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This video from ReasonTV shows you an interview with Arnold Kling and Nick Schulz about the book From Poverty to Prosperity.

Transcript

From Poverty to Prosperity Nick Gillespie: Hi, I’m Nick Gillespie with reason.tv and today, we’re talking with Arnold Kling and Nick Schulz, coauthors of, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and The Lasting Triumph over Scarcity. Thanks for coming guys. Nick Schulz: Same here. Nick Gillespie: You write at the beginning of the book that economics is not what it used to be and you draw a distinction between Economics 1.0 and Economics 2.0. Can you talk a little bit about what’s behind that typology? Arnold Kling: All right, I’ll take a shot and you take a shot. These are economists who don’t make it in the mainstream media. Even though they’re perfectly respectable of the 10 economists that we interviewed, four of them won noble prizes, two of them are often listed as potential prize and the other four are no slackers either, but the media ignore them. More importantly, the mainstream media ignore their ideas. So what we mean by Economics 2.0 is, they focus on intangibles. The typical Economics 1.0 says, well, there’s labor, there’s land, there’s capital and these people focus on institutions, things like property rights and so on, and also on ideas, innovation as factors. Nick Gillespie: And these are the intangible you write that Economics 1.0 looks at the market as a mechanism for allocating a given amount of resources, Economics 2.0, the market is a mechanism for stimulating and filtering innovation. But when I read that and of course in the book, you get props to just of Schumpeter—but it seems very coming out of a Schumpeterian tradition of that, you know the gales of creative destruction are not about taking a set number of goods and distributing them but constantly creating new ways of meeting or creating needs and demands, and desire. Nick Schulz: Right. I think that’s fair and it gets to an important point and important thing with the book, which is how you would think about problem solving, how you would think about challenges that are faced. So if you think that the world is sort of a fixed pie, what you needed to do is move around parts of it over here or parts of it over there, that’s going to lead to one set of kind of policy responses, say in the context of the politics. But if you instead say that world problems can be solved by innovation by new products, by new processes, it opens up and enlarges how you might look at the world, how you might look at political problems, how you’d look at social problems, how you think about economic development and the like. So it’s—I think a subtle but important reorientation in how people look at the world around them and the problems of the earth. Arnold Kling: And I think it’s important how innovation takes place. There’s like a central conflict throughout the book between what—called searchers and planners. So there are people who rely on plans, that’s large bureaucracy’s large organizations and there are people who rely on trial and error. And I guess there’s something like reason.tv, if they were trying to launch that out of a large network like CNN or NBC, there would be this gigantic committee of vice presidents involved and there would be years of planning, and probably the budget for Xeroxing PowerPoint decks would be bigger than everything you’ve spent so far. Whereas you’re probably just trying to throw things against the wall, try different things, try different revenue models and what have you, and that’s the way most innovation takes place. Nick Gillespie: I wished we had thought about a revenue model. That’s a gaping hole in our plan or searching. You mentioned pie. Talk about how food is an example of a Triumph over Scarcity. Nick Schulz: Well, one—that’s actually Arnold’s, so I will bring it up. One of illustrating the dynamic that we’re talking about is if you looked at economic problem, say four or five generations ago and you want to teach young people about economic problems that they face, you might give them the Grapes of Wrath. But today, if you want to talk about the plate of the poor, you might suggest, Super-Size Me. So we now have—especially in developed countries, abundance becomes—in a certain sense, its own problem. We’ve solved so many economic problems that we had a new set of challenges, it’s not that they are challenges, I mean there are obese people and this is something you have to do, but it’s a categorically different kind of problem that you’re dealing with them, say in 1920s. Nick Gillespie: Do you follow Schumpeterian line when he was—he influenced other critics of capitalism that one of the ways that capitalism goes away is because people get too fat and lazy, and they forget how wealth is created and how it is—how was society is nourished. Are you negative about the move to oppose scarcity world? Nick Schulz: I’ll take that. You know, I thought a lot about that and I used to be, but I’m not anymore. One reason is that, say in the United States, culturally, the entrepreneurial culture here is very strong. So, yes for some people that maybe the case were relatively successful, we have most of our basic needs met, will people then continue driving, striving and innovating. But the cultural makeup of the country is such that I don’t think that’s a problem. You’re still going to have people who want to innovate, who want to try new things, want to experiment and those sorts of things are going to provide that people can continue to do that or are going to continue to drive along with innovation. So I’m not worried about releasing the contracts in United States. Arnold Kling: Well, you know, the book doesn’t actually answer that question, it’s a good question, but the Economics 2.0 very much emphasizes the role of culture and the individual attitudes in kind of shaping the economy. And so, some of the economics that we’ve learned over the last 50 years, it’s just how important that culture is. You can’t just sort of go into Iraq and change the culture overnight or go into an African country and change the culture overnight. And hopefully, you can’t go into an— Nick Gillespie: Go into Michigan, right? In terms of the culture of the— Arnold Kling: Yeah. Nick Gillespie: Is this a good time to write and release a book about the Lasting Triumph over Scarcity? Nick Schulz: Yes. Counterintuitive, we’ve joked that the book—that maybe we should call From Poverty to Prosperity and Back to Poverty Again. But the—you know, it’s somewhat counterintuitive but I think one of the themes in the book is that allow—the gains are pretty lasting. I mean, obviously, we are in the middle of a pretty rough economic time but I remember going to Japan for example first time many years ago after Japan had had this last decade, right, and I kept thinking, “Well, I’m going to go and there’s going to be this horribly,” depress society, no energy, no vigor, when you go there, you would have no idea coming from the outside. So that there are gains that can be made that can be lasting and I do think that this Triumph over Scarcity is real, and it’s an important story and it’s an underappreciated one. Arnold Kling: And a useful exercise, I actually gave this to my high school students, is to do a plot of real gross domestic product per person over a long period, from let’s say, as far back as we have the date until now and every recession in that plot shows up as a tiny little blip. Now, this one will—should show up as a bigger blip but will still be 10, 15 years from now, it will still appear to be a relatively tiny blip. Nick Gillespie: Oh, and a lot of ways, the problems from this will be less the kind of evaporation of capital and more of the legacy of the rules and regulations of the institutional changes that get made. Arnold Kling: Absolutely, of course I described this, I’m known for describing this as the great recalculation, meaning that there are—there can be dramatic movements out of some industries and into others. Nick Gillespie: On top of this, you have another new book— Arnold Kling: Yes, I call that Book 2, it’s called Unchecked and Unbalanced, and it’s about the discrepancy that’s emerging between knowledge being highly dispersed and specialized while power, political power is becoming more concentrated. Nick Gillespie: And Nick, you are the editor in chief of the American Enterprise Institutes Publication, how does that carry through the themes of your book? Nick Schulz: Well, we focus a lot at American.com on economic growth and another issue that is big in this book and this is important to me, which is entrepreneurship. It’s by—one of the things that we want the book to do is to point areas that people should be looking at and spending more time thinking about. Because we’re not presenting this as, “Well, here’s this set view of the world,” instead it is, “Here, areas of academic research of just intellectual research that people should be doing and spending more attention to spending more time on,” we do a lot of that at the American, so that’s how the two—anyway. Nick Gillespie: Well, and it’s certainly clear that we are desperately in need of new economic frameworks and kind of philosophical frameworks, and probably even epistemological framework, since a lot of the explanations emanating from D.C. whether it’s conservative or liberal don’t seem to be capturing out reality as we experience. I want to thank Arnold Kling and Nick Schulz, authors of, From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and The Lasting Triumph over Scarcity, and I would also like to thank Washington D.C. for supplying more than enough ambient noise during this interview. For reason.tv, I’m Nick Gillespie.