds of millions of lives is quite clear when he talks about it that lots of people cared about the equity of land holdings at the time, and he said openly, I don't care about any of that, right? We need maximum yields so that we can feed people so that they don't die. Right?

And you see this big clash in the seventies in particular, whether the wind is sort of coming out of land reform for other political reasons as well, where the sort of argument that, oh, we'll have higher yields if we have individual farmers concentrating on the plots starts to lose plausibility because of this massive revolution in the productivity of agricultural land. It becomes clear that actually bigger farms are not necessarily going to be less productive, and in fact they're likely to be more productive.

Ben: One thing you mentioned was credit. Could you explain what you think the importance is there?

Mike: Absolutely. I mean, I think talking to the audience of people who be listening to this, they're familiar with the housing theory of everything. So I can skip past all of the land use elements of all of the things that land use and housing is extraordinarily important to in terms of the downstream effects. But when you're looking at it as a financial asset, credit is enormously important.

Land is a very widely owned asset, largely in the form of residential housing. It's much more widespread in its ownership than say any form of financial asset. If you look at the stock ownership in the US for example, there's a very, very small proportion of people that actually own the vast majority of the stock market. That's not an enormous problem because there's no limit to the size that companies can grow to and the number of shares they can list and whatever the cap there is on dynamism in general, and it's a system for turning dynamism into securities and then you can keep selling them. And that's why these big companies expand.

The sort of restricted nature of land is what changes that a little bit. When we're talking about land and credit, the easiest way of accessing a loan in the vast majority of the world is against land or the property on top of it, and the property on top of it, of course, containing the value of the land beneath.

That's partly because of government fiat because there are all sorts of subsidy and assistance schemes that have made this the case. A lot of them emerge in the US in the 1930s, almost everywhere has favourable terms for lending against land and housing.

What this means in practise is that if you already own land, and especially if the land you own has seen a huge value uplift, you have significantly better access to credit in all forms, anything that's tied to the land as collateral than other people do. You see this hit sort of extreme versions in places where you've had a very, very rapid runup in land prices. So Japan in the 1980s is a great example, right? Huge, huge swell of credit in Japan, huge amount of that tied to the value of land. Now, if you happened to think in the early 1960s, oh, I'm going to buy some land in the centre of Tokyo, whatever. By the 1980s, this is worth hundreds of times what you paid for it. And if you are a company, you can use the land as collateral for extraordinarily favourable borrowing terms, right?

The every time land prices really swell, you see things like mortgage standards, the standards for mortgage writing weaken. You saw this both in Japan and the 1980s, you saw it in the UK immediately before the crash in 2008, that people will lend you more than the value of the asset you're using as collateral because they're so confident that the asset is going to go up in price anyway, that they're happy to do 125% mortgage or whatever.

So basically that connection between credit and land I think is enormously important. And it has an interesting macroeconomic effect, which is that land and credit have these sort of cycles where they roll together land prices rise, which releases the financial constraint on the people that own land and allows them to borrow more, which if you are in a sort of economic upswing can magnify things.

So you have this sort of effect of sort of vicious cycle. In some ways it can get out of hand as it did in Japan in the 1980s where it becomes vulnerable to any slowdown or change in the assessment of what the land will be worth in the future. You can see the credit dry up incredibly quickly, which is exactly what happened there.

So I think this is a story that people don't grasp quite enough. You can see it in the developing world when it comes to land titling. There's a famous experiment in Thailand in the 1980s that the World Bank did, which formed the basis of some of its work on land titling where they gave secure title to a series of Thai farmers and ensure that they had it and basically check what happened.

And effectively what happened is not only does productivity go up, not only are they able to access all sorts of things they previously weren't in terms of permits and sewers and electricity and all kinds of things, but they start to borrow far, far more to invest, which they can now do because they own the titles of the land. So I think that element of it is probably one of the least discussed, and I think it comes down to the attributes the land has, the other assets don't.

Ben: Is it possible that a bank will lend me lots of money against land rather than against say a car or a factory, but without the land attached?

Mike: The reason is that for the banker it's relatively easy to value and because it's extraordinarily long lived, it's not going anywhere. You don't have to rely on an understanding of the technology, you don't have to know anything about a given business. If the collateral is there in the form of land, then you've got something you're going to repossess. Unless you see a really sharp downturn in land prices, then there's always going to be something valuable there. They only can't take it away with them. It's always going to be sat there.

So I think this is a huge story. It's partly, again, because those subsidies and assistance programmes and all sorts of changes that happened in the 20th century that made housing a much bigger problem in a problem, a much bigger part of the banking system. But yeah, land and credit I think very intimately linked in a way that's not always well understood.

Ben: And I have another question for you, which is if you were, let's say you were trying to do a version of your book that wasn't the version you actually did, but was a Freakonomics Mike Bird explores how land affects things in ways you don't understand. So it's like the land economics version of freak economics. Do you think there are any good examples there? One that I often think about is a fun one to think about is that shopping malls or shopping centres, as we call them, offer have different rents per square foot to different shops. So they have shops that they reckon will bring in customers and they have shops that they reckon will generate high profits but not bring in customers. If they only exist, there're on their own the ones that bring in customers they call anchor tenants. And in the US it's like the big department stores in the uk they'll be like John Lewis will be a classic anchor tenant. People go there, but they don't actually make big profits, producer surplus, the anchor tenants.

And I think it's an interesting example of where the economics of land are either rents on bits of land being spilling over to each other, the uses of different bits of land spilling over to each other and the rents on them being effect to achieve that effectively. A shopping mall owner, the property company that owns a shopping mall is charging a land value tax on all these different companies. And it's an interesting feature that helps you understand if you understand all the economics of land is a big feature and also could potentially help you understand stuff like why did so many American high streets decline after the 1960s say, and shopping malls, which are basically just a high street, but one guy owns it and so it's all managed.

If you don't understand the land question, it's quite confusing why shopping malls, which are just high streets in a new less convenient location have taken over from high streets. But I think if you understand the land question, you realise, oh, the shopping mall has a single owner who can charge a lower rent to an anchor tenant to get the people in and then have a nice mix of shops rather than a hoteling situation where it's all one kind of shop, et cetera, et cetera. Do you think, are there any other free economic style insights that you can get from land like that one?

Mike: I actually love that case, by the way, and I think it's one of the really interesting things when I sort of think about whether I support land value taxes in general, and I think I am relatively supportive of land value taxes. This example of the problems that it causes when you have single ownership and the trade-offs there is one of the most interesting, I think, arguments less in favour of having land value taxes in general.

I guess on that basis, the two things I would use as sort of Freakonomics points, one of which is that I think land had an enormous impact that is almost completely forgotten in the American revolution. So one of the biggest tensions between British and American elites, these emerging American elite at the time is over the use of land and the ability to use it for lending and collateral. So you have all of these schemes in the 18th century and late 17th century to set up these private and public land banks.

So institutions that will lend money new currencies against land in the form of mortgages. And this is to try and allay what is a huge problem in colonial America of an actual shortage of cash, right? In the early days in colonial America, the shortage of cash is sort of ludicrous. They're trading in any sort of species that they can get their hands on, they'll trade in commodity for commodity. It's extraordinarily backwards in terms of a market system.

And they tried to remedy this with these land banks, which were constantly sort of whack-a-mole smothered by the British government, which still had the same much older attitude towards land ownership, which is that you can't just have guys lending money against land and then a banker gets to repossess it. You can't have the Earl of Norfolk, whoever that happens to be on any given year, mortgaging his entire estate and losing it to some Italian guy who's willing to lend him money that the single person's ownership of land is sort of subordinated to the family and the history of the place and all sorts of other things made it very different in the UK.

The other one that I'd used is during the land bubble in the 1980s in Japan, the way that this was to the benefit of the Yakuza, it was an enormous part of the growth of the Yakuza in the second half of the 20th century was around its ability to take a cut essentially to find any way of getting on the inside track of the boom in land prices.

So you see them moving into things like construction, of course, where they ended up owning a large portion of the construction companies, but their most profitable route was a thing. And I'm going to butcher this a little bit called jiageya, right? Which was essentially coercing, threatening, bullying, assaulting the owners who wouldn't give up pieces of land to the companies that wanted to possess it, for which they would take the cut of the sale price of the land often in the 5% region to the extent that you have some of these guys by the late 1980s who are like billionaires in dollars in 1980s, money, extraordinarily rich people who've gotten out of prison five years earlier managing to accumulate the equivalent of a billion in 1980s dollars simply through bullying people out of their houses in Tokyo. So yeah, that's one of the other fun ones that I think shows some of the extreme circumstances you can get in the most ridiculous moments when land prices really go ballistic.

Ben: I have one more classic one that may be familiar to people, but I think it's such a good one that it bears repeating, which is of course that many, many historical infrastructure expansions were funded by speculation on the land that would result, and it's still done today in certain places.

So if you are opening a new MTR station in Hong Kong, then they most likely will have either used compulsory purchase or careful slow buying up or something to get hold of the property around the new station, which will then go loads in value and they'll sell it off and then that money will then fund the infrastructure investment they did.

And this has been done in all sorts of crazy ways. For example, the ghost acres of the Midwest that were, everyone knew this was the best farming land that could ever be found in the entire world, but before railways had been built to them, and they would have to be incredibly long and expensive, obviously, given how far away it is from the American population centres at the time before the railways were built to them, all the crops would wither and die by the time they would get to the European markets that they were intended to go to. So it was all valueless land, and then the railways were built by buying land around where the railways would've gone or many of the railways were built. The Kansas Pacific Railroad was built this way and then selling land farmland, not because it makes the transport easier to go anywhere, but just because your grain can now go and be sold to all the overpopulated places in Europe that had famines all the time.

And this is how Chicago's tram network, the streetcar network expanded or how the metropolitan line expanded an incredibly resilient way and how Japanese railways build their private railways, build their new places now. But something where if you don't think about, okay, what's actually going on here? Then it becomes like, how can all these countries fund all this infrastructure? Where is it coming from? Well, it's coming from land value that you can just give out to the people who live around it, or you can try and use it to fund investments that benefit.

Mike: Absolutely. And the MTR has got to be the best example of that, right? I mean the MTR is like, I would encourage everyone here who isn't familiar with this to go and read as much of it as you can, but the MTR is borderline sort of a mall and housing company that happens to have these pipes connecting things that have trains in them underneath, right? The trains are so, such a fringe part of the actual financing of the company.

So you have this, it's the world working as it should really, I think, and it probably is made easier. Hong Kong has all sorts of problems because of the high land price policy stuff, but it does allow for this extraordinarily cheap functioning successful public transport model.

I think one of the main things that comes across for me when I was writing the book was just you can do sometimes very similar things where you're trying to use the value of land productively for its best use. And very small variations mean these are either enormously successful or total disasters, right? So exactly the example you use of the railways and land values in America during the late 19th century.

This is the cause of endless financial speculation and turmoil as well. These are enormously profitable, but if you're borrowing against the value of the land that you've got the uplift and you get it wrong in some way, these were the causes, I think 1873/1857, big sort of railway speculation elements, these bubbles, because you'd have the credit created around the land. That doesn't mean it's a bad idea to use the land value to try and finance the venture, but it is extraordinarily powerful in getting it right versus getting it wrong. Matters enormously.

Sam: Well, Mike, thank you very much for joining us. If you want to hear more from Mike, you can buy his book, the Land Trap, which comes out in November. But is it available for pre-order now? And if you want to read more from us, you can go to worksinprogress.co. Thanks for listening.

Thumbnail includes: collage using “Longji Terraces” (modified — colors/cropping). Image “Longji Terraces” © Dariusz Jemielniak (Pundit), CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/

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You can watch or listen on YouTube, Spotify, or Apple Podcasts.

You can watch or listen on YouTube, Spotify, or Apple Podcasts.