00:00hi everyone welcome to the a 6nz podcast
00:03today's guest is joel milkier professor
00:06of economics and history at Northwestern
00:08his new book a culture of growth the
00:10origins of the modern economy is about
00:13what really drove the Industrial
00:14Revolution it was a period not unlike
00:16today where we took quantum leaps
00:18forward to quote the author in tech from
00:21taming electricity to making cheaper
00:23steel refining iron cheaply improving
00:25the quality of food automating fiber
00:27looms pumping water out of coal mines
00:29preventing smallpox and even bleaching
00:32underwear in short one of the most
00:33significant ages of tech and economic
00:35progress in this interview we cover
00:38everything from the public virtual
00:39sphere of ideas that drove this
00:41knowledge at the time and internet
00:43analogies today we also touch briefly on
00:46how to focus on big problems like
00:47climate change - how do we measure
00:49growth but we begin the conversation
00:51with the then revolutionary idea of a
00:53steam engine the first team a genius is
00:55introduced in England in 1712 by a man
00:59called Thomas Newcomen and you know the
01:02principles on which that engine was
01:04built we're not known a century earlier
01:07because these are called atmospheric
01:09engines and the idea that the earth is
01:12surrounded by an atmosphere which sounds
01:15kind of commonplace to us actually was
01:18not realized until the 17th century by
01:22one of Galileo's more famous students a
01:24man called Tori Shelley and while she
01:26has the concept of an atmosphere then
01:28the notion of creating a vacuum and
01:30having the pressure of the atmosphere
01:33push a piston down in a cylinder in
01:36which you have created the vacuum that
01:38idea can then follow but in order to do
01:41that you also have to realize that a
01:44vacuum is possible and thereby hangs an
01:46important part of the stories or now
01:48because Aristotle thought that there is
01:52no such thing as a vacuum and Aristotle
01:55was the gospel for many centuries and
01:59basically Aristotle said something that
02:01was true people thought and then you
02:04know in the 17th century damn it people
02:07start building a vacuum pumps now you
02:10have to have these principles to build
02:13it couldn't be built at the middle age
02:15you said it couldn't be built by any
02:17other Society because the fundamental
02:20notions on which it was built just
02:21didn't exist and just couldn't be
02:24now what is true for steam engines is
02:26essentially true across the board
02:29knowledge builds technology and
02:33technology builds knowledge and that
02:36synergy between these two sort of
02:38different aspects of human knowledge is
02:40what drives essentially our modern
02:44economic growth and it still does to the
02:46present day I think we can accept that
02:48today generally speaking an important
02:51nuance in what you just described is
02:53that the people who are working on the
02:54steam engine were going against people
02:56they respected there was a certain
02:58movement that we now take for granted
02:59that was actually very difficult to do
03:01at the time and so I'd love to drill
03:03down on that a little bit more as well
03:04well the key word to describe what's
03:07happening is contestability and by that
03:11I mean that this is an age which sheds
03:16its deep respect and awe for ancient
03:19wisdom an ancient venerable belief that
03:23that is almost religious in nature and
03:25and just it gets just tossed out and
03:28essentially every idea that came down
03:33from the from the ancients is contested
03:36and it is Butley test and people
03:39confront it with data with evidence with
03:43logic with mathematics now that you know
03:46that sounds sort of totally urban how
03:48could it any other way and the answer is
03:51basically everybody does it the other
03:53way then which people rely on the wisdom
03:56of earlier generations and if you're
03:58looking for the answer to a question
03:59that you have this go look in the books
04:02you know the books could be you know the
04:04Bible or it could be Confucius or it
04:06could be the Talmud or it could be the
04:08Quran you know there are these self
04:10revelations of wisdom and this is an age
04:13at which Europe sheds that essentially
04:17there are no more sacred cows you know
04:20the the slogan of the Royal Society
04:23which is Revati a paradigmatic entity
04:28of the age the slogan is a new loose
04:30verb ah it's Latin for on no one's word
04:35skepticism and contestability become
04:39essentially the keywords of intellectual
04:42activity and I have a question about
04:45that and how that applies today because
04:47one of the interesting things that we
04:48confront when we think about what you're
04:50describing to me is actually very
04:51analogous to even the business world you
04:52have incumbents and you have new sort of
04:54upstarts or startups going against like
04:57you know established knowledge and the
04:58way of doing things part of the
05:00contestability and scepticism is about
05:01criticizing and not taking what's given
05:04as a given but there is also an element
05:06when you're building a company or if
05:07you're pushing forward an idea back then
05:09- now where there's also a collaborative
05:12element where there's trust that goes
05:14with that skepticism so what is the role
05:16of Trust and pushing forward this engine
05:18of creativity that's a really good
05:20question we should realize that much of
05:23the knowledge at that time is created by
05:27single individuals there's not that much
05:29collaboration you know co-authorship and
05:32these have multiple names on papers and
05:34books obviously today that wasn't very
05:37much there was quite uncommon in those
05:38days but what happens is that you know
05:42knowledge has to be circulated it has to
05:46be distributed and what is created in
05:48Europe is a virtual network and that
05:52plays a very important role in this book
05:54which is known as the Republic of
05:55Letters the rest pública litter area as
05:58they call it in Latin and what it is
06:00it's it's a virtual network it's not a
06:03formal organization there is no bricks
06:05and mortar institutions involved but
06:07it's based on a network of people who
06:09writes letters to each other to
06:11correspond publish books and they read
06:14each other's books and the reason that
06:16Trust emerges is because that everybody
06:18knows that if you publish something or
06:21you do some discovery some mathematical
06:24theorem that you have proven or some
06:25planet you've discovered or some new
06:28species that you found that others will
06:30take will look at it because they know
06:32that other this has been vetted by other
06:35experts and so if it survives that means
06:40is created by the fact that experts and
06:45specialists and learn it people talk to
06:49each other communicate with each other
06:50and essentially a spread their ideas
06:53around I'm never one to yearn for a past
06:56that never really was but I can't help
06:58but wonder if that was a more civil time
07:00because what you're really describing is
07:01essentially a market of ideas and you
07:04describe this funny quote from one of
07:05those people where a very humbly bag of
07:08all those whose opinion I have attacked
07:10perhaps it too much Liberty not to take
07:12it in a bad way since I have most often
07:14done this only to invite them to do the
07:17same to mine this philosophical war will
07:19likely cost a bit of ink but there will
07:21be no spilling of blood and I think it's
07:23a very telling quote because it's in
07:24stark contrast to a lot of what we're
07:27what's happening and playing out today
07:28it means justic sharpen the contrast of
07:31what you're describing between then and
07:32now I guess I see a certain similarity
07:36there as well the notion that this was
07:39kind of an harmonious or friendly
07:42organization whose oldest scientists
07:44were sitting around the campfire and
07:45singing Kumbaya that clearly isn't the
07:48case it was jealousy there was rivalry
07:50there was justice today I mean even John
07:55took credit right it's very similar to
07:57today where we talk about who had the
07:59idea first what really matters is who
08:00took it to market and executed on it
08:02well so it is really interesting that
08:04when you think about authorship and the
08:05previous models of knowledge that were
08:08produced that it's not necessarily the
08:10person who received credit is the person
08:12who was like the first to discover it or
08:14like say you know talk about it or label
08:16it but the one who really sold it
08:18effectively in this market for ideas and
08:21very much like today there are priority
08:23fights this is this big priority fight
08:27today about who's the first to discover
08:30Chris cas9 you know the new just talked
08:37about that yesterday here at
08:38Northwestern but you know there's a
08:40there's a very famous priority fight
08:42between two of the Giants of the age
08:44Isaac Newton inand and live dates about
08:48who invented calculus basically each of
08:51them argued that the other one stolen
08:54him and it's got to be quite ugly just
08:57as it sometimes gets today I actually
08:59think much like today what made progress
09:03possible in this market for ideas is
09:06that it was a competitive market and one
09:08thing economists know competitive
09:11markets by and large work better than
09:14uncompetitive markets and what is
09:16critical and understanding about the
09:19European system is how competitive it
09:22was there are literally scores of
09:25countries and states and cities that
09:27compete with one another competition may
09:30Nina may not be much Sun for the people
09:32engaged in it but it produces the
09:34results right but a key enabler behind
09:36that competitive market for ideas or any
09:38competitive market for that matter is a
09:40certain symmetry of information or
09:42transparency a lot of what matters here
09:44is role of reputation there's peer
09:46assessment there's a lot of ways of sort
09:48of assigning credibility in the
09:51marketplace of ideas and this is even
09:52true in the Internet today when you
09:53think about the Internet as like a
09:54massive enabler for this kind of
09:56openness and transparency but the key
09:58word and that you gotta hit the nail on
10:00the head there is reputation because you
10:03need to build a reputation among your
10:06peers if you're going to get patronage I
10:12mean that's what peer review is at the
10:14end of the day and the way my University
10:16and other than any other university
10:18gives tenure is they look at your
10:20reputation that's how these things are
10:21being decided and so Joe Blow has the
10:24incentives to publish as much as he can
10:29because that's how he gains a reputation
10:31and so everything is put out there in
10:33the open and you know if you writing
10:34open source software it is it's
10:38interesting though because it was still
10:39a very small proportion of the
10:40population it wasn't as egalitarian as
10:42one might think based on this beautiful
10:44idea of a marketplace of ideas I mean
10:45yes it's a different type of egalitarian
10:47ism because it's the credibility is not
10:49bestowed based on family connections or
10:51how much money you have but more about
10:52the meritocracy of your ideas and
10:55creativity but it still was a very elite
10:57phenomenon and even when we think about
10:58credentialed institutions today there is
11:01a certain elitism associated with that I
11:03think what's really interesting about
11:04the internet and the production of
11:05knowledge on the Internet is that there
11:07unknown names that are essentially
11:09building credibility reputation now in a
11:11completely different way it's not
11:14necessarily levelled it equally but it's
11:16definitely created a far more equal
11:18level playing field I've done ever
11:19before for knowledge I yes or no you're
11:22right the Internet has changed the rules
11:23of the game in a dramatic way all the
11:27same it remains true that the number of
11:30people who are pushing the envelope who
11:32are really making advances it's still
11:34probably quite small and I would guess
11:38that Internet or no internet a
11:41disproportionate number of them come
11:43from a dozen institutions such as
11:45Caltech MIT Stanford Carnegie Mellon you
11:50know and northwestern places like that
11:51now that doesn't mean that new people
11:53coming out of nowhere to college
11:55dropouts you know like you know people
11:58like Bill Gates long history of like
12:03coding as a child just not in the
12:04traditional system exactly in some ways
12:08I'm looking at the similar
12:10transformation there's the printing
12:13press so all of a sudden somebody come
12:16come out of nowhere and publish a book
12:18that everybody takes notice of right and
12:21but even still like the friction I mean
12:23the friction of creating knowledge and I
12:24think this is a really important point
12:25you touch on at the end of the day
12:27knowledge is a really unusual commodity
12:28it's a public good it's not excludable
12:31to others can use it you know the
12:32sharing the cost of sharing is very low
12:34unless you think about things like
12:35intellectual property or patents you
12:38know and secrecy but at the end of the
12:39day it's your marginal cost and it's
12:42really fascinating because what the
12:43Internet has done the printing press
12:45still required a certain amount of
12:47friction and some knowledge to use it
12:48some technical being access availability
12:51you now have a situation where someone
12:53anywhere in the world I think of art you
12:54know we did a podcast with entrepreneurs
12:56and Iran and there was a thorough
12:58sanctions in place at the time and they
12:59were creating businesses on the internet
13:01it's literally bleeding into borders and
13:04barriers and in a way that's
13:05unprecedented I think that's absolutely
13:06true and I would certainly subscribe to
13:09the notion that our own age is in many
13:11ways totally unique and which is why I
13:15am not really a great believer in the
13:18hypothesis that there's an awful lot we
13:21OAH because our own age is so different
13:24in so many way but in some ways it's
13:26everything that you see in the dam I'm
13:28looking at is true multiplied a thousand
13:31times over everything moves it moves a
13:32thousand times faster a thousand times
13:35cheaper yeah it's a difference of degree
13:37but the degree is so huge that it
13:39becomes a distance I totally buy that so
13:42one question I have for you so far
13:43you've been talking a lot about
13:44knowledge and production that's sort of
13:46a more individual level in this
13:48marketplace of ideas it's the role of
13:50institutions in this like both then and
13:52now and how do you see that evolution
13:53happening well so we the way we think
13:56about institutions today is that we
13:59don't really think about them it's the
14:01state or any sort formal organization
14:04institutions are ways and we said we set
14:07the rules of behavior that individuals
14:09observe when they're active in the
14:11marketplace but also when you know when
14:12they're playing basketball or something
14:14the institution that I am interested in
14:16here are the institutions that govern
14:19the markets for ideas and you have two
14:22kinds of institutions you get national
14:23institutions and you get transnational
14:27institutions and my way of thinking
14:29about is that the national institutions
14:31probably play a relatively secondary
14:34role quite frankly you know if you put a
14:36gun to my head I would say what happened
14:39to happen to despite the best efforts of
14:42these states not thanks to them what is
14:45far more interesting I think is this
14:47spontaneous emergent embody of the
14:51Republic of Letters which is an
14:54institution even though it doesn't have
14:57a headquarters and it doesn't have a you
15:00see oh and nobody designed it and nobody
15:02founded it it's if the result it's one
15:04of those spontaneous virtual networks a
15:07little bit if you want like you know
15:09like our virtual communities today you
15:12know obviously when I was reading about
15:13your ideas of the republic of letter is
15:16this sort of epistolary knowledge world
15:18the first thought that jumped into my
15:20mind was actually the early days of
15:22internet the blogosphere where you had
15:24this you know bloggers and a smaller
15:25community exchanging ideas back and
15:26forth was literally the the Republic of
15:29Letters it was similarly elitist in the
15:31sense that of a small proportion of
15:33population was doing it not everybody
15:35was doing it but it was based on this
15:37meritocracy of ideas and creativity than
15:39past connections everything else
15:41excellent analogy and I totally agree
15:43with you and you learn and you will see
15:45that these blogs blogosphere was not set
15:48up by any individual it wasn't designed
15:50nobody would have dreamed in it at the
15:52time out of that came our modern world
15:55out of that came every technological
15:58advance that made a big difference in
16:01electricity in textiles in steel in
16:04you-know-what in transportation in
16:06medicine you name it it came all out of
16:08those interactions and that's basically
16:11the central message of my book it's a
16:13weirdly unexplained driver of the
16:15Industrial Revolution people usually
16:17fixate on the more obvious things like
16:19the printing press etc and the
16:21equivalent today the online communities
16:23these makers these early Indies that
16:25helped push and share ideas in the
16:27spontaneous virtual world arguably are
16:30also the drivers a lot of our tech
16:32advances today I think we could even
16:33make that same kind of inferential leap
16:35so my question for you is what are the
16:37biggest enablers of that both then and
16:39now because one of besides the things
16:40that we've talked about so far one of
16:42the things that really stuck out to me
16:43and it's a favorite concept of mine I
16:45know it's credited originally to
16:46Granovetter but I remember it from Ron
16:48Bert's work this idea of structural
16:50holes and this the importance of weak
16:52ties versus strong ties and being able
16:54to exploit these ideas like what role
16:56does that play well so I use some of our
16:59you use of my former colleague Mark
17:01Granovetter is working this and you're I
17:03think you're absolutely right it what
17:04you get in the Republic of Letters is a
17:08a bunch of people spread all over a
17:12remember transportation at the time was
17:13slow and difficult so if you live in
17:15Warsaw and somebody else lives in in
17:16London they could well be living on the
17:18moon you know you'd never meet these
17:19people they don't have any of this
17:23reason to trust each other very deeply
17:25and but what is happening is that
17:27because of these weak ties yes but
17:29Granovetter points out you actually
17:31learn more from each other Xerox PARC
17:33one of the things that we used to talk
17:34about a lot is that the most interesting
17:36innovations and they produce innovations
17:38over and over and over again it wasn't
17:39just one time happen between at the
17:41interstitials between just between
17:43disciplines and weak ties in networks
17:45and you make this statement that of this
17:48occurs at the margins and I wanted you
17:51to explain what you meant by that
17:52because that was a very fascinating
17:53concept me well I think what happens in
17:57many fields is that they tend very
18:00quickly to reach a situation in which
18:04progress becomes rather incremental and
18:07that people basically take two
18:09substances well what we know is
18:11basically the older is to know and so we
18:14can sort of make little sauce small
18:16steps in it but not really step outside
18:19and you know make a huge quantum leap
18:22into into the unknown and in order to to
18:26do that you need either one of the two
18:28things either you need a to recombine
18:30two different fields in it knowledge
18:33from one field and Transplant it into
18:36another so that it becomes a completely
18:38different way of thinking I mean that's
18:40the kind of thing that happens with it
18:41Newtonian revolution or later on with
18:43Einstein actually today an example I
18:45would think of is with deep learning and
18:46computer science this I this opportunity
18:49of training data on much smaller data
18:51sets and borrowing from the worlds of
18:53developmental psychology in order to see
18:55how a computer could truly learn like a
18:57that's a brilliant example I think
18:59that's exactly the kind of thing I'm
19:00single so you look at my own seal of
19:02economics you know and you know the last
19:03I said 2025 years almost all the major
19:08pixels have occurred by people coming in
19:10with ideas from psychology or from
19:13mathematics and basically introducing
19:16these into economics and the major
19:18changes that economics is one example
19:20has happened it's through game theory
19:23and game theory was originally devised
19:26by mathematicians to solve very very
19:29simple and situations unrelated to
19:33economic sentiment and turski would like
19:36the ideas of prospect theory versus
19:37utility that's exactly these people
19:40coming from psychology know both
19:41Kahneman and turski are trained
19:43psychologists and this is coming to
19:46economics from the outside and John Nash
19:48who won the Nobel Prize in Economics for
19:50his contribution to games here it comes
19:51- it's some mathematics just so they say
19:54people are just people like say John's
19:55for no man and so on so forth and I
19:57think this has been happening across the
19:59board in even in the humanities that's
20:01what's happening you look
20:02have major transformations in say
20:05history which is my other area and a lot
20:07of it comes from people in philosophy so
20:10that's how major steps forward happen
20:14and I think if you leave field to its
20:17own devices and without interacting with
20:20other fields eventually it will start to
20:22stagnate but of course that doesn't
20:25happen in a competitive market for ideas
20:28because they're always surprised guys
20:30who say you know what I'm gonna study
20:31chemistry then apply my knowledge in
20:33chemistry do I don't know what biology
20:36today's wise guys might be computer
20:38scientists who and I sometimes make fun
20:39of this will think that they can take on
20:41any industry in any problem and frankly
20:43it's true you can do things like do
20:46bring that mindset to biology you know
20:48health care everything related to new
20:50areas but I want to make one more point
20:52since you ask me and you ask me we are
20:53what's enabling dish and I are just
20:56talking about competition there's one
20:57more thing because this is something
20:59that happens throughout history success
21:02in making breakthroughs in science and
21:05technology often depends on focus as to
21:08say people have to agree that a
21:11particular issue a particular question
21:14is something that we need to solve or a
21:17particular technological bottleneck is
21:19something that's really bothering us and
21:21so for instance at this time one of the
21:24big issues this is a seafaring time and
21:27everybody has a problem was measuring
21:28longitude Columbus sailed across the
21:31oceans not never knowing where he was
21:33longitude wise you can only measure
21:34latitude so this is a big issue and
21:37everybody knows it and ships get rich
21:40and so on and so slowly but certainly
21:42society puts its minds together to solve
21:46the issue of longitude and it's not an
21:49easy problem it takes it takes centuries
21:51but they crack it and and the same is
21:53true for something entirely different
21:55but also it's a big issue smallpox
21:57so smallpox is a real scourge of this
22:01age and people feared it greatly not
22:02only because it killed people but also
22:04because it disfigured him so the age
22:07inciting smallpox and lo and behold no
22:11they cracked it takes away again takes a
22:13long time there lots of false starts and
22:16have her but in the end smallpox get
22:19conquered and this is something that
22:21happens throughout history all the way
22:23down to project Manhattan you know and
22:26so it's a substance we think we can do
22:30and it needs to be done urgently that
22:32becomes a focus of intellectual activity
22:34and I think our own age is going to have
22:39go through a similar thing as climate
22:41change becomes more and more the central
22:44issue that a human race is coping which
22:47I actually think it doesn't only apply
22:49to problems to be solved but even areas
22:51of opportunity like the focus now on
22:53Mars that isn't necessarily being driven
22:55by government but private sector which i
22:57think is really fascinating and that is
23:00where an enormous amount of human
23:02ingenuity is focused on and this train
23:06of pattern I see repeated again and
23:08again and again activity the focus of
23:13intellectual activity the best minds in
23:15the world well I mean look what happens
23:18with polio or with AIDS same thing in
23:21our disease pops up and everybody goes
23:24oh my god you know this disease becomes
23:26a threat to us and so we put the bet our
23:29best minds to it we took our best tools
23:31it's not always within people's
23:33capability so what the black death
23:35occurs in Europe in the 14th century you
23:37know they had no clue what it was that
23:39hit that they had no tools they had no
23:41idea what was causing this and so
23:42instead of preventing the problem if
23:44they execute they killed the Jews
23:46because they saw the Jews were poisoning
23:47the wells so you know that's what we
23:49should hope that that does not happen
23:51finding a scapegoat instead of a
23:53solution here's another thing that
23:57people's you know really focusing
24:00attention defeating gravity so flying
24:02they couldn't build airplanes because
24:04for airplanes you know certain things
24:05today they didn't have but what they did
24:07invent albeit late in the 18th centuries
24:12ballooning is the first real triumph by
24:15which the human race defeats gravity but
24:19is they been thinking about this since
24:20days immemorial and we'll think about
24:22the Greek mythology of of Daedalus and
24:25and and and all I can tell you stories
24:27about medieval monks you know building
24:30jumping off church towers breaking their
24:33legs I mean people been dreaming about
24:35flying even beyond the Western knowledge
24:37fear there's so many wonderful examples
24:39coming out of Asia in China India as
24:41well where there's a lot of ancient like
24:44work in that area everybody tries it and
24:46you know and then all of a sudden a
24:48bunch of Frenchmen basically say hey you
24:50know what if we heat add air expands it
24:54becomes lighter than the air around it
24:55will go up it seems obvious on the
24:57surface but this idea that you can
24:59actually truly solve anything by putting
25:01focus on it we again take that for
25:04granted and I think that's really
25:05important you have this newest book
25:07talking about the drivers and the
25:09cultural that drove the cultural
25:10progress of this you know unprecedented
25:12Industrial Revolution and we're talking
25:14about today as being a different time
25:16again maybe a difference of degree that
25:18becomes so much a difference of kind
25:19because of the sheer degree how would
25:22you think about the role of Technology
25:23today and what's playing out should
25:25people not because there's a lot of fear
25:26I think from a lot of people like should
25:28they not consider the cost of technology
25:30advances how do you think of what you've
25:33learned from the past how can we sort of
25:35apply it to now this is a big question
25:38and I thought about the great lengths I
25:40must say before I engage in this that by
25:43and large the lessons we learn from
25:45history are fairly limited to the
25:48periods what we're talking about
25:49extrapolating the lessons from one
25:51period to another period is
25:53extraordinarily dangerous but what I
25:55would say is that one of the obvious
25:59things that screams at you when you're
26:02looking at the history of a cohesive
26:04technology is that almost every
26:07technology that's ever been introduced
26:10has had unexpected unintended unforeseen
26:16consequences this is a pattern that goes
26:19out through history people noticed
26:21amazing say well maybe we should just
26:22stop innovating because as always
26:24something bad is going to happen and I
26:26think that is an extremely dangerous
26:28conclusion to draw the alternative to
26:31not to not innovating is stagnation and
26:34I don't I don't see we can afford that
26:36we cannot afford that because the world
26:38has major problems that can only be
26:44I new technology and of that I think
26:45primarily of climate change because
26:48climate change cannot be solved by any
26:51means except technology because a
26:53political solution is clearly not going
26:56not doing it is worse and I think that I
27:00think is a great lesson that history
27:03teaches us you know if any nation is
27:06going to decide to not innovate then
27:08because they like stability they will
27:09end up like 19th century China 19th
27:12century China wanted stability the West
27:15what the progress they're just thinking
27:17and look at them today I mean talk about
27:18a culture of growth it's an origin of
27:20the modern economy happening right now
27:21in a weird way even though it's a very
27:24ancient society it's a very society but
27:27it all happened the last 30 years
27:29because between 1850 and 1950 China was
27:33was not growing it wasn't developing and
27:36it wasn't catching up and then of course
27:37you get communism for another 25 years
27:39that's even worse but it's at some point
27:42the Chinese get themselves together then
27:44they start drawing they still have a
27:45long way to go but clearly stagnation is
27:49not something that's in the cards for
27:51them and I think the West is going to
27:54decide to stop innovating which of
27:55course will never happen sometimes you
27:57think about the political climate and
27:58frankly you know there are certain rules
28:00of law and conditions that need to be in
28:01place to support innovation and it is a
28:04little frightening to think that that
28:05could be if not stopped slowed down in
28:09comparison to you know a place like
28:11China where it's like the Industrial
28:13Revolution is playing out like right now
28:14I am justified and as you are and many
28:17of these things worry me and in some
28:20ways defy my understanding you know like
28:22the virus that defies my understanding
28:24my understanding is their inexplicable
28:27resistance of many nations to
28:30genetically modified organisms which you
28:33know the evidence does not support it as
28:35any danger this whole notion but
28:37frankenfoods is completely made up but
28:40people just keep going resisting this I
28:43actually don't think it's wrong for like
28:45as we've talked about for people to
28:46consider the consequences and think
28:49about you know some of the third but you
28:51know the second and third order effects
28:53but the realities we've discussed is you
28:54never actually know how those things
28:56play out and you can think about
28:57but that doesn't mean should actually
28:58preemptively stop them which is I think
29:00what happens a ton with Europe and
29:01frankly if you look at Europe in the era
29:04of the Industrial Revolution and today
29:05it's quite a stark contrast it is indeed
29:07they say why should we grow you know
29:09we're happy as we are we need more
29:12income per capita you talk a lot about
29:14this tension between growth and
29:15stagnation and then and we talk a lot
29:17about how the previous drivers of this
29:19was basically material prosperity in
29:21terms of measuring progress but a lot of
29:24our progress today is sort of D
29:25materialized and so it begs of course
29:27the question of how do we actually
29:29measure that progress and there's a lot
29:30of debates around the notion of
29:32measuring GDP and I'd love to hear your
29:33thoughts on that well there's a growing
29:35literature on missing growth and as I
29:38see it the main reason is that the
29:41relative importance of product
29:43innovation compared to process
29:45innovation is rising we have new things
29:47appearing on the horizon or vastly
29:50improved things which is the main form
29:53technological change takes today we're
29:56not nearly as good at making the same
29:59thing who used to make before only
30:00cheaper which is what standard
30:03productivity measurement usually does
30:05and so we are miss measuring growths or
30:10to pull slightly different we're over
30:12measuring inflation because that'll
30:14still have to things boil down to the
30:16same thing you we've known it for a long
30:18time but it turns out the process is
30:20getting worse and worse simply because
30:23so many new and new products appear on
30:25the market that cost nothing and that's
30:29that's good for us but it's bad for
30:31their income accounting because it's it
30:33cost nothing then how you know then how
30:35do we enter them what's the value that
30:37we put in on them Indian national income
30:40account so if you look at something that
30:41we all use it is a great example
30:44what's of contribution of Wikipedia to
30:46GDP was nothing because you know every
30:48time you click on it you're not charged
30:49and that's the debts the best thing
30:51about Wikipedia right but that means
30:53it's of great value to us but it doesn't
30:56enter the Makana what sufi Wikipedia is
30:59true for for scores of of websites and
31:03services that we get and this is
31:07something that I'm not a hornpipe own
31:10you know there are things in life that
31:13are subject to technological change that
31:16never show up in the national income
31:18account and I think all these are sort
31:20of transactions cost in consumption so
31:23here we give you an example what is the
31:25full cost of going to a store and buying
31:29a gallon of milk the transaction that's
31:32recorded is three dollars 1901 ever for
31:35one gallon of milk that's not entering D
31:37D national income a cup but that's not
31:39the full cost that you pay because you
31:41have to spend your time driving to the
31:43store you're using up you know gasoline
31:45and your weight you know wear and tear
31:47in your car and then it's not just the
31:50time getting there there's the time of
31:51standing in line in front of the it's
31:54also the cost is actually higher than
31:56the $3.00 19 that you pay for the milk
31:59but they don't get measured and as long
32:01as you don't change that's okay because
32:04then it's just a constant that's
32:05dropping out and so you know but suppose
32:08that shopping became easier and easier
32:10because you no longer have to run your
32:13bottle of milk through cashier who
32:15actually has to look at that at the
32:16price in the punch it in but you run it
32:18through a barcode reader you just run
32:21into an automatic cash register or even
32:23better you order it online and it just
32:26arrives at your doorstep well then the
32:27cost for you have come down so you
32:29better you better you're better off
32:31doesn't get register anyway in the
32:32national income accounts this is true
32:34for thousands of things that we do every
32:39everything that's in some sense easier
32:41the one thing I always detested has been
32:44shoe shopping I hate it because I have
32:47eleven and a half shoe size and most
32:50stores only have 11 in 12 or so I get F
32:52and then the only better evident Levin
32:53half and it's kind of clunky ugly brown
32:55shoe there I won't have to drive to a
32:57different store so now I go online and I
33:01basically click eleven and a half and
33:03you know two days later it's sitting in
33:04front of my door you know that is a
33:06major improvement in what I call
33:09consumption transactions cost because
33:11the transactions cost where for me to go
33:13from store to store gets frustrated
33:15stand in line let's find the stuff you
33:16know you know using that mindset frankly
33:21even Netflix binge watching is an
33:22amazingly incredible
33:24Bing but that's not being recorded in
33:26any way it's not being banned and that's
33:28precisely so here's another example
33:31which I take something like Spotify what
33:33Spotify gives me is not only something
33:35that is extremely inexpensive virtually
33:38free but it also gives me a variety and
33:41again variety is something that national
33:43income accounting cannot deal with they
33:46can deal with it's so overlooked when we
33:49talk about this topic measurement GDP in
33:51the past like the efficiency would have
33:53been more important than something like
33:54recording the variety exactly the whole
33:58GDP accounting system that we have today
34:01was designed for an economy that
34:04produced wheat and steel and so progress
34:08occurs because you can produce a bushel
34:09of wheat or Tov steel and with less
34:12capital and less labor than last year
34:14and so that's so that's how we make a
34:17total factor productivity it's sort of
34:18the the difference between the growth of
34:21output the difference of the dollars
34:22input but if the outputs nature is
34:25changing either in fact that is much
34:28better than it used to be or because it
34:30is very different or hexie more variety
34:33something it wasn't there in the first
34:35place you look at the way cellular
34:37phones were twenty years ago and what a
34:39cellular phone does today know looking
34:41at the decline in price will tell you
34:43nothing my cellular phone today does
34:46things that that nothing could do twenty
34:49here's one more if we know as I'd like
34:52to make because it's often overlooked
34:54and that is what's happening to leisure
34:56look at the amount of spectacle sports
34:59available as I'm saying this in it in a
35:01city where the baseball team finally
35:04makes it boss here it's because of
35:06technology is because people have access
35:08people can watch this on the telephones
35:10on their televisions on you know I know
35:12one day it's all over the place and that
35:16is in my judgment a major improvement in
35:20people's lives I mean this is something
35:23that they enjoy they find interesting it
35:25fills them with a sense of satisfaction
35:27there were anything like that before so
35:30how does this show up in a national
35:32income accounting so these are the
35:34issues I think that we need to struggle
35:36with if we're going to
35:38assess what technology does to our lives
35:40there's a very large number of nations
35:42in the world who are still struggling
35:43with poverty but more seriously
35:45eventually we need to keep you know
35:48science and technology advancing because
35:51new problems are cropping up on the
35:54horizon why are the ice caps at the
35:57poles melting we should all read your
36:02book and while I understand we have to
36:03be careful about how we extrapolate from
36:05history we can certainly learn a lot
36:07from it and it really sheds light even
36:09on our modern world in new ways and I
36:11want to thank you for joining the a six
36:12in Z podcast it's been an absolute
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