Tyler Cowen: belief

Transcript context

…I think Rand’s view is actually very similar to mine. Remember, she was angry about the world because she thought that most people were heavily influenced by their cultures. That outraged her, that just because you grow up in the culture of Russia, that you’re a Russian. She’s there saying, “No, I don’t care where you are. You should be an Aristotelian. Doesn’t matter you were born in Moscow or you had this background. We should all be reading the great works and the great minds, especially me,” for her of course. Your background shouldn’t matter very much. In the end, the reason she wrote about this is, she looked around and saw that people are generally very conformist — Fountainhead, the “second-handers,” the people who form their views of what is meaningful based upon looking around at others. She didn’t write about this because she thought it was rare. She wrote about this because she thought it was normal but terrible. I think very much at least in the same ballpark for me, I am very individualistic. Of course, if this were the normal thing, everyone else would be doing it. Then there wouldn’t be anything special about me doing it. In a way, if you don’t think the culture’s really important, it’s hard to be an individualist because then you aren’t different from other people. Now let’s talk about education policy. Let’s say we agree with your basic take on education: There’s educational failures. There are connected labor market failures. And the question is what should we do about this? What if someone came to you and said, “Well, take South Korea. Government there spends relatively little subsidizing higher ed. But signaling costs are high. In Germany, the whole system is more or less free. People go on strike if they’re asked to pay 10 marks or 10 euros a semester. And in Germany, a lot of the universities are mediocre. But the German economy does fine. So isn’t the solution to too much signaling, in a sense, nationalize the sector and lower quality and get people less interested in it?” I think this is a classic case where there’s multiple omitted variables. When someone says, “Look, the government funds it all, but they don’t spend very much. So the way to get spending down is for government to increase spending” — I think that is one of the strangest inferences I’ve heard in social science. Government spending is generally going to be piled on top of whatever other spending is there. We see that there’s countries where the total spending is low, but government’s spending it all. I wouldn’t say that shows that government spending reduces spending. I’d say that government is spending in countries where otherwise the private demand would have been lower on its own. Fun fact: it seems like the US spends as much as a share of GDP on Medicare plus Medicaid taking care of a small part of the population as a lot of other countries do taking care of the whole population. So you might look and say, “Wouldn’t it be great if we just did what other countries did?” I say, “Well, is what other countries do to spend in an American style for everybody? Or is it to go and spend in the style of other countries on everybody?” I think what would happen in the US, or really almost any country that were to follow your advice, is that they would just have even more spending. Especially the US. If the US took socialized medicine, we wouldn’t even have Medicaid for all. We would have Medicare for all. Americans would be horrified at the idea of anyone getting anything less than the very best treatment, and the cry of death panels has enormous resonance here. Your general point: government subsidies increase spending. If it seems like they don’t, it’s probably because you haven’t looked closely enough.…

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