#457 – Jennifer Burns: Milton Friedman, Ayn Rand, Economics, Capitalism, Freedom

0:00:07 The following is a conversation with Jennifer Burns, a historian of ideas, including the
0:00:14 evolution of economic, political and social ideas in the United States in the 20th century to today.
0:00:22 She wrote two biographies, one on Milton Friedman and the other on Ian Rand, both of which I highly
0:00:30 recommend. This was a super technical and super fascinating conversation. At the end, I make a
0:00:36 few comments about my previous conversation with President Zelensky, for those of you who may be
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0:02:36 Did you know that he wrote capitalism and freedom in just six months
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0:05:00 This episode is also brought to you by Element, my daily zero sugar and delicious electrolyte mix.
0:05:06 Did you know that Ayn Rand’s daily diet was black coffee, french fries and cigarettes?
0:05:14 Well, she should have been consuming some element. I mean, listen, let’s not be judgmental here.
0:05:21 Churchill did quite a few impactful things in the world and his diet and
0:05:29 liquids and substances he consumed were just atrocious and the guy was out of shape and it was
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0:06:35 I often talk about capitalism when I do the ad read for Shopify and no better episode than
0:06:43 for many hours focuses on the work of Milton Friedman, who was the seminal figure of the
0:06:51 Chicago School of Economics. And Ein Rand, who is basically the most hardcore and saying the so
0:06:58 defender of capitalism. Howard Work, his architectural principles that we talk about with Jennifer
0:07:07 Burns, I mean is the embodiment of this spirit of, “Fuck you, I’ll do whatever I want. I’ll do it my
0:07:16 way.” That radical individualism that makes up America, that makes up the individual gears that
0:07:23 make up the machinery of capitalism. That is the American way and that has some downsides,
0:07:28 but mostly it’s upsides. It’s the reason we have so many amazing things and the quality of life is
0:07:33 going up and the productivity, the GDP is going up, not just in the United States, but across the
0:07:41 world, thanks to the incredible innovation by US inventors, US companies. So anyway, Shopify is
0:07:46 just one implementation of that. First of all, of course, the engineers that create Shopify,
0:07:51 but if you yourself want to sell stuff, you’re creating something and you want to sell it,
0:08:01 Shopify enables you to do that. Sign up for $1 per month trial, period, at Shopify.com/Lex.
0:08:06 That’s all lowercase. Go to Shopify.com/Lex to take your business to the next level today.
0:08:14 This episode is also brought to you by AG1. And all in one daily drink to support better health
0:08:20 and peak performance as I slide slowly down in my chair. It is late late at night,
0:08:27 embarrassingly so. And I’ve lost all energy and I’m slowly losing my mind.
0:08:38 And there’s a cup next to me that I am swirling gradually. It is a cup of ice with some water
0:08:46 and element in it, but it makes me feel like maybe it’s a whiskey. And whiskey is probably
0:08:52 something I need at this moment. But let us focus on the essentials. And definitely not whiskey,
0:08:57 but something way healthier, which is AG1. I already had it twice today, did crazy exercise,
0:09:05 didn’t sleep much the night before, had to do a super long podcast, had to do a lot of reading.
0:09:13 It was just an insane day, my friends. I’m so grateful to be alive. And yeah, there’s the little
0:09:20 joys of drinking a bit of AG1. Does it do much for me? I don’t know. It makes me feel like it does.
0:09:26 It’s like a really nice multivitamin. Brings joy to my life. I miss it when it’s not there.
0:09:29 Who knows? We’re all going to die in the end.
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0:09:45 This is the Lex Friedman podcast. To support it, please check out our sponsors in the description.
0:09:55 And now, dear friends, here’s Jennifer Burns.
0:10:13 You have written two biographies, one on Milton Friedman and one on Ayn Rand. So if we can,
0:10:16 we will focus on each one separately. But first, let’s talk about the ideas that
0:10:22 two of them held in common, the value of individual freedom, skepticism of collectivism,
0:10:27 and the ethics of capitalism. Can you talk about the big picture ideas they converge on?
0:10:33 Yeah. So Milton Friedman and Ayn Rand, in the biggest picture, they’re both
0:10:38 individualists and they’re skeptical of collectivities and collectivism.
0:10:42 So their unit of analysis is the individual, what’s good for the individual,
0:10:46 what works for the individual, and their understanding of society flows from that.
0:10:55 They also both use this focus on individualism to justify and to support capitalism as a social
0:11:01 and economic system. So we can put them in a similar category. We can call them individualists.
0:11:06 We could call them libertarians of a sort. They’re also really different in how they approach
0:11:14 capitalism, how they approach thinking. Ayn Rand developed her own moral and philosophical system
0:11:20 to justify individualism and to connect the individual to capitalism and to support
0:11:25 capitalism as a social and economic system. Friedman struggles a bit more with how to justify
0:11:32 capitalism and he’ll ultimately come down to freedom as his core value, his God, as he says.
0:11:38 And so freedom does connect back to the individual, but he’s not justifying capitalism for his own
0:11:44 sake. He’s justifying it for its ability to underwrite freedom in a social sense and also in the
0:11:48 individual sense. At a high level, are there interesting differences between them? You already
0:11:53 mentioned a few, maybe in terms of who they are personally, maybe in terms of how they approach
0:11:58 the justification for capitalism or maybe other ways. Yeah, for sure. So beyond this idea that
0:12:03 that Milton Friedman takes a while to come to his justification of capitalism,
0:12:09 Morzine Rand kind of has it from the start. She really focuses on the core quality of
0:12:15 rationalism and rationality. Rationality is the defining feature of human beings. And so
0:12:22 she works from there, whereas Milton Friedman eventually converges on this idea of freedom.
0:12:27 So that’s one part of it. The other is their intellectual styles are really, really different.
0:12:32 Their interpersonal styles are really different. So Friedman has big ideas, big principles that
0:12:38 guide him, but he’s also deeply empirical. He spends most of his career doing historical research,
0:12:43 economic research, pulling data from how people actually make economic decisions and live in
0:12:49 the world and using them to test and refine his theories. Where Rand, to some degree, we could
0:12:53 say she’s empirical and that she lives through the Russian Revolution and takes a very big lesson
0:13:01 from that. But her style of thinking is really first principles, an axiomatic approach, going from
0:13:08 the basic idea of rationality and then playing that out in different spheres. And so those are
0:13:14 just very different intellectual approaches. And then they lead in some ways to really different
0:13:21 ways of thinking about how you get things done in the world. Ein Rand is a purist. She wants to
0:13:28 start with the pure belief. She doesn’t want it to be diluted. One of her favorite sayings was,
0:13:32 it’s earlier than you think. In other words, we’re still moving towards a place where we can really
0:13:38 hold and express these ideals purely. Friedman, although he didn’t use this terminology, was
0:13:43 much more half a loaf guy. I’ll take what I can get and then I’ll try to move to where I really
0:13:49 want to be. But he is able to compromise, especially when he moves from being an economist into being
0:13:55 more of a political thinker. And so that’s a really different intellectual style. And then
0:14:02 it also plays out in their lives in that Ein Rand is incredibly schismatic. I mean, she wants her
0:14:08 friends to believe what she believes and support what she supports. And she’s willing to break
0:14:14 a relationship if it doesn’t match. Milton Friedman, he also does tend to have friends
0:14:21 who agree with him. Yet he’s always willing to debate his opponents and he’s willing to do so
0:14:27 with a smile on his face. He’s the happy warrior. And he actually will win a lot of debates simply
0:14:33 by his emotional affect and his cheerfulness and his confidence, where Rand will lose debates because
0:14:39 she gets so angry in the face of disagreement. So yeah, they have a lot of similarities and a
0:14:43 lot of differences. And it’s been really fascinating to kind of dive deep into both of them.
0:14:50 I just re-listened to Ein Rand’s, I think, last lecture or at least it’s called that. And just
0:14:58 the confrontational nature of how she answers questions or how she addresses critics and so
0:15:05 on, there is a kind of charisma to that. So I think both of them are very effective at winning over
0:15:12 sort of popular support, but in very different styles. It seems like Ein Rand is very cranky,
0:15:16 but there’s, I mean, it’s the most charismatic, cranky person I think I’ve ever listened to.
0:15:24 Yeah, I mean, people talked about her meeting her and coming to believe in her ideas
0:15:30 in a similar way as they did with Marxism in that suddenly everything made sense.
0:15:33 And that when they came to believe in objectivism, they felt they had this
0:15:39 engine for understanding the entire world. Now after a while, for most people, that then became
0:15:45 confining. But yeah, that’s certainty. And Friedman had some of that as well. He clothed it differently.
0:15:50 He clothed it in happiness, where Rand kind of closed it, as you said, in crankiness or anger.
0:15:55 I mean, there’s also an arc to Rand. She gets kind of angrier and angrier and crankier and crankier
0:16:00 over the course of her life. What I enjoyed about my research is I was able to get into this early
0:16:06 moment when she was different and a little more open. And then I kind of watched her clothes and
0:16:12 her heart in over time. Would it be fair to say that Milton Friedman had a bit more intellectual
0:16:19 humility, where he would be able to sort of evolve over time and be convinced by the reality of the
0:16:26 world to change sort of the nuances of policy, the nuances of how he thought about economics
0:16:31 or about the world? Yeah, absolutely. Friedman believed in being able to say I was wrong.
0:16:36 And there are some things he said he was wrong about, will delve more into
0:16:42 monetarism and monetary policy. But he was able to talk about the ways his ideas hadn’t mapped
0:16:46 onto the world the way he thought they would. He does a really interesting interview at the
0:16:53 end of his life where he’s beginning to voice some doubts about globalization, which was,
0:16:56 he was sort of a prophet of globalization, a cheerleader of globalization. He really thought
0:17:00 it would lead to a better world in all respects. And towards the end of his life, it’s about two
0:17:07 years before he dies, there’s a note of doubt about how globalization unfolded and what it would mean,
0:17:11 particularly for the American worker. And so you can see him still thinking. And that to me,
0:17:17 I had sort of assumed he became crankier and crankier and more and more set in his ways. And
0:17:20 of course, there’s a phase where he does become that way, especially since he’s in the public
0:17:24 eye and there’s not room for nuance. But to find in the last years of his life,
0:17:30 of his life, him being so reflective, that was absolutely not something Rand could do.
0:17:34 I think there’s a thread throughout this conversation where we should actually also
0:17:40 say that you’re kind of a historian of ideas. I am a historian of ideas, yes.
0:17:48 And so we’re talking about today, in part, about two people who kind of fought for ideas,
0:17:53 for an idea, like we mentioned, freedom for capitalism. And they did it in very different
0:18:00 ways. And it’s so interesting to see sort of the impact they both had and how their
0:18:08 elucidation explanation of those ideas like reverberated throughout society and how we together
0:18:14 as a society figure out what works, the degree to which they have influence on the public,
0:18:17 the degree to which they have influence on individual administrations like the Reagan
0:18:24 administration, Nixon and so on, and how it might return like fadeaway and then come back
0:18:31 in the modern times. And it’s so interesting if you just see this whole world as a game of ideas
0:18:38 where we were like pushing and pulling and trying to figure stuff out. A bunch of people got real
0:18:45 excited over a hundred years ago about communism and then they tried stuff out and then the
0:18:52 implementation broke down and we keep playing with ideas. So these are the two greats of playing
0:18:55 with ideas. I think that’s a thread that just runs through this.
0:19:01 Yeah. And kind of pushing back against that movement towards communism, social democracy,
0:19:06 but one difference that I really should emphasize, Rand is a writer of fiction.
0:19:10 She’s a philosopher, but she’s also a writer of fiction. So she is working
0:19:16 almost in the mythic register, much more in the psychological register. She’s creating characters
0:19:22 that people identify with and people relate to experiences they’ve had. And that’s one of the
0:19:27 reasons she hits so deep. And she’s also offering people, I read all the fan letters to her. People
0:19:35 would say things like, “I read the fountain head and now I’m getting a divorce.” Having
0:19:40 just these incredible realizations. Mill and Freeman didn’t get such things.
0:19:45 And Mill and Freeman didn’t get such things. Or I’ll meet someone and they’ll say to me,
0:19:51 “Ian Rand is the reason I went to medical school.” A couple of women said this to me a few years back.
0:19:55 I never even occurred to me that I could be a doctor until I read “Ian Rand” and I said,
0:19:59 “I’m going to go to medical school.” And so she has that really intense impact on people.
0:20:07 So she thought of herself as rational. She thought of rationality as what she was doing,
0:20:14 but she was actually doing a mythopoetic psychological work as well. Whereas Freeman,
0:20:19 on the one hand, was much more rational. There’s a whole set of economic thinking and he provides
0:20:25 a rational framework for understanding the world and it’s the framework of neoclassical economics.
0:20:32 At the same time, he does pull on mythologies of the idea of America and the Gilded Age,
0:20:38 the frontier mythology, the individual immigrant, the settler mythology. He pulls on these,
0:20:44 but he doesn’t create them and he’s more kind of playing a tune he already has.
0:20:50 Whereas I think Rand really does something a little bit deeper in her ability to reach into
0:20:57 people’s psyche and then take that emotional, psychological experience and fuse it to an
0:21:03 intellectual world and a political world. And that’s really what makes her so powerful.
0:21:09 And so I think she comes back in to relevancy in a different way than Friedman does because
0:21:16 I think in some way she’s tapped into a more universal human longing for independence and
0:21:22 autonomy and self-creation and self-discovery. Nevertheless, there are still pragmatic ideas
0:21:28 that are still important today for Milton Friedman, even just on the economics level.
0:21:36 So let’s dig in. Let me try. I took some notes. Let me try to summarize who Milton Friedman is
0:21:42 and then you can correct me. Okay. So he is widely considered to be one of the greatest,
0:21:46 the most influential economists in history, not just the 20th century, I think, ever.
0:21:53 He was an advocate of economic freedom, like we said, and just individual freedom in general.
0:21:59 He strongly advocated for free market capitalism and limited government intervention in the economy,
0:22:04 though you do give… I’ve listened to basically everything you have on the internet.
0:22:08 You give some more depth and nuance on his views on this and in your books.
0:22:17 He led the famed Chicago School of Economics and he won the Nobel Prize in Economics in 1976.
0:22:24 He greatly influenced economic policies during the Reagan administration and other administrations.
0:22:29 He was an influential public intellectual, highly influential, not just among economists.
0:22:38 He lived 1912 to 2006. So that means he lived and worked through some major world events
0:22:43 where his ideas were really important, the Great Depression, with the New Deal, World War II,
0:22:50 with the post-war reconstruction, the rise and fall of the Bretton Woods Monetary System,
0:22:56 as we may talk about, the Cold War and all the conflicts involved in that,
0:23:01 sort of the tensions around communism and so on, so the fall of the Soviet Union.
0:23:08 And also he has some interesting relationships to China’s economic transformation since the 1970s,
0:23:11 the stagflation of the 1970s, and I’m sure there’s a lot more.
0:23:19 Can you maybe continue this thread and give a big picture overview of the ideas he is known for?
0:23:27 Yeah, sure. And that’s a great summary. You learn fast. So let me start with the economics and
0:23:35 then I can kind of transition to how he used those economic ideas to become a real voice
0:23:37 in the American conservative movement, the American political realm.
0:23:43 So I’ll kind of highlight four ideas or contributions or episodes.
0:23:49 One was his work with Anna Schwartz in revising our understanding of the Great Depression.
0:23:54 And that’s tightly related to the second, which is the School of Monetarism
0:24:03 that he and Schwartz really become founders of. Then there is the prediction of stagflation
0:24:09 and the explanation of that in the 1970s, which really is one of these sort of career-making
0:24:14 predictions. And we can dig into that. And then in terms of technical economics,
0:24:21 he’s known for the permanent income hypothesis which he develops with a group of female collaborators
0:24:27 that I can talk about. So those are kind of four technical pieces and being really brought together
0:24:32 in what becomes the Chicago School of Economics. He’s undoubtedly the head and the leader of the
0:24:38 Chicago School of Economics. There’s an earlier generation that he learns from. There’s his
0:24:44 generation. There’s also a Chicago School of Law and Economics that’s really profoundly influential.
0:24:48 And then there’ll be kind of a third generation that he’s somewhat distinct from,
0:24:54 but that goes on to really shape economics. But let me go back to these kind of four pieces,
0:25:01 and let me start with Great Depression. So Milton Friedman actually lives through the
0:25:09 Great Depression. He’s in college when it hits, and he is, so he’s in college just 1928 to 1932.
0:25:16 And he’s aware of the Depression, and he’s deciding, should I study mathematics or should
0:25:23 I study economics? And he’s had some good economics teachers, but it’s really the context.
0:25:29 It’s looking around at the slow dissolving of economic prosperity. So he decides to go to
0:25:34 Chicago. He decides to study economics. And what’s really interesting is that
0:25:42 the Great Depression is so unexpected. It’s unpredicted. It’s unprecedented. And economists
0:25:47 are really struggling to know how to respond to it. And so he’s going to arrive at the University
0:25:54 of Chicago when the field is struggling to know what to do. So he’s in this kind of really open
0:26:00 space where the institutional economics of the 1920s has failed to predict, which was focused
0:26:05 on business cycles. This is the irony. Their big thing was charting and understanding business
0:26:09 cycles. And then we have the biggest business cycle of all time, and they haven’t seen it coming,
0:26:19 and they don’t have a good explanation for it. And what he will get at Chicago is the remnants of
0:26:26 the monetary understanding of the economy. And so his teachers, they don’t know exactly what’s
0:26:33 going on, but they look first to the banking crisis. They look first to the, in 1933, it’s,
0:26:37 you know, bank runs, failures of, maybe it’s up to a third of American banks. Thousands of banks
0:26:42 are failing per week. So they’re focused on that. So that’s the first kind of imprint he will have.
0:26:48 The Great Depression has something to do with a banking system. The second imprint he will have
0:26:54 is that all of his professors are profoundly concerned about the social crisis. They want
0:26:59 relief programs. They want them now. They want bank regulation and financial reform. They’re
0:27:04 very active. This is not laissez-faire by any stretch of the imagination. So Friedman has
0:27:14 that imprinting. And then about, so that’s, he gets there in ’32, ’36, ’37, the ideas of John Manured
0:27:18 Keynes from Britain, which has a different explanation. Keynes has a different explanation,
0:27:23 the Great Depression will kind of make landfall in American economics and be very profoundly
0:27:29 influential on most American economists, but Friedman already, it’s too late for Friedman. He
0:27:36 already has a different perspective. So Keynesianism unfolds. I can say more about that, but it basically
0:27:44 leads to more active federal government participation in the economy. And what underlies
0:27:49 a lot of that, it’s adaptation in America particularly, is the idea that capitalism
0:27:58 has failed. Capitalism has revealed itself to have a profound flaw in that it’s two,
0:28:04 it’s cycles of boom and bust, create social instability, chaos. It needs to be tamed. It
0:28:12 needs to be regulated. And so that becomes the kind of baseline of politics in the United States,
0:28:16 the understanding of the New Deal, the understanding of the Democratic Party, even to some extent
0:28:22 the understanding of the Republican Party. And Friedman never quite sure about that. He has
0:28:26 a hunch that there’s something else going on, and he does not buy that capitalism has sort of
0:28:31 ground to a halt, or the other idea is that capitalism has gone through some sort of phase
0:28:38 transition. And it worked great maybe while we had a frontier. This is a very serious argument
0:28:44 that people are making. United States used to have a frontier, a place where Europeans hadn’t
0:28:48 fully settled. Of course, they’re pushing out the native tribes. That’s another story, but
0:28:53 that this frontier is the engine of economic growth, and the frontier is now over, it’s closed,
0:28:58 and we’re going to stagnate. There’s a theory of secular stagnation. And so to deal with secular
0:29:03 stagnation, we’re just going to have to have a more active state. So Friedman is suspicious of all
0:29:09 these assumptions. And he has this idea that there’s something to do with money. Money is somehow
0:29:16 important. And so he joins together with Anna Schwartz, who is an economist. She doesn’t at
0:29:21 this time hold a PhD. She’s working for the National Bureau of Economic Research, and they come
0:29:27 together to do this study of money in the US economy. And it takes them 12 years to write the
0:29:33 book. And they’re releasing their ideas, and they’re arguing, and Friedman is writing papers,
0:29:39 giving talks, saying money’s really important. And nobody’s really believing him. He’s a crank.
0:29:44 He’s at Chicago. Chicago is a well-known university, but he’s sort of considered a crank.
0:29:52 And then in ’63, he and Anna Schwartz published this book, and it’s 800 pages. It’s a reinterpretation
0:29:57 of the history of the United States through money. The central character is money, whether it’s
0:30:02 specie, greenback, or the US currency. And they have a whole chapter on the Great Depression.
0:30:08 What they’ve literally done, Schwartz has done most of this. Schwartz has gone to banks and said,
0:30:13 show me your books. And then she’s added up column by column. How much money is in your vault? How
0:30:18 much money is on deposit? How much money is circulating? And so they literally have graphs.
0:30:23 You can see them in the book of how much money has been circulating in the US at various different
0:30:28 points in time. And when they get to the Great Depression, they find the quantity of money
0:30:33 available, and the economy goes down by a third. And in some ways, this is completely obvious,
0:30:42 because so many banks have failed. And we don’t have any type of bank insurance at that point.
0:30:46 So if your bank goes under, your savings are there, the money essentially vanishes. And it’s
0:30:51 fractional reserve banking, right? So you’ve put in, they can loan up to 90% off on their deposits.
0:30:58 And so Friedman and Schwartz present this argument that what really made the Great
0:31:03 Depression so bad was this drop in the amount of money, the 30% drop in the money. They called
0:31:08 the Great Contraction. And then they go further and they say, well, how did this happen? And why?
0:31:15 And they pinpoint the Federal Reserve, which is a fairly new institution at that time. And they
0:31:19 say, what did the Federal Reserve do, the lender of last resort? What did it do in the face of what
0:31:25 they’re depicting as a massive, unprecedented liquidity crisis? And they find it’s not really
0:31:32 doing much. And they really dig into the details. And they find that the Federal Reserve has gone
0:31:37 through a sort of personnel change. And some of the key leaders in the 1920s, Benjamin Strong,
0:31:42 is one of them. He’s now deceased. And the dominance of the New York Federal Reserve,
0:31:49 which in their telling is global, it’s interconnected, it’s seen a lot of financial
0:31:55 things come and go. And they believe that the New York Fed had the understanding to recognize
0:31:58 this is a liquidity crisis. We should be very generous. We should support all the banks.
0:32:05 Their influence has diminished for the kind of banks that are more, they don’t say like the
0:32:08 rubes and the hicks, but it basically is. It’s like, people in charge don’t know what they’re
0:32:14 doing. And so the Fed pursues this kind of policy of masterly inactivity. They don’t see it as a
0:32:22 problem. They don’t do much. There’s an enormous liquidity crisis. And that’s their version of
0:32:27 what the Great Depression is all about, that it’s a financial system meltdown. It’s a liquidity
0:32:34 crisis. And that in some ways, well, in many ways, they argue very strong counterfactual argument.
0:32:39 The Federal Reserve could have prevented it, and it did not. And so it becomes then
0:32:46 an institutional failure and a political failure, not a failure of capitalism as a system.
0:32:53 And so this book comes out, it’s a blockbuster. And even those economists who’ve been like,
0:32:58 “Freedmen is a crank. I don’t buy it,” are like, “Freedmen in shorts are onto something.
0:33:04 Milton Friedman on a shorts are onto something.” And so that really changes the game. And
0:33:11 this is also one of his most influential contributions, because Friedman in shorts becomes
0:33:17 the playbook for the Federal Reserve. And we have lived through this, right? The financial crisis,
0:33:23 the Federal Reserve is ready to loan. COVID, the Federal Reserve is all kinds of new things,
0:33:30 because no Federal Reserve chair wants to be in Friedman in shorts 2.0 that somebody writes,
0:33:36 or they’re the bad guy who let the economy melt down. So the specifics of what they say to do
0:33:42 have obviously evolved as the system has changed. But this is a playbook for how to deal with economic
0:33:48 crisis. It’s Friedman in shorts. And so it’s absolutely fundamental. And that is really going
0:33:53 to be the place he makes his mark. There’s a lot of things to say here. So first, the book we’re
0:33:58 talking about is a monetary history of the United States in part for which Milton Friedman won the
0:34:03 Nobel Prize. You’ve also mentioned the influence of the Great Depression. If you’re going to even
0:34:12 just rewind to that. So he went to, I guess, college in Rutgers. And he was mathematical
0:34:18 proclivities. So he was kind of wanted to be a mathematician. And so it’s kind of a cool crossroads.
0:34:27 It’s interesting how the right time, the right person arrives, right? So you describe this really
0:34:32 well that he had his choice to be a mathematician or an economist. An economist is the University of
0:34:41 Chicago. A mathematician is Brown University, whichever. And then this is also the beginnings,
0:34:48 as you’ve described, of mathematical economics. So he fits in nicely into this using,
0:34:54 I think you said the number of equations started going up per paper, which is a really nice way
0:35:02 to put it. So really, the right person at the right time to try to solve this puzzle of the economy
0:35:08 melting down. It’s so interesting. Just one human, it’s just from just zooming in on a single human
0:35:16 making a decision about life. And it’s hard to know when you’re in it that the world is melting
0:35:22 down from an economics perspective. And then I could do something about this to figure out what
0:35:27 it is. And also, I’m going to reject the mainstream narrative about why this happened.
0:35:32 Yeah. So the other piece of the puzzle, when he goes to Rutgers, he thinks he’ll be an
0:35:38 actuary. So Milton Friedman’s family, his parents are immigrants, Jewish immigrants from Eastern
0:35:45 Europe, they’re pretty atypical in that they don’t stay in New York. And they moved to
0:35:51 Raway, New Jersey, and they put together a fairly middle class life as kind of, they have a shop,
0:35:54 they do some wholesale buying and selling. And then his father dies when he’s 16.
0:36:00 His life becomes more precarious. But it’s never as precarious as he makes it up to be.
0:36:04 He’s got three older sisters, they earn a good living, and suddenly they all have better grades
0:36:11 in high school than he does, but he’s the one that goes to college. But it’s actually really
0:36:17 important that he loses his father figure because he’s then looking for other father figures. And
0:36:22 he meets two at Rutgers. One is Arthur Burns, who will go on to have a huge influence in his
0:36:30 career. No relation to me, by the way. But Arthur Burns is like him, a fellow Jewish immigrant boy
0:36:36 on the make. He’s older. And he’s making a career as an economist. And then there’s Homer Jones,
0:36:41 who has gone to the University of Chicago and is studying with Frank Knight at Chicago and says,
0:36:47 you have to go to Chicago. So he has these two mentors. And Burns in particular suggests, oh,
0:36:52 I could be an economist. That could be my career path. The idea to be an actuary for an insurance
0:36:57 company, I’m not sure where he got that idea, but he just thought that was something he could do
0:37:01 as someone who was good at math. And so the college really opens, the perspective opens the door.
0:37:10 And then I think it’s really key that again, he doesn’t get an explanation that he buys
0:37:16 for the Great Depression. So then he’s looking for one. And the math part is really interesting
0:37:23 aspect of his career. Now, he actually comes to Chicago to study with the mathematical economist,
0:37:31 Henry Schultz. But he gets there and he thinks Schultz is kind of dumb. He really does. He’s
0:37:36 incredibly arrogant and he just thinks this guy’s not that smart. And it seems that, I mean, Schultz
0:37:41 did some really important work in the early stages of mathematical economics, but a lot of the oral
0:37:46 histories about him are like, yeah, he wasn’t that bright. So Friedman’s maybe onto something.
0:37:54 So he falls into the set of students who are really enthralled with his other professor, Frank
0:38:00 Knight. And Frank Knight is against math and economics. Frank Knight is like a neoclassical
0:38:05 economist, but not a mathematical economist. He’s an old school liberal. He’s really concerned about
0:38:13 liberal democracy, economic liberalism. And Friedman is very deeply influenced by Knight.
0:38:18 And he continues to pursue mathematical economics. So he’ll go for part of his graduate career. He
0:38:24 goes to Columbia University, where he actually gets his PhD from. And he works with a mathematical
0:38:30 economist there. And so he comes out trained in what will eventually be econometrics.
0:38:36 Statistics and economics, his early publications are in statistics, but it’s not really where his
0:38:42 intellectual heart and soul are. And eventually, he will turn very profoundly against mathematics
0:38:47 in economics and become a sort of heterodox strain throughout 20th century economics. It says,
0:38:55 simple models are better. We need to work on empirical, work off empirical data,
0:39:02 not construct elegant models, and becomes really sort of counter cultural within economics in
0:39:06 that way. And the test of a good model is it should actually predict stuff that happened.
0:39:09 It should predict stuff that happened. It should tie back to what’s going on.
0:39:14 I’m wondering which direction to go. So first, actually, if we could zoom out on the different
0:39:20 schools of economics, just the basics. You mentioned neoclassical. We mentioned
0:39:25 Kenzian economics. What else did we mention? Well, the Chicago School of Economics. Where does
0:39:33 Austrian economics fit into that pile and Marxian economics? And can we just even just linger and
0:39:39 try to redefine Kenzian economics and Chicago School of Economics and neoclassical economics
0:39:44 and Austrian economics, because there’s some overlap and tension.
0:39:51 Schools of economics. So we could start with classical economics. Classical economics,
0:39:55 we could think of, Adam Smith is kind of your classic classical economist,
0:40:02 the founder of the discipline. Classical economics does not really use math. It’s very close to
0:40:09 political economy. It’s concerned with, as Smith puts it, the wealth of nations. It’s concerned
0:40:14 to some degree with distribution. It’s concerned to some degree with what makes a good political
0:40:22 system. And what tends to really define classical economics when you’re looking from a great
0:40:29 distance is what’s called the labor theory of value. So where does value come from in classical
0:40:37 economics? It comes from the labor that a person puts into it. So maybe this in some ways comes
0:40:42 from Locke’s notion of property that you kind of mingle your labor with the natural world.
0:40:49 We can say labor theory of value. So classical economics concerned with Smith is arguing against
0:40:55 mercantilism for more free trade often goes by the name of political economy to show it’s more
0:41:03 capacious. It’s thinking of politics and economics. You can still read these books today. The sentences
0:41:08 are long. The words are different, but you can still follow along. So the real big transition
0:41:14 from classical economics and political economy to economics, as it’s understood today, comes
0:41:20 with the marginal revolution. And the marginal revolution is a scientific revolution that happens
0:41:24 in a couple of different places simultaneously. This is one of these things that you see in the
0:41:30 history of science. There’ll be some breakthrough. Darwin has a breakthrough, but somebody else has
0:41:34 sort of the same breakthrough at the same time, totally differently. So there’s a version of
0:41:41 marginalism that’s continental. There’s a version in the German-speaking lands, in the French-speaking
0:41:48 lands, and in Britain. And they all kind of come together. And the shift is in the theory of value.
0:41:58 So the theory of value in marginalism is on the margin. So say you have one apple and you want
0:42:06 a second one. How much is going from one apple to two apple worth for you? Probably quite a bit.
0:42:11 If you had 10 apples, maybe going to 11 apples, doesn’t matter that much. The marginal value is
0:42:18 less. So what marginalism does, though, most importantly, is it opens the door to math and
0:42:26 economics, because it means you can graph this. Now, you can depict this relationship graphically.
0:42:31 And there’s some really interesting work in the history of economics that shows a lot of the
0:42:38 people who developed marginalism were looking to physics as a model, physics, the queen of the
0:42:45 sciences. And so they were thinking, they imported terms from the natural world to describe the
0:42:52 social world through the lens of economics, terms like equilibrium. So the idea being that if you
0:42:59 looked at a market, a market would reach equilibrium when everybody is bought and sold,
0:43:05 all that they want, or the price will settle at an equilibrium price when it’s really the demand
0:43:11 and supply are matching up. And some of these ideas are things we would pick up at a microeconomics
0:43:18 class? Oh, yes. This is still out there. This is sort of the basic foundation of microeconomics,
0:43:25 marginal analysis. And so in the German-speaking intellectual tradition, this is the root of
0:43:31 Austrian economics. And people picking up the marginal revolution in the German-speaking lands
0:43:39 are opposed to the historicists who are thinking in a more evolutionary way about how societies
0:43:49 kind of grow and change. And they have a vision of economic ideas as applying differently to different
0:43:55 types of social arrangements. Or the marginalists, remember, are inspired by physics. And this is
0:44:02 a set of natural laws that applies anywhere to any sort of human society. So that’s this first
0:44:10 really big fissure that we’ll see again and again. Are you historically minded? Do certain traits of
0:44:17 economic life adhere and become expressed in certain types of societies? Or are there universal
0:44:22 economic laws that flow through any type of society? So that’s kind of a juncture, a break.
0:44:29 And so marginalism, first, people start using really geometry to kind of graph things, but
0:44:35 marginalism is also opening up to the possibility of calculus and the possibility of creating models.
0:44:40 But at that point in time, late 19th century, a model is something like a physicist does,
0:44:44 like think of an inclined plane and how fast does the ball roll from one to the other? It’s
0:44:49 a physical representation of the world. And eventually economists will start to create
0:44:53 mathematical representations of the world. But we’re not quite there yet. So we’re late 19th
0:44:59 century and we have this fissure, we have this introduction of marginal analysis that marks the
0:45:05 juncture from classical economics to economics. So let’s say now we have economics, but we still
0:45:12 have this fissure between historical thinking and let’s call it natural law thinking. That’s not
0:45:19 quite right, but physical laws versus contingency. And then in the United States, this ends up mapping
0:45:27 onto debates about capitalism. And so more historically minded economists tend to be
0:45:33 interested in the progressive movement, and which is invested in taming and regulating
0:45:41 industrial capitalism and changing its excesses, you know, factory safety laws, wage laws, working
0:45:48 conditions laws. Yet in general, American economists all use marginal analysis just in
0:45:54 different ways. The ones who are more drawn to marginal analysis become known as neoclassical
0:45:59 economists. They’re neoclassical. The neo is because they’re using marginal analysis. The
0:46:05 classical is because they don’t think we need to change the way the economy operates or the
0:46:08 government operates. They’re not progressive. Whereas the progressives are saying things like
0:46:16 we need to use social control. The state and the people collectively and democratically need to
0:46:26 control the way economics unfolds and make sure things are fair and equal. So that school of
0:46:31 thought becomes known as institutional economics in the United States by the 20th century. So it’s
0:46:36 part of the progressive movement late 19th century. Into the 20th century, it really becomes institutional
0:46:42 economics. And it’s quite dominant. And the neoclassical economists are still there, but they’re
0:46:48 very much a minority. And Frank Knight, Milton Friedman’s teacher, is one of the minority
0:46:55 neoclassical economists. And the institutionalists are much more progressive still.
0:47:01 Is it fair to say that the neoclassical folks and even the classical folks versus the institutional
0:47:07 economics folks, they have a disagreement about how much government intervention that should be
0:47:13 in the economy. So neoclassical is less intervention. And then institutional economists,
0:47:20 the progressive folks, has more intervention. Yes, exactly right. So this is the situation in the
0:47:28 1920s. But the other piece I should mention is the first generation of progressive economists
0:47:34 were very radical. They were closely allied with the socialist movement, with labor radicalism.
0:47:39 And many of them lost their jobs at universities. This kind of connects to the early dawn of
0:47:45 academic freedom. This is before academic freedom. And they were chastened. They became much more
0:47:51 mainstream. By the time we get to the 1920s, we don’t really have radical critiques of society
0:47:58 coming from economists. Much smaller profession, much less important than it is today. And
0:48:04 fairly peaceful, because the 1920s are a fairly peaceful decade in the United States.
0:48:11 So this is a situation when the Great Depression hits. And as I mentioned before, the head,
0:48:17 the kind of most important institutional economist is Wesley Mitchell. And he has said,
0:48:23 he’s written a whole book on business cycles. But he doesn’t see this business cycle coming,
0:48:28 and it hits, and he doesn’t have a good explanation for it. Now, perhaps the preeminent neoclassical
0:48:34 economist was Irving Fisher. Now, Irving Fisher is big into the stock market. And Irving Fisher
0:48:42 says sometime in late summer, 1929, stocks are going ever higher and will continue to go ever
0:48:48 higher forever. And so he loses his reputation after the stock market crash. So Milton Friedman
0:48:53 is stepping into a field in which the greats have been discredited, and there’s an enormous
0:48:59 economic crisis all around. And everybody’s struggling to figure out why the crisis happened.
0:49:04 Yes. And the other thing he’s stepping into is a world where in the United States, there’s a
0:49:11 great deal of anger at capitalism, at the system, unemployed people on the street in Europe. There’s
0:49:18 rising fascist movements in Asia. There’s rising fascist movements. And so everyone’s very concerned
0:49:23 about this. And Friedman is seeing a lot of this through the lens of Frank Knight, who feels like
0:49:29 we are maybe reaching the end of what he calls liberalism. He calls himself an old-fashioned
0:49:33 liberalism. We’re reaching the end of representative democratic government, because
0:49:40 representative democratic government cannot solve these social problems. And capitalism,
0:49:45 as it has developed, Knight is very pro-capitalist, but he says it’s generating inequality, and this
0:49:51 is putting too many strains on the system. So Knight will become one of the people who helps
0:50:00 Friedman think, how do I develop a new theory of capitalism that works in an era of mass democracy,
0:50:06 where people can vote and people can express at the ballot box their unhappiness with what’s
0:50:12 happening economically. So this larger movement will generate, of which F.A. Hayek is a part,
0:50:18 Friedman is a part. That becomes the very early stirrings of trying to think about a new sort
0:50:24 of liberalism, which will eventually be called neoliberalism. Okay. So if we can just linger on
0:50:30 definitions of things. So we mentioned what neoclassical is in the institutional economics is.
0:50:37 What’s Kenzie in economics? And the Chicago School of Economics, I guess, is a branch of
0:50:44 neoclassical that’s a little bit more empirical versus maybe model-based. And Kenzie in this very
0:50:52 model, model heavy, more intervention of government. So the real battle is Kenzie in versus everybody
0:50:58 else. That is what eventually comes to pass in the United States and in the kind of overall developed
0:51:03 kind of developed profession of economics. The other piece of the puzzle here is the
0:51:10 introduction of mathematics. And it’s been around the edges, but it will pick up speed in the 1930s,
0:51:18 like the econometrics society has founded. They start publishing. People start using more statistical
0:51:23 and mathematical tools to think about economics. And they’re given a boost sort of inadvertently
0:51:28 by the rise of Kenzie in economics. So Kenzie is trained in the neoclassical tradition.
0:51:35 He’s an absolutely fascinating figure. He’s been there in peace negotiations at Versailles. He
0:51:41 basically calls World War II. He’s like, hey, we’re going to have another war here,
0:51:46 caused by Germany, because this peace treaty has been done in such an vindictive way. And people
0:51:52 have made such bad decisions. He’s there. He sees it happening. And so when the Great Depression
0:51:58 unfolds, he basically comes up with a new theory for explaining what’s going on. And
0:52:04 the previous neoclassical understanding is where things go up and things go down. And when they
0:52:09 go down, there’s a natural mechanism to bring them back up. So when the economy is going down,
0:52:15 prices are going down, wages are going down. Everybody’s losing money, but eventually firms
0:52:21 are going to realize, hey, I can hire people cheap. Hey, I can buy stuff cheap. I don’t have a lot of
0:52:25 competition. Maybe I should get in the game here. And then others will start to get in and then you
0:52:32 regenerate prosperity in that way. And so Keynes says, sure, that’s one theory, but something
0:52:38 different is happening right now. Part of why it’s happening is because we have– the working
0:52:43 class is more empowered now. They’re not simply going to just take low wages and ride them down
0:52:51 to the floor. We might not hit the floor. But also, he says, people might become too anxious
0:52:58 to spend. They might not want to invest. And Keynes has these discussions of animal spirits.
0:53:04 He’s still enough of a political economist to think not just in terms of human rationality,
0:53:08 but what are some other things going on in human beings? And people might decide to sit on their
0:53:15 money. They might not invest it. And so what happens then is you could get stuck in a bad
0:53:20 equilibrium. So in the neoclassical model, the equilibrium kind of restarts and resets itself.
0:53:25 And he says, no, we could get stuck here. We could get stuck in the depression. And in that case,
0:53:30 what has to happen, he says, the government stimulates investment and the government itself
0:53:36 invests. And then he argues that– this is a student of his, Richard Kahn, says,
0:53:41 as the government invests a dollar, it has a multiplier effect. A dollar spent by the government
0:53:47 kind of ramifies out throughout the economy. So it takes the government and puts it in the center,
0:53:50 as opposed to, say, the banking system or the financial system, which would be the
0:53:57 more Friedman analysis. And for many economists of Friedman’s generation– and he’s a weird
0:54:02 generation because it’s the generation that becomes dominant. It’s just like four years older,
0:54:06 the men who become Keynesian economics. But that four years is really important because they come
0:54:11 in to graduate school in economics and they get exposed to the new ideas of John Maynard Keynes.
0:54:18 And I think it’s Paul Samuelson calls it– it was like a South Sea virus that
0:54:24 attacked all of the younger economists, immediately succumbed, and no one under 50
0:54:32 ever got the disease because their thinking’s already set. And so Keynesianism, Keynes himself,
0:54:38 is very suspicious of math and economics. And he and Friedman is fascinating. One of the first
0:54:43 books by Jan Tingerman, a Dutch economist, to use math and economics. He has huge volumes.
0:54:51 Volume one, Keynes pans it. Volume two, Friedman pans it. So they’re in the same page, but what
0:54:59 happens is as Keynesianism arrives in the United States, Franklin Roosevelt is not really a Keynesian.
0:55:05 He’s kind of an accidental or experimental Keynesian. And there’s a bunch of different ideas
0:55:09 in the United States that are very similar to Keynesianism. They’re not theorized,
0:55:14 but they’re similar ideas that the government has to do something. So this all comes together
0:55:22 and American economists realize that you can construct models in the Keynesian perspective.
0:55:29 And if you can use numbers in these models, you can go to Washington, D.C. with numbers,
0:55:37 and you seem like you have a lot more authority. And so math becomes really
0:55:46 twinned into Keynesian economics. So the numbers are used as a symbol of expertise.
0:55:50 We really know what the hell’s going on because we have some numbers, right?
0:55:54 Right. And we can create a model. And so we can say, okay, in the model, the interest rate is here
0:55:59 and taxes are here. So let’s play with government spending. Let’s make it up. Let’s make it down.
0:56:04 And then we can get an estimation. It’ll spit out here’s predicted GDP. So the other piece of
0:56:11 the Keynesian revolution is it really gets people thinking kind of holistically about the economy
0:56:21 as one conceptual unit. And you then have what Hollis-Hamulson will end up calling the neoclassical
0:56:27 synthesis. And this was still in economics today. If you take micro, you’re going to get supply and
0:56:32 demand, scarcity, marginal analysis. If you take macro, you’re going to get a very different approach.
0:56:38 And that’s more Keynesian-based. And so the idea is that, and this makes sense, I mean, you can think
0:56:43 of this from statistics, right? The way things act individually versus when they’re all added
0:56:49 together can be very different. So there’s this kind of uneasy piece where economists are using
0:56:54 kind of neoclassical tools to analyze individual behavior and individual market
0:56:57 behavior, and they’re shifting to a different paradigm when they think about the economy as
0:57:03 a whole. And in this paradigm of the economy as a whole, the federal budget, the taxing and
0:57:08 spending power of the federal government become paramount. And that is called the fiscal revolution.
0:57:16 And that’s really the essence of Keynesianism. But the key thing to remember is that Keynesianism
0:57:22 and Keynes are different. And there’s this famous episode where John Maynard Keynes comes to DC and
0:57:27 he goes to dinner, and he comes back and he says to one of his friends in London, he’s, “Oh, yeah,
0:57:36 it was really interesting. I was the only non-Keynesian there.” Yeah. So Keynesianism is more government
0:57:45 intervention, fiscal policy. So put the government at the center of influencing the economy. And then
0:57:51 the different flavors of whether it’s Austrian economics or Chicago School of Economics
0:57:59 is saying, “No, we have to put less government intervention and trust the market more.” And
0:58:06 the formulation of that from Milton Friedman is trust the money more, not trust, but the money
0:58:13 supply is the thing that should be focused on. Yes. So the Austrians and the Chicago School see
0:58:21 economic prosperity and growth comes from individual initiative, individual entrepreneurship,
0:58:25 kind of private sources. The private market is what drives economic growth, not the public sector.
0:58:32 And so for Friedman, then the question is, what is the government’s role? And because he’s lived
0:58:38 through the Great Depression, he’s not laissez-faire, and he won’t ever be laissez-faire. Now, interestingly,
0:58:44 Hayek, living through the Great Depression, at first is laissez-faire. And he’s like, “Sure,
0:58:50 like let it rip.” And things get so bad that Hayek’s like, “Okay, that’s not going to work.”
0:58:54 Can we actually define laissez-faire? So what do we mean? Like, what’s the free market? What’s
0:59:00 laissez-faire? What’s the extreme version here? So yeah, laissez-faire means levabie in France.
0:59:07 It’s more often used as an insult than as an actual. Very few people are completely and totally
0:59:12 laissez-faire. That would be like the pure laissez-faire would be the sort of pure,
0:59:16 maybe pure anarchist position, like the state does nothing, or the state isn’t even there.
0:59:23 But it tends to, if I could maybe make it more precise, it would be focused on freedom of contract
0:59:32 would be essential. And that means the buyer of labor and the seller of labor must have absolute
0:59:40 freedom to contract. So that means no minimum wage law, no working hours law, no employment law,
0:59:45 things like that. That was, and this is all pre-progressive movement. A lot of things are
0:59:50 that way, right? You know, imagine you’re in 19th century America and you have a farm and you hire
0:59:56 someone to help you on the farm. You offer the money, they take it. If they fall off a ladder and
1:00:00 break their back, maybe you help them out, maybe you don’t, right? But there’s not a whole apparatus
1:00:06 of legal liability and safety and things like that. So that would be one piece. Another piece of
1:00:15 laissez-faire would be free trade amongst nations. So no regulation of who can invest in a nation or
1:00:22 who can take money out of a nation. So Nippon Steel could come and invest in US Steel and there would
1:00:28 be no grounds in which to reject that. Or you could, as a billionaire in the United States,
1:00:33 relocate you and all your money to another country and the United States couldn’t try to keep you
1:00:40 and nobody else could stop you from coming in. And then in the context of economic crisis,
1:00:50 laissez-faire would not encompass centrally provided relief because in the pure theory,
1:00:57 again, very seldom applied purely, but in the pure theory, the wages need to come down far enough
1:01:03 and people need to be desperate enough to start taking work and to start the machine again.
1:01:07 So the theory would be if you give people relief, they might not go back to work.
1:01:14 Now, almost nobody says that in the Great Depression because the situation is so bad
1:01:20 and people are starving on the street and people feel, for humanitarian and ethical reasons,
1:01:25 it’s not okay to say that. The Austrians, though at first, Hayek and Lionel Robbins,
1:01:30 are like, this is a business cycle and it needs to run its course and it will be detrimental
1:01:34 if we intervene. And then pretty soon, Hayek has to change his tune.
1:01:38 So the Austrians are the most hardcore in terms of laissez-faire.
1:01:44 Absolutely. And so Hayek will make the turn towards accepting more of a state and then
1:01:50 we’ll come to talk about how the state needs to support what he calls the competitive order.
1:01:58 But his mentor, Ludwig von Mises, still remains very hardcore and is not really open to things
1:02:03 like unemployment insurance or other state-based interventions.
1:02:08 What does von Mises say about human suffering that’s witnessed in the Great Depression,
1:02:13 for example? What are we supposed to do as economists, as humans that define policy?
1:02:18 What are we supposed to see when people are suffering at scale?
1:02:24 Yeah, I wish I knew and answer that question. I don’t know enough about von Mises and his
1:02:33 reaction in the Great Depression. I think I would hazard that he would look more down the road and
1:02:40 say, well, if you start here, you’re going to go places that are bad. But I don’t factually
1:02:44 know what he said in response. I do know that Hayek’s position doesn’t last very long.
1:02:51 It’s not a position you can hold to. Maybe you could hold to it in other cycles. The other thing
1:03:00 that was interesting is I found very few Americans saying this. Most who were were kind of small town
1:03:07 electeds or the most famous is Andrew Mellon, quoted by Herbert Hoover. So not directly,
1:03:12 you don’t have him on record saying this, but apparently Hoover records in his memoirs that
1:03:20 Mellon said something like, liquidate real estate, liquidate stocks, purge the rottenness
1:03:26 out of the system. People will live a healthier life. And certainly, they were members of the
1:03:31 Federal Reserve who felt like it would create, they didn’t say moral hazard, but it would create
1:03:37 what we now call moral hazard, bad habits, where we to intervene and to save failing banks because
1:03:42 failing banks need to be taught a lesson, they need to be taught discipline. And so a lot of
1:03:47 people, I think, saw it in the context of discipline. This is discipline. And if you remove the
1:03:51 discipline, you’ll be taking away something fundamental in society.
1:03:55 So Milton Friedman never quite went all the way to Lise Fair?
1:04:01 No. No, he didn’t see that. And what’s really interesting is the number of incredibly radical
1:04:07 proposals that he and his teachers were floating. So I’ve mentioned Frank Knight. Another really
1:04:15 important influence on Friedman was Henry Simons, who was a junior professor at Chicago. And Simons
1:04:23 had this idea for what he called 100% money, which would be a law that says banks have to
1:04:27 hold 100% of the deposits they receive. They can’t loan them out on the margin.
1:04:32 So this would completely and totally have overhauled the US banking system. And he would have said,
1:04:36 there’s a category of things called banks where you get deposits. And then there’s going to be a
1:04:41 category of sort of, he didn’t say investment banks, but investment vehicles that will invest.
1:04:48 So similar to what did happen in some ways in the banking reforms, in the 1930s, the investment
1:04:53 banks were split from the deposit banks. And the banks that took deposits were much more
1:04:58 highly regulated, and they were supported by the FDIC. But the point being, the Chicago
1:05:04 School had these very radical proposals for reform, go off the gold standard, restrict
1:05:12 the currency, change the banks, immediately relief payments now. What is important to note,
1:05:17 though, is that they thought of all of those as emergency measures to get through the emergency,
1:05:24 not as permanent alterations in the state of what had to be and not permanent alterations
1:05:29 between state and market. Where the Keynesian assumption is things have changed, times have
1:05:37 changed, we’re in a new dispensation, and we need a new relationship. So Milton Friedman
1:05:44 is very open to doing things differently in a state of emergency. He will have different ideas
1:05:48 during World War II than any other time. And that’s why I argue I think he would have been
1:05:53 supportive of at least the first rounds of coronavirus relief, because I think he would
1:05:59 have put his emergency thinking hat on. So in that way, he was definitely more flexible.
1:06:07 You mentioned Hayek. Who is this guy? What’s his relationship to Milton Friedman in the space
1:06:12 of ideas and in the context of the Great Depression? Can we talk about that a little bit?
1:06:21 Sure. So F.A. Hayek is an Austrian economist who takes up a posting in London, and he’s
1:06:27 in a mentor, a mentee rather of Ludwig von Mises. He’s writing about business cycles,
1:06:35 Austrian capital theory, and the depression hits. And he’s one of the few economists who in the
1:06:41 beginning really is not calling for much intervention. Although, as he realizes how politically
1:06:45 unpalatable that is, he will develop a more softened version of Austrian economics that has
1:06:52 room for a whole range of social services. What’s significant about Hayek is that he is also watching
1:06:57 what’s happening in Austria, what’s happening in Germany, and he’s really worried the same
1:07:04 thing is going to happen to the Western democracies. And he sees the root cause of this is socialism,
1:07:08 the shift towards an expanded role for government, which we’ve been talking about is happening in
1:07:13 the United States. It’s also happening in Britain. And so he writes this book that becomes incredibly
1:07:20 famous, “The Road to Serfdom,” basically saying taking these steps towards a planned economy
1:07:26 or an economy that’s a modified form of capitalism is going to could. He’s very clear that this is
1:07:31 not an inevitability, but if the same steps are taken and people follow the same line of thinking,
1:07:37 we may end up in a sort of coercive totalitarian state. So this becomes enormously popular in the
1:07:43 United States. First of all, he’s in good touch with Friedman’s teachers, even before this book
1:07:47 comes out. They see them as kindred spirits. Frank Knight is in touch with him. Henry Simons
1:07:52 is in touch with him. They all see themselves as liberals. They call themselves old-fashioned,
1:07:58 unreconstructed liberals. And so even before he becomes famous, Hayek will be trying to kind of
1:08:04 organize thinkers and intellectuals who he believes shares his values of what we would call
1:08:10 today classical liberalism and to kind of create a counter-consensus to the one that’s gathering.
1:08:17 Now, Hayek also chooses not to argue against Keynes, and he feels that this is a huge missed
1:08:22 opportunity, that he should have staked out the case against Keynes, and that because he did not,
1:08:27 people come to believe there is no case against Keynes. Keynes is literally unanswerable.
1:08:34 So Hayek will have this great regret. He will channel some of his regrets into sort of community
1:08:41 building, specifically developing the Montpelerin Society. And it will fall to Friedman to really
1:08:50 make that case against Keynes. But Hayek will end up at Chicago, and Hayek really influences
1:08:58 Friedman to think about what Hayek calls the competitive order and how the state can and must
1:09:05 maintain a competitive order. That is the system of laws, of norms, of practices that makes it
1:09:11 possible for markets to function. And this is one of these key differentiators between the older
1:09:18 philosophy of laissez-faire and the newer reconceptualization of liberalism, which says, “Yes,
1:09:25 we need a state. We need a state that’s not intervening in markets under social democratic
1:09:30 auspices, but is structuring and supporting markets so that they can function with maximum
1:09:38 freedom, keeping in mind that if there aren’t basic social supports needed, the market is apt to
1:09:44 generate the type of either inequality or social instability that will call the whole system into
1:09:51 question.” So Hayek is really key in promoting this modified liberalism. But from being a very
1:09:58 prominent economist in the 1920s and 1930s, as mathematics becomes the language of economics,
1:10:03 Hayek is completely left out in the cold. Now, Friedman to some degree is left out in the cold,
1:10:09 but Friedman at least has proved the mathematical economists that he knows what they’re up to,
1:10:15 and he’s rejecting it from a position of expertise and knowledge. And he literally drives the
1:10:20 mathematical economists out of Chicago. They’re clustered in a group called the Kohl’s Commission,
1:10:28 and he makes their life hell. They flee. They flee the Friedman slot. But then when Hayek arrives
1:10:33 at the University of Chicago, he would like to be considered for a position in the economics
1:10:37 department. And Friedman, Milton Friedman says, “No way. You’re not really an economist because
1:10:44 you’re not empirical because you just developed these theories.” So he has an appreciation for
1:10:51 Hayek as a social thinker, but not as an economist. So what Friedman decides to do, his answer to
1:10:58 Keynes will be deeply empirical, but it will also be theoretical. And it will create an alternative
1:11:05 intellectual world and approach for economists who aren’t satisfied with Keynesianism. And almost
1:11:11 single-handedly, Friedman will introduce sort of political and ideological diversity
1:11:17 into the field of economics because from his beachhead in Chicago, he will develop the theory
1:11:26 of monetarism. So what is monetarism? The easy way to summarize it is this famous dictum of Milton
1:11:34 Friedman’s. Inflation is always and everywhere a monetary phenomenon. And it’s fascinating that he
1:11:41 becomes an expert in inflation because the first research and the first major research product
1:11:45 of monetarism is that theory of the Great Depression in a monetary history of the United
1:11:53 States. And that is the theory of a deflation, all prices going down. And he will go back to an idea
1:11:59 that Irving Fisher had popularized, but a very old idea, almost a truism, the quantity theory of money,
1:12:05 which says the level of the price level is related to the amount of money circulating in an economy.
1:12:11 So if you have more money, prices go up. If you have less money, prices go down. Now, this seems
1:12:17 like very basic and almost too basic to bear repeating. But Friedman is saying this very basic
1:12:24 relationship holds true even in an advanced industrial economy. And that is what people
1:12:30 have started to doubt. And if you think about money, you think about banks, you don’t think
1:12:37 necessarily about the federal budget spending and taxation. And what you see happens in American
1:12:42 economics, the textbooks previous to the Keynesian Revolution, they spent a lot of time on money,
1:12:47 they spent a lot of time on interest rates, you can do word counts and other scholars have done
1:12:52 the word counts. And then word count for money after World War II just plummets. And you start
1:13:00 seeing things like taxation, budget, those things go up. So what happens is the economics profession
1:13:05 shifts its attention. It just looks away from money to other things. And Friedman is one of the
1:13:13 few who’s saying, no, money still matters, money still counts. And it’s a very counterintuitive
1:13:19 argument to make. It’s a very historical argument to make. And this is absolutely fascinating to me.
1:13:25 With Anna Schwartz, he develops this 150-year time frame. He also has students working on
1:13:30 episodes of hyperinflation in different periods of time. He’s also looking back
1:13:37 to ancient history, inflationary episodes there. And he’s saying this is a law of economics.
1:13:42 This is something that recurs throughout time. It’s not historical, right? It’s not contingent.
1:13:49 It’s a law of economics. And his Keynesian counterpoints are saying, no, that’s not
1:13:54 relevant any longer. Maybe once it was relevant, but it’s not relevant today. Now, in some ways,
1:14:02 they have a point because in order to pay for World War II, the federal government
1:14:09 sells a lot of bonds. It issues a lot of debt. And it wants to pay this debt back at a low
1:14:14 interest rate. And it wants people to keep buying it. It wants the low interest rate
1:14:19 to be competitive with other interest rates. So once in general, low interest rates throughout
1:14:25 the economy. And the Federal Reserve has been so discredited by the Great Depression that the
1:14:31 Treasury basically runs a Federal Reserve and says, keep interest rates low. And so that’s
1:14:37 what it’s doing. And so the Federal Reserve has stopped being an independent entity. It’s just
1:14:43 a sub sort of department of the Treasury. But in 1951, they negotiate what’s called the Treasury
1:14:49 Fed Accord. And the Federal Reserve gets its independence, but it doesn’t really use it.
1:14:57 But statuatorily, it now has it. And so most economists are just observing a regime in which
1:15:01 the Federal Reserve has no power, a regime in which there is really little inflation,
1:15:05 the inflation that is seen as post, there’s a little burst of inflation in the Korean War.
1:15:10 And they’re saying inflation is not really important. It’s not really relevant. And money’s
1:15:14 not really relevant and important. And so to break through and to make the argument,
1:15:20 that’s why Friedman and Schwartz go to history. And they’re able to make that argument for history.
1:15:25 So then Friedman is coming out with a variety of papers that are saying,
1:15:31 you know, when I look at economic fluctuations, he maps them side by side to fluctuations. And
1:15:36 the money supply and says, look, they fit. And other economists, remember, they’re building
1:15:41 complicated mathematical models. And Friedman’s doing extremely simple stuff. And they just think
1:15:47 it’s dumb. It’s not interesting. It’s not true. They just, they don’t buy it at all. And so,
1:15:53 but after a monetary history of the United States, they have to pay attention. So it’s really in
1:16:00 those years, Friedman is hammering this idea of monetarism, and it starts to become something
1:16:06 respectable, bordering on respectable for other economists to look to and think about. And that’s
1:16:10 really the beginning of the kind of Keynesian monetarist split, where if you start to give
1:16:16 Friedman any credence, you’re heading towards a monetarist position. Now, at the same time,
1:16:26 Friedman comes out very publicly in 1964 as a supporter of Barry Goldwater. And Keynesian economics
1:16:31 has found a home in the Democratic Party. It’s probably the brightest moment in the sun is
1:16:36 the administration of John F. Kennedy, who brings in a lot of Harvard and Yale professors to the
1:16:42 Council of Economic Advisers. He proposes a series of spending programs that are really guided by
1:16:49 the Keynesian philosophy. And the Barry Goldwater is tremendously controversial, part for his votes
1:16:54 against civil rights, which Friedman really supports in part because he’s a hardcore libertarian
1:16:59 in an age when that’s not in the political mainstream or not discussed in the political
1:17:04 mainstream. And I mean, he’s just tremendously unpopular, particularly in all the educated
1:17:09 precincts where Friedman lives. So Friedman is like an outcast on a pariah for his support of
1:17:15 Goldwater. And so that actually really affects monetarism because people feel that this is now
1:17:21 becoming a package deal. And so there’s a great reluctance to embrace Friedman’s ideas because
1:17:28 it seems like you would then have to embrace his politics. So it’s associated with conservatism.
1:17:35 So this is the years when conservatism, there is a movement that calls itself conservatism.
1:17:40 And Friedman is very tightly allied with this movement from the beginning, partly through his
1:17:45 friendship with William F. Buckley. And a lot of people say to me, yeah, but Friedman’s not
1:17:52 conservative. And this is like a bigger, you have a whole separate podcast on this. But for now,
1:17:58 I’ll just say that conservative in the United States becomes a political brand that contains
1:18:04 elements of conservatism that are recognizable across time and space, embrace of tradition,
1:18:11 for comfort with hierarchy, et cetera. And it also has something new and different, which is
1:18:17 Friedman’s ideas about Milton Friedman’s advocacy of more free markets, less government regulation
1:18:21 and the benefits of capitalism and the benefits of freedom. And that gets folded into American
1:18:28 conservatism in part because Milton Friedman is such a powerful intellectual figure. And after
1:18:34 his advocacy, Goldwater media realizes this guy is really smart. He has really interesting things
1:18:39 to say. He makes great copy. He makes a great guest. And he starts writing a column for Newsweek
1:18:45 magazine, which is a very big deal in a much more consolidated media environment. And he’s quoted
1:18:50 in all the newspapers. And so his public profile really starts to rise right as he’s pushing
1:18:55 monetarism as an alternative to the Keynesian synthesis.
1:18:59 Can we just linger on what is monetarism?
1:19:01 Yes, okay. I didn’t come into it.
1:19:04 So like what, okay, the money supply.
1:19:04 Yes.
1:19:12 So money is this thing that you can leave it a note, like a notion where people buy and sell
1:19:20 stuff. And there’s this fascinating complex dynamical system of people contracting with
1:19:24 each other in this beautiful way. I mean, there’s so many pod head questions I want to ask about
1:19:30 the nature of money. I mean, money is fascinating in that way. And I think for Milton Friedman,
1:19:39 trusting the flow of money is really important. And the signals that pricing and money in general
1:19:42 provides is really important.
1:19:48 So yeah, and some of this, I could take some of this back again to Frank Knight. So one thing
1:19:55 Frank Knight said to all his students was the market is the best allocation mechanism we have.
1:20:02 The market is what allocates resources in a situation of scarcity. The market allocates them.
1:20:09 The best. And Hayek will add to that by saying prices are information signals, and a price
1:20:14 sends information to buyers and sellers about how they should act. And these are the two of the
1:20:20 strongest arguments for why the government should not intervene in the price system because it will
1:20:26 blur information or because it will allocate less efficiently than market allocation will.
1:20:32 And so what Friedman is really going to add to that is maybe going up a level and thinking
1:20:40 in the macro about the whole economy and how money circulates through that economy as a whole.
1:20:47 And so what he and Anna Schwartz do is they construct what are called monetary aggregates.
1:20:53 This is adding together, say, all the money that’s on deposit in banks and all the money that’s
1:20:59 believed to be circulating in people’s wallets. And you also have to really go back in time.
1:21:06 We don’t have credit cards. There is a stock market, but it’s tiny in terms of the number
1:21:13 of people who invest. There aren’t mutual funds. When travelers checks are introduced,
1:21:20 this is a big deal. So we have a very simple monetary system. And so Schwartz and Milton
1:21:25 Friedman start measuring what they call the monetary aggregates. They focus on M1 and M2,
1:21:32 and their favorite aggregate is M2, which I believe is encompassing deposits and circulating medium.
1:21:37 The other thing to recall, there’s some fine distinctions between
1:21:48 money in savings accounts and money in checkings accounts. And money in savings accounts
1:21:53 can earn interest and is generally believed not to circulate, or money in checking accounts
1:21:58 does not at that time bear interest and cannot legally bear interest. And so his thought of
1:22:02 is circulating. And then there’s different institutional architectures of postal savings
1:22:09 banks and credit unions. But Friedman is, one, taking the focus to these aggregate amounts of
1:22:17 money and saying, “These really have a lot to do with economic booms and busts. When we have
1:22:23 an expansion in the amount of available money, we see an expansion in economic activity. When we
1:22:32 have a contraction in available money, we have a contraction.” And so he says, “At this stage,
1:22:38 the government, through the mechanism of the Federal Reserve and its influence on interest rates,
1:22:44 can either make money more cheaply available and more freely available in the economy,
1:22:52 or can make money more expensive and slow things down.” But the central core idea of
1:22:59 monetarism is this is potentially very bad if the government can hit the gas and then hit the
1:23:06 break and hit the gas and hit the break based on, say, what a politician wants or what somebody
1:23:13 at the Federal Reserve wants. You have a lot of instability in the system. And so one of the core
1:23:20 policy proposals of monetarism is let’s grow the money supply at a steady rate. And in the beginning,
1:23:26 Friedman just says K percent. He doesn’t even put a number on it because he says the number
1:23:32 doesn’t matter. What matters is the steadiness in the growth rate because if it’s a steady growth rate,
1:23:38 it will fade away and then people will make economic decisions based on the fundamentals,
1:23:45 not based on what they think is going to happen, not based on hedging against inflation
1:23:52 or hedging against deflation. They’ll just be able to function. So this is sort of the paradox
1:23:59 of monetary policy. When it’s happening right, you don’t see it, you don’t notice it. When it’s
1:24:03 happening wrong, Friedman argues, it can just fundamentally destabilize everything. It can
1:24:10 cause a great depression, it can cause an artificial boom. And so he’s taking monetary policy at a
1:24:14 time when most economists think it’s completely irrelevant and saying this is the central game
1:24:21 of the economy. Now, we live in a world where we believe this and the Federal Reserve chair can’t
1:24:27 open their mouth without headlines being generated. But Friedman is saying this at a time when the
1:24:33 Federal Reserve is like a mysterious and secretive organization. It’s not well known,
1:24:38 it’s not deeply appreciated. Some of the only people who appreciate the Fed’s power are
1:24:46 hardcore rural populace who have constituents who think the banks and money power are the problem,
1:24:52 who are like throwbacks from the frontier days. So Friedman in the beginning has no constituency
1:24:59 for this policy, he has no constituency for this analysis. And so just going back to summarize
1:25:06 monetarism, it’s looking, it’s using the quantity theory of money to analyze the macro economy.
1:25:15 It’s proposing a policy of slow and steady growth in the money supply. And then it is arguing that
1:25:21 inflationary episodes when they emerge are profoundly driven by changes in the money supply,
1:25:28 not by anything else. I mean, and going even up a level as we started,
1:25:37 how epic is it to develop this idea, to hold this idea and then to convince
1:25:45 the United States of this idea that money matters, that today we believe is mostly correct
1:25:54 for now. And so just this idea that goes against the experts and then eventually wins out
1:26:00 and drives so much of the economy, the biggest, the most powerful economy in the world. So
1:26:05 fascinating. Yeah. So I mean, that’s a fascinating story. And so what happens is Friedman has
1:26:10 advanced all these ideas. He’s roiled the economics profession. He’s built a political profile.
1:26:18 And then he becomes the head of the American Economics Association. And he is asked in that
1:26:23 role to give a presidential address. And so he gives his presidential address December 1967.
1:26:31 And he says, I’m going to talk about inflation. And I’m going to talk about the trade-off between
1:26:36 inflation and unemployment. And this is what’s generally known as the Phillips curve. And the
1:26:42 Phillips curve in its original form is derived of post-World War II data. So it’s derived of
1:26:51 about 12 years of data. And it shows that when inflation goes up, unemployment goes down. And
1:26:56 the idea would make sense that as the economy is heating up and lots of things are happening,
1:27:03 more and more people are getting hired. And so this relationship has led policymakers to think
1:27:09 that sometimes inflation is good. And if you want to lower unemployment, you could let inflation
1:27:17 kind of go a little bit. And in accrued forms, it becomes to seem like a menu, like you could
1:27:22 take your model and you could plug in, I want this much unemployment. And it would say, well,
1:27:27 great, this is how much inflation you should do. And so then you would target that inflation rate.
1:27:34 So Freeman gets up and he says, this is wrong. This might work in the short term, but it’s not
1:27:39 going to work in the long term because in the long term, inflation has, first of all,
1:27:45 it has a momentum of its own. Once it gets going, it tends to build on itself, the acceleration
1:27:52 as thesis. It accelerates. And once inflation gets going, and the reason it gets going is because
1:27:59 workers go to the store and they see the price level has gone up, things have cost more.
1:28:07 They ask for the wages to go up. Then people, eventually, the wages will go up too high,
1:28:11 and they will no longer be hireable or companies will decide, at these high wages,
1:28:16 I can’t hire as many workers, I’d better lay off. So if inflation keeps going, eventually,
1:28:21 over the long term, it will result in high unemployment. So he says, theoretically,
1:28:26 you could end up in a situation where you have high inflation and high unemployment.
1:28:29 This hasn’t been seen, but he says, theoretically, this could happen. And then he goes and he says,
1:28:35 and the government has started expanding the money supply, started expanding the money supply
1:28:41 in 1966. So we’re going to get a bunch of inflation and then we’re going to get a bunch
1:28:46 of unemployment. And he estimates about how long it will take. And then he says, once this all
1:28:54 happens, it will take about 20 years to get back to normal. And he predicts the stagflation of the
1:29:03 1970s. Stagflation of the ’90s. Again, against the mainstream belief represented by the Phillips
1:29:10 Curve. Yeah. And what really makes it happen is that many of the economists who most deeply
1:29:16 dislike Friedman and most deeply dislike his politics in the 1970s as they’re running their
1:29:21 models, they start to say, Friedman’s right. They start to see in the data that he’s right.
1:29:26 And a very parallel process happens in Britain. Britain is going through a very similar burst
1:29:32 of spending, burst of inflation. And so Friedman is vindicated in a very profound way in the way
1:29:36 that he himself said would be the ultimate vindication, which is my theory should predict.
1:29:44 So that prediction of stagflation is really this sort of final breakthrough of his ideas
1:29:52 and also their importance to policy and to thinking about how we should intervene or not in the
1:29:56 economy and what the role of the Federal Reserve is. Because he’s saying the Federal Reserve is
1:30:02 incredibly powerful. And finally, people start to believe it. And I don’t know if we said,
1:30:08 but to make clear, stagflation means high unemployment and high inflation, which is a thing
1:30:15 like you mentioned was not seen before. And he predicted accurately. And it also disproves the
1:30:21 relationship, the inverse relationship between unemployment and inflation.
1:30:28 Yeah. Now I should say the Phillips Curve is still out there. It’s been expectations augmented. And
1:30:36 it is relevant in the short term, but Friedman’s warning is still very much apt that if you get
1:30:43 too focused on unemployment, you can let inflation out of the bag. And so until very recently,
1:30:49 the Federal Reserve’s tradition has been focusing on inflation, believing that’s fundamental,
1:30:54 and that will keep unemployment low rather than trying to lower unemployment at the cost of
1:31:00 raising inflation. Can we go back to Frank Knight and the big picture thing we started
1:31:05 with, which is the justification of capitalism? Yes. So as you mentioned, Milton Friedman
1:31:12 searched for a moral justification of capitalism. Frank Knight was a big influence on Milton Friedman
1:31:19 and including on this topic of understanding the moral justification of capitalism. I think you
1:31:25 spoke about Knight’s case for capitalism was grounded in the idea that the ability to act
1:31:31 in the face of uncertainty creates profit. And it should because taking risks should be rewarded.
1:31:37 So this idea that taking risks in the face of uncertainty should create profit. And that
1:31:43 becomes a justification that the ethics of capitalism. Can you just speak to that?
1:31:49 Yeah. So Knight is talking about where does profit come from? And to his mind, it comes
1:31:55 from the entrepreneurial function and the risk taking function. And so he weaves that into why
1:32:04 capitalism works best and why it’s the most effective allocation machine and why it assigns
1:32:11 responsibility in a way he believes that a socialist system never could. Now, Knight, though, is not a
1:32:16 booster of capitalism. It could be in part because he’s just a darkly pessimistic kind of depressive
1:32:22 guy. And so he’s afraid capitalism is going to collapse and socialism or fascism is going to
1:32:29 take over or communism. And so he kind of descends into darkness there. Friedman as the more
1:32:35 optimist believes with Hayek that you can develop a different approach to capitalism that would
1:32:40 preserve the price system, preserve allocation, but build in social supports, build in a social
1:32:45 minimum, things like this. But there’s a moment in his career where he’s really struggling to figure
1:32:50 out like, how do I make this case for capitalism? And basically, the whole sort of conservative
1:32:53 movement or people who we later call the conservative movement are struggling to make this case.
1:33:00 And he starts thinking about what makes capitalism work is that if you put forth effort,
1:33:04 you get a reward. So then you could say, well, people get what they deserve under capitalism.
1:33:09 But then he kind of stops and he says, that’s not really true because we’re born with such
1:33:14 different endowments and there’s a huge quotient of luck, right? So some people are just in the
1:33:20 right position and some people aren’t. So if I say capitalism is moral because people get what
1:33:27 they deserve, that’s not really true. And he also kind of has like an ethical reaction, which he
1:33:33 ends up calling like an aesthetic reaction. He’s kind of like, it just doesn’t feel right to say
1:33:38 that. And so he struggles for a while with like, what do I say? And then he basically says, capitalism,
1:33:44 it can’t be the core. Discipline of the market can’t be the core to your ethics. It has to be
1:33:48 something else. So that’s when he will decide it’s freedom is individual freedom. That’s really
1:33:54 the ethical core and capitalism makes individual freedom possible because capitalism is dedicated
1:34:04 to maximizing that. And so the defense of capitalism comes through freedom. And at his stage in history,
1:34:10 he’s able to set aside nice worry about inequality and say, when I look at the data, and this is true
1:34:16 for the macro data mid-century, incomes are actually converging, right? And also, if you
1:34:21 look historically, if the country goes from, say, a more feudal agrarian society to a more
1:34:26 market-based society, incomes will converge. Now, then they might start to diverge, but
1:34:30 freedom is in the moment when he’s seeing the convergence. And so that’s what he’s really
1:34:37 focused on. So he believes he can justify capitalism through the ethic of freedom. And he also believes
1:34:43 that inequality is a problem that can be addressed through specific policies. And it’s not a
1:34:49 fundamental feature of capitalism. In other words, he doesn’t see capitalism as an engine of inequality
1:34:53 the way that Frank Knight did and the way that maybe some critics on the left would.
1:34:59 How did he conceive of freedom? So individual freedom, economic freedom, political freedom,
1:35:04 civil freedom, what was the tension, the dynamic between those different freedoms for him?
1:35:10 So he really begins focusing on economic freedom. And he says it’s really important to focus on
1:35:16 economic freedom because in the United States, we don’t value it enough. So by economic freedom,
1:35:23 he means the ability to keep what you’ve earned, the ability to make decisions about your business,
1:35:28 the ability to make decisions about the work that you do. So this will translate into things like
1:35:32 there shouldn’t be a minimum wage. He believes the minimum wage has bad social
1:35:36 effects, but he also believes you should be free to accept a job at a wage that you yourself have
1:35:44 determined is acceptable to you. And there should be very minimal regulation, questions around safety
1:35:48 and other things because the market will ultimately, if you create an unsafe product,
1:35:55 it won’t sell. And that will be that’s sort of your incentive. So he really centers economic
1:35:59 freedom because he thinks especially, and he’s really speaking from his vantage point in the
1:36:04 universities and speaking to the kind of liberal consensus of the 50s and 60s, he thinks economic
1:36:09 freedom has been undervalued in the American context. So he really wants to push that forward.
1:36:13 He’s really kind of taking political freedom for granted. Now later in his career, when he becomes
1:36:19 famous, he’s traveling the world, he spends time in Chile, and this country is now being
1:36:25 ruled by a dictator, Gustav Pinochet, who starts introducing economic freedom, but there’s no
1:36:29 political freedom. And Milton Friedman believes eventually these two things are going to go
1:36:35 together and tells Pinochet, “You’ve got economic freedom, and eventually it’s going to mean
1:36:39 political freedom.” Pinochet is like, “Okay, fine. I’m not really interested in that. I want to
1:36:44 know what I should do about inflation.” But then when Milton Friedman leaves Chile, he is
1:36:50 attacked and vilified for having been a supporter. He’s a supporter of the regime,
1:36:55 which he’s not, but he realizes he has talked too much about economic freedom and he hasn’t
1:36:58 talked enough about political freedom. And he’s kind of assumed political freedom because he’s
1:37:04 come from the American context. So then he starts recalibrating them and saying, “You know what?
1:37:08 If you don’t have political freedom, you’re never going to be able to hold on to economic freedom.”
1:37:14 So he sees that they need to go together and they don’t naturally go together. And so he starts to
1:37:20 become more clear in talking about political freedom. Now let’s fast forward to the end of
1:37:26 his life, and he’s witnessing the emergence of what we call the Asian Tigers. So capitalist economies
1:37:32 that are doing very well, but they don’t have political freedom. But then he observes, they
1:37:37 don’t have political freedom in that you can’t vote in a free and fair election, but they also
1:37:44 don’t have a stazi. They don’t have a KGB. They’re not hauling people off for their wrong opinions.
1:37:49 So then he says they have something called civic freedom. And so he kind of defines this third
1:37:55 sphere, civic freedom of debate, discussion, interpersonal relations, but you can’t be political.
1:38:02 So this is a late in life addition. I don’t think it’s fully theorized. I think what it shows is
1:38:08 that during the Cold War, he very much believed economic and political freedom, capitalism and
1:38:15 freedom, democracy, the United States capitalism, this all went together. And he starts to see at
1:38:19 the end of his life the emergence of different social systems that are using market trading
1:38:24 and allocation, but aren’t giving people similar freedoms. And he’s kind of puzzling over that.
1:38:31 Now he always believes that China will democratize. And he thinks China’s on the path to democratization,
1:38:36 in part because Chile does democratize. Eventually, Pinochet has voted out and it’s
1:38:41 become a democratic capitalist and very prosperous country. And he thinks as exactly what’s happening
1:38:46 in China, he sees Tiananmen and he doesn’t live long enough to get to where we are now,
1:38:51 in which doesn’t look like political or civic freedom is coming to China anytime soon.
1:38:58 And he did oppose the dual-track system of China, meaning like the market is bottom up,
1:39:03 the government in China is top down, and you can’t have both.
1:39:06 He thought you couldn’t have both. Yeah.
1:39:08 He thought eventually the market would triumph.
1:39:12 Well, it’s a really powerful idea to say, okay, maybe there’s not political freedom,
1:39:18 but just hold on to the economic freedom and eventually that’s going to give political freedom.
1:39:23 Is that correct to say like start to work on the economic freedom
1:39:26 and the political freedom piece will take care of itself?
1:39:31 That’s what he believed. That’s what he believed. Yeah, I think it’s more complicated than that,
1:39:36 right? The people who gain out of a system of economic freedom could decide to collude
1:39:41 in a system where there isn’t political freedom. That’s certainly a scenario.
1:39:46 So, but that was, again, that’s that core idea of freedom, right? And that core belief
1:39:50 that people want freedom and that people are drawn to freedom.
1:39:56 Just to go back to Frank Knight a little bit, he wrote an essay called The Ethics of Competition,
1:40:01 the metaphor that economic life is a game, and then maybe that extends the society as a whole,
1:40:07 like the entirety of it is a competitive game. And Milton Friedman,
1:40:12 I think, adapted some of this, appreciated some of this. Can you speak to this metaphor?
1:40:18 Yeah, I think what the metaphor of the game does is it asks you, okay, well, what are the rules then?
1:40:24 And let’s focus on the rules that keep the game going. So, he didn’t use the concept of an
1:40:28 infinite game, but I think that’s an interesting one, a game that all the players are in and keep
1:40:33 going again and again and again. And so, that helped Knight, along with Hayek,
1:40:41 shift from the allocation question, who’s getting what, are things allocated fairly
1:40:46 to the more structural question of, like, what are the rules of the game that we need to keep
1:40:52 this system going? And so, for a while, that led to the discussion of monopoly, well, we need rules
1:40:58 against concentration, or we need the rule of law. Everyone needs to be treated equally.
1:41:06 People need to know what they’re up against. And then, going back to monetarism,
1:41:14 the core of monetarism is a rule. Friedman called it a monetary growth rule. And so, again, what
1:41:21 keeps the economic game going is a rule about how much the money grows that everybody knows.
1:41:27 Nobody’s guessing. Nobody’s changing the rules to help their side or to help the people they’re
1:41:34 friendly with. We all know it’s there. It’s clear. It’s easy. And so, that emphasis on rules, I think,
1:41:38 really has a through line. It goes into Hayek’s competitive order, and then it goes into the
1:41:48 monetary growth rule. And then, today, monetary policy makes use of monetary policy rules. We
1:41:54 have not abandoned discretion, but rules are used as a heuristic or a check, and those come out of
1:42:03 Friedman’s thinking. And so, it’s really profound. And it was always counterposed to discretion,
1:42:09 which Friedman worried would be subject to capture or political corruption if you had
1:42:14 discretion in policymaking or if you had discretion in these very big areas. Then,
1:42:20 people would stop competing against each other in a market, and they would turn their attention
1:42:27 to getting control of the rules or the rule makers. So, if there’s clear, transparent rules,
1:42:33 then you’re free to play the game. Yes, exactly. But then, depending on the rules,
1:42:40 the game can turn out the equilibrium that arrives at might be different. So, that speaks
1:42:46 to the mechanism design, the design of the rules. Yeah, and that was, again, to go back to the idea
1:42:52 separating new liberalism or neoliberalism from classical liberalism was more of a focus on what
1:42:56 are the rules that are needed. What is the competitive order that we want to set out?
1:43:03 How do we design in social safeguards? How do we think about it? And so, that shift
1:43:09 towards monetary policy and focusing on stable monetary growth, that becomes really important
1:43:15 in the post-70s era is one of the basic rules of how capitalist economies should function. And it
1:43:21 becomes really important because they see the example of, say, countries most notably in Latin
1:43:28 America where monetary rules weren’t followed and different governments played politics with
1:43:35 their currencies, and that created just huge upheaval and huge social loss, economic loss,
1:43:41 just economic disaster. So, my friend, she’s a poker player, philosopher of sorts,
1:43:46 great human being. She has a podcast called Win-Win that everybody should listen to.
1:43:51 And the whole purpose of the podcast and her whole way of being in spirit is to find win-win
1:43:59 solutions. So, do you think of economic life as having such win-win solutions? So, being able
1:44:05 to find rules where everybody wins or is it always going to be zero sum? I definitely believe
1:44:12 in win-win, but with the big asterisks, like you can have win-win, but it can feel like win-lose,
1:44:20 which is it’s not just are people getting more, it has a lot to do with do people feel
1:44:25 they’re getting more and do people feel they’re getting what’s fair and equal. So, you could have
1:44:33 a situation, for instance, if you look at the history of going back to Chile, it has
1:44:40 steady growth, steady income growth, steady diminution of inequality, and a high level of
1:44:46 discontent within the society and a high level of belief that the society is corrupt and unfair.
1:44:51 And that’s what matters. How people feel about it, how people perceive it,
1:44:57 matters. And we saw this recently, you can’t just come out with a bunch of statistics and
1:45:03 tell people you’re winning in this game if they feel like they’re losing. So, that goes to all
1:45:10 the non-rational factors and all the comparative factors that people have when they think about
1:45:15 where they are vis-a-vis other people in society. So, we’re just incredibly social creatures. We’re
1:45:20 incredibly attuned to our status, to rising and falling, to where we sit vis-a-vis others.
1:45:26 And so, that absolutely has to be attended to. It can’t just be an economic analysis.
1:45:32 That’s so interesting that the experience of the economy is different than the reality of
1:45:38 the economy. On the topic of corruption, I think the reality of corruption versus the perception
1:45:43 of corruption is really important in a lot of these nations. You take Ukraine, for example,
1:45:50 the perception of corruption has a big impact on the economy. You don’t want to invest, you’re
1:45:54 very cautious as a business person. The reality of corruption could be way different than the
1:46:01 actual perception. But if narratives take hold, it’s a self-fulfilling prophecy that it has a
1:46:06 big effect on the psychology that people involved. It’s interesting. Yeah. I mean, this goes back to
1:46:12 Keynes’ analysis of the Great Depression, right? If people won’t invest, if they’re spooked,
1:46:18 if the investing classes are spooked, you could be in real trouble. And in some ways,
1:46:24 this simple analysis of the problem and proposal of a solution was enough to restore
1:46:30 eventually the path to academic prosperity, right? That’s Franklin Roosevelt, nothing to fear but
1:46:36 fear itself. The sense of we know we have a future, we have optimism, then you believe in it. And to
1:46:42 go back to thinking about money, right? Money works because we all believe in it. It’s a form
1:46:48 of social trust. And it’s a form of belief and faith in our society and in the other people in it.
1:46:51 And when that breaks down, the money system will break down as well.
1:46:57 Is there something Milton Friedman said and thought about how to control the psychology of
1:47:04 humans at scale? No. I mean, what’s interesting is he does talk, especially in his later work,
1:47:11 he says we have fiat currency and this is an experiment. And we don’t know how it’s going
1:47:16 to turn out. And it’s turning out okay right now, but we’ve always had a commodity based or backed
1:47:24 currency of some form or another. And this is the first time. And so who really knows, so far,
1:47:30 so good. And he also is very attuned. It’s interesting in his later writings when he’s
1:47:35 thinking about this to, sure, I could design a monetary system that would be different. But
1:47:41 when I look at history, I see that monetary systems have always say incorporated the role of the
1:47:47 state because it’s so important to people. And so therefore, my theoretical designs really have
1:47:52 to be tempered by what I’ve actually seen happen in history. So maybe you could speak to this
1:47:59 tension between how much government intervention is okay for Milton Friedman. So he was against
1:48:04 minimum wage, but he was for guaranteed minimum income. Can you explain actually the difference
1:48:09 between the two? Yeah. So this was one of the discoveries I made in my research. I found a
1:48:14 paper from 1938, he wrote advocating what we would call today a universal basic income,
1:48:20 a minimum income. And he basically sees this as part of the effort to create a new liberalism,
1:48:25 right? And he basically says we have advanced societies, we have prosperous societies,
1:48:32 we have decided in keeping with our morals and our ethics that people should not be starving
1:48:36 in an advanced society like this. The question is how are we going to make that happen?
1:48:41 And he ended up believing the best thing to do was to put a floor under everybody.
1:48:48 And he said you can get that based on your income. If you have a lot of income, you don’t get it.
1:48:52 If you have a little income, you might get a little bit of it. If you have no income,
1:48:57 you get enough of it. And he believed in the beginning, you should base that on what was
1:49:02 required to buy food, right? That that would be kind of an objective. You could objectively determine
1:49:07 the nutrition and the price of food. And so that for him, it’s important, he says,
1:49:12 it’s keeping with a liberal polity because it’s not intervening in the price system,
1:49:18 it’s not intervening in economic relations. And it does not, in his view, require a bureaucracy
1:49:25 to administer. It is not, in his view, require that you qualify for it by virtue of being in a
1:49:32 protected class. You just get it as kind of part of your membership in this general citizenship
1:49:40 body. And so that, to him, was really different than a minimum wage because it did not interfere
1:49:46 with the work bargain. His belief about minimum wages was specifically that it priced out unskilled
1:49:52 labor. That what an unskilled laborer had to offer was a willingness to work for a very low wage.
1:49:58 And if you set the minimum wage too high, businesses instead of hiring that higher
1:50:03 priced labor would not hire, or like we could think of today, right? They put in an electronic
1:50:08 checkout, you know, or something like this where you don’t actually need the labor. So he really
1:50:13 believed the minimum wage had that perverse incentive. Now, there’s, this is a live debate
1:50:18 on what minimum wages do. And there seems to be a level at which you can set them that they can
1:50:24 not have that perverse effect and, in fact, can kind of create people with more spending money
1:50:30 that then powers the economy. So he had a very sort of clinical analysis of that, rather than
1:50:37 an empirical one or a really abstract analysis. But the minimum income is fascinating because it
1:50:45 seems very leftist to us. But what it is, is it’s purely individualistic. And it never really happened
1:50:52 because it was so purely individualistic because American social policy typically identifies
1:50:57 like this group of people is deserving and will give them benefits. So the classic example is
1:51:03 soldiers, veterans. Another example is mothers raising dependent children. These people deserve
1:51:08 money. The rest of you, you better go out and work. And so Friedman’s proposal, it really
1:51:15 caught on in the ’60s. It ultimately went nowhere, but it was no litmus test, no income analysis.
1:51:20 Just we’re going to give you this much. Everyone’s going to get this much. And he decided once mass
1:51:25 taxation had come in, you could do it through taxes. And you could just rebate people who didn’t pay
1:51:30 income taxes, got a rebate. That actually came to pass. It’s the earned income tax credit. And it’s
1:51:36 considered extremely successful by policy analysts. It does what it’s supposed to do. It’s not that
1:51:44 expensive. And so I see that as a kind of paradigm of his thinking in that instead of creating a
1:51:50 bureaucracy that does some form of redistribution, or instead of trying to intervene in the market
1:51:56 for labor or the market for something else, the market for housing, you provide a cash grant that
1:52:03 people spend for themselves. And so interestingly, that’s what happened in the emergency situation
1:52:07 of COVID, right? That’s exactly what people did. They followed that model. We just get money out
1:52:12 quick. And there’s a lot of discussion still about UBI’s is something that should be done.
1:52:20 And I think it’s always going to be hard to pull off because I think Americans and their elected
1:52:24 representatives don’t want to provide a universal benefit. They want to provide a targeted benefit
1:52:30 because they believe there’s like a moral component here. And Friedman advanced a policy that was
1:52:37 really abstract and really just kind of, it was devoid of judgment. It was like pure and beautiful
1:52:43 in that way, but utterly impractical. And it really focused on not interfering with the market
1:52:48 and the signals that the market provides. It was really against price controls for the same kind of
1:52:54 reason. Yeah, exactly. You could say, okay, but how does this not interfere with the market, right?
1:52:58 If you provide people with a minimum income, won’t that change their incentives to work, etc?
1:53:02 I mean, there’s a big body of research on this. Most of it seems to show
1:53:09 one, it’s way better than the current benefits cliff where you have to not work to get your
1:53:17 benefits. And any incentive impact on working seems to be much lower than would be expected. But
1:53:23 I’ll let the economist and the social science to spite that one out and figure it out empirically.
1:53:27 Hopefully we should be able to. Yeah, there’s been a bunch of studies. It’s interesting,
1:53:31 even just how you conduct studies like this, how you do these kinds of experiments,
1:53:38 especially if you’re empirically minded. Because a lot of the studies I saw are pretty small.
1:53:46 So how do you make big conclusions about how to run the world, how to run the economies
1:53:55 from such small studies? It’s all a fascinating experiment of ideas. And it’s also inspiring to
1:54:01 see individuals and maybe small groups of individuals like the Chicago School of Economics
1:54:09 to sort of shake out what we believe and how we run the world. Yeah, inspiring. Yeah.
1:54:14 You call Milton Friedman, the last great conservative,
1:54:22 maybe to be a little bit sort of controversial and make bold statements that get everybody excited.
1:54:25 But what do you mean by that? And what makes a great conservative?
1:54:31 So I was really thinking of that in terms of kind of American political identities
1:54:37 and particularly the 20th century conservative movement, which people are always saying this
1:54:42 isn’t conservatism. And I said, yes, in America, conservatism is different. It looks different.
1:54:47 It feels different. Conservatism in America builds in a big component of what we could
1:54:55 call libertarianism, pro-capitalism, anti-government ideas. And critics will say, but conservatism
1:55:01 is about conserving institutions and practices and it has a role for the state and an organic
1:55:07 community. But in the United States, it’s always had since the 20th century, also this anti-statist.
1:55:14 Let’s let the market rip. Let’s not worry about what the market does to establish traditions.
1:55:19 The market is our tradition. Capitalism is our tradition. So that was really synthesized.
1:55:24 Many people were there, but Friedman and the importance of his books,
1:55:31 Free to Choose, Capitalism and Freedom, the television series he did, all of these were
1:55:37 like core components of this American conservative synthesis as it evolved. And I really see that
1:55:44 as having broken down. It is scattered into different pieces. We don’t know where they’re
1:55:51 going to come back together again. But Friedman’s push for open global markets,
1:55:55 unfettered free trade, that’s getting pushback on both the left and the right.
1:56:02 That I think is just a major sign that both parties have turned away from this vision.
1:56:07 I don’t know what they’ve turned to, but the way that Friedman brought these pieces together,
1:56:11 I think that political moment has passed. So that’s what I was trying to talk about
1:56:16 with the book title. There’s another way, though, in which I think of him also as a
1:56:22 conservative, which is that within the field of economics, he went back to this older idea,
1:56:28 the quantity theory of money, and said, this still has value. This can be applied in the
1:56:33 modern day. It is something to teach us. And he pushed back against this trend towards
1:56:38 mathematicization. So he kept writing books. He can still pick up a Friedman book and read it.
1:56:44 There’s lots of economics articles and outputs, like “unreadable unless you’re in the field.”
1:56:50 And so I think in that way, he was trying to conserve methodologically and intellectually
1:56:55 the traditions of the field. The work that he, and particularly Anna Schwartz did that
1:57:01 literal counting of things and deep analysis of data from the field, that was completely
1:57:06 unfashionable in his time. Now, we’ve sort of gone back to it with big data and with computers,
1:57:10 but he helped bring that forward and preserve that tradition. So I think of him kind of
1:57:15 intellectually as a conservative, if you think of the mode of his thought. And so,
1:57:21 I mean, what makes a great conservative is one who takes those older ideas and makes them fresh
1:57:26 for a new time period. I think that’s exactly what he did.
1:57:32 You’ve also spoken about the fact that the times when he was sort of out in public,
1:57:42 there was more of an open battle of ideas, where conservatism often had William F. Buckley. He had
1:57:52 a more vibrant, deep debate over ideas, where it seems less deep now.
1:57:58 I mean, that is the thing that it’s hard, especially for the students I teach today,
1:58:03 to be like, there were arguments about ideas and conservatives want a bunch of them,
1:58:10 and that happened in the ’70s and late 1960s and 1970s, when one set of arguments was about
1:58:16 economics, like, okay, this idea of stimulating the economy by spending more, it has a downside.
1:58:21 The downside’s called inflation, and the downside’s called too much regulation.
1:58:29 You’ve gone too far in kind of bottling up the actual sources of economic growth and dynamism,
1:58:34 and we have to let those free. In social policy, there was also a critique.
1:58:40 The Great Society had all these ways of ideas of ending poverty, and people came and analyzed them
1:58:45 and said, the programs aren’t helping. In some ways, you’ve actually created engines to trap
1:58:50 people in poverty because you’ve given them a benefit and said, if they actually start to work,
1:58:55 they lose the benefit. You’ve created all these perverse incentives, and these ideas were fought
1:59:00 out, they were empirical, they were controversial, and they were based on really deep research
1:59:10 and really deep argumentation. It seems that era has passed. It seems like we’re driven much more
1:59:17 quickly by moods rather than thought through ideas. Right now, it seems like the ideas come
1:59:24 after they follow the political mood and try to put together the underpinning of it, where it
1:59:28 really was the opposite for much of the 20th century. It does seem like we lead with emotional
1:59:36 turmoil, and the ideas follow versus lead with the ideas, and sort of the emotion of the masses
1:59:41 respond. Right, exactly. If we think of the evolution of conservatism, it was a whole set
1:59:49 of ideas that was crafted, refined, the 1950s, 1960s, 1970s, sort of really found their emotional
1:59:56 standard bearer, translator, salesperson in Ronald Reagan, who incidentally had been following these
2:00:01 ideas as they developed and had been honing his ability to express them and apply them politically.
2:00:08 It’s very opposite if we look at Trump as the political definer of the era. There’s a set of
2:00:15 ideas, but it was more attitudes, impulses, vibes, and the ideas are coming after that,
2:00:22 trying to figure out how they patch on. It’s interesting to watch, to see that difference,
2:00:28 and I hazard that a lot of it just has to do with the immediacy of the media environment we’re in,
2:00:33 and it’s just power of the media messages to get out so fast.
2:00:41 What do you think Milton Friedman would say about Donald Trump, about him winning in 2024,
2:00:46 and just in general, this political moment? I think he would love Doge.
2:00:54 I think he would focus on that part because I think he would really love it. He would be
2:01:01 very alarmed by the idea of tariffs and very alarmed by the return to protectionism. I mean,
2:01:07 I think he believed that part of what made the world peaceful in the second half of the 20th
2:01:13 century, as opposed to during World War II, was that the world was knit together more by trade,
2:01:18 and that was the great hope that people traded with each other. They wouldn’t fight. He was also
2:01:25 a proponent of the freeing movement of capital. He would absolutely oppose this idea that
2:01:33 Nippon Steel wasn’t allowed to invest in the United States. I think he would struggle, and he
2:01:39 wholeheartedly embraced Reagan, and he worked to minimize the parts of the Reagan legacy he didn’t
2:01:44 like. I think he would find it harder to embrace Trump because he’s not of that
2:01:49 style. He just had a different style, but I’m guessing he would have come around through
2:01:56 I think he would just say, okay, we have a chance to reduce the size of government. At the same time,
2:02:03 the spending plans of the Trump administration are not fiscally conservative in any way,
2:02:09 and that was his concern. It was not so much with debt, but with the feeling that there’s no
2:02:14 mechanism to stop the growth of government, that it just grows and grows and grows. He ended up
2:02:22 believing even deficits aren’t so bad because they make politicians cautious he thought about
2:02:29 continuing to spend. I have to believe he would be concerned about the potential threats to the
2:02:36 US currency’s position as the world’s reserve currency with increased levels of debt and spending.
2:02:48 He was concerned about low interest rates. He died, I think it’s 2004, 2006, but it was in the
2:02:52 beginning he didn’t see the zero low bound, but he saw low interest rates and he said this isn’t
2:02:57 necessarily good. Everyone’s talking about low interest rates as if they’re good, but there
2:03:06 should be a price on capital. There should be a price on this. It shouldn’t be so low. He had
2:03:12 some of still the macro insights that I think are important. You wrote the Wall Street Journal essay
2:03:19 titled How Inflation Ended Neoliberalism and Re-Elected Trump. Can we weave that into this
2:03:25 discussion in terms of inflation and Trump? What’s the main idea of the essay?
2:03:34 The main idea is looking back and saying, today we have been living in a world where people have
2:03:44 been focused on monetary policy, steady monetary policy, free trade, reducing regulation. This is
2:03:52 all called the neoliberal era. My argument was a lot of that arose was driven by inflation.
2:03:58 We have Milton Friedman predict inflation in 1967. It starts breaking out in the 1970s,
2:04:08 Britain and the United States. Every institution was designed around stable prices. Once inflation
2:04:15 broke out, prices were no longer stable. For example, tax rates weren’t inflation adjusted.
2:04:21 If your income went up because of inflation, you might bump from a low tax rate to an extremely
2:04:25 high tax rate, but you don’t actually have more money. On paper, you have more money,
2:04:28 but everything costs more. You don’t actually have more money and your taxes have gone up.
2:04:35 That kicks off the taxpayer revolt. There’s a whole shift of American corporations towards
2:04:41 focusing on financial investments because the tax breaks they used to get for depreciation,
2:04:46 for building new factories, are not inflation adjusted. They no longer pay off in an inflationary
2:04:54 environment. Then when Paul Volcker comes in, early 1980s and starts fighting inflation,
2:05:00 really pushes up interest rates to bring down inflation. That completely reorders the banking
2:05:07 sector because banks had statutory legal limits on the interest they could charge. Once
2:05:14 general market interest rates exceeded that, it was proliferation of new financial forms to take
2:05:22 advantage of that. My point was the era we live in was ushered in by inflation. Then everyone
2:05:29 turned against all the formulations we had and said, “Well, these have hollowed out our industrial
2:05:36 base. We’ve got too much immigration. We’ve got too much economic openness. We need to
2:05:40 reshore. We need to focus. We need to turn against all these things. We need to spend more. We’ve
2:05:49 disinvested.” The net result of that turning away, I argued, is people forgot about inflation.
2:05:53 They really forgot it could ever exist. You had a whole set of theories on the left,
2:05:56 modern monetary theory that basically said, “We don’t really need to worry about inflation.
2:06:03 We can spend what we want.” Lo and behold, inflation came back. My argument is that
2:06:10 is now open the door to the presidency of Donald Trump, which is potentially a deeply
2:06:17 transformative moment that will change the size and shape of government, that may change our foreign
2:06:23 policy profoundly, that may change our immigration policy, that may change the demographics of our
2:06:30 country. All of that in my thesis is that it’s all been made possible by inflation. The great
2:06:37 mistake of the past years was to forget how fundamental inflation was to the rise of the
2:06:46 last political order and to profoundly underestimate how much inflation would change the current
2:06:50 political order. I just think it’s one of these things. This is why I think you should study
2:06:55 history, because I think if you had studied history, you would be aware of this. It’s so easy
2:07:01 for people to forget just like the banks forgot that interest rates could ever go up. They got so
2:07:07 used to it. It’s only a 10, 15-year thing, but to them, that seems like forever. I really do
2:07:14 believe what history teaches you to do is just have a much vaster scope in your vision and then
2:07:18 take into account the possibilities of so many things happening that are different
2:07:24 than what’s happening today. I just hope we don’t forget about inflation entirely, but here’s the
2:07:31 thing. It is quite a strong chance that Trump’s policies will initiate even worse inflation,
2:07:36 and then they will prove to be his undoing. The ironies of inflation could be continuing.
2:07:45 Like you said, Milton Friedman would be a big fan of Doge. If he was still here today and rolled
2:07:51 with Elon Musk and Vivek, what advice would he give? What do you think he would focus on in terms
2:07:58 of where to cut, how to cut, how to think about cutting? His signature policy move I talk about
2:08:09 this is taking the price mechanism and trying to make that into the policy. That seems obvious to
2:08:14 us today, but in the era that he came in, there would be rent controls. Let’s take away rent
2:08:21 controls. Let’s let housing prices set themselves. He was very against national parks. I actually
2:08:27 think the national parks are good, so I hope the Doge people don’t take this up. Rather than an
2:08:31 allocation to fund the national parks, they should be funded by the revenue that they bring in when
2:08:39 people visit them. Let’s let prices make the decisions here. I think that would be one of the
2:08:44 key pieces. The other thing I think he’d really be thinking about, he wrote about this a lot about
2:08:51 occupational licensure and barriers to entry. He felt like one of the worst things that government
2:08:57 does and sometimes it’s private entities that do this is create barriers to entry to protect
2:09:01 industries and markets. He talked about this in the case of the medical profession, which I think
2:09:07 is actually not a good example because I think we all have a collective investment in having medical
2:09:14 doctors be highly trained. For instance, you could look at nail technicians or hair cutting.
2:09:18 There’s often these licensing requirements or there’s a big kerfuffle. I think it’s the
2:09:22 DC passed a law that to run a childcare center, you have to have a college degree. What does
2:09:26 that do? That disenfranchises a whole bunch of would-be entrepreneurs who don’t happen to have
2:09:30 a college degree, but probably could be really good at this particular business. I think he would
2:09:39 be saying, look out for where private interests have used the state to protect themselves and
2:09:47 clear away those types of barriers and let competition through prices guide outcomes.
2:09:53 Yeah, so open up for more competition and allow for more signals from the market
2:10:02 to drive decisions, which would actually naturally lead to cutting a lot of the bureaucracy of
2:10:07 government. I think the other thing he would probably be arguing for is again, go back to
2:10:14 the design of the minimum income or the negative income tax, that there’s a way he ultimately
2:10:18 decided to run it through the tax system. The government’s already collecting this data.
2:10:22 They already have your information and they can just send the money out through the system.
2:10:27 Rather than having a social bureaucracy where you have to come in in person, you have to fill
2:10:33 out forms, you have to document, do you own a car? What’s your income? Who lives in the household?
2:10:42 I think he would say and his analysis of that was who that really benefited was the bureaucracy,
2:10:48 that process, that paper that implemented those norms and that if you could pull that away,
2:10:54 you could get help out where it was needed much quicker without having this drag of people doing
2:10:58 sort of unproductive work of administering these systems. I think trying to cut administrative
2:11:03 overhead and what he didn’t have then, which we have now, is the technology that we have and the
2:11:11 ability to send benefits out via smartphone or just to move so much faster and to handle
2:11:17 information on a mass scale so much faster. It’s painful, but I think one of the big things you
2:11:22 can do is just that, which is digitalize. I don’t know if that’s a word, but just
2:11:33 convert everything to where the speed of signal can be instantaneous. There’s no paperwork.
2:11:41 It goes immediately. Then that means that the pricing signals and all these kinds of things
2:11:45 are just immediately available to people. That seems to be the low-hanging fruit government,
2:11:53 IT systems could be vastly improved. But that would result again with a lot of people getting
2:12:02 fired. I think somebody submitted a question for me saying, “What are your thoughts as a person
2:12:07 who cares about compassion? What are your thoughts about government employees, which there’s a lot of
2:12:15 that are going to be hurt by doge?” It’s always a really difficult question.
2:12:22 A lot of people get fired to make room for a new system that’s going to lead to a lot of pain.
2:12:28 There is going to be a lot of pain. I don’t know what the solution is. I think that’s also part of
2:12:35 why Friedman favored a minimum income. He talked about it being countercyclical. In other words,
2:12:41 when things were really bad, the spending level on it would naturally go up. This is what economists
2:12:48 today call an automatic stabilizer. Then when it’s not needed, the cost of it goes down.
2:12:54 Maybe there’s a way to make it sweeten it with honey and have people take buyouts or things
2:12:59 like that. That would certainly be a way better way to go. I did a podcast with Javier Malay.
2:13:05 He has consistently praised Milton Friedman and cited him as one of his inspirations.
2:13:11 So, what do you think Milton Friedman would say about what’s going on in Argentina and
2:13:15 what Javier Malay is trying to do in Argentina? Yeah, I think he would appreciate it. I mean,
2:13:22 I think Malay is much more of an Austrian-inspired thinker, but I think he definitely appreciates
2:13:28 Friedman. On the macro level, Friedman always understood it’s really painful to treat inflation,
2:13:35 but the more you put it off, the harder it is. So, I think he would be trying to get him,
2:13:44 as he’s doing, to just message that short-term pain, long-term gain. I think he’d be very supportive.
2:13:49 I think he’d be thrilled to see also that Malay is very good at explaining these abstract ideas
2:13:53 and putting his policies in the framework of the bigger picture. That was really meaningful
2:14:01 to Friedman. I don’t know how politically persuasive it is overall. Malay is very intense.
2:14:07 He doesn’t have the same sort of gifts of salesmanship and sending people at ease that say
2:14:11 someone like Ronald Reagan had, but it seems to be that’s what his country was calling for right
2:14:22 now. Yeah, he has more chainsaw-less, more blanket. Javier recollects this line from
2:14:26 Milton Friedman. I don’t know if this is accurate, but if you strive for equality over freedom,
2:14:30 you often get neither, but if you strive for freedom, you often get both. Do you think
2:14:39 there’s truth to this? I think on the big picture, definitely. We’ve seen focusing too much on
2:14:47 equality. Because equality is such an alluring word, it can lead you to downgrade all kinds of
2:14:52 other things that are really important. But I really think it depends on how you’re defining
2:15:03 freedom. The statement is too big and too broad. If you’re talking about freedom, if by freedom,
2:15:10 you mean not having to pay taxes if you’re successful, I think that can have all kinds
2:15:15 of knock-on effects. The idea that people are able to prosper when they’re educated,
2:15:20 where is education going to come from? How is that going to be paid for and supported?
2:15:28 Again, to go back to night, if you’re generating too much inequality or people are feeling that
2:15:33 you’re generating too much inequality, sometimes they value that more than they value freedom.
2:15:41 I think there has to be more of a balance. It’s hard to make such global statements
2:15:45 if you have to break them down into what actually do you mean. But again,
2:15:50 Malay is coming from a very different context, a very different country that has seen
2:15:56 so much upheaval, so much government intervention, so much inflation, so much political turmoil.
2:16:01 He’s probably thinking about it differently than Friedman was thinking about it.
2:16:08 There probably still is a real threat of hyperinflation. There seems to be a very high
2:16:14 level of corruption or the capacity for corruption, so it’s a really messy situation.
2:16:20 So, Javier Malay likes to recollect this great line from Milton Friedman, that if you strive for
2:16:26 equality over freedom, you often get neither, but if you strive for freedom, you often get both.
2:16:33 Do you think there’s truth to this? Yeah, I think in the macro, for sure. We’ve seen,
2:16:40 if you really put equality as your goal, it’s such a seductive ideal, and people believe in
2:16:46 it so much that they can carry out horrible crimes in the name of equality. But then,
2:16:52 focusing on freedom, these words are too big. They’re so hard to define. So, I think you have
2:16:58 to ask what is the freedom you’re talking about? If you’re talking about the freedom of ordinary
2:17:04 people to be entrepreneurial, to make their own way, to start new things, to continue what
2:17:08 they’re doing, to keep what they’ve earned, for sure, I think that can increase the equality
2:17:15 overall. If you’re talking about lower taxes, if freedom is just a code for lower taxes, there has
2:17:22 to be, I mean, lower taxes in general, great. But if you’re one of the top generators of wealth,
2:17:29 there has to be some way to ensure that, say, education, people prosper when they’re well
2:17:35 educated. That’s when economies do better. Education is generally state-funded, and you need some way
2:17:41 to support that and provide for those institutions that structure society that make competition
2:17:48 possible. So, I think it’s just a really broad statement. Again, Malay is coming from a really
2:17:54 different context. He’s coming from the South American context from such upheaval, such economic
2:18:00 devastation, in pursuit of the goal of equality that I think trying to rebalance with that emphasis
2:18:05 on freedom, I definitely see where he’s coming from. If we can pivot a little bit. We’ve talked
2:18:11 about Reagan. What are some interesting stories about how Milton Friedman navigated to Reagan,
2:18:16 and maybe even the Nixon administrations, and how he was able to gain influence?
2:18:22 Well, the Nixon administration is an interesting case because, so I’ve been talking about inflation
2:18:29 and the different consequences it had. One consequence it had is that it began to undermine
2:18:33 the Bretton Woods currency system that was established in the wake of World War II. Now,
2:18:40 Bretton Woods, what it did basically, it ended up inadvertently putting the U.S. dollar at the
2:18:45 center of the world economic system. But under Bretton Woods, countries of the industrialized
2:18:52 West agreed to trade their currency in set ratios that governments sent. A franc was worth so many
2:18:58 dollars or a German mark was worth so many francs. Then also under this system, countries could come
2:19:05 to the United States and they could trade the dollars that they held for gold because the U.S.
2:19:14 was on a modified gold standard. There was a ratio of gold to paper money. The system was set up
2:19:21 and very quickly, most countries were, the dollar was at the heart of it and that the converting
2:19:25 into and out of dollars was really the mechanism of trade for many of these countries. So,
2:19:35 Friedman said, what we should have is floating exchange rates. This is an idea, again, of instead
2:19:41 of having a top-down design of policy, an administered policy, we will have policy set by
2:19:46 prices and usually be able to trade currencies on an open market. They should trade and they
2:19:52 should fluctuate and that would be fine. Totally outlandish idea. But he was pinpointing the fact
2:19:58 that Bretton Woods had an instability and that instability began to emerge in the time of inflation.
2:20:08 So, you have more and more dollars being printed. They’re worth less and less. If European nations
2:20:14 keep trading their currency for dollars, they’re going to be importing inflation into their own
2:20:19 economies. So, they say, we don’t want these dollars, we’d like some gold instead and they
2:20:26 have the right to go to the treasury, send in an order and get gold out. So, they start doing this
2:20:32 more and more and it becomes, it’s called the gold drain and the United States starts running out of
2:20:39 gold. They’re aware this is happening through the ’60s. They’re trying various things to fix it and
2:20:47 when Nixon comes into office in ’68, Friedman sends him a memo and it says,
2:20:57 “This is going to be a real problem.” He says something like, “This is a running sore and you
2:21:05 have to lance it right away.” Some very graphic metaphor. Otherwise, it’s going to explode and
2:21:13 Nixon just files the memo away. Nixon loved people to think he was influenced by and following the
2:21:18 wisdom of Milton Friedman, but he didn’t actually want to do that. He just wanted the political
2:21:27 benefit that came from it. So, then comes the moment where the US Treasury Department realizes
2:21:33 we’re going to run out of gold. What should we do? Everybody de-camps to Camp David and Nixon
2:21:40 decides we’re just going to stop redeeming currency for gold. It’s called slamming the
2:21:47 gold window shut, done. He also, at that same meeting, decides to institute price controls.
2:21:52 He does a whole bunch of stuff. It’s an emergency. He calls it the new economic plan,
2:21:57 which is an unconscious echo of the Soviet new economic plan, so a problematic name,
2:22:02 a problematic policy. Friedman is livid at the price controls, but he’s like,
2:22:07 “Actually, it’s great that you closed the gold window. Let’s go all the way to floating exchange
2:22:14 rates.” This idea was heresy within the Treasury Department. Everyone’s very committed to the
2:22:19 idea of the gold standard, convertibility, possibility, the United States at the court,
2:22:24 the financial system, kind of hem and haw. But at this point, Friedman has a very close
2:22:31 relationship with George Schultz. George Schultz is a high-level appointee who will eventually,
2:22:35 over the course of the Nixon administration, become the Treasury Secretary. So,
2:22:42 Friedman is feeding Schultz all his ideas about how we should move to floating exchange rates,
2:22:48 how we shouldn’t try to reconstruct Bretton Woods. The people in Treasury, it’s funny because I’ve
2:22:51 read some of their accounts, and actually Paul Volcker is in the Treasury Department at this
2:22:57 time. He can sense that Friedman is in here somewhere, like feeding his boss ideas. He
2:23:02 doesn’t quite know. In the oral history, Schultz talks about this quite a bit.
2:23:09 So, at any rate, Friedman exerts this behind-the-scenes influence, and what Schultz does is just let’s
2:23:17 Bretton Woods fade away. He doesn’t make grand pronouncements. It just slowly, the world shifts
2:23:24 to a regime. For a while, it was like a regime of steady prices, and then they call it a steady
2:23:28 regime of changing prices or whatever. The language changes, the reality changes, and they kind of end
2:23:33 up where they are. So, that’s a real measure of Friedman’s influence. If there had been another
2:23:38 economist in Schultz’s ear that said, “No, catastrophe is imminent. We have to go back to
2:23:42 Bretton Woods,” he probably would have worked harder. The U.S. government would have worked
2:23:49 harder. That becomes one of these pieces of globalization. What people don’t realize is
2:23:54 there used to be, in addition to these floating set capital ratios, you couldn’t bring capital
2:23:58 in and out of different countries. You had to register. You couldn’t invest. All these
2:24:03 rules and strictures and the falling of Bretton Woods really blows that all open. It’s a precursor
2:24:10 to globalization. So, Friedman is right there. Now, he’s very ambivalent about Nixon. I mean,
2:24:14 he sees that Nixon is not an honest person. He thinks he’s very intelligent,
2:24:22 and Nixon’s dream is to create a new centrist majority. So, he does many things to go back on
2:24:27 his supposed economic principles and ideals. So, Friedman does not like this. He doesn’t
2:24:32 like the price controls. He’s in communication with his old mentor, Arthur Burns, who’s now
2:24:37 the chair of the Federal Reserve, and Burns is basically doing everything wrong in monetary
2:24:42 policy. And I described this in the book in some detail, these anguished letters back and forth.
2:24:50 And basically, as I see it, Burns doesn’t have a solid theory of inflation. And the more Friedman
2:24:55 pushes him, it’s almost like Burns is willfully ignoring Friedman and kind of doing the opposite
2:25:00 of what Friedman says. So, Burns is running a very loose monetary policy. Inflation is quite
2:25:04 considerable over the ’70s. I mean, we were all spooked by what did it get to 6% something like
2:25:11 that recently for a very short time. This is inflation going over 10%, hovering an 8% for
2:25:15 basically the whole decade of the ’70s. It’s going up and down with extremely elevated rates.
2:25:21 And so, the Carter presidency largely falls, foreign policy is a big part of it, but the
2:25:25 failure to tame inflation is part of it. And then Reagan comes in. And now,
2:25:31 Reagan loves Friedman and Friedman loves Reagan. Very mutual feeling. The Reagan administration
2:25:37 creates an advisory economic board. Friedman’s on it. He’s retired now. He’s entering his golden
2:25:44 years. But he really has Reagan’s ear. And here, what he does is he convinces Reagan of his theory
2:25:50 of inflation, which is inflation has been caused. It’s a monetary phenomenon that has been caused
2:25:59 by bad monetary policy. Inflation has an accelerating dynamic. The only way to end inflation is by
2:26:04 really showing and signaling that government policy has changed. And when you do that,
2:26:10 it’s very painful for a short amount of time. People will suffer. But then, you will come out on the
2:26:17 other side into stable prices. And this is what you need for economic prosperity. So, the man who
2:26:27 implements this policy, Paul Volcker, is definitely influenced by Friedman. He even buys Friedman’s
2:26:33 specific technique of the monetary growth rule and of the focus on monetary aggregates, which
2:26:38 Friedman has said, right, money matters. Aggregates matter. And that’s what money is. Pretty quickly,
2:26:45 Volcker finds that because of inflation and the financial deregulation and response to it,
2:26:50 the aggregates don’t work the way Friedman said they would. And so, the specific policy Friedman
2:26:56 recommends. Volcker tries it for a year or so. It doesn’t work super well. But what does work
2:27:03 is letting interest rates go high, go above inflation to a point where both the general
2:27:07 citizenry and the financial markets believe like, oh, they’re actually serious about inflation.
2:27:11 And because we’ve had a decade of inflation with all these presidents saying,
2:27:17 forward, we’re going to whip inflation now, that monetary policy has lost credibility.
2:27:21 This is why people focus so much on credibility today, because once it’s lost,
2:27:25 it’s really hard to get it back. And one way Volcker gets it back is interest rates over 20%.
2:27:33 Unemployment, very high, as high as 25% in construction sectors. And as this is happening,
2:27:37 Milton Friedman is whispering in Reagan’s ear, this is the right thing.
2:27:43 Stay the course. This is going to work. Now, interestingly, he hates Volcker. Volcker hates
2:27:48 him. And Friedman will never give Volcker credit for this policy, but he will give Reagan credit
2:27:57 for this policy. But he owes credit himself for keeping Reagan from wobbling on this policy and
2:28:02 just pushing it through. And he also tells Reagan very pragmatically, you better do this now.
2:28:06 You’ve got a four-year term. Do this in the first two years of your term.
2:28:11 Things will have turned around by 1984 when you run for reelection and you’ll benefit from it. And
2:28:16 that’s absolutely what happens. If we could take a small tangent. Sort of a question I have to ask
2:28:21 about, this is so much of Bretton Woods and maybe the gold standard, maybe just
2:28:27 have a general discussion about this whole space of ideas. There’s a lot of people today that care
2:28:35 about cryptocurrency. What do you think that Milton Friedman would say about cryptocurrency and
2:28:43 what role crypto might play in the economy, whether he would be for this idea,
2:28:51 against this idea. And if we could look at it for today and also just 10, 100 years from now.
2:28:57 There’s a clip, I think it’s in 1992 where people say, oh, Friedman predicted cryptocurrencies
2:29:03 because he’s talking about how payments will eventually be electronic. So in some ways,
2:29:07 he definitely, as he was looking at the computer and money, he knew these would come together in
2:29:15 some way. I think he probably would see a use case for a crypto. He definitely would not buy
2:29:22 the stronger forms, I think of crypto ideology in which we could be heading towards a future
2:29:25 in which there’s many different currencies that compete or that are distributed or there’s a
2:29:31 stateless currency. And he addresses this very, very clearly because a Hayek’s denationalization
2:29:37 of money, it’s a paper in the late ’70s, Hayek argues for this kind of competing currency model
2:29:42 or regime. And so he’s responding to that. He’s responding to people writing about free banking.
2:29:48 And he basically says, look, even if you developed a variety of competing currencies,
2:29:53 eventually society would converge on one. And that’s because people just want one currency
2:29:57 that they know they don’t want a bunch of different options. Even in places where there have been
2:30:03 options to do that, they’ve been used very minimally. And then he says, secondly, the state always steps
2:30:09 in. He says, technically, theoretically, it doesn’t have to, I could draw you a model. I could tell
2:30:14 you about how it could work without the state. But in actual reality, all human societies,
2:30:21 through time and space, the state eventually becomes involved in the provision of money because it has
2:30:27 so many knock-on effects to so many people. So sure, I think he would, again, find a use case
2:30:32 for crypto. I think it’s interesting, but I don’t think he would see it as this is going to display
2:30:38 state money, and we’re going to have a variety of distributed currencies. The other thing he
2:30:46 really stresses is that a change in a monetary system, it only happens amid great, great crisis.
2:30:52 So again, you see in countries where the state is not controlling the money well, right? That’s when
2:30:57 people are more turning to crypto. But he says, because money is so fundamental, they’re going to
2:31:05 be so much political pressure on any country that gets the currency profoundly wrong that the government
2:31:09 will fall and another one will replace it, right? So if you look at episodes of hyperinflation,
2:31:14 they don’t go on very long because they’re so upsetting to people.
2:31:19 If we can go back in time, we’ve talked about it a bunch, but it’s still a fascinating time.
2:31:27 The Great Depression, the University of Chicago, there’s these folks like Jacob Weiner, Frank Knight,
2:31:31 Henry Simons, all of these influence the thinking of Milton Friedman.
2:31:38 There’s this Room 7 situation in the University of Chicago. Just going back there,
2:31:44 even just speaking almost philosophically, what does it take to explore ideas together,
2:31:49 sort of like deliberate, argue in that space? And maybe there might be interesting stories
2:31:55 about that time. It would just be interesting to understand how somebody like Milton Friedman
2:32:04 forms. The seed is planted and the flower blooms. Yeah, yeah. So he gets to University of Chicago,
2:32:11 he makes fast friends. And in his third and fourth year, they become what I call them the Room 7 gang.
2:32:16 So Room 7 is they find an old store room in the basement, they take it over, and that’s where
2:32:22 they have their jam sessions. And what made this world come together was Frank Knight. There was
2:32:28 a charismatic leader, and there are a bunch of acolytes who clustered around him. That, I think,
2:32:33 was a key piece of the ingredient. And then there was a sense that they were on to something that
2:32:38 the rest of the economics field had forgotten or was rejecting. So there was that sense of mission.
2:32:45 So that seems to have been, there was a formal education piece. And then there was a parallel
2:32:52 education piece rooted in admiration for a thinker, a shared admiration. And then what that led Friedman
2:33:00 to do, what I found syllabi that he had from non-economics courses, lists of books, and he’d
2:33:05 written the prices of different ones he wanted to read. So he had John Stuart Mill on Liberty,
2:33:11 like 50 cents, written in the margin. So he began to educate himself. He gave himself a parallel
2:33:16 curriculum alongside this very formal economics curriculum. He started reading the traditions
2:33:21 of political liberalism and then talking them through with friends and then developing a shared
2:33:28 sense of mission. And the incredible thing is, of those friends in the group, they scattered
2:33:32 for like 10 years, and then they all came back together. George Stigler, his great friend,
2:33:40 was hired at Chicago. Aaron Director, who was his wife’s brother, was at Chicago. So many of these
2:33:45 people continued. He became Frank Knight’s colleague. So that was the base. That was what
2:33:52 really grew him, that really profound peer group. Now, the other piece I talk about a lot is,
2:33:58 Friedman was a collaborator, an open-minded collaborator, and he had incredible connections
2:34:04 with economists who were women. And he basically found, first in the figure of Anna Schwartz,
2:34:09 later in the figure of this group of women who were his wife’s friends, this kind of untapped
2:34:14 pool of talent. And so he immersed himself in this whole other world of consumption economics,
2:34:21 and that resulted in his more technical work on a theory of the consumption function,
2:34:26 which is the theory of permanent income. So for Friedman, intellectual work and intellectual
2:34:33 production was always done in this very social context, in a context that blended like friendship
2:34:40 and intellectual partnership. And he only had a handful of friends who were not also economists
2:34:47 interested in the same questions he was. So he just lived and breathed ideas all day long.
2:34:51 Can you speak to the jam sessions? Like, what do we know about the jam sessions? What are we
2:34:55 talking about here? You’re sitting in the room. Are they analyzing, are they reading papers and
2:34:59 discussing papers, or are they arguing more like over beers kind of situation?
2:35:06 Yeah, more arguing over beers. And in this case, there are several people who say it was all about
2:35:12 Frank Knight. What did he say? What did he mean when he said it? Is he right? And so Knight was
2:35:17 very, he would say one thing and then say another. If you read him, it’s very hard to follow what he’s
2:35:22 actually saying because he’s full of qualifications and ironies, it blends. And so he would throw out
2:35:27 these pieces, and then the students would kind of clutch at them, and then they would come back
2:35:32 together and try to assemble this sort of worldview. And then Frank Knight fell into this terrible
2:35:38 depression, and to cheer him up, they planned a big party. And they went back through all of his
2:35:43 previous writings, and they assembled them into a book that was published. This is the Ethics of
2:35:48 Competition. And you can read the introduction written in part by Milton Friedman. So not only
2:35:52 were they talking about Knight and what he said, but then they started pouring over his work.
2:35:57 And one of them described it as like a general equilibrium system where you had to know all
2:36:02 the parts, and then all of a sudden it all fit together in a whole. So if we step back, what
2:36:08 they were doing was getting inside the mind of a great thinker and understanding the ways that all
2:36:14 fit together, and then kind of testing their ideas against Knights. And what’s fascinating is one of
2:36:21 the first papers that Friedman publishes in Statistics is a rebuttal of Frank Knight. He
2:36:27 publishes a rebuttal of Frank Knight’s ideas about risk and uncertainty. And Frank Knight,
2:36:33 he kind of took a black swan argument. He said, “Risk, you can calculate uncertainty. You can’t,
2:36:39 like, existentially, philosophically. You can’t get your hands around it. It is the black swan.”
2:36:44 And Friedman publishes this statistical paper, and he says, “I can put uncertainty on a graph.”
2:36:50 And so there’s that sort of Freudian killing of the father element when he comes back, and he will
2:36:57 in some ways turn his back on Knight’s approach and Knight’s pessimism even while it’s like a
2:37:03 foundation of his thinking. Fascinating. Is there something you could say about the thinking process
2:37:10 that Milton Friedman followed, like how he developed his ideas? You mentioned there’s a
2:37:18 strong collaborative component, but there’s another story I saw about that I think his son
2:37:24 recalled about the argument number system that you mentioned, which I, by the way, if you’re
2:37:29 going to explain that as a tangent of a tangent, that’s really awesome. I think it’s like number
2:37:37 one if the other person is right. Number two means you were right and I was wrong. And the number
2:37:42 system evolved in some ways to be quick and efficient, but in other ways, they also were
2:37:47 really clear about it. So, you know, something like there’s kind of like three reasons behind it.
2:37:54 First is if you use a number, it reminds the listener that it’s really hard to say the words
2:38:00 I was wrong. So, you’re kind of calling on their sympathy by using the number, reminding them that
2:38:07 you’re doing a hard thing. And then it’s also reminding them that you’re in this family with
2:38:14 this code. And so you’re signaling your membership and your closeness and your love, really. And
2:38:18 so it’s supposed to be an easy way to disagree without like breaking the relationship. Yeah. So,
2:38:25 admitting you’re wrong now comes with this warm fuzzy feeling. Yeah. Yeah. And that’s really, I mean,
2:38:34 that’s so powerful. I think so much of the friction of human interaction can be boiled down to
2:38:38 just not being able to admit that you’re wrong, efficiently and quickly and regularly and just
2:38:44 often. And to be able to do that, that’s really, that’s really powerful. Yeah. I think it’s a really,
2:38:50 a really neat aspect of their family life for sure. That’s a fun story, but like can we just
2:38:57 generalize to how he engaged in collaboration, how he developed his ideas as they’re like a
2:39:02 thinking process. So, he taught at the University of Chicago and he tended to teach for six months
2:39:08 and then have six months off. And he spent the summers in New Hampshire or Vermont. He had a,
2:39:12 right near that border, they had two different houses. And that to him was the deep thinking time.
2:39:19 And so, when he’s at Chicago, he’s teaching, he’s arguing, you know, some people love his
2:39:25 teaching style very much in charge, very much keeping students on their toes, confrontational,
2:39:30 others found it too much overwhelming, kind of shut them down intellectually and they couldn’t,
2:39:36 they couldn’t cope with it. And so, I think it was kind of go time when he was teaching. In that
2:39:41 case, he was, that was a lot of social time interacting, talking, other professors, going
2:39:46 out and giving papers, arguing with the people at Yale or Harvard. Then he would go and do these
2:39:51 very deep dives over the summer. He would also regularly do these trips to New York
2:39:55 to see Anna Schwartz. So, it was a 12-year collaborator. They didn’t have, phone calls were
2:39:59 really expensive. They did have quite an extensive correspondence, but then they would do these
2:40:04 meetings. So, he would basically come in at the beginning of the summer, going to Raleigh,
2:40:09 stop in New York, see Schwartz, and then again on the way back to Chicago. So, you’d have these
2:40:13 deep check-ins at that point. The other thing that happened is people would come visit him
2:40:18 in New Hampshire. And so, he would have these, he had a studio separate from the house. He would
2:40:23 go and he would work. And then at night, his friends would come. His friends were all economists.
2:40:27 There’s a whole like cluster of economists. They all clustered within driving distance of the
2:40:32 Dartmouth Library so that they could get their hands on books. And so, they would come over and
2:40:38 then they would argue and talk into the night. So, I think he did need that deep focus time.
2:40:44 But it was not like, he also lived a very engaged, very embedded social life.
2:40:51 A part of which was his marriage. Is there something you could say about love, about marriage,
2:40:56 about relationship? They made the whole thing work because it was vibrant and they wrote a
2:41:00 biography together. They did. I mean, they were very complimentary. They were kind of the ying and
2:41:09 the yang. She was very introverted, somewhat suspicious of others, skeptical. And he was
2:41:17 extremely extroverted, optimistic, high energy. And they also were at a time when it was really
2:41:21 clear like for a broader society, these are the roles of a man. These are the roles of a woman.
2:41:28 And they pretty much adopted those. Now, Rose Friedman did some very important economic work.
2:41:32 She’s part of the early stages of the theory of the consumption function. She didn’t complete her
2:41:38 degree because she really knew there wasn’t, if she wanted to be married and have children in the
2:41:44 world she lived in, there wasn’t a real pathway to also being an economist. I do think that a lot of
2:41:50 that, it’s not, although it feels very gendered, like he’s the man out in the world and she’s in
2:41:54 private. It’s interesting because her brother, Aaron, director was the same way. He was very
2:41:59 private man, very shy, very introverted. And he exerted this quiet intellectual influence on
2:42:05 all of his friends. So I think that was just kind of a family treat of being more quiet,
2:42:09 preferring to be behind the scenes. It wouldn’t have worked any other way. Because Friedman was
2:42:17 so out there, so extroverted. And there’s a bit of a sad thing she said. She said,
2:42:22 “When I married Milton, I lost half of my conversations. When David came along, I lost the
2:42:29 other half.” So it was a household that was just dominated by male voices in which she didn’t have
2:42:34 a lot of room. What was tricky for me in my research is she didn’t leave much of a trace.
2:42:39 She put together Milton Friedman’s archive and she took herself out of it. So I really
2:42:44 had trouble finding her actual voice in the historical documents. And she didn’t want to
2:42:50 leave that behind. So it’s an absolutely essential piece of his success because she’s the one who
2:42:55 pushed him to do the Newsweek column, to do Free to Choose. And she really wrote Capitalism and
2:43:01 Freedom. She took all his random notes and she put them together into a book. And that became this
2:43:08 kind of testimony of his ideas. But she shared many of his ideas. And she, without… When I think
2:43:12 of Friedman, if you take away… Anna Schwartz, if you take away Rose Friedman, if you take away
2:43:17 the other woman who collaborated with him, you have a much thinner resume than the one he actually
2:43:25 has. Yeah, it’s always sad. It always makes me wonder about the private secret conversations
2:43:32 between partners. Yeah. Because they’re… They might not show up in the record, but they probably
2:43:39 influence the person more than almost anything else. Those quiet little conversations. Yeah.
2:43:49 If we can switch our path to another great mind of the 20th century,
2:43:55 Ayn Rand. We talked about some of the similarities here about them being fighters for freedom and
2:44:03 fighters for capitalism. What is Ayn Rand’s philosophy if you can give a big 10-thousand
2:44:08 summary of Objectivism? Yeah. So she called it Objectivism. China, she used to do this thing
2:44:15 like, I can stand on one foot and say it. So it goes something like epistemology,
2:44:21 reason, ethics, selfishness, politics, capitalism. That was kind of how she summarized it. So
2:44:26 what she did, there’s a couple things she did with Objectivism. First of all, she says the key
2:44:32 defining element of humanity is rationalism, the rational faculty. So that’s what defines
2:44:38 what humanity is. Therefore, there is an objective reality that we can access and know with our
2:44:45 reason. That’s the objective of epistemology. And the one social and economic system that lets
2:44:53 rationality flower and is based upon rationality is capitalism. And then rationality only works
2:45:01 in her view as an individual capacity. And that rationality teaches that what you should do is
2:45:11 pursue your interests. And so she ends up calling that selfishness. Now, it’s tricky because selfishness
2:45:18 has so many strong and negative connotations. And she meant, I think, something closer to
2:45:27 like self-actualization because she really tried to create this idea and express the idea that
2:45:35 to be truly selfish did not mean trampling on others, it meant just being motivated by your
2:45:44 own kind of internal measures and metrics. And so in her fiction, she tries to show this by
2:45:50 showing the false selfishness of some of Peter Keating, who’s an architect who kind of steps
2:45:55 over everybody to advance his career. And she says it’s not true selfishness because true selfishness
2:46:01 would recognize it’s false to take others’ work and pass it off as your own. Now, the other big
2:46:10 piece of objectivism is a very approach that’s really inspired and related to Friedrich Nietzsche’s
2:46:19 idea of revaluing values or a genealogy of morals. And so she says, what’s happened here is
2:46:26 Western culture has converged on this idea of altruism as good, being selfless and altruistic
2:46:34 is good. And this has led us to communism and has led us to devalue the individual in favor of the
2:46:40 collective. So what we need is a new moral code which elevates selfishness, which elevates the
2:46:45 individual and which takes all the things that we have been told are bad and actually says their
2:46:50 values. This is what she’s trying to do with objectivism. I mean, it is about as ambitious
2:46:57 of an intellectual project as there can be. And that’s what really draws people in. Yet at the
2:47:04 same time, she’s flying in the face of the way human morals and ethics and societies have evolved.
2:47:09 And she’s not able to single-handedly recreate them the way she wants them to be.
2:47:14 Yeah, I mean, she’s not doing herself any favors by taking on the words and trying to rebrand them
2:47:21 completely, like writing the virtue of selfishness. It’s like, can we just call it self-actualization?
2:47:26 There’s a negative connotation to selfishness and a positive connotation to altruism.
2:47:34 So she sometimes it seems takes on the hardest possible form of argument.
2:47:41 Yeah, I mean, she had a student who ended up being very close to her, Nathaniel Brandon,
2:47:44 and he was the Reverend Advisor, and he said, “Can you please not use selfishness,
2:47:49 like just come up with another word.” But part of her liked it. Part of her wanted to provoke
2:47:51 and unsettle. She didn’t want to give that up.
2:48:02 I mean, people should listen to her public talks. Her whole aura, the way of being is
2:48:08 provocative. And she’s a real powerhouse of an intellectual. So she loves the challenge.
2:48:16 And that just listening to her in itself is just inspiring, because you could see the individualism
2:48:23 radiate from her. Yeah, I mean, that was one of the things I found in researching and writing
2:48:29 about her. She’s an incredibly unusual human being. And so that was her strength, right?
2:48:34 Because she’s so unusual, but it was also her downfall, because she looked to herself as a model
2:48:40 or to get insight about humanity. And she never quite processed how different she was from other
2:48:48 people. So just because we talked about Milton Friedman so much, can we just return to what to
2:48:54 you, given everything we’ve said, because the interesting difference is about Ayn Rand, her ideas
2:49:04 related to Milton Friedman. Yeah, I mean, broadly, we could put Milton Friedman and Ayn Rand in
2:49:14 some sort of category together, but she has this focus on ethics and rationality and this desire
2:49:21 to be revolutionary. That’s much stronger than Friedman. Friedman wanted to overthrow the economic
2:49:28 consensus. He didn’t want to overturn the moral basis of Western society. So she’s also, she does
2:49:33 something. So in one of Frank Knight’s essays, he talks about the ethics of competition. And he
2:49:40 says, you basically cannot build an ethics out of competition, because it would be monstrous to do so,
2:49:47 because it would say the winner of this competition is ethically right. And that would open the door
2:49:51 to sort of might makes right. And this is what Friedman struggles with. And he says, I can’t
2:49:56 take capitalist outcomes as ethical unto themselves. I can’t do it. It doesn’t feel right.
2:50:01 And there’s this line where Frank Knight says, no one would ever do this. And I was like, oh,
2:50:07 Frank Knight, you haven’t read Ayn Rand yet. You’re a little too early, because that’s what she does.
2:50:13 She takes the outcomes of capitalism and of marked competition and says, these have ethical meaning.
2:50:20 And this is where ethical meaning inheres. And it is ethical to try to succeed and to succeed in a
2:50:25 capitalist society. Now, what she’s able to do is create a fictional world in which people succeed
2:50:31 in her fictional capitalist world through ethical behavior. And so she doesn’t really have to wrestle
2:50:38 with a capitalist world in which people succeed through fraud and corruption and all the other
2:50:43 things that might go into someone’s success. She creates the best possible take on success under
2:50:49 capitalism. And then she holds that up as an ideal. And I think what’s important is that so few people
2:50:55 have done that. And she comes at a time when everybody is emphasizing the downsides of capitalism.
2:50:59 And she says, there’s another way to look at it. Here are the good sides of capitalism.
2:51:04 And like you said, she was operating, which I really loved the phrasing of that in the mythic
2:51:12 register. So she was constructing these characters, these capitalists that are like the highest form,
2:51:20 these great heroic figures, almost romanticizing them. You mentioned We The Living as one of the
2:51:28 books that you like of hers the most. But can we stay in the mythic register with the Fountainhead
2:51:35 and Alice Rugg? What to you are some sort of memorable, inspiring moments, insightful moments
2:51:44 from those books that may be scenes or ideas that you take away from them that are important for
2:51:54 people to understand? Yeah. So the Fountainhead is this story of a struggling architect, Howard Rourke,
2:51:59 and she kind of follows his life and his career. And the message is really,
2:52:06 it’s a version of “to thine own self be true,” right? And Rourke’s designs are too avant-garde.
2:52:13 Nobody appreciates him. And he just keeps doing what he wants to do and is just focused on his
2:52:18 own visions, his own genius. I think that’s been really inspiring to kind of creators of all types.
2:52:24 I think it’s barely unrealistic as a portrait of human achievement, but it’s an aspirational idea.
2:52:31 I mean, one phrase that comes to mind is there’s a character, I forget which one, who is in some
2:52:34 sort of adversarial relationship with Howard Rourke and says something to him like, “Well,
2:52:41 Mr. Rourke, what do you think of me?” And Rourke says, “I don’t think of you.” And that to Rand
2:52:47 was the ideal. You’re not thinking of other people. You’re an island unto yourself. You’re
2:52:53 focused on your own goals, your own capacities. And you’re not doing it to impress other people
2:52:57 or to be better than other people or to dominate other people. You’re doing it because you’re
2:53:04 expressing your inner soul in a way. So that has been very captivating to so many. And The
2:53:08 Fountainhead is one of those books we talked about that causes people rooted and they make
2:53:13 changes in their life or they feel called to their higher self. And I think there’s also
2:53:18 the scene where Rourke, with the Dean of Architecture at school that’s speaking to what
2:53:25 you’re saying, I think to me is inspiring. So this is the Dean of Architecture that expels Rourke
2:53:31 and it brings him into a meeting thinking Rourke will plead for a second chance. And the Dean says
2:53:37 that Rourke’s work is contrary to every principle we have tried to teach you, contrary to all
2:53:43 established precedents and traditions of art. Do you mean to tell me that you’re thinking seriously
2:53:50 of building that way when and if you are an architect? And then in a gangster-like way,
2:53:56 Rourke says yes. And then Dean asks, my dear fellow, who will let you? And Rourke replies,
2:54:03 that’s not the point. The point is, who will stop me? Yes. I mean, Rand’s coming from communist
2:54:09 Russia, but it has a bit of the don’t mess with Texas flavor. I might say that really resonates
2:54:15 with this idea of anyone who’s felt like they’re fighting the powers that be. Yeah, it’s interesting.
2:54:21 I thought you might be going to the quote where he says something like, I inherit no tradition.
2:54:27 I stand at the beginning of one. And I really think Rand’s thinking about herself when she says
2:54:32 that. She inherits nothing. She stands at the start. But the fountainhead comes out in the
2:54:38 middle of World War II and it’s not expecting Rand as an unknown writer. This is kind of a strange
2:54:44 book. It’s a classic story. It’s turned down by 12 publishers before one takes a chance on it. And
2:54:50 Rand really loved this story. The editor who read it said, this book is great. And his boss said,
2:54:57 no. And he said, if you don’t take this book, I’m quitting. And so she idolized him for doing that.
2:55:03 So they print it and it becomes a bestseller just through word of mouth. So it’s not advertised,
2:55:08 it gets one good book review, but people tell each other how much they like this book. And it
2:55:13 keeps printing and selling out printings. It’s made into a movie. And so it lands in this time
2:55:18 when Americans are engaged in this great collective endeavor of World War II. They’re making all kinds
2:55:23 of sacrifices for the collective. And I think paradoxically, as they do that, they’re drawn
2:55:28 to this vision of someone who doesn’t have to compromise at all, who is leading their life
2:55:32 exactly as they want to. Meanwhile, they might be sleeping on an ocean liner because they’ve
2:55:35 been drafted to fight in this war. And they’re reading The Fountainhead and they’re feeling
2:55:40 better about themselves. And so it’s also really interesting. The Fountainhead is hugely popular
2:55:45 in India, which is fascinating. And talk to people about this. And they basically say,
2:55:51 this book comes like a breath of fresh air into a very traditional and conformist culture. And
2:55:55 people just latch onto it and they love it. And it gives them that feeling of freedom and
2:56:00 possibility that they’re hoping for. Yeah, I mean, it really is a book. Alice
2:56:06 Shrugged can be a bit of that too, but it’s more the philosophy of objectivism and the details
2:56:12 and the nuance of that seeps into Alice Shrugged. The Fountainhead is very much like a thing that
2:56:18 makes you change the path of your life. Yeah. And that, I mean, that’s beautiful to see that books
2:56:25 can have that power. And Rand knew that she was doing that and she knew what she was doing.
2:56:31 This wasn’t an accident. And people say, oh, she’s a bad writer. Oh, her characters are so heavy-handed.
2:56:36 You know, she started as a screenwriter. She started as someone who analyzed films
2:56:42 for movie studios. She knew exactly how to manipulate plot and character and drama.
2:56:47 And she also knew that she was writing. You know, people say, oh, Rand is for, you know,
2:56:51 adolescence. Adolescent teenagers love Rand. And that’s kind of who she was writing for. And she
2:56:54 said, you know, I’m writing for people as they start out on their life and they’re thinking
2:57:01 about who they want to be. So she’s not writing, you know, for the weary middle age. She’s writing
2:57:05 for the young who are looking for inspiration. You know, people say that to me sometimes about
2:57:12 certain books like Rand, but also about the alchemist. I know a lot of people for whom the
2:57:17 alchemist and their adults and their brilliant people, the alchemist changed our life. And the
2:57:25 same can be said about the fountainhead. And I sometimes get criticized for using words that
2:57:34 are too simple. I think simple words can have power. And the cliche thing sometimes needs to
2:57:43 be said. And sometimes, if effectively needs to be said in an over-the-top way in the mythic
2:57:48 register, because that’s the thing that resonates with us. Because we are like heroes of our own
2:57:54 story. And we need to hear that message sometimes to take the bold step, to take the risk, to take
2:58:00 the leap. Yeah. And I mean, the other thing, she knew she was doing kind of propaganda in a way.
2:58:04 She was like, I’m doing pro-capitalist propaganda. She has a degree from the University of Leningrad.
2:58:09 You know, she’s raised up in Soviet Russia. She said, we need to present the case for the other
2:58:15 side in the same way. And that’s what she did. Why do you think she’s so divisive? People either
2:58:22 love her or hate her? I mean, I think it’s because of that purity that I’m willing to say,
2:58:29 sort of you get what you deserve, and that kind of lack of charity. And part of that in her work
2:58:35 is because she creates this fictional world where she can set everything up just so. And so you don’t
2:58:43 have contingency or accident or bad luck. Or you don’t really have a lot of children. You don’t
2:58:49 have handicapped people. You just have this idealized world. And I think it’s really infuriating
2:58:55 for people who feel that’s so inaccurate. How can you be depriving a social theory and philosophy
2:59:00 around this? And how can you be missing what seems to many people she’s missing the kind of
2:59:07 ethical instinct or the altruistic or charitable instinct? And so they just become enraged at
2:59:12 that. And they don’t want to see anyone go that far. And they’re outraged that someone went that far.
2:59:19 Did the thing that Frank Knight said no one would do. Yeah, it’s just it’s very unsettling.
2:59:25 Would you say that’s her main blind spot? The main flaw of objectivism is just
2:59:33 how black and white it paints the world. Or if not, what would you say are the flaws of objectivism?
2:59:40 So, I mean, the big flaw is that it’s justified through a fictional world. It’s not justified
2:59:49 through reference to the real world. It’s not empirical in a way. And Rand herself would say
2:59:56 that she’s not writing about things how they are, but how they should be. And so that idealism
3:00:04 just really undermines it as a mechanism to understand where we’re actually living.
3:00:10 And that is a big contrast with Milton Friedman who would focus on how things are versus how
3:00:16 things should be. And then I think it’s the problem of elevating rationality or any other
3:00:21 mode of insight or thinking. And so what happens in Rand’s life when I describe this in some detail
3:00:29 in the book is she essentially creates a cult of reason around her. And people who are drawn into
3:00:34 this cult, it’s called the collective. It’s a group of young people in New York City who are
3:00:39 drawn to her work. And she’s already famous, but she’s writing Atlas Shrugged. And so she’s sharing
3:00:45 drafts of Atlas Shrugged as she goes along. And one of the members of the collective
3:00:50 to bring all of this together is Alan Greenspan, later behead of the Federal Reserve. And he’s
3:00:55 incredibly taken with her. He’s one of these people who says, I was a narrow technical thinker. I
3:01:00 never thought about ethics or politics or anything bigger until I met Ein Rand. And she really opened
3:01:06 my mind. He’s part of this tight-knit group. But in this tight-knit group, they think of themselves,
3:01:10 we are all individualists. We’re dedicated to individualism and capitalism. We’re different
3:01:17 than everybody else. Over time, they all come to share Ein Rand’s views and opinions on everything
3:01:23 from music to art to clothes. She gets a dining room table and a bunch of them get the same dining
3:01:30 room table. And it becomes incredibly conformist because they’ve all believed they’re acting
3:01:36 rationally. And they believe that to act rationally is to agree with Ein Rand. And they believe there’s
3:01:43 no other way to make decisions than rationality. And so to just agree with her is to be irrational.
3:01:48 They don’t want to be irrational. So people get really caught up in this very damaging
3:01:56 cult-like circle around her. Plus, for a cult of reason, they get awfully emotional when there’s
3:02:06 any disagreement with Ein Rand. I mean, it’s kind of hilarious. It’s absurd. But it’s also beautiful
3:02:12 to watch this singular figure. We’ve talked about several singular figures in Like Frank, right?
3:02:19 That shakes up the world with her ideas. And of course, it would form a cult. And of course,
3:02:22 that cult would be full of contradictions and hypocrisies.
3:02:28 Yeah, I mean, it’s amazing. So Murray Rothbard is a famous anarchist, falls into the Ein Rand cult.
3:02:36 And then he disagrees. And there’s some type of show trial where he’s told he’s wrong about
3:02:41 everything. And then he has a little sort of pseudo cult of his own. And two of his cult members
3:02:50 switch over to Ein Rand. And then one of them, to gesture their breaking of their relationship,
3:02:56 mails him a dollar bill that’s been torn in half. I mean, this is high theatrics, right?
3:03:05 Okay, sticking on the drama and the theatrics. Who was Nathaniel Brandon? Can you take me through
3:03:11 the arc of Ein Rand’s relationship with Nathaniel Brandon to their dramatic falling out in 1968?
3:03:19 Yes. So after the fountainhead, the fountainhead’s auction is sold to be a film. So Ein Rand moves
3:03:22 to Hollywood, where she’s going to help in the writing of the film. She wants a lot of creative
3:03:27 control. And then she’s also still working in screenwriting and things like this. And so she
3:03:33 gets a letter from a Canadian student who’s written to her several times. And then he writes
3:03:37 again, and he says, I’m at UCLA. And she’s like, young man, you’re so full of error. Why don’t
3:03:42 you come visit me? And I’ll straighten you out. So he comes and they have this real meeting of the
3:03:48 minds. They talk all night. He comes again. He brings his girlfriend. She loves him. And they
3:03:54 start this very intense relationship of spending every weekend at her house, basically, staying
3:03:58 up all night talking about ideas. He becomes completely converted to the Objectivist worldview.
3:04:05 Rand begins counseling him and his girlfriend about their relationship. Very intense thing.
3:04:11 Then eventually, they graduate from college and they both enroll in a graduate program in Columbia
3:04:18 and they leave. And after they’ve left, I and Rand is just bereft. And within a few months,
3:04:23 she packs up her home and she moves to New York. Here I am. I like New York better. And so that
3:04:28 becomes the seedbed of the collective. And the Brandon’s, they get married. They change their
3:04:34 name to Brandon. They’ve never publicly spoken on this, but many people have pointed out it has
3:04:41 the word Rand in the name. So it’s some type of acknowledgement of how important she is to them.
3:04:47 And time goes on and romantic feelings develop between I and Rand and Nathaniel Brandon,
3:04:54 some 20 years or junior. And they discuss them and they realize that rationality has led them
3:04:59 to the conclusion that they should be lovers. Right. Right. They’ve rationally decided this,
3:05:04 but because they’re rational, they need the consent or at least to inform their partners.
3:05:07 They’re both married. They’re both married. So they call a meeting and they
3:05:15 obtain the consent or maybe simply inform the others of the rationality of the choice. And then
3:05:21 they say, but this is only going to be an intellectual relationship, but we’d like a few hours alone
3:05:25 each week. And we don’t want to be deceptive. So we want you to know and approve of this. So the
3:05:32 spouses bought into rationality, know and approve. One thing leads to another, it becomes a full,
3:05:36 romantic and sexual relationship. And although it’s open within these four people, it is not
3:05:42 open more broadly. And so in all these meetings of the collective, Alan Greenspan, all these other
3:05:47 people coming up, drinking coffee all night, talking, talking, they all know that Nathaniel
3:05:53 Brandon is objectivist number one. They don’t know that there’s a romantic and sexual relationship
3:05:59 happening. It’s kept a secret. And then when Atlas Shrug comes out, it’s panned by reviewers. People
3:06:05 absolutely hate this book. And Rand is not Howard Rourke. She falls into a deep depression
3:06:12 because her masterpiece has been rejected. And so then the romantic relationship ends,
3:06:18 but the close personal relationship continues. And then over time, Brandon, who’s still married
3:06:24 to his wife, begins an affair with another young woman. And at this point, he has started the
3:06:30 Nathaniel Brandon Institute to teach objectivism. And he’s making good money. He’s becoming quite
3:06:35 famous. She supported the Institute. She supported it. And at first, it was to help her in her
3:06:39 depression because he said, “The world needs to recognize your genius. They missed Atlas Shrug,
3:06:44 but I’m going to teach them. I will bring the message.” And it’s very successful. It becomes
3:06:48 its own business. It has a newsletter. It’s a whole world. So that small cult around,
3:06:53 I’d Rand, expands to this whole social network. And it’s very much a piece with this burgeoning
3:06:57 conservative movement. Objectivists are involved in criticizing the draft. And
3:07:04 they’re kind of a libertarian, objectivist world going on. All of this is happening.
3:07:09 In the meantime, Nathaniel Brandon has found a new partner. And he doesn’t tell I ran this
3:07:18 because he knows she’ll be upset. And so it goes on for years. And I ran knows something is going
3:07:24 on, but she can’t quite figure it out. And finally, Barbara Brandon says to Nathaniel Brandon,
3:07:30 “You have to tell her. This has just gone on too long.” So she finds out and the whole thing
3:07:37 blows up and she exiles him and she breaks off contact with him. And nobody has ever told what
3:07:42 happens. It’s called the objectivism. Objectivism breaks in two because some people say,
3:07:49 “How could I do anything wrong?” And other people say, “What is this letter all about?
3:07:52 And what did Nathaniel Brandon do? And I’m not just going to take her word for it. I need more
3:07:57 information.” And then a bunch of people, I read all the accounts of this, a bunch of people are
3:08:02 like, “Okay, they were having an affair.” And a bunch of other people are like, “No, that couldn’t
3:08:08 possibly be happening.” And so the whole thing breaks up. But what I argue in my book is actually
3:08:15 this is to the benefit of Rand’s ideas because Rand herself was so controlling over her ideas.
3:08:22 And now that she steps back from a public role, objectivism flows into the student libertarian
3:08:27 movement. Some objectivists become conservatives. It just kind of spreads out more generally. And
3:08:32 you don’t have to drink the Kool-Aid. You don’t have to take the official course. Nathaniel Brandon
3:08:37 goes on to be part of the self-esteem movement, killer human potential movement, California.
3:08:43 And Ayn Rand lives another 10 years or so, but she doesn’t do major work after that.
3:08:53 Since we were talking about some of the, although rationalized, some strange sexual
3:08:59 partnerships that they’re engagement in, I have to ask about the Fountainhead and the
3:09:05 quote-unquote “rape scene” in the Fountainhead. Was she intending to add that there to be
3:09:12 controversial? How are we supposed to read into it? Is it a glimpsing to Ayn Rand’s sexuality?
3:09:20 And maybe broadly, we can say, well, what was her view on sexuality, on sex, on power dynamics,
3:09:26 and relationships? Yeah. I mean, there’s also an objectivist theory of sexuality that probably the
3:09:32 least convincing of all the parts of objectivism. And it goes something like your sexual desires
3:09:40 express your highest values. And they are related in some ways to your rationality,
3:09:46 right, which is also related to your highest values. So for her, that explained her attraction
3:09:51 to Nathaniel Brandon and Nathaniel Brandon’s attraction to her was a function of their highest
3:09:57 values. And in fact, Brandon imbibed this so deeply that the fact that he was later drawn
3:10:03 sexually to a woman who was not particularly accomplished, but was beautiful, caused him
3:10:09 deep anguish and guilt for being non-objectivist. So this is the objectivist theory. Then the
3:10:15 gender politics are just crazy. And we have to kind of back up and think, okay, so who is Ayn Rand?
3:10:21 She’s born in Lisa Rosenbaum in Russia. She is someone who stands out from the crowd from the
3:10:26 beginning. She never really fits in. She’s not conventionally beautiful by any stretch of the
3:10:30 imagination. She struggles with her weight, and she doesn’t consider herself to have a beautiful
3:10:37 face. She’s very independent. She meets none of the metrics of traditional femininity at all.
3:10:41 She finds love with a man who is very handsome, but very passive.
3:10:48 Yet she writes in all her fiction about strong manly heroes. So this seems to be like a projection.
3:10:54 The man she’s actually with is not a strong manly hero. The hero she writes about, she probably
3:10:57 wouldn’t be able to be in the same room with them for more than one minute before they got
3:11:04 into raging argument, right? And then she develops this theory about women and men in that
3:11:12 a woman should worship her man, and a woman finds her true expression in worshiping the
3:11:17 man she’s with. So again, this is not at all how Ayn Rand lives her life. This is like this,
3:11:25 I would say, compensatory theory for her lack of ability to conform to the gender norms of her day.
3:11:33 She then articulates them in a very strong and almost distorted and exaggerated way to compensate
3:11:37 for the fact that she doesn’t actually meet them, can actually enact them.
3:11:45 The rape scene, to some degree, embodies that idea that to some degree, that the woman should
3:11:53 worship the man. I tend to read it more in terms of literary genre. So Rand is a screenwriter,
3:12:03 a consumer of movies, and that rape scene is paradigmatic for the romance genre. In other
3:12:11 words, these pulpy romance novels, the hero rapes the heroine, and then they fall in love. That’s
3:12:16 just the trope of how it works. So it’s crazy when you read it, but if you were reading a bunch of
3:12:23 novels in this genre, you would find this is very standard. And so that is a huge part of
3:12:28 this appeal at the time. There’s this feminist who hates Rand, Susan Brownmiller, and she wants to
3:12:33 write an angry denunciation of the rape scene. So she goes to get the fountain head, and she’s
3:12:38 wondering how is she ever going to find the scene in this 800-page book? It’s a library copy because
3:12:43 she doesn’t want to buy it. And it just falls open to the rape scene because everybody’s gone
3:12:49 and read it because it’s very racy and explicit for that time. So I’m almost positive she also knew
3:12:55 that. Like, if I put in this kind of taboo-breaking sex scene, that’s also going to probably be why
3:13:02 people tell their friends about it. So I think it’s a mess. I think all of the gender and sexuality
3:13:10 stuff is that she states is just a total mess. I think it also reminds me of another guy related
3:13:19 Fugius Nietzsche who had very strong opinions on women and wrote about what women’s role in society
3:13:23 should be and different power dynamics and relationships and all that kind of stuff when
3:13:30 he himself really had trouble getting laid. Yeah. And so you have to sort of always maybe
3:13:36 chuckle or take with a grain of salt the analysis of power dynamics and relationship from these
3:13:45 figures which failed in many regards in their own private life. You mentioned feminists.
3:13:49 Would you consider Ayn Rand a feminist? I mean, she’s almost an anti-feminist
3:13:59 because she then goes on and someone writes her a letter about, like, should there be a
3:14:06 female president or something? This is like the beginning of feminism. And she says, no. No women
3:14:12 should ever be president because if she’s president, she wouldn’t be able to look up to any man
3:14:16 because she would be so powerful and therefore she would be corrupt and rotten in the soul
3:14:23 and unfit to be a leader. It just makes no sense. But that said, she’s a woman and she’s one of
3:14:30 the most powerful intellects in the 20th century. Yeah. And so the contradictions, I mean, Nietzsche’s
3:14:39 full contradictions of this sort, that the very fact that she’s one of the most powerful minds
3:14:47 in history to me means that she is a feminist in the spirit she embodies, right, and what she
3:14:53 represents. I mean, she lived the ideals of individualism in her life and set aside gender
3:14:58 norms in her own life. But she did not see herself as part of any… She did not see herself as doing
3:15:04 this for the benefit of other women or to change society’s views about women. There was no collective
3:15:13 essence to it. So if feminism has some sort of collective aspect to it or at least some
3:15:18 identification, one needs to identify with a broader category of women and feel they’re acting
3:15:27 in behalf of that, she’s definitely not doing that. And she was fair to women in her life,
3:15:32 promoted them in her life, but did not… I mean, she was very negative about feminism. And then
3:15:38 because they dress terribly. And then the other thing, it’s really interesting, there’s all these
3:15:45 kind of homoerotic themes in her writing. And for that reason, many gay men were drawn to her writing.
3:15:50 And then she would say homosexuals are dirty, terrible people. She would denounce
3:15:55 people for being homosexual. So there’s a whole actual literature of gay men wrestling with
3:16:03 Rand and what she says about gay people. So yeah, it’s hard to make sense of. And I just
3:16:08 think of the enormous pressures. I want to be charitable. I just think of the enormous pressure
3:16:13 she was under in the culture she was raised in, the expectations that were placed upon her and
3:16:19 her uttering ability to meet any of them. And it came out in this very tortured set of ideals
3:16:27 that she tried to promote. And this kind of lack of ability to introspect in herself and to,
3:16:31 it was probably too painful to introspect and to think about that. So she just
3:16:37 tried to rationalize her way through it. And it came out in these very strange theories.
3:16:43 Why do you think that Iran is, maybe you can correct me, but as far as I can see,
3:16:48 never mentioned in the list of great thinkers in history or even the great thinkers of the 20th
3:16:54 century or even the great female thinkers of the 20th century. So you have somebody like Simone de
3:17:02 Brevard, Hannah Arendt. I almost never see her in the list. If you Google those silly lists, top
3:17:08 whatever, top thinkers of the 20th century, she’s not mentioned. Why is that?
3:17:14 A lot of people just deeply dislike Rand. They deeply dislike her ideas. They don’t think they’re
3:17:21 profound because they’re disconnection from other ideas and other understandings of human society.
3:17:28 I think, I think where you could look at them and say, these ideas are very provocative and
3:17:32 they’re very deep because she’s not taking anything for granted and she’s flipping everything around
3:17:38 and forcing you to really think. To a lot of other readers, to her critics, they just look absurd.
3:17:46 Like, how could you even make these contentions? And I think that because she’s not without
3:17:51 precedence and she’s not without followers, but she doesn’t knit herself into an intellectual
3:17:59 community the way that these other thinkers do very naturally, that you can see who they influence,
3:18:05 you can see who they’re in dialogue with. I think my book was one of the first to really
3:18:09 take Rand and say, she’s a figure in American history. Here’s who she’s connected to. Here’s
3:18:16 who she’s influenced. And I got a lot of pushback for that. I think now people are more open to it,
3:18:23 but I think the people who compile these lists really dislike her work and they think it’s shallow
3:18:31 because they find her fiction overdrawn. They find her work in the mythic register simple and she’s
3:18:39 also a grand systematic thinker in an age that’s over systems. She’s almost creating an inverse
3:18:47 Marxism. Marx was writing in 1848. He’s not a thinker of the mid-20th century. I think that’s
3:18:52 part of it. The lack of a legacy and the dislike of what she had to say and the feeling that she’s
3:18:58 too detached, her insights are not insights because they’re too idealized rather than being rooted in
3:19:01 a theory of human nature that people find plausible.
3:19:10 You study and write about history of ideas in the United States over the past 100 years,
3:19:19 100 plus years. How do you think ideas evolve and gain power over the populace, over our government,
3:19:26 over culture? Just looking at evolution of ideas as they dance and challenge each other and
3:19:35 play in public discourse. What do you think is the mechanism by which they take hold and have
3:19:42 influence? There’s a couple different ways I think it happens. I really am interested in
3:19:50 the relationship between the thinker and then the reader and the interpreter of the ideas
3:19:56 and then the conditions on the ground that make that idea resonate or not resonate.
3:20:05 As an intellectual historian, I’m studying ideas and I’m always putting them in their
3:20:10 historical context. What is happening that is making these things resonate, that is making them,
3:20:18 people seek them out. For Ranskay, she has this credibility because of her experience of communism.
3:20:24 She’s one of these defining moments of the time. Then I think the idea comes out in a sort of
3:20:30 pure form and then other people rework it and reshape it as they read it. I’m really interested
3:20:35 in how people form communities around these ideas. A bunch of people started calling themselves
3:20:43 objectives and getting together to read Rans’ work. That was spontaneous and ground up and wasn’t
3:20:48 supported by any money nobody planted. It just happened. Friedman’s a different case in that he
3:20:53 joins an established tradition of thought that’s been institutionalized in universities. People
3:20:58 are signing up and paying money and getting credentialed to learn these ideas. To my mind,
3:21:04 these are two different ways but really emblematic ways of how ideas spread. Rand, I think of this
3:21:10 more bottom-up, people encounter the idea in a book. They’re blown away by it or they imbibe it
3:21:14 without even realizing they’re imbibing it and then they’re like, “Well, maybe I don’t like
3:21:20 Franklin Roosevelt so much or maybe I’ll look another time at Barry Goldwater.” Whereas Friedman,
3:21:25 you get the idea more top-down. I know I’m getting the idea. I know I’m being positioned
3:21:31 within a elite discourse of economics. I think they go top-down and bottom-up and then they
3:21:37 hit the events. Friedman’s ideas wouldn’t have gone anywhere without that episode
3:21:42 of stagflation that really made people think they proved out. I think Rand’s idea has really
3:21:47 caught fire in Cold War America that’s looking for a statement of what does it mean to be an
3:21:52 individual? What does it mean to live in this mass society because it’s also a time of great
3:21:57 social conformity and where people are suddenly, they’re working for large corporations.
3:22:04 They’ve been served in a large military. The United States is stepping out onto the
3:22:07 world stage. Everything is bigger. What does it mean to be an individual in that world? That’s
3:22:12 where Rand’s ideas catch fire. I think a lot about that, about how they trickle through
3:22:17 different levels of society and then how ideas collide with experience I think is critical.
3:22:22 What do you think about when they actually take power in government? I think about ideas like
3:22:30 Marxism and how that evolves into the Bolshevik Revolution and how that takes hold in its
3:22:37 implementations or you can think about Nazism and with Hitler where it goes from a small number of
3:22:43 people that get real excited about a thing and then somehow just becomes viral and takes hold
3:22:52 in power and then that has its consequences. When I think about this historical path of
3:23:00 Communism and the kind of logics and dynamics of Communism, in many ways it has some echoes with
3:23:07 Rand in that the ideology in its purest form is almost, it’s a rationalist ideology of some ways.
3:23:11 It’s an analysis of history and how things are supposed to be and I think you mentioned Hannah
3:23:16 Arendt. I think she is one of the most kind of penetrating analyses of Communism which she really
3:23:24 puts in the category of it’s a logical ideology. Logic leads inexorably to its conclusions and
3:23:31 then experience crops up and experience is different. What does a sort of cult of rationality do when
3:23:36 it hits experience? Well, it tries to bend experience to its will and that I think is really the
3:23:46 story of Communism writ large. The question though is why does it catch fire? Why does it draw people
3:23:52 into political allegiance? I think in the case of Communism, it’s this dream of a more ethical
3:24:00 world, dream of equality, dream of the powerless rising up against the powerful. That’s drawn in
3:24:07 so many and then you had the whole addition of Leninism which gave a kind of international
3:24:12 cast to that and helped people think about what are the relations between poorer and richer countries
3:24:16 and what can we expect out of them and what might happen, gave a sort of framework for thinking about
3:24:22 that in a time when the world was becoming more interconnected and those differences were becoming
3:24:31 more obvious. Fascism to me is unleashing more something primal, something sort of dark and
3:24:39 primal within people and it’s more a permission structure to indulge in that that is normally
3:24:44 not there. Those impulses are normally channeled or held down and it seems that when the fascist
3:24:48 regimes come into power, they give people permission to let those forces out.
3:24:54 I think on Communism, going back to that lecture that Anne Rand gave,
3:25:04 I think what ranks true to me a little bit is that what fuels it is a kind of maybe not resentment
3:25:11 but envy towards the people that have the have-nots versus the haves and there’s some
3:25:17 degree to which Nazism has the same of envy towards some group, resentment towards some group.
3:25:24 So it’s given the environment of hard times, hard economic times, combined with the more primal
3:25:32 just envy of not having and seeing somebody who has it and just constructing a narrative around
3:25:39 that, that can become a real viral idea. Yeah, it seems like Communism is more animated by this
3:25:46 idea of injustice. The world is unjust. It should be different and fascism seems like the process
3:25:54 of scapegoating. We’ve identified the source of the problem and it’s this group and they need
3:26:00 to be punished for what they’ve done to the rest of us. There is a primal thing, going back to
3:26:08 literature in 1984, two minutes of hate where you can get everybody real excited about hating a thing
3:26:14 and there’s something primal about us humans where once you’re in that state of hate,
3:26:24 anyone can direct that hate towards anything, towards any group, towards any idea,
3:26:29 towards anything because we could get caught up in the masochistic area of the hatred. It’s a
3:26:40 dangerous thing. You floated the idea, I forget where, of pivoting for your next book towards maybe
3:26:47 writing about postmodernism, which is a set of ideas, almost the opposite of Onerant’s philosophy.
3:26:56 Can you maybe explain your curiosity about, first of all, spaces of ideas, but maybe postmodernism?
3:27:04 Yeah, I think in the broadest sense, what I’m interested in, two dimensions that guide me
3:27:07 in doing intellectual history. One is what I talked about, how does an idea go from
3:27:14 a book, an elite space out to more popular dimensions? How does that happen? What happens
3:27:20 to the idea along the way? How is it distorted or changed? The other is just search for meaning in
3:27:25 of a post-Christian era or a secular era. What are people coming up with? I think
3:27:32 to replace that void in their religious or spiritual lives, I think both Rand and Friedman
3:27:38 offered these sort of alternatives, right? Objectivism, quasi-rationalist religion. People
3:27:45 take economics as a theory of the world that almost, you can almost believe in it, right? It
3:27:49 can almost take that place. And in both cases, how do those ideas travel? When I think about
3:27:56 postmodernism, it first struck me, if you read the original postmodern thinkers, it’s really
3:28:01 tough going. I mean, I make my students do it and they suffer. I think they see it’s worthwhile,
3:28:08 but it’s no fun to read Derrida. But somehow it’s trickled down into, how do we go from like Derrida
3:28:13 to Tumblr? And I sort of realized, oh, this has happened with postmodernism. It’s followed the
3:28:20 same path that say from Milton Friedman’s economic theory to free to choose on YouTube. We’ve had
3:28:27 a similar path of high French theory down to Tumblr and I sexually identify as an attack
3:28:33 helicopter or whatever it may be. And so that was really interesting. And then I also thought,
3:28:41 well, at the same time, this is clearly a structure of meaning. And I actually think it’s followed
3:28:47 the same path of objectivism, which is turning into its opposite, just still down and then
3:28:51 turning into its opposite. So if objectivism was a group of people who considered themselves
3:28:56 individualists who ended up deeply conforming to the dictates of a charismatic leader,
3:29:02 postmodernism started about disrupting binaries. We’re going to be fluid. We’re going to go
3:29:07 beyond the border. We’re going to disrupt the binary. And it’s devolved in its popular forms
3:29:14 to the reinscribing of many different binaries. Pressor and oppressed has become this like
3:29:18 paradigmatic set of glasses you put on to understand the world. So I think the dynamics
3:29:24 are very, very similar. So I think it’s something in the traffic of the idea from its pure form to
3:29:30 its popular form, and then how it gets politicized or mobilized in different ways. And behind it
3:29:36 all, I think, is this human longing for meaning and the inadequacy of the traditional ways that
3:29:42 need was met at this point in time. By the way, that going from pure form to popular form,
3:29:49 I remember this might be before the internet, but when I was in college reading Derrida and Foucault
3:29:58 and not knowing context at all, it was just interesting. I’m able to read pure encapsulations
3:30:03 of an idea and just kind of like, oh, all right, well, that person believes that and you just kind
3:30:08 of hold it. But then you realize if you actually take the pure form of that idea and then it creates
3:30:13 a community around it, you realize what that actually becomes. And you’re like, oh, yeah, no,
3:30:21 that’s not, although I do consider myself sexually an attack helicopter. That’s it.
3:30:23 Identify sexually. Yes, beautiful. Okay.
3:30:32 Your process of researching for, let’s say, the biographies of Mr. Friedman and I’m Rand
3:30:40 seems like an insane amount of work. Yeah. You did incredible work there going to the original
3:30:51 sources. Can you maybe speak to that? What is required to persevere and to go for so many years,
3:30:59 to go so deep to the sources? Yeah. So I mean, I go to the archive. That’s where I feel like I’m
3:31:06 communing with the dead in some ways. I’m seeing what they saw in some ways and reading what they
3:31:11 felt. And I tell my doctoral students, it’s got to be something that gets you out of bed
3:31:16 in the morning because there comes a point in your doctoral career where nobody’s,
3:31:20 there’s nowhere to go. There’s nowhere to be. You got to be getting up because you’re interested
3:31:24 in what you want to study. And so with Rand, it was this real sense of discovery. I am discovering,
3:31:28 I want to know about this woman. I want to know where she fits. And the only way to find out
3:31:37 is to do the research. And so, yeah, I like to go deep. It’s really interesting to me.
3:31:42 And I should say, in both of these cases, I’ve done it in an institutional structure. I don’t
3:31:46 know that I would do it independently. So the first was the graduate program in history. It was at
3:31:53 UC Berkeley. And so I had coursework and then I had structures. I did have people to check in with
3:31:57 and read, but I had a great deal of latitude. I’m very grateful for people are like, you wrote a
3:32:02 dissertation on I ran at Berkeley. I’m like, yeah, hell I did. Berkeley’s like, it’s a great place.
3:32:06 At the time I was there, there was absolute room for free inquiry.
3:32:11 Oh, can you just linger on that? So when you said that you’re doing that and doing a dissertation
3:32:22 on I ran, was there, did people get upset? No, I did have a friendly critic who took it upon
3:32:26 himself to throw at me everything he thought the outside world would throw at me. I think maybe
3:32:32 five or 10 years earlier, it wouldn’t have been possible. But the most important thing I had to
3:32:38 the person I really had to convince this was worth doing was myself, you know, because I knew it was
3:32:44 an unconventional choice for the field and for a dissertation. But once I convinced myself, I just
3:32:48 said, well, we’re going to do this and see. And because it was unconventional, it ended up standing
3:32:56 out. And when it really was the time there was a was I started it during second Bush administration,
3:33:02 second George W. Bush, second term, people were interested in just conservatism in general and
3:33:06 felt, no matter where they stood on the political spectrum felt like objectively, we don’t know
3:33:11 enough about this. And this is a problem. And so they were open to learning more. So I really kind
3:33:15 of caught that caught that wave in scholarship and caught that wave in American culture where people
3:33:22 wanted to know more. And we should probably say that, I mean, I ran is at the very least, as you’ve
3:33:27 mentioned, a kind of gateway to conservatism. Yes, I called her the gateway drug and people
3:33:34 start with Rand, they’re taken by her, you know, in some ways, she takes the worldview of Milton
3:33:40 Friedman in terms of what capitalism can accomplish economically. And then she puts it in this
3:33:46 mythopoetic register and she fictionalizes it. So once people have absorbed that, they want more,
3:33:52 you know, they go on to learning more of the ideas behind that vision, or they have become true
3:33:56 believers, they’ve converted. And so then they head off to work for a politician to work for a
3:33:59 think tank to work for a party. And so absolute traffic. Now, not everyone. There’s plenty of
3:34:03 people who read on Rand who don’t take the politics in. It’s a nice story. It’s interesting.
3:34:09 Just an episode in their life. But for others, it’s really foundational. It really changes them.
3:34:14 So those were the people I wanted to track very deliberately. I wasn’t trying to do in the round
3:34:18 everything about on Rand. I was like, I’m Rand and the American right, you know, goddess of the
3:34:23 market, I’m Rand and the American right is the title. So where did they, where did they take
3:34:26 her, those who took her in this political direction? What difference did she make?
3:34:32 If we return to like the actual, your process. Yeah. So you’re showing up and you’re reading
3:34:39 sources and you’re like, is it kind of like the process of discovery? You’re just kind of like
3:34:47 taking it all in and seeing what unifying ideas emerge or maybe special moments that
3:34:54 illustrate an idea emerge? Yeah. I mean, I know with the biography of a person, I am already
3:35:00 given a start and an end date and a rough narrative of what happens. So I have a kind of structure.
3:35:06 And then with Rand, both with Rand and Friedman, I started by reading their major books before I
3:35:11 really read anything about them because I wanted my own experience of the material to be fresh.
3:35:16 And I had read some on Rand, but not a lot. Similarly, I had read some Friedman, but not
3:35:21 a lot. So at first it’s like, let me read the major stuff, get oriented, and then just dive into
3:35:28 the archive and see what’s there. Who are they talking to? What’s going on? In Rand’s case,
3:35:34 I was interested in her in the United States, not her in Russia. I didn’t have the language
3:35:39 skills to do that. So I start her in the United States and I start when she publishes her first
3:35:43 book and she starts getting letters. And who is she writing to? Who’s writing to her?
3:35:48 And then I start to uncover this world of kind of nascent conservatism. And I’m kind of putting
3:35:52 that together. And once I have enough, I say, well, that’s a chapter. I’m going to cover that
3:35:58 chapter. And then there’s going to be the book has come out. And so now I need to start a different
3:36:02 chapter. What’s her life like after the book has been published? And then I look for that. But I’m
3:36:07 really, although I have this very high level structure, it’s coming out of the archive,
3:36:13 the material I’m finding. And if I’m not finding the material there, I won’t cover it in great
3:36:18 detail. Or if I’ve decided it’s outside my am, but I’m not going to go into great depth on it.
3:36:22 And you’re trying to understand the relationships is so fascinating, like reconstruct
3:36:29 in a dark room, trying to reconstruct shine a light on relationships through reading letters.
3:36:33 It’s interesting. Yeah. Yeah. I mean, correspondence is really, really helpful.
3:36:39 Drafts, correspondence, and you know, someone this famous, they have oral histories,
3:36:43 other people write about them. So you’re reading all these different things and kind of triangulating
3:36:47 and trying to sort of put them together. And then think about, how do I present this in a
3:36:53 compelling story? And what do I need to explain? And then also for me, what was really helpful was
3:36:59 is that because I teach, and I am explaining the kind of broad sweep of 20th century history. So
3:37:05 you know, I know that Rand’s involved in a labor action at Warner Brothers. But through my teaching,
3:37:10 I realized, oh, yes, this is a moment of labor strikes across the country. And so then that
3:37:17 really changes the origin story of Atlas Shrugged, because she’s looking at labor actions. And she
3:37:23 originally thinking of the book as being called The Strike. So she’s really responding in real
3:37:29 time and being inspired by what’s happening, you know, in the mid 1940s in the United States.
3:37:32 So then I can kind of take that and run with that and figure out where to go.
3:37:37 So you’re super passionate about teaching. You mentioned Milton Friedman had a very
3:37:45 interesting way of teaching. So what’s your, how do you think of teaching, teaching history,
3:37:50 teaching history of ideas, teaching great young minds about the past?
3:37:56 Yeah, I mean, it’s great. It’s really inspiring. The ways the old school kind of dominating way in
3:38:02 which Friedman taught would not fly in today’s university wouldn’t be permitted. And also the
3:38:08 students wouldn’t respond to it, you know? So I try to share my enthusiasm. I think that’s like
3:38:12 almost the number one thing I bring is my enthusiasm, like, look how neat and interesting
3:38:18 these ideas are. I try to keep my own views out pretty much. I try to give the fairest possible
3:38:24 rendition I can of each thinker. If I find someone really disturbing, I might sidebar at the end of
3:38:29 the lecture and say, this kind of, you know, I find this unsettling and this, you know, tells me
3:38:34 something about myself. But most of the time, I’m bringing people into the, like the biography of
3:38:39 a great thinker, the context of them. And then we, in the lecture, we’ll literally read the work
3:38:44 together and we’ll talk about it. And I’ll ask the students, what are you finding here? What’s
3:38:51 jumping out at you? Kind of breaking down the language and really teaching them how to do deep
3:38:56 reading. So I feel like that is my contribution right now. We’re having trouble reading collectively.
3:39:00 We’re having trouble paying attention collectively. And I’m trying to cultivate
3:39:06 their skills to doing that and showing them how I do it and also modeling like this is how I would
3:39:11 read a text. This is what jumps out to me when I look at, you know, Thomas Kuhn or something like
3:39:17 this. And just show them that I’d studying a history of ideas is really fun. I feel incredibly
3:39:22 perfect to do it, you know. And the other thing is I think this is the time for students in college
3:39:28 figuring out who they are. Their minds are developing and growing. They can really handle
3:39:32 complicated hard ideas. They don’t always have the context behind them. So I need to give them
3:39:36 the hard ideas and then show them this is kind of the context of what’s happening in the world.
3:39:41 But really, I’m just, I’m showing them the landscape. I don’t have time to go deep.
3:39:48 We have a 10 week quarter, you know, giving them a flyover. And then I want them to know
3:39:52 how to go deep and know where they want to go deep. Do the thing that Milton Friedman did, which is
3:40:00 in parallel. Yes, do their own parallel curriculum. Exactly. Exactly. What advice
3:40:05 would you give in terms of reading about ideas you agree with and reading ideas you disagree with?
3:40:10 I mean, even though I think the passion is important for the teaching of the ideas, like,
3:40:16 dispassion is more important for the reading and understanding of them. So a lot of people have
3:40:21 said to me like, I could never write about Ayn Rand like she makes me so angry. You know,
3:40:26 and I’ve never become, I don’t get angry reading her. Like, I’m like, oh, there you go again,
3:40:32 you know, or like, well, that’s going to cause trouble. You know, and so I guess I’m approaching
3:40:38 it with a sort of charity, but also with, I’m not, I don’t have huge expectations. I’m not expecting
3:40:43 to have the light shine on me. I’m not expecting to agree. I’m like, I can be very clinical about
3:40:49 it. So that’s what’s worked for me. It might not work for others. But and then I just try to find
3:40:54 the humor in it. You know, like, how, how funny is it? Like these different aspects of them,
3:40:58 you know, like when teaching my students about Oliver Wendell Holmes, like his,
3:41:05 his dad wrote a poem about him. He called him the astronaut about how he came from outer space.
3:41:09 He seemed like he came from outer space. I’m like, this is his dad’s view of his son. Like,
3:41:14 that’s how weird of a guy he was, you know? And so I try to like find that, keep alert for those
3:41:19 funny kind of human touches that like, these are ultimately just people, you know, people with
3:41:23 ideas that they spent enough time polishing up and developing that we still want to read about them
3:41:28 a hundred years later. What about the dramatic formulation of that same question? Do you think
3:41:33 there’s some ideas that are good and some of that are evil? Do you think we can draw such lines? Or
3:41:38 is it more complicated, like the old soul genius in line between good and evil that runs to the
3:41:44 heart of every person? I mean, I philosophically agree with souls and it’s in for sure. I do think
3:41:50 some ideas pull on the good side and some ideas pull on the bad side, like absolutely. And I think
3:41:55 that’s probably, that’s probably why people dislike Rand so much is they feel like she’s
3:42:00 giving license to the bad side. And she’s saying it’s okay to be selfish and it’s okay, you know,
3:42:07 they feel like she’s unloosing the dark forces. And, you know, in some cases that may be true,
3:42:14 but she’s also unloosing some of the light forces in terms of reflecting on yourself and trying to
3:42:19 be true. But definitely there are ideas that are dangerous to play with and there are ideas that
3:42:26 I think give license to the darker sides of human nature. But I think you can see that in the
3:42:34 historical record. So I think that it’s possible to show that. And obviously there’s some places,
3:42:37 you know, like Germany, they’re trying, they think the ideas are so dangerous,
3:42:42 they can’t be allowed to circulate. And in some contexts that may absolutely be true.
3:42:48 And then still even that we should take with a grain of salt because perhaps censorship of an
3:42:53 idea is more dangerous than the idea. So all of that, that’s the beautiful thing about us humans,
3:43:00 we’re always at tension trying to figure out what ideas are the ones that are going to help
3:43:08 humanity flourish. Pothead question, do humans have ideas or do ideas have us? So where do
3:43:12 ideas come from? You have Milton Friedman sitting there after Rutgers trying to figure out what
3:43:21 he can do about the Great Depression. Where, do you ever think about this? I sometimes think that
3:43:27 aliens are actually ideas. They’re just kind of like travel through human brains and
3:43:38 like captivate us. So we get all real excited. Like with a monolith in 2001 Space Odyssey,
3:43:44 a monolith lands and everybody gets excited and somehow this idea just gets everybody
3:43:51 to be on the same page and it reverberates through the community. And then that results in an
3:43:56 implementation of some action that results in us figuring out that that idea was actually bad and
3:44:02 we learned new ideas. But it feels like the idea is right in the show. Yeah. I mean, I think in a
3:44:09 lot of cases, I think it’s true. Kane says this famous quote, “Most men are slaves of some defunct
3:44:19 economist.” That’s funny. So I do think it’s really hard to have an original thought. We are social
3:44:25 creatures. We encounter the same situations again and again. And so it’s really hard. You’re born
3:44:30 into these traditions of thinking and being and knowing and most people are never going to question
3:44:34 them and most people are never going to become aware of them. So again, that’s some of the work of
3:44:39 what I do as an intellectual historian is like, let’s become aware. Let’s realize that you’re
3:44:46 carrying a map that’s orienting you to the world in a certain way. And so I think you have to work
3:44:51 really, really hard to have an original idea. And even then, it’s not a completely original idea.
3:44:56 It’s a reworking and a reassembling of ideas others have had. So I definitely think it’s
3:45:03 possible to create autonomy in the realm of ideas and to be an autonomous consumer of ideas. But I
3:45:09 think on balance, most people are not. And that’s fine. They want to have experiences. They want
3:45:15 to do other things with their life. Well, Jennifer, thank you so much for this journey through ideas
3:45:21 today. And thank you so much for your incredible work. It was really fun and fascinating to talk
3:45:27 with you today. Thank you. Thank you. Thank you for listening to this conversation with Jennifer
3:45:33 Burns. And now let me try to reflect on and articulate some things I’ve been thinking about.
3:45:39 If you’d like to submit questions or topics that I can comment on in this way here at the end of
3:45:49 episodes, go to lexfreeman.com/ama or contact me for whatever other reason at lexfreeman.com/contact.
3:45:54 Please allow me to say a few words about my interview with the president of Ukraine,
3:46:00 Volodymyr Zelensky. Now that a few days have passed and I’ve had the chance to think about
3:46:06 the conversation itself, the response, future upcoming conversations, and what it all means for
3:46:13 the war in Ukraine, for global geopolitics, and for us humans in general. I’ve gotten a lot of
3:46:20 heartfelt, positive words from all sides, including, at least so far, literally everybody who knows
3:46:25 me personally inside Ukraine, which includes a lot of soldiers and many high-profile figures,
3:46:29 some who are supportive of the president and some who are critical of him.
3:46:36 Literally all private communication has been positive and supportive. This is usually not the
3:46:42 case with me. Friends usually will write to me to criticize and to disagree. That’s the whole point
3:46:49 of friendship. To argue and have fun doing it. There was none of that here, at least so far.
3:46:54 So, thank you for your support and kind words, it means the world.
3:47:00 The most common message was please keep pushing for peace. I will.
3:47:09 But online, on the interwebs, I saw a lot of attacks, sometimes from swarms of online accounts,
3:47:12 which of course makes me suspicious about the origin of those attacks.
3:47:19 One of my friends in Ukraine, who by the way thinks the attacks are all propped up by Ukrainian
3:47:25 bot farms, said there’s no need to say anything extra. Let the interview stand on its own.
3:47:28 Just keep focused on the mission of pushing for peace.
3:47:36 Basically, he’s a Ukrainian version of my other friend, Joe Rogan, who to this day says,
3:47:41 don’t read the comments. This is generally good advice and I try to follow it. But I’m also a
3:47:48 human being. I worry my heart on my sleeve in this interview. This war, for me, is deeply personal.
3:47:56 And the level of vitriol, misrepresentation and lies about the conversation and about me personally
3:48:01 was particularly intense and disingenuous. So, I thought I would use this opportunity to say a
3:48:07 few words, just speak a bit more about how I approach this conversation with President Zelensky
3:48:13 and conversations in general. This interview is something I poured my heart and soul into,
3:48:19 preparing a lot. I’ve described parts of the preparation process I follow in the outro to
3:48:25 the Zelensky conversation. But in general, let me say that I’ve read a lot, listened to a lot,
3:48:31 and had a lot of private conversations with people on the ground. I have many flaws, but being
3:48:38 unprepared for this conversation is not one of them. Two low effort attacks got to me a bit,
3:48:46 if I’m being honest, though I am learning to take it all in stride. First attack is that I’m unprepared,
3:48:54 uninformed, or naive. I don’t give a damn about the trolls, but I want people who listen to me,
3:48:59 who support me, who care about my words to know that this is not the case. It never will be the
3:49:07 case for future conversations, especially ones of this importance. I work extremely hard to prepare.
3:49:15 Second low effort attack that got to me a bit, is that I’m a shill for Zelensky or a shill for
3:49:22 Putin. Both accusations were hurled readily and freely by the online mob of all persuasions,
3:49:28 by the left and the right in the United States, and Europe, by the pro and the anti Zelensky people
3:49:35 in Ukraine, or of Ukrainian origins, and by the pro and anti-Putin people in Russia, or of Russian
3:49:44 origins. As I’ve said, over and over, this is not the case, and will never be the case. I’m a shill
3:49:50 for no one. More than that, I just simply refuse to be caught in any one single echo chamber.
3:49:56 It’s an ongoing battle, of course, because social media algorithms and the various dogmatic groups
3:50:03 and tribes out there want to pull you in to their warm embrace of belonging, and humans want to
3:50:10 belong. But the cost of the path I have chosen is that I will never belong to any one group.
3:50:19 In the end, like many of us must, I walk alone. And I try to do my best to do what is right,
3:50:24 to my independent heart and mind, not what is popular with any one group.
3:50:31 My goals for this conversation were twofold. First, give a large platform to President Zelensky
3:50:36 to explain his perspective on the war, and to do so in a way that brings out the best in
3:50:44 who he is as a leader and human being. Second goal was to push for peace, and to give him every
3:50:49 opportunity possible to signal that he’s ready to make peace, and to provide his vision for what
3:50:56 that might look like. And just to be clear, by peace, I mean long-lasting peace that minimizes
3:51:02 suffering of people in the region and maximizes the flourishing of humanity in the coming decades.
3:51:10 The war in Ukraine has led to over one million casualties and growing every single day.
3:51:17 For some people, torn apart by loss, tormented and forced into a state of anger and hate,
3:51:25 peace is a dirty word. To them, nothing less than justice must be accepted.
3:51:35 I hear this pain. I’ve seen the bodies and the suffering. It’s true, peace will not bring back
3:51:41 your loved ones, but it will prevent further slaughter of more people, each of whom are someone
3:51:49 else’s loved ones. So again, the second goal of this conversation was to push for this kind of peace.
3:51:58 So how did I approach it? Every conversation is its own puzzle, so let me try to explain my
3:52:04 approach for this one. As I’ve said, I read and listened to a lot of material since February 24,
3:52:11 2022. There would be many weeks over the past three years where I would spend every day over
3:52:18 eight hours a day of focused reading and research. There were several rabbit holes that I consistently
3:52:24 returned to and researched, but the most important line of inquiry was always peace talks. Not just
3:52:31 in this war, but in other wars in modern history. For this specific war, as part of the background
3:52:37 prep, I would take notes on every single perspective I could find on every single major diplomatic
3:52:43 meeting and negotiation that happened in Ukraine-Russia relations since 1991.
3:52:51 There is a lot of material to go through, and there are a lot of perspectives, even on the very
3:52:57 2019 meeting that President Zelensky spoke about in this podcast. Just as a small but important
3:53:04 example, Andrei Bogdan was interviewed twice by Dmitry Gordon and gave a deep inside look
3:53:11 of the administration of President Zelensky, including that very 2019 meeting. The two interviews
3:53:18 are seven and a half hours, by the way, and from my interviewer perspective are a masterclass of
3:53:24 interviewing. Andrei Bogdan worked directly with President Zelensky as the head of the office of
3:53:30 the President of Ukraine. He was there for the 2019 face-to-face meeting between Volodymyr Zelensky
3:53:37 and Vladimir Putin at the Paris summit, along with French President Emmanuel Macron and German
3:53:45 Chancellor Angela Merkel. This was part of the Normandy format peace talks. In those two interviews,
3:53:52 Andrei Bogdan gave a very different perspective on that 2019 meeting than did President Zelensky
3:53:58 to me in our conversation. The perspective being that the failure to negotiate a ceasefire
3:54:05 and peace was not a simple one-sided story. I don’t think this is the right time for me to dive
3:54:10 into that data point and be critical. I’m not interested in being critical for the sake of
3:54:17 criticism. I am interested, once again, in productive conversations, critical or otherwise,
3:54:24 that push towards peace. The kind I described earlier. This is merely an example of a data
3:54:31 point I was collecting in my brain. There are many, many others. But all of it taken together
3:54:38 made it clear to me, and I still believe this, that it is indeed very difficult, but possible,
3:54:45 to negotiate long-lasting peace with Vladimir Putin. It is certainly true that Ukraine is
3:54:51 best positioned to negotiate from a place of strength. After the invasion of February 24,
3:54:59 2022, I believe there were three chances where peace was most achievable. First chance was March
3:55:06 and April of 2022, with a successful defense of the North. Second chance was the fall of 2022,
3:55:13 with a successful counter-offensive in Hassan and Kharkiv. The third chance is now.
3:55:19 As he has stated multiple times publicly, Donald Trump is very interested in making peace.
3:55:25 It is likely that the U.S. financial support for this war will continue to dwindle. So,
3:55:32 the leverage and the timing for peace negotiation is now. There is unlikely to be another chance like
3:55:40 this for a long time. Just to zoom out on the conversation piece of this, I interviewed Donald
3:55:47 Trump and may do so again. I interviewed Vladimir Zelensky and may do so again. And it seems likely
3:55:55 that I will interview Vladimir Putin in Russia, in the Kremlin. I understand the risks and I accept
3:56:00 them. The risks for me are not important. I’m not important. I merely want to do my small part in
3:56:07 pushing for peace in a moment in history when there’s a real chance for that peace to actually be
3:56:14 achieved. I may be speaking too long, I’m sorry, but I can probably speak for many more hours,
3:56:20 so this is in fact me trying to be brief. So again, my two goals were to bring out the best in
3:56:26 President Zelensky as a leader and a human being and to give him every opportunity possible to
3:56:32 signal that he is ready to make peace and to lay out his vision for what that peace might look like.
3:56:41 Like I said, step one through ten is prepare well. I did. But step 11 is the actual conversation.
3:56:46 There the specific psychological and personality quirks and qualities of the guest matter a lot.
3:56:50 My job is to try to cut through the bullshit walls we put up with human beings
3:56:56 and reveal directly or indirectly who the person truly is and how they think.
3:57:03 With Zelensky, he is a deeply empathic and emotional human being who personally feels
3:57:10 the suffering of the people of Ukraine in this war. This is a strength and perhaps also a weakness.
3:57:17 But it is an important part of the reason why I said many times that he is a truly historic figure.
3:57:24 Very few leaders in recent history would be able to pull off what he did, to stay in Kiev,
3:57:29 to unite the country, to convince the West to join the war effort to the degree they did.
3:57:37 He is also a showman to borrow the title of the biography I recommended. A man with many layers
3:57:46 of humor and wit, but also ego and temper. Sometimes fully self-aware and sometimes losing himself
3:57:52 in the emotional roller coaster of a painful memory or a turn of phrase that he can use as
3:57:59 a springboard for an angry soliloquy. After this, the fact that we didn’t agree to anything,
3:58:05 what we will talk about or how long we will talk about it. The interview could have easily been
3:58:11 five minutes or three hours, so I had to quickly gain his trust enough to open up
3:58:17 and stay for a long-form conversation, but push him enough to reveal the complexities of his
3:58:24 thought process and his situation. This is where humor and camaraderie was essential and I would
3:58:29 return to it often, though it was very difficult given the stakes, the heaviness, the seriousness
3:58:35 of the topic of the war. So in this case, the approach I followed for this conversation is
3:58:41 constant nudges and questions about peace, often using almost childlike statements or questions.
3:58:47 I generally like these kinds of questions. On the surface, they may seem naive, but they’re not.
3:58:53 They are often profound in their simplicity, like a lot of questions that children ask.
3:58:59 Remember, it was a child who pointed out that the emperor was not wearing any clothes.
3:59:05 I like the simplicity, the purity, the boldness of such questions to cut through the bullshit
3:59:11 to the truth. And that truth is that hundreds of thousands of people died in this war
3:59:18 and are dying every day. And all the other problems, from corruption to suspended elections,
3:59:25 to censorship, cannot be solved until peace is made. I give the president every single chance
3:59:31 to signal willingness to negotiate, knowing that both Trump and Putin will listen to this
3:59:38 conversation. I don’t think he took it and instead chose to speak very crude words towards
3:59:44 Vladimir Putin. This is fully understandable, but not directly productive to negotiation.
3:59:51 To clarify, I have hosted many conversations that were intensely critical of Vladimir Putin,
3:59:56 from Sir Hiplohi to Stephen Kotkin. But this conversation is with a world leader,
4:00:02 speaking about another world leader during a historic opportunity for peace.
4:00:08 Crude words of disrespect, while powerful, may harm negotiations.
4:00:15 Peacemaking in this situation requires compromise in order to avoid further death and suffering.
4:00:22 And I believe it requires treating the other leader with a seriousness you expect him to treat you
4:00:29 with. This is what I was pushing for. All that while also putting my ego aside and letting the
4:00:35 president shine, which is necessary to accomplish both goals one and two that I mentioned previously.
4:00:41 This is also why I wanted the president to speak about Elon and Trump, to extend the olive branch
4:00:48 for further avenues of peacemaking. This is not about politics. It is, once again, simply about peace.
4:00:55 Now, all of this, my words, my attempts were taken out of context and used to attack me by
4:01:01 some online mobs. As an example, President Zelensky said in a mocking tone that he thinks
4:01:10 that Vladimir Putin is simply irritated by people who are alive in Ukraine. And I answered, “If you
4:01:15 believe this, it will be very difficult to negotiate. If you think that the president of a country is
4:01:22 completely crazy, it is really hard to come to an agreement with him. You have to look at him as a
4:01:28 serious person who loves his country and loves the people in this country. And he conducts,
4:01:35 yes, destructive military actions.” The president interrupted me at this point and said,
4:01:42 “Who are you talking about now? Who loves this country?” And I said, “Putin. Do you think he
4:01:49 doesn’t love this country?” And the president answered, “No.” Again, this is not a podcast
4:01:55 conversation with a historian or activist. And I somehow, out of nowhere, just for fun,
4:02:02 waxed poetic about Putin’s or Zelensky’s or Trump’s love of nation. It is a conversation
4:02:09 with a world leader discussing the opportunity to negotiate peace when a large number of people
4:02:17 are dying every single day. Even if the heart boils over with hate, leadership now requires
4:02:23 sitting at the negotiation table and compromising. This may be painful, but it is necessary.
4:02:28 There are a few other places in the conversation where some online mobs took my words out of
4:02:35 context and used them to call me naive and to call for more war, saying peace is impossible
4:02:42 with a man who they claim is the second coming of Hitler. My friends, if you make such attacks on
4:02:49 this conversation, it is in fact you who are naive and ignorant of the facts of history and
4:02:59 geopolitics. Peace must be made now in order for death and suffering to stop, in order for Ukraine
4:03:05 to have a chance to flourish, and in order for the drums of a global war to stop beating,
4:03:14 a global war that would cripple humanity. This was my goal, once again, to push for peace.
4:03:22 And I will continue this effort to the best of my ability. Thank you. I love you all.
4:03:38 [Music]