Embark on an intellectual journey with Michael Gayed and our esteemed guest Brian Albrecht as we unravel the intricate tapestry of today's economic landscape. This episode guarantees to arm you with a deeper understanding of how data, computation, and behavioral economics are reshaping the field. Together, we scrutinize the rise of empirical research focused on causal relationships, and how these advancements influence policy-making and macroeconomic trends. By shedding light on the complexities of market power and competition in the US economy, we lay bare the fundamental shifts affecting both businesses and consumers.
As the dialogue progresses, Brian and I confront the contentious issues of market concentration, inflation, and the role of 'superstar' firms in our economy. We tackle the misconceptions around price gouging head-on, emphasizing the need to discern the nuanced interplay between supply and demand. The chapter on tariffs cuts through the political rhetoric, offering a candid evaluation of their consequences on international trade, domestic manufacturing, and the wallets of everyday Americans. This segment is sure to challenge your preconceptions and enrich your grasp of current economic policies.
Concluding with a look towards the horizon, our conversation shifts toward the pressing concerns over government debt, regulatory landscapes, and the economy's ability to adapt in uncertain times. Brian's insights shine a light on how markets and regulations can evolve, presenting a hopeful outlook on the potential for reform and innovation in the face of these challenges. This episode is more than just a podcast; it's a panoramic view of our economic reality, intended for those ready to embrace a sophisticated perspective on the forces shaping our fiscal and regulatory frameworks.
Nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities.
The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
Sign up to The Lead-Lag Report on Substack and get 30% off the annual subscription today by visiting http://theleadlag.report/leadlaglive.
Embark on an intellectual journey with Michael Gayed and our esteemed guest Brian Albrecht as we unravel the intricate tapestry of today's economic landscape. This episode guarantees to arm you with a deeper understanding of how data, computation, and behavioral economics are reshaping the field. Together, we scrutinize the rise of empirical research focused on causal relationships, and how these advancements influence policy-making and macroeconomic trends. By shedding light on the complexities of market power and competition in the US economy, we lay bare the fundamental shifts affecting both businesses and consumers.
As the dialogue progresses, Brian and I confront the contentious issues of market concentration, inflation, and the role of 'superstar' firms in our economy. We tackle the misconceptions around price gouging head-on, emphasizing the need to discern the nuanced interplay between supply and demand. The chapter on tariffs cuts through the political rhetoric, offering a candid evaluation of their consequences on international trade, domestic manufacturing, and the wallets of everyday Americans. This segment is sure to challenge your preconceptions and enrich your grasp of current economic policies.
Concluding with a look towards the horizon, our conversation shifts toward the pressing concerns over government debt, regulatory landscapes, and the economy's ability to adapt in uncertain times. Brian's insights shine a light on how markets and regulations can evolve, presenting a hopeful outlook on the potential for reform and innovation in the face of these challenges. This episode is more than just a podcast; it's a panoramic view of our economic reality, intended for those ready to embrace a sophisticated perspective on the forces shaping our fiscal and regulatory frameworks.
Nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities.
The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
Sign up to The Lead-Lag Report on Substack and get 30% off the annual subscription today by visiting http://theleadlag.report/leadlaglive.
My name is Michael Gaiat. Join me for the 40-45-minute time period here, as it's your Brian Albrecht. Brian, if you're just up to the audience and to me, who are you, what's your background, what have you done throughout your career and what are you doing currently?
Speaker 2:All right, my name is Brian Albrecht. I'm the Chief Economist at the International Center for Law and Economics. I'm an economist by training. I have a PhD in economics from the University of Minnesota. My main focus is around antitrust, but also just broader economics education. I was a professor before I took my career role. I run a sub-stack called price theorysubstackcom, which is all about basic economics, undergrad-level economics, and how we can apply that to understand the world around us. My research goes into things like antitrust and competition a little bit more abstract types of things but I really am also focused on teaching very, very basic stuff, so I hope we can cover a variety of topics. I see a few change in the title here. It sounds great. I'm excited to talk to you, Michael.
Speaker 1:All right, so I want to start just very basic, and maybe this is not really a basic question, but how has the in quote the dismal science of economics changed over time, In other words, does the framework through which economists look at the world? Is that different today than maybe 10, 15, 20, 30 years ago?
Speaker 2:Yeah, absolutely. It evolves like any field. Some of that is fads that come and go, some of it is more of a longer-run trend that we've seen continue for a while, if we're looking over the last 10, 15 years. It depends exactly the field you're looking at, but the general trend is more towards empirical work, more towards microeconomics and what's called causal inference. So how do you like? Yes, we can find a lot of correlations in the data, but how do you actually tease out causation?
Speaker 2:And there's a whole literature that's not just within economics, it goes across a lot of fields but that's had a really big impact on economics. So a lot of economists will find themselves asking things like some standard economic questions, like when taxes rose by 10%, what happened to sales and things like that, and getting good causal estimates of that sort of thing. But it also shows across lots of things that aren't traditionally seen as economics, so things that are more intermediate, like education. What's the effect of this intervention on education outcomes? What's the effect of this tax policy on marriage outcomes? All sorts of things. Development every field has been influenced by this revolution, pointing towards a lot of more empirical work. So therefore it's a lot less theoretical than it was before. Part of that is because the data is better, the computational abilities are better, but I think it's not all for the good, and I'm trained as an economic theorist. I think theory is important. The thing that makes economists different from statisticians is our economic theory, and so that is where my specialty is.
Speaker 1:I've got to mention also just the advance of the behavioral economics as added to another layer over time.
Speaker 2:Yeah, so if we're going to talk about behavioral, it's become a bigger issue over time. For sure Part of it has been more integrated and a little bit more mainstream. This is one of the things, that kind of ebbs and flows. So if you'd go back and read somebody like Milton Friedman in the 1960s, let's say 1950s, when he was really doing a lot of his pure academic works, there's a lot of things that we would think of as kind of behavioral, talking about how the exact setup of the situation or in really impacts your decision, not just the objective facts but how a question is posed so you could influence you. Friedman will say stuff like that. Then there was a trend where it got much more rationalistic, much more extreme assumptions about what is rationality, and then there's a pushback that became behavioral economics and that's had an influence. For sure it's had less of an influence on me than maybe on the profession, so I probably had the best defender of it, but it's absolutely just as a statement about what's happened in the profession.
Speaker 2:It has a bigger deal and things like, let's say, finance finance is for a long time now has been really okay with behavioral type of stuff. It's really grown into things like tax policy. Do we think about tax policy with these behavioral elements? For example, a classic result in introductory economics that we teach in introductory economics is like it doesn't matter who actually pays the tax. Whether the store or the consumer pays the tax, it doesn't matter, it works out. But there's research that's actually not true. There's subtleties about whether the tax is displayed and who remits it to the government and whatnot. That falls under behavioral economics somewhat, but it's also not implausible. It's not like this thing that overthrows tons of standard economics. So it's gotten integrated in some ways.
Speaker 1:I want to talk about your pinned post. Two macro trends over 40 years rising aggregate markups, falling business dynamism. Let's define those two and why, from an economic lens. Those are important to keep in the back of one's mind.
Speaker 2:Yeah. So these are macro trends, big picture stuff for the US economy. I should say this is for the US economy. There are similar trends elsewhere, but my paper with Ryan Decker, which is pinned this is based on the US economy. So markups markups are a way of measuring market power. So for a long time economists would think about market power as like the level of concentration, like how many firms are there, how big is the biggest firm, things like that, and there are lots of problems with that. We can get into it. Another measure that people can use is called a markup. Basically, how much is price over marginal cost? It's like a profit measure. There are some times in which you could think of it like profits, but the nice thing about it is it doesn't have the problems that concentration has. But the downside is it's harder to measure anyways. So markups seem to have risen. It's hard to make blanket statements across a lot of industries, but it seems to have risen across. Many people have really good data on manufacturing from the US census seem to find this. People who have tried to use other things like publicly available data or sorry data on publicly traded companies seem to find this, which seems like there's more market power over the last 40 years and it's gone up as a straight line. So that's markups lots of debates in this literature. I think it's fair to say that people agree that markups have gone up. Questions whether it's a lot or a little, bit's gone up. So there seems to be more market power in the US economy.
Speaker 2:The other is business dynamism. This has reversed, possibly in the last few years, but let's talk pre-COVID. Since the late 70s it was started in 1980 or so until pre-COVID, business dynamism has fallen. What do I mean by business dynamism? Things like what percentage of workers work for a firm under five years old. We think that number is high. That means a lot of people are going and working for young firms. That seems to be some measure of dynamism. Or something like how often are workers changing jobs? That's a reallocation of workers between different firms. Sorry, not changing jobs. How often are workers changing firms? It's reallocation. A big literature.
Speaker 2:My co-author is one of the main people on this, ryan Decker. It's fallen quite a bit over the last 40 years and so this has caused a lot of people to say these two things are related. There's higher markups, there's more market power. When there's more market power, it's harder for new businesses to get started, and so there's some kind of underlying story that makes this all more difficult than it was 40 years ago. So we see two bad trends and there's some individual story that's causing both of them. So that's kind of the fairly accepted wisdom within US macro academic circles I can get into. We don't think that that's the whole story. We can get into that if you want it.
Speaker 1:Yeah, I mean. The first thing that comes to mind for me is I'm gonna assume that there are pretty high correlations between that and market concentration and Pareto principle getting even more extreme right In terms of industry makeup. I've made this point before and I've had a few people talk about on the anti monopoly side. It seems like almost every industry is basically an oligopoly at this point.
Speaker 2:Yeah, it depends. We definitely see that. We see increasing concentration among the top few. So I think it's fairly well accepted that let's say let's define a market to be something like textiles or something. The top four biggest firms have gotten bigger and they have a larger market share than they would have 40 years ago. It's not true everywhere, but that's true. There are complications.
Speaker 2:I have a newsletter on this about concentration, about. Should we think about concentration from the US firms perspective or from the US consumers perspective? For example, we've also or sorry as an example of explain the difference as trade has increased, that has run out and caused a lot of US businesses to fail. But the consumer may have more options now and so from the consumers perspective, there might be less concentration than there was 40 years ago, and that seems to be the case. The best data that we have on industries that have good import-export data that seems to be true, but it's a complicated picture. Absolutely.
Speaker 2:One thing that's not really disputed when you put it inside concentration is the top few firms have huge markups, huge profits relative to 40 years ago or 30 years ago, that there is a real superstar effect in which the top firms are really really doing them all, they also pay them most. There's just a real extreme on that front. Now we should be careful here. I'm not just talking about the Googles, the Amazons, the world, that type of thing. When we think about big businesses like within bread manufacturing, okay, this is true that the top firms are I don't know who they are are making big profits, so we're doing it. Different research on this is drilling a bunch of different industries to say this, and so it seems to be a pretty widespread phenomenon, and then it can be exemplified by the big tech companies or the Walmart, the world, or wherever.
Speaker 1:Isn't the effect of that? Ultimately, I think you did a lot to look at the thing the effect of that is that you end up having, because of the concentration, more inflationary pressure across the board because there's no real competition to bring prices down.
Speaker 2:then Again, it's a little subtle and this is one of the reasons that I think concentration is well the nice thing about. It is easy to measure. People can do it basically even from just like public data on publicly traded companies. You just look at their revenue and compare big revenues. The problem is that in many situations if you have the lowest suppose you have someone come along who's a very low cost producer. Okay, this is Walmart, it's 1980, 1990. They're low cost. That causes them to win a lot of the market, to get a large market share. So a low cost producer is catching and winning a large part of the market. So you can have high concentration, which some people think of as monopoly. But you're getting high concentrations exactly because you have a lower cost producer who enters the market. So there's a given take here. Your force is absolutely true. If it's just that, I like to take another extreme. If I get the government to prevent people from entering my market, I say, okay, I get an exclusive patent or I'm going to get occupational licensee or things like that, absolutely that's going to drive up prices. But normal competition sort of things are going to drive down prices and in its empirical manner, in which case is the downward pressure of competition versus the upward pressure of being the lone survivor weighs out, I think, over a long enough time period.
Speaker 2:It's an open debate. I don't think we actually have even let me take a step back. There's a question about whether then inflation is going to be worse because of this, and we need to be careful about jumping from the micro to the macro, and one reason is that suppose you have two industries you have appliances and you have food. Any market power that's driving up prices and appliances means that consumers have less money to spend on food, which is going to drive down the price of food, and so I'm of the opinion that this sort of dynamic doesn't have that big of an impact. We can get into situations where maybe it would, and that the real driver of inflation and overall prices are the things we think they are, and you get stimulus supply conditions, macro level phenomenon. Yes, there's a micro thing underneath, but the micro thing, like market power and things like that, don't seem to be driving a lot of it.
Speaker 1:Although I guess there is a that, it does become an interesting political argument. You see from the Biden administration the idea that they're gouging by some of these companies. They're just using inflation as a excuse for the higher prices which are causing inflation.
Speaker 2:Yeah, and this is actually how I originally got into the inflation debates. I came from. I do a little bit of macro work. I was on. My early publications were on economic growth, but I didn't really do much on inflation. And then the recent episode in the US and around the world changed that, especially the connection to market power, because it's been a discussion since as soon as prices started to rise in 2022 that Elizabeth Warren and even the FTC chair, lina Khan, were talking about price gouging as the cause of inflation.
Speaker 2:I'm very skeptical of that argument. There are more subtle arguments related to it. I don't think these are coming from politicians, but there are academics making more subtle arguments that we could try to get into. But my problem with a price gouging argument is I never understand what people mean. I understand what people mean when there's a hurricane and the price of gasoline goes up a bunch.
Speaker 2:Whether we want to call it gouging or not, I understand there was a discrete event that things change. Supply and demand change in such a way that prices rose a bunch. We may not like that and there may be problems with that, but I don't know what people mean when they say price gouging happened there. When people say price gouging in the context of the last let's not even talk about early COVID and supply chain issues in the last year what does that mean? You've raised prices. Okay, yeah, you've raised prices. Prices are rising all over the places, everywhere prices go up. Is that price gouging? I think it's not. I don't know and of course, no tweet from a president is going to actually fill in the details. It's going to just hint and nod at some sort of argument that I don't think is actually there.
Speaker 1:Yeah, or tweet from an intern.
Speaker 2:Yeah, yeah, yeah, yeah yeah.
Speaker 1:And that's not meant to be a swipe at an iteration of just the reality.
Speaker 2:Yeah, yeah. No, I don't think it's a unique problem, a unique sin for any sort of political party or thing like that. Everyone's trying to make their arguments at appeal. It's just the way.
Speaker 1:I see those Speaking about things that cause inflation. We should get into the topic which you have on your sub-sec, which was the impetus for me to change the name of the space 40% tariffs, which sounds a little bit aggressive and sounds a little bit dangerous. But let's talk about some of these things that are being put out there, proposed and, of course, this is election season, so there's a lot of stuff that said ends up never ending up happening and they're never actually occurring. But what Trump is is the idea that Trump's floating out there more. I feel like what do we say?
Speaker 2:Yeah, it's a question of how serious to take any statement from any politician at this point in the cycle. There are spaces for tariffs. I may be economists myself included may generally be more against them than average people, but I would never go out and say that there's no reason for them. National security is obviously a reason to try to build up some certain industries, but it's just a broad-based tariff on everything coming from, let's say, china. I don't see possible justification for it. The standard argument and this is the argument you've seen pushed by fans of the former president is that these tariffs are going to be taxes paid by the foreign producers. They're the ones that have to pay the tax and it's not going to be the Americans. So why not try to collect tax from the Chinese? It doesn't sound great. They'll paper our stuff. Earlier I said that one of the basic ideas in economics is that it doesn't If the tax is paying in like the actual person paying it is a Chinese company, that doesn't matter, because the price is going to adjust and that the prices are going to be higher, and then US consumers are going to be harmed because of the tariff. They used to be able to get laundry machines for $500. Now it's going to be $600. Us consumers are hurt by $100, as a quick way of thinking about it. So that's the old school, that's what I teach in 101 type of thing. Now there are benefits in that sort of analysis. That means the price of wash machines has gone up to $500. I think that was the number I used $500. Well, that means US productions of wash machines can charge more money. That's maybe a goal.
Speaker 2:You want to try to subsidize certain industries that they expect to consumers. That's very common. But even if you want to try to do that, suppose you wanted to try to boost US manufacturing. It's not so simple once you actually start looking at the data and thinking through modern supply chains. First of all, most tariffs are paid by US companies. The companies that import them pay the tariffs. So it's just the way that modern trade works.
Speaker 2:Another thing is, most trade is not actually between file goods producers. It's not someone just shipping me apples and then the apples come from Argentina and then I get the apples and I consume them at home. A lot of this is happening within businesses, within the individual company or within tightly connected companies within the supply chain. So it's not like you, if the good is coming from China's has a huge tariff on it. The buyer of that good is a US company, so you're raising the cost of a US company. Yes, you're lowering competition for one market, but there's another market in which you're raising prices.
Speaker 2:And so I go through in the post some research that looked at tariffs added when Trump was president last time and that seemed to show that a few things, but that employment in these industries went down a little bit.
Speaker 2:But really the big thing is that costs went up a bunch and that was the biggest factor. So to raise the cost of US companies of doing business and that is really the effect of it You're making things harder for US companies to do because they can no longer get it when you have these broad based tariffs. And so I think, even on the grounds of I wanna help manufacturing I think the goal is to boost manufacturing in the US we can dispute whether that's a worthwhile goal, but let's say that's your goal. I think we need to be skeptical of that. Is that that's impossible? There are some papers that seem to find that it can have some effect, although all of those sorry that can have some positive effect on employment that it actually does help US manufacturing. All of them come at a ridiculous cost. You're talking like millions of dollars per job, and so is that a good use of cost benefit analysis, or, in terms of cost benefit analysis, I'm not so sure.
Speaker 1:Yeah, and certainly, certainly. It seems like the let's call it, the average American is not even making that link at all.
Speaker 2:Yeah, and I think that that's the beauty and the downside of modern markets is that they're very complicated. We maybe imagine that a company sells, there's a manufacturer in China that sells something to Walmart, that sells it to us. That's not how it works and there's no reason we should know that. This is one of the things that I stress in some other pieces is like markets work, because I don't need to know everything. I just go to the store and I see the price, I decide whether the price lives up to it, what I think the expected value is gonna be, and I don't need to know the whole system of how it got here. And so that's the beauty of markets you don't need to know. The downside is well, if you don't know, you may mess up the system somehow.
Speaker 1:Another post, fear sub-sac, which has a title that I think everybody would probably answer note, which is are you paid what you're worth? Hey, so let's. This is, I think it's, maybe it's around perception. I'm gonna remind you a little bit of that experiment where, if you were to ask a crowded room, if people think that they're better than the average driver, everybody raises their hand. Lay out what you put out in that post, because this is, I think, where a lot of discontent comes from and maybe misconceptions.
Speaker 2:Yeah, it's a. It was meant to be provocative post title. I don't know if it really worked out. I don't know if it got picked up that much, but everyone thinks that they're paying too much for stuff, that they are underpaid, and I don't. It's hard to tell whether you are or not. There's in some sense. Do we have any metric for that? If I'm going out and I'm trying to sell my artwork and no one's willing to buy it, am I being underpaid? Well, it means I'm not sure what it means.
Speaker 2:What this post is trying to do is to give a framework for thinking about that, and it's a theory contribution, even though it sounds like it's going to be giving you tips for bargaining or something like that. It's really to give you a conceptual framework, and the framework that I lay out is about this idea that, okay, what would happen if you weren't there? What would happen if you didn't show up at your company? What would happen to profits, things like that? Let's just think about profits. Okay, now, if profits would go up sorry, would go down how much would they go down? Okay, and then you need to think about that with respect to what you're getting paid and the difference between that and what you're getting paid. In a competitive world the profits would not change because whatever profit you are generating for the company, you are earning back as your wage. So on the revenue side you're adding value to the company, but on the cost side you're going to pay it exactly that. That's what you'd see in the competitive market. But if there are other situations in which you're generating more value, then you are receiving, and then I say that's a case of being underpaid. But if someone's being underpaid, it's quite possible that people are being overpaid, that they are getting paid more than the value that they generate.
Speaker 2:This thing I'm trying to extend out not just to your working, but to think about how much benefit are you getting in a local club you're a part of? Are you adding more value than you're receiving that source? The basic idea is is there an externality? Is there a benefit or cost that I am generating for the people around me that I'm not capturing? That's the way to think about it. So often in business it's very difficult. This is why we have disputes about this. If you're just a person out there selling widgets, going around as a traveling salesman, you can see what you're producing. But most people and companies can't do that. So this little exercise isn't directly applicable, but I think it's a conceptual exercise to help think through things.
Speaker 1:This is not an odd question, but I think it's interesting in the context of all these narratives here on AI and the future of labor with artificial intelligence. But is there going to be a way to get paid more because of the supposedly industrial revolution that's coming on the tech side? That's going to benefit all these companies? Because if one is worth a certain amount of dollars, but it's hard to really know what that amount of dollars is, that you can clearly make a link between the AI output and those dollars. It seems like it's hard to really negotiate.
Speaker 2:Yeah, and anytime people work together, it's tough to figure this out and this is the fundamental problem. A trivial example, but a way to think about this is suppose there is a heavy box, a crate, with two handles, one on each side, and it takes two people to carry it. With one person, neither can carry it. Okay, with two people, they can carry it. A third person doesn't help because there's only handles or two. And this problem is like who is contributing? Which person? The person on the sideline? The person who's carrying it? We have kind of natural inclinations that well, the two people carrying it are doing it equally, but if you do my exercise, actually each person is contributing the whole thing, because without them, nothing would happen. And so there's this fundamental tension here and you're going to see a lot of this. You see this a lot already and people have already figured it out. If you take a tractor and a driver, the driver is basically yes, they could shovel and they could do a little bit of work, but they basically would do nothing without the capital, without the tractor, but the tractor is worthless without the driver.
Speaker 2:To the extent AI can be completely independent of workers, it's going to look, it's going to. Maybe it's going to be a return. The money is going to flow towards the owners of the AI, whatever that looks like. But if the real skill is in the combination of the AI and the workers and the worker is crucial, and the worker is going to have bargaining power on that, it's going to be able to fight. I think that. So that's definitely going to happen. There's a balancing act that's going to happen there. We're going to figure out what that looks like and it happens already all the time.
Speaker 2:I think the thing that cannot be lost is that if it makes the pie bigger, if you can just do more stuff, then arguing over the exact division doesn't matter as much. And this is where the optimists like me tend to come down as okay. If output doubles in 20 years because of this or whatnot in 10 years an extreme example okay. And maybe the owners of AI or the people who somehow control the AI are able to get 30%, 40% to 50%, whatever it is. If my wage also goes up a bunch, do I really care? I don't know, we'll see, but I'm less hung up on what the bargaining is going to be and more interested in what the productive capabilities are going to be.
Speaker 2:That's from looking at the past. We continually had new inventions come on, new productivity come on, and there's Times where there's strife absolutely Look net. If you look at the long term, the conflicts have gone down and I think one of the reasons conflicts have gone down, let's say in the United States, is because there's just so much more going around. And there's so much more going around, more can be distributed through policy. There's people aren't bombing their employers like you'd have in the past, just not the same thing when you have a bunch of things. We're getting paid a bunch already, a bunch by historical standards, right, but not compared to your peers necessarily.
Speaker 1:So use the word optimist and, let's face it, it's hard to find optimists. I mean in general, I think everyone, just in general there's a societal affliction more towards pessimism anyway, even though the fact of the matter is things have gotten a lot better over time. I did a space with Zachary Carabell on this very topic. He called it the vibe session. Right, people feel worse about the economy when in reality their lives, probably on balance, are better than they were at least a decade ago Over a long cycle. Is there any concern being optimistic when the trajectory of government debt is what it is? You keep seeing those posts on X we had another trillion dollars government debt and people get nervous when they see that the line of course. Is that gonna affect our children? Any concerns there? At first like very long term, I know that's been in the cage for a while, but presumably there's some point where it really does become an issue.
Speaker 2:Yeah, this is one of the hard things when you have people who are thinking about the future. If, for 40 years, people are saying avoid that rock, don't run into it, and then we don't run into it because people have been screaming that, what would happen? What were the people who are screaming the run of the rock right or wrong, or how do you think about that? So the reason I tend to be an optimist on this sort of stuff, first of all, absolutely there's you need to think about it. It's gonna be a concern. If we do nothing, it'll be a major concern. But that's true for a lot of crises, a lot of things that, especially when we have a long term to plan out for it, I think the doomsdayers are just tend to be wrong.
Speaker 2:Now, if there's a media attacks and war and stuff like that, that kind of hits you. That's not true. But if you can see something coming for a long time, I think we tend to find ways to deal with it. For example, climate change has been an issue for a growing amount of time. But we have I'm not saying we've done everything perfect or that we live in some sort of utopia, but there are developments that have happened that help protect against the worst effects of it. Now you could always say that in 10 years it's going to be so much worse and we're not gonna be able to, because if we reach some tipping point that's possible. You can make the argument, but I'm skeptical. I think we'll find ways to get around it Again. There could be lots of struggles, but I think on that you'll get around it. I think the same thing is true with our national debt. So security trust fund thinking about that going forward, there'll be ways.
Speaker 2:Is this as functional as our politics are? In the past we've found ways to shave off some dollars here and there to save things. Some of it's not great, like the way that we paid for. A lot of the stimulus spending in COVID was through inflation not ideal, but it also, once we weather that, the US economy is in pretty good spot. So I don't know exactly what it's gonna look like. If it's gonna look like raising retirement age continually doing that, if it means cutting benefits somewhat, if it means hiding it through inflation somehow. None of those are great. But in the scheme of kind of the upward trend of the US economy, I'm not so worried.
Speaker 1:What about other macro trends that you can argue in a place for a while that are getting more prevalent? I think you got the wrong of this, but I get the sense that over time we never really were a fully capitalist system, but we've become you can argue tilted a little bit more towards the socialism side of things. Does that throw anything off in terms of the way you think about the future?
Speaker 2:It's a good question, and this is yes and no. I'm with you in that there have been worrying trends about government spending, about regulation, things that I don't think are ideal. At the same time, when these big programs come in, they don't seem to destroy things. They we adapt to them, we find ways around them and we go on. Now you can say that economic growth would be higher if we hadn't implemented whatever Medicare or something like that. I don't know if that's true, but you can make that argument. Things that, no, sorry, I'm blanking on exactly your question.
Speaker 2:Yeah, just there's like how the economy is shifting, tilting more oh yeah, yeah, towards more regulation and that's showing up in lots of bad ways. Absolutely Hard construction productivity is really down. That's been I forget the exact timeline, let's say 40, 50 years of construction productivity in absolute terms, in real terms, has declined. So we're doing less. We're producing less today than we were 50 years ago in construction and I think the most obvious example, or the obvious culprit for that, is regulation, of sometimes some local type of regulation. The reason I'm again tend to be an optimist is I think that there is reaching a point in which there's a pushback against it, that there's a pushback against not in my backyard policies of where you're not allowed to build a thing. There's a pushback on general regulation. It hasn't pushed us back to some 1920s, 1900 type of system, but it's undone some of the, some policies and some of it is yet to be seen, but I'm optimistic that'll happen.
Speaker 2:So if you look at some of the zoning stuff, there's reasons to think that bad is turning around. Maybe it's slowing down in other cases. Again, the problem is when you have people looking at these things, you have people warning against them. Change does happen. For example, just in Minnesota, right now, minneapolis, the whole city is no longer single family zone, so everything can be multi-family homes. You can build larger units, okay, not just standalone houses. That's a response to housing prices. Has it been perfect? No, there's been other things that's been thrown in the way. A core is holding it up. I don't know the exact details of that spread. At some point at least, the core was holding it up because of environmental concerns and whatnot. But there is a response to these sort of regulatory problems and so, yes, if you gave me a red pen, I would try to get rid of a ton of regulations.
Speaker 2:In the scheme of things, I think we're still a fairly unregulated economy by comparable standards, and so, again, that's one of the reasons that I'm not just blindly optimistic. When we look at dynamism within the US, like circling back to the beginning topic, there's been a fall in new startups and things like that, but the fall has been much worse everywhere. So it doesn't seem to be all about some weird thing about the US and its policies, and the US has actually done relatively well in all of it that the US still reallocates workers I'm talking as if it's some abstract system. People within the US market economy move between jobs much more rapidly than any comparable country. We said a comparable country of any size and so things like that.
Speaker 2:When I see that in the data, it leaves me optimistic that despite all these regulations that I'm not a fan of, they haven't been destroyed. Broke the camel bag cartels back, could the next one be? Absolutely, and I'll be here arguing against it. But if I'm just gonna take a step back and not think about this regulation or that regulation, I'm gonna be optimistic about the trends.
Speaker 1:Brian, for those who wanna track where your thoughts more, what were your points?
Speaker 2:So my newsletter that I write with Josh Hendrickson is called Economic Forces. It's economicforcesxyz or price theorysubstackcom. It's linked in my Twitter bio everywhere. If you search Brian Albrecht economics, I'll show up. Bryanclbrechtcom is my academic website. They'll do links to everything there. Yep, google search bar is still a wonderful way to see everything I got.
Speaker 1:Everybody. Please give Brian a follow. Great conversation Again. This will be an edited podcast on their lead lag live probably a couple days here and hopefully I'll see you on tomorrow's space. Thank you, brian, really appreciate it. Thank you, michael. Cheers everybody. Thank you.