Jennifer Burns: Milton Friedman, Ayn Rand, Economics, Capitalism, Freedom | Lex Fridman Podcast #457
the following is a conversation with Jennifer Burns a historian of ideas including the evolution of economic political and social ideas in the United States in the 20th century to today she wrote two biographies one on Milton fredman and the other on iron Rand both of which I highly recommend this was a super technical and super fascinating conversation at the end and I make a few comments about my previous conversation with president zalinski for those of you who may be interested this is Alex region podcast to support it please check out our sponsors in the description and now dear friends here's Jennifer Burns you have written two biographies one on Milton fredman and one on Ein Rand so if we can we will focus on each one separately but first let's talk about the ideas that two of them held in common the value of individual Freedom skepticism of collectivism and the ethics of capitalism can you talk about the big picture ideas they Converge on yeah so Milton Freedman and Ein Rand in the biggest picture they're both individualists and they're skeptical of collectivities and collectivism so their unit of analysis is the individual what's good for the individual what works for the individual and their understanding of society kind of flows from that they also both use this focus on individualism to justify and to support capitalism as a social and economic system so we can put them in a similar category we can call them individualists we could call them Libertarians of A Sort they're also really different in how they approach capitalism how they approach thinking you know irand developed her own moral and philosophical system to justify individualism and to connect the individual to capitalism and to support capitalism as a social and economic system fredman struggles a bit more with how to justify capitalism and he'll ultimately come down to Freedom as his core value like his God as he says and so Freedom does connect back to the individual but he's not justifying capitalism for his own sake he's justifying it for its ability to underwrite freedom in the social sense and also in the individual sense at a high level are there interesting differences between them you already mentioned a few maybe in terms of who they are personally maybe in terms of how they approach the justification for capitalism maybe other ways yeah for sure so beyond this idea that that Milton fredman takes a while to come to his justification of capitalism morzin ran kind of has it from the start she really focuses on the core quality of rationalism and rationality rationality is the defining feature of human beings and so she works from from there whereas fredman Milton fredman eventually converges on this idea of freedom so that's one part of it the other is their intellectual styles are really really different their interpersonal styles are really different so fredman has big Ideas big principles that guide him but he's also deeply empirical he spends most of his career doing historical research economic research pulling data from how people actually make economic decisions and live in the world and using them to test and refine his theories where Rand to some degree we could say she's empirical and that she lives through the Russian Revolution and takes a very big lesson from that but her style of thinking is really um first principles an axiomatic approach going from the basic uh idea of rationality and then playing that out in different spheres and so those are just very different intellectual approaches and then they lead in some ways to really different ways of thinking about how you get things done in the world irand is a purist she wants to start with the pure belief she doesn't want it to be diluted you know one of her favorite sayings was you know it's earlier than you think in other words we're still moving towards a place where we can really hold and express these ideals purely fredman although he didn't use this terminology was much more a halfa loaf guy you know like I'll take what I can get and then I'll try to move to where I really want to be but he is able to compromise espe especially when he moves from being an economist into being more of a political thinker and so that's a really different intellectual style and then it also plays out in their lives in that Ein Rand is incredibly schismatic I mean she wants her friends to believe what she believes and support what she supports and she's willing to break a relationship if it doesn't match Milton fredman he also does tend to have friends who agree with him yet he's always willing to debate his opponents and he's willing to do so with a smile on his face you know he's a kind of he's the happy warrior and he actually will win a lot of debates simply by his emotional affect and his cheerfulness and his confidence where Rand will lose debates because she gets so angry in the face of disagreement so yeah they have they have a lot of similarities and a lot of differences and and it's been really fascinating to kind of dive deep into both of them I just uh relistened to an Ran's I think last lecture or at least it's called that and just the the confrontational nature of how she answers questions or how she addresses critics and so on there is a kind of Charisma to that so I think both of them are very effective at winning over sort of uh popular support but in very different styles it seems like H Rand is is very cranky but there's I mean it's the most charismatic cranky person I think I've ever listened to yeah I mean people talked about her meeting her and coming to believe in her ideas in a similar way as I did with Marxism in that suddenly everything made sense and that when they came to believe in objectivism they felt they had this engine for understanding the entire world now after a while for most people that then became confining but yeah that certainty and and fredman had some of that as well he he clothed it differently he clothed it in happiness where ran kind of closed it as you said in crankiness or anger I mean there's also an arc to ran she gets kind of angrier and angrier and crankier and crankier over the course of her life yeah what I enjoyed about my research is I was able to get into this early moment when she was different and a little more open and then I kind of watched her her clothes and her Harden over time would it be fair to say that uh Milton fredman had a bit more intellectual humility where he would be able to sort of evolve over time and and be convinced by the reality of the World to Change sort of the nuances of policies the nuances of how he thought about economics or about the world yeah absolutely fredman believed in being able to say I was wrong and there are some things he said he was wrong about we we'll delve more into monetarism and monetary policy but he was able to talk about the ways his ideas hadn't mapped on to the world the way he thought they would he does a really interesting interview at the end of his life where he's beginning to voice some doubts about globalization you know which was he was sort of a profit of globalization a cheerleader of globalization he really thought it would lead to a better world in all respects and towards the end of his life it's about two years before he dies there's a note of doubt about how globalization unfolded and what it would mean particularly for the American worker and so you can see him still thinking and that to me I had sort of assumed he became crankier and crankier and more and more set in his way and and of course there's a phase where where he does become that way especially as he's in the public eye and there's not room for nuance but to find in the last years of him life of his life him being so reflective that was absolutely not something Rand could do I think there's a thread throughout this conversation where we should actually also say that you're kind of a historian of ideas I am a historian of ideas yes and so we're talking about today in part about two people who kind of fought for ideas for an idea like we mentioned freedom for for capitalism and they did it in very different ways and it's so interesting to see sort of the impact they both had and how the their uh elucidation explanation of those ideas like reverberated throughout society and how we together as a society figure out what works you know uh the degree to which they have influence on the the public the degree to which they have influence on individual administrations like the Reagan Administration Nixon and so on and how it might return like fade away and then come back in modern times and it's so interesting if you just see this whole world as a as a game of ideas where we were like pushing and pulling and trying to figure stuff out uh a bunch of people got real excited over 100 Years Ago by communism and then they try stuff out and then the the implementation broke down and we keep we keep playing with ideas so these are the two greats of playing with ideas I think that that's a thread that just runs through this yeah and and of kind of pushing back against that movement towards communism social democracy but but one one difference I didn't that I really should emphasize Rand is a writer of fiction she's a philosopher but she's also a writer of fiction so she is working almost in the Mythic register much more in the psychological register she's creating character that people identify with and people relate to experiences they've had and that's one of the reasons she hits so deep and she's also offering people you know I read all the fan letters to her people would say things like I read the Fountain Head and now I'm getting a divorce you know you know having just um these incredible realizations Milton Freedman didn't get such didn't get S things or um you know I'll meet someone and and they'll say to me you know Ein Rand is is the reason I went to medical school you know like like a woman a couple of woman said this to me a few years back it never even occurred to me that I could be a doctor until I read IR Rand and I said I'm going to go to medical school and so she has that really intense impact on people so she thought of herself as rational she thought of rationality as kind of what she was doing but she was actually doing a kind of mytho mythopoetic psychological work as well whereas fredman on the one hand was much more rational there's a whole set of economic thinking and he provides a rational framework for understanding the world and it's the framework of you know neoc classical economics at the same time he does pull on mythologies you know of the idea of America and the Gilded Age the frontier mythology the individual immigrant the settler mythology he pulls on these but he doesn't create them and they and they are he's more kind of playing a tune he already has uh whereas I think ran really does something a little bit deeper and her ability to reach into people's psyche and then take that emotional psychological experience and fuse it to an intellectual world and a political world and that's really what makes her so powerful and so I think she comes back in to relevancy in a different way than fredman does because I think in some way she's tapped into a kind of more Universal human longing for Independence and autonomy and kind of self-creation and self-discovery nevertheless there are still pragmatic ideas that uh are still important today for Milton fredman even just on the economics level so let's dig in um let me try I took some notes let me try to summarize who Milton fredman is and then you can correct me yeah okay so he is uh widely considered to be one of the greatest and most influential economists in history not just the 20th century think ever he was a an advocate of economic freedom like we said and just individual freedom in general he strongly advocated for free market capitalism and limited government intervention in the economy though you do give I've listened to basically everything you have on the internet you give some more depth and Nuance on his views on this and in your books he uh led the famed Chicago School of economics and he won the Nobel prize in economics in 1976 he greatly influenced economic policies during the Reagan Administration and other administrations he was an influential public intellectual highly influential not just among economists he lived 1912 to 2006 so that means he lived and worked through some major world events where his ideas were really important the Great Depression with the New Deal World War II with the postwar reconstruction the rise and fall of the Breton Woods monetary system as we may talk about the Cold War and all the conflicts involved in that sort of the the tensions around communism and so on so the fall of the Soviet Union and also he has some interesting relationships to uh China's economic transformation yeah since the 1970s the stack flation of the 1970s and I'm sure there's a lot more so uh can can you uh maybe continue this thread and give a big picture overview of the ideas he is known for yeah sure and that's a great summary uh you learn you learn fast so let me start with the economics and and then I can kind of transition to how he used those economic ideas to become a real voice in the American conservative movement in the American political realm so I'll kind of highlight four ideas or contributions or episodes um one was his work with Anna Schwarz in revising our understanding of the Great Depression and that's tightly related to the second which is the school of monitorisation of stagflation and the explanation of that in the 1970s which really is one of these these sort of career making predictions and we can dig into that and then in terms of technical economics he's known for for the permanent income hypothesis which he develops with a group of female collaborators that I can talk about so those are kind of four technical pieces and up being really brought together in what becomes The Chicago School of Economics he's he's undoubtedly the head in the leader of The Chicago School of Economics there's an earlier generation that he learns from there's his Generation Um there's also a Chicago School of Law and economics that's really profoundly influential and then there'll be kind of a third generation that he's somewhat distinct from but that goes on to really shape economics but let me go back to these kind of four pieces and let me start with Great Depression so Milton Friedman actually lives through the Great Depression he's in college when it hits and he is so he's in college it's 1928 to 1932 and he's aware of the depression and he's deciding should I study mathem itics or should I study economics and he hasn't he's had some good economics teachers but it's really the context it's looking around at the slow you know dissolving of economic Prosperity so he decides to go to Chicago he decides to study economics and what's really interesting is that the Great Depression is so unexpected it's unpredicted um it's unprecedented and economists are really struggling to know how to respond to it and so he's going to arrive at the University of Chicago when the field it's is struggling to know what to do so he's in this kind of really open space where the the institutional economics of the 1920s has failed to predict which was focused on business Cycles this is the irony their big thing was charting and understanding business cycles and then we have the biggest business cycle of all time and they haven't seen it coming and they don't have a good explanation for it and um what he will get at Chicago is the remnants of the monetary understanding of the economy and so his teachers they don't know exactly what's going on but they look first to the banking crisis they look first to the the 1933 it's you know Bank runs failures of maybe it's up to a third of American Banks it's hu thousands of banks are failing per week so they are focused on that so that's the first kind of imprint he will have the Great Depression has something to do with a banking system the second imprint he will have is that all of his professors are profoundly concerned about the social crisis they want relief programs they want them now they want Bank regulation and financial reform they're very active this is not Les a fair by any stretch of the imagination so Freeman has that imprinting and then about so that's he gets there in 32 36 37 the ideas of John manard Kes from Britain which has a different explanation canes has a different explanation of the Great Depression will kind of make landfall in American economics and be very profoundly influential on most American e economists but fredman already it's too late for fredman he already has a different perspective so keynesianism unfolds I can say more about that but it basically leads to more active federal government participation in the economy and what underlies a lot of that it's at adaptation in America particularly is the idea that capitalism has failed capitalism has revealed itself to have a profound flaw in that it's two it's its cycles of boom and bust create social instability chaos it needs to be tamed it needs to be regulated and so that becomes the the kind of Baseline of politics in the United States the understanding of the New Deal the understanding of the Democratic Party even to some extent the understanding of the Republican party and fredman never quite never quite sure about that he has a hunch that there's something else going on and he does not buy that capitalism has sort of ground to a halt or the other idea is that capitalism has gone through some sort of phase transition and it worked great maybe while we had a frontier this is a very serious argument that people were making United States used to have a frontier a place where you know Europeans hadn't fully settled of course they're pushing out the native tribes that's another story but that this Frontier is the engine of economic growth and the frontier is now over it's closed and we're going to stagnate there's a theory of secular stagnation and so to deal with secular stagnation we're just going to have to have a more active state so fredman is suspicious of all these assumptions and he has this idea that is something to do with money money is somehow important and so he it joins together with Anna Schwarz who is uh an econom she doesn't at this time hold a PhD she's working for the National Bureau of economic research and they come together to do the study of money in the US economy and it takes them 12 years to write the book and and they're releasing their ideas and they're arguing and fredman is writing papers giving talks saying money is really important um and nobody's really believing him he's a crank he's at Chicago he's out you know Chicago is a well-known University but he's sort of considered a crank and then in ' 63 he and Hest Schwarz published this book and it's you know 800 Pages it's a reinterpretation of the history of the United States through money like the central character is money whether it's spec Greenback or the US currency and they have a whole chapter on the Great Depression and they what they've literally done Schwarz has done most of this they've gone Schwarz has gone to Banks and said show me your books and then she's added up column by column how much money is in your Vault how much money is on deposit how much money is circulating and so they literally have graphs you can see them in the book of how much money has been circulating in the US at various different points in time and when they get to the Great Depression they find the quantity of money available in the economy goes down by a third and in some ways this is completely obvious because so many banks um have failed and we don't have any type of B Bank Insurance um at that point so if your bank goes under your savings are there the money essentially vanishes and it's fractional Reserve banking right so you've put in they can loan up to 90% off on their deposits and so fredman and Schwarz present this argument that what really made the great depression so bad was this drop in the amount of money the 30% drop in the money they called the Great contraction and then they go further and they say well how did this happen and why and they pinpoint the Federal Reserve which is a fairly new institution at that time and they say what did the Federal Reserve do the lender of Last Resort what did it do in the face of what they're depicting is a massive unprecedented liquidity crisis and they find it's not really doing much and they really dig into the details and they find that the the the Federal Reserve has gone through a sort of personnel change and some of the key leaders in the 1920s Benjamin strong is one of them he's now deceased and the dominance of the New York Federal Reserve which in their telling you know is Global it's interconnected it's seen a lot of financial things come and go and they believe that the New York fed had the understanding to recognize this is a liquidity crisis we should be very generous we should support all the banks their influence has diminished for the kind of uh banks that are more um they don't say like the Rubes and the Hicks but it basically is it's like the people in charge don't know what they're doing and so the FED pursues this kind of policy of masterly inactivity they don't see it as their problem they don't do much there's an enormous liquidity crisis and that's their version of what the Great Depression is all about that it's a financial system meltdown it's a liquidity crisis and that it in some ways well in many ways they they argue very strong counterfactual argument the Federal Reserve could have prevented it and it did not and so it becomes then an Institutional failure and a political failure not a failure of capitalism as a system and so this book comes out it's a blockbuster and even those economists you've been like Freedman is a crank I don't buy it are like Freedman and Schwarz are on to something Milton Freedman on a Schwarz are on to something and so that really changes the game and this is also one of his most influential contributions because Freedman and Schwarz becomes the playbook for the Federal Reserve and we have lived through this this right the financial crisis the Federal Reserve is ready to loan Co the Federal Reserve does all kinds of new things because no Federal Reserve chair wants to be in Freeman Schwarz 2.0 that somebody writes or they're the bad guy who let the economy melt down so you know the specifics of what they say to do have obviously evolved as the system has changed but this is this is a playbook for how to deal with economic crisis it's Freeman and Schwarz and so it's absolutely fundamental and that is really going to be the place he makes his Mark there's a lot of things to say here uh so first the book we're talking about is the a monetary History of the United States in part for which milon Freeman won the Nobel Prize uh you've also mentioned the influence of the Great Depression if you could even just rewind to that yes so he went to I guess College in ruter that's right and he was uh you know mathematical proclivities so he was kind of wanted to be a mathematician and so it's it's kind of a cool Crossroads um it's interesting how the right time the right person arrives right so you described this really well that so he had the choice to be a mathematician or an economist and Economist is University of Chicago mathematician is Brown University whichever and then uh this is also the beginnings as you've described of mathematical economics so he fits in nicely into this using what I think you said the number of equations started going up per paper which is a really nice way to put it so really the right person at the right time uh to try to solve this puzzle of the economy melting down it's so interesting just one human it it's just from uh just zooming in on know a single human making a decision about life and it's it's hard to know when you're in it that the world is melting down from an economics perspective and that I could do something about this to figure out what it is and also I'm going to reject the mainstream narrative about why this happened yeah so uh the other piece of the puzzle when he goes to recers he thinks he'll be an actuary so Milton freedman's family his parents are immigrants Jewish immigrants from Eastern Europe they're pretty atypical and that they don't stay in New York you know and and they move to raway New Jersey and they put together a fairly middle class life as kind of they have a shop they do some wholesale buying and selling and then his father dies when he's 16 his life becomes more precarious um but it's never as precarious as he makes it out to be he's got three older sisters they earn a good living incidentally they all have better grades in high school than he does but he's the one that goes to college and um but it's actually really important that he loses his father figure because he's then looking for other father figures and he meets two at Ruckers one is Arthur Burns who will go on to have a huge influence in his career no relation to me by the way but um Arthur Burns is like him a fellow Jewish immigrant boy on the M he's older um and he's making a career as an economist and then there's Homer Jones who has gone to the University of Chicago and is studying with Frank Knight at Chicago and says you have to go to Chicago so he has these two mentors and and burns in particular suggests oh I could be an economist that could be my career path you know the idea to be an actuary for an insurance company I'm not sure where he got that idea but he just thought that was something he could do as someone who was good at math and so the college really opens the the perspective opens the door um and then I think it's really key that again he's he doesn't get um he doesn't get an explanation that he buys for the Great Depression so then he's looking for one and the math part is really interesting aspect of his career now he actually comes to Chicago to study with the mathematical Economist Henry Schultz but he gets there and he thinks Schultz is kind of dumb he really does he's incredibly arrogant and he he just thinks this guy's not that smart and it seems that I mean Schultz did some really important work in the early stages of mathematical economics but a lot of the oral histories about him are like yeah he wasn't that bright you know so fredman's maybe so he falls into the set of students who were really enthralled with his other Professor Frank Knight and Frank Knight is against math and economics um Frank Knight is like you know a neoclassical Economist but not a mathematical Economist he's an old school liberal he's really concerned about liberal democracy um economic liberalism and and fredman is very deeply influenced by Knight and he continues to pursue mathematical economics so he'll go for part of his graduate career he goes to Columbia University where he actually gets his PhD from and he works with a mathematical Economist there and so he comes out trained in what will eventually be econometrics statistics and economics his early Publications or in statistics but it's not really where his intellectual heart and soul are and eventually he will turn very profoundly against mathematics in economics and become a sort of heterodox Str throughout 20th century economics that says simple models are better um we need to work on empirical work off empirical data not construct elegant models and um and becomes really sort of countercultural within economics in that way and the test of a good model is it should actually predict stuff that happen it should predict stuff that happen it should tie back to what's going on I'm wondering which direction to go so first actually if we could zoom out on the different schools of E economics yeah just the basics you mentioned neoc classical we mentioned kenian economics we mentioned uh what else did we mention well The Chicago School of Economics right where does uh Austrian economics fit into that pile and marxan economics and can we just even just linger and try to redefine kenian economics and Chicago School of economics and neoclassical economics and um Austrian economics because they there's some overlap and tension okay so schools of Economics so we could start with classical economics classical economics we could think of Adam Smith is kind of your classic classical Economist the founder of the discipline classical economics does not really use math is very close to political economy it's concerned um with as Smith puts it The Wealth of Nations it's concerned to some degree with distribution it's concerned to some degree with what makes a good political system and what tends to really Define classical economics when you're looking from a great distance is What's called the labor theory of value so where does value come from in classical economics it comes from the labor that a person puts into it so maybe this in some ways a comes from Lock's notion of property that you kind of mingle you know your labor with the natural world we can say labor theory of value so classical economics concerned with um Smith is arguing against mercantilism for more free trade um often goes by the name of political economy to show it's more capacious it's thinking of politics and economics um you can still read these books today the sentences are long the words are different but you can still follow along so the real big transition from classical economics and political economy to economics as it's understood today comes with the marginal Revolution and the marginal Revolution is a scientific revolution that happens in a couple different places simultaneously right this is one of these things that you see in the history of science like you know there'll be some breakthrough like Darwin has a breakthrough but like somebody else has sort of the same breakthrough at the same time you totally you know differently so there's a version of marginalism that's um Continental there you know there's a version in the German speaking lands in F in the French speaking lands and in Britain and they all kind of come together and the shift is in the theory of value so the theory of value in marginalism is on the margin so say you have one apple and you want a second one how much is getting going from one apple to two Apple worth for you probably quite a bit if you had 10 apples maybe going to 11 apples doesn't matter that much the marginal value is less so what marginalism do does though most importantly is it opens the door to math and economics because it means you can graph this now you can depict this relationship graphically and there's some really interesting work in the history of Economics that shows a lot of the people who developed marginalism were looking to physics as a model physics the queen of the sciences and so they were thinking they they imported terms from the natural world describe the social world through the lens of Economics terms like equilibrium um so the idea being that if you looked at a market uh a market would reach equilibrium um you know when everybody is bought and sold all that they want or the price will settle at an equilibrium price when it's really the demand and Supply are matching up and some of these ideas are things we would pick up at a microeconomics class oh yes ex this is still out there this sort of the basic Foundation of microeconomics marginal analysis and so in the German speaking intellectual tradition this is the root of Austrian economics and people picking up the marginal revolution in the German speaking lands are opposed to the historicists um who are thinking in a more evolutionary way about how societies kind of grow and change and they have a vision of economic ideas as applying differently to different types of social Arrangements where the marginalists remember are inspired by physics and this is a set of natural laws that applies anywhere to any sort of human society so that's this first really big fisser that we'll see again and again are you historically minded do certain traits of economic life um inhere adhere and become expressed in certain types of Societies or are there Universal economic laws that flow through any type of society so that's kind of a juncture a break and so marginalism first people start using really geometry to kind of graph things but marginalism is also opening up to the possibility of calculus and the possibility of creating models but at that point in time late 19th century a model is something like a physicist does like think of like an incline plane and how fast does the ball roll from one to the other it's a physical representation of the world and eventually economists will start to create mathematical representations of the world but we're not quite there yet so we're late 19th century we have this we have this Fisher we have this introduction of marginal analysis that marks the the juncture from classical economics to economics so let's say now we we have economics but we still have this fisser between historical thinking and let's call it you know natur natural law thinking that's not quite right but physical laws versus contingency um and then in the United States this ends up mapping onto debates about capitalism and so more historically minded economists um tend to be interested in the Progressive Movement and which is invested in taming and regulating industrial capitalism and changing its excesses you know um Factory safety laws wage laws working conditions laws um yet in general American economists all use marginal analysis just in different ways the ones who are more drawn to marginal analysis become known as neoclassical economists they're neoc classical the Neo is because they're using marginal analysis the classical is because they don't think we need to change the way the economy operates or the government operates they're not Progressive whereas the progressives are saying things like the we need to use um social control uh the the state and the people collectively and democratically need to control uh the way economics unfolds and and make sure things are fair and equal so that school of thought becomes known as institutional economics in the United States by the 20th century so it's part of the Progressive Movement late 19th century into the 20th century it really becomes institutional economics and it's quite dominant and the neoclassical economists are still there but they're very much a minority and Frank Milton freedman's teacher is one of the minority neoclassical economists and the institutionalists are much more Progressive um still is it fair to say that the neoclassical folks and even the classical folks versus the institutional economics folks it's they have a disagreement about how much government intervention that should be in the economy so neoclassical is less intervention and then institutional Economist the progressive folks as more intervention yes yes exactly right so this is the situation in the 1920s but um the other piece I should mention is the first generation of progressive economists were very radical they were took closely allied with the Socialist movement with labor radicalism and many of them lost their jobs at universities this is kind of connects to the early the dawn of academic freedom this is before academic freedom and they became they were chasing they became much more mainstream by the time we get to the 1920s we don't really have radical critiques of society coming from economus much smaller profession much less important than it is today and barely peaceful because the 1920s are a fairly peaceful decade in the United States so this is a situation when the Great Depression hits and as I mentioned before the head the kind of most important institutional Economist is Wesley Mitchell and he has said he's he's written a whole book on business Cycles but he doesn't see this business cycle coming and it hits and he doesn't have a good explanation for it now perhaps the preeminent neoclassical Economist was Irving Fischer now Irving fiser is big into the stock market and Irving fiser says sometime in late summer 1929 stocks are going ever higher and will continue to go ever higher forever and so he loses his reputation after the stock market crashed so so mil and Freedman is stepping into a field in which the greats have been discredited and there's an enormous economic crisis all around and everybody's struggling to figure out why the crisis happened yes and the other thing he stepping into is a world where in the United States there's a great deal of anger at capitalism at the system unemployed people on the street in Europe there's Rising fascist movements in Asia there's Rising fascist movements and so everyone's very concerned about this and fredman is seeing a lot of this through the lens of Frank Knight who feels like we are maybe reaching the end of what he calls liberalism he calls himself an oldfashioned liberalism we're reaching the end of Representative democratic government because representative democratic government cannot solve these social problems and it h and capitalism as it has developed Knight is very Pro capitalist but he says it's generating inequality and this is putting too many strains on the system so Knight will become one of the people who helps fredman think how do I develop a new theory of capitalism that works in an era of mass democracy where people can vote and people can express at The Ballot Box their unhappiness with what's happening economically so this this larger movement will generate of which fa hyek is a part fredman is a part becomes the very early stirrings of trying to think about a new sort of liberalism which will eventually be called neoliberalism okay so if we can just Linger on the definitions of things so we mentioned what neoclassical is and the institutional economics is what's Kenzie in economics and The Chicago School of Economics I guess is a branch of neoclassical that's a little bit more empirical versus maybe model based and kenian is very model model heavy more intervention of government yes and there's a that's so the real battle is Kian versus everybody else that is what eventually comes to pass in the United States and in the kind of overall developed the kind of developed profession of Economics the other piece of the puzzle here is the introduction of mathematics and it's been around the edges um but it will pick up speed in the 1930s like the econometrics uh Society has founded they start publishing um people start using more statistical and mathematical tools to think about economics and they're given a boost sort of inadvertently by the rise of Keynesian economics so so kees is trained in the neoclassical tradition um he's a absolutely fascinating figure he's been there in the peace negotiations at Versa he basically calls World War II he's like hey we're gonna have another War here caused by Germany because this peace treaty has been you know done in such a vindictive way and people have made such bad decisions he's there he sees it happening and so when um the Great Depression unfolds he basically comes up with a new theory for explaining what's going on and the previous neoclassical understanding is sort of things go up and things go down and when they go down there's a natural mechanism to bring them back up so when the econom is going down prices are going down wages are going down everybody's losing money but event firms are going to realize hey I can hire people cheap hey I can buy stuff cheap I don't have a lot of competition maybe I should get in the game here and then others will start to get in and then you regenerate prosperity in that way and so Kan says sure that's one Theory but something different is happening right now part of why it's happening is because we have work the working class is more empowered now they're not simply going to just take low wages and ride them down to the floor we might not hit the floor but also he says people might become too anxious to spend they might not want to invest and you know canes has these discussions of animal spirits right he's still enough of a political Economist to think not just in terms of human rationality but what are some other things going on in human beings and people might decide to sit on their money they might not invest it and so what happens then is you could get stuck in a bad equilibrium so in the neoclassical model the equilibrium kind of restarts and resets itself and he says no we could get stuck here we get stuck in the depression and in that case what has to happen he says the government stimulates investment and the government itself invests and then he argues that you know uh this is a student of his Richard Khan says you know as a government invests a dollar it has like a multiplier effect a dollar spent by the government kind of ramifies out throughout the economy so it takes the government and puts it in the center as opposed to say the banking system or the financial system which would be the more fredman analysis and for many economists of fredman's generation and he's a weird generation because it's it's the the generation that becomes dominant it's just like four years older the men who become keyy in economics but that four years is really important because they come in to gradate school in economics and they get exposed to the new ideas of John May AR kanes and they you know I think it's PA Samson calls it like it was like a south sea virus that that attacked all of the young all of the younger economists immedately succumbed and like no one under 50 ever got the disease right because their their thinking is already set and so um keynesianism KES himself is very suspicious of math and economics and and he and fredman is fascinating one of the first books by Yan tingman a Dutch Economist to use math and economics these huge volumes volume one um KES pans it volume two fredman pans it so they're they're in the same page but what happens is as keynesianism arrives in the United States Franklin Roosevelt is not really a Keynesian he's kind of an an accidental or experimental Keynesian Keynesian and there's a bunch of different ideas in the United States that that are very similar to keynesianism they're not theorized but there similar ideas that the government has to do something so this all comes together and and American economists realize that you can construct models in the Keynesian perspective and if you can use numbers in these models you can go to Washington DC with numbers and you seem like you have a you have a lot more Authority and so math becomes really twinned into Keynesian economics so numbers are used as a kind of uh um a symbol of expertise we we really know what the hell is going on because we have some numbers right right and we can create a model and so we can say okay in the model the interest rate is here and taxes are here so let's play with government spending let's make it up let's make it down and then we can get an estimation it'll spit out here's predicted GDP so the other piece of the Keynesian Revolution is it really gets people thinking kind of holistically about the economy as a one conceptual unit and you then have what Paul Samuelson will end up calling the neoclassical synthesis and this still in economics today if you take micro you're going to get supply and demand scarcity marginal analysis if you take macro you're going to get a very different approach and that's more Keynesian based and so the idea is that and this makes sense I mean you can think of this from statistics right the way things act individually versus when they're all added together can be very different so so there's this kind of uneasy piece where economists are using kind of neoclassical tools to analyze individual behavior and individual Market behavior and they're shifting to a different Paradigm when they think about the economy as a whole and in this Paradigm of the economy as a whole the federal budget the taxing and spending power of the federal government become Paramount and that is called the fiscal Revolution and that's really the essence of keynesianism but the key thing to remember is that keynesianism and Canes are different and there's this famous episode where John manard kees comes to DC and he goes to dinner and he comes back and he says to one of his friends in London he oh yeah it was really interesting I was the only non-c in there yeah you know uh so keynesianism is more government intervention fiscal policy so put the government at the center of influencing the economy and then the different flavors of whether it's Austrian economics or Chicago School of Economics is saying no we have to put less government intervention and Trust the market more and and the formulation of that from Milton Friedman is trust the money more the the not trust but the money supply is the thing that should be focused on yes so so the austrians and the Chicago schools see economic prosperity and growth comes from Individual initiative individual entrepreneurship kind of private sources the private Market is what drives economic growth not the public sector and so for fredman then the question is what is a government's role and because he's lived through the Great Depression he's not Les a fair and he won't ever be Les a fair now interestingly hyek living through the Great Depression at first is Les a fair and he's like sure like let it rip and things get so bad that Hayek's like okay that's not going to work can we actually define l a fair so what what do we mean like what's the free market what's Le Fair what's what's the extreme version here so yeah Le fair means leave a be in France it's more often used as an insult than as an actual um very few people are completely and totally Le a fair that would be like the pure Le Fair would be the sort of pure maybe pure Anarchist position like the state does nothing or the state isn't even there um but it tends to if I could maybe make it more precise it would be focused on freedom of contract would be essential and that means um like the the buyer of Labor and the seller of Labor must have absolute freedom to contract so that means no minimum wage law no working hours law um no employment law things like that that that was and this is all pre- Progressive movement a lot of things are that way right you you know imagine you're in 19th century America and you have a farm and you hire someone to help you on the farm you offer the money they take it if they fall off a ladder and break their back maybe you help them out maybe you don't right but there's not a whole apparatus of legal liability and safety and things like that um so that would be one piece another piece of Le Fair would be free trade amongst Nations um so no regulation of who can invest in a nation or who can take money out of a Nation so nepon steel could come and invest in US steel and there would be no grounds in which to reject that um or you could as a billionaire in the United States relocate you and all your money to another country and the United States couldn't try to keep you and and nobody else could stop you from coming in um and so and then in the context of economic crisis Le Fair would would not Encompass centrally provided relief because in the pure Theory again very seldom applied purely but in the pure Theory the wages need to come down far enough and people need to be desperate enough to start taking work and to start the machine again so the theory would be if you give people relief they might not go back to work now almost nobody says that in the Great Depression because the situation is so bad and it's it's you know people are starving on the street and feel for humanitarian ethical reasons it's not okay to say that the austrians though at first Hayak and Lionel Robbins are like this is a business cycle and it needs to run its course and it will be detrimental if we intervene and then pretty soon Hayek has to change his tune so the austrians are the most hardcore in terms of Li Fair absolutely and so Hayek will make the turn towards accepting more of a state and then we'll come to talk about how the state needs to support what he calls a competitive order but his mentor lud vanon mises Still Remains very hardcore and is not um really open to things like unemployment insurance or um other other state-based interventions what does vona say about like human suffering that's witnessed in the Great Depression for example like what are we supposed to as economists as humans that Define policy see what are we supposed to see when people are like suffering at scale yeah I wish I knew an answer that question I don't know enough about Von misus and and his reaction in the Great Depression I think I would Hazard that he would look more to the down the road and say well if you start here you're going to go places that are are bad but I I don't I don't factually know what he said in response I do know that hak's position doesn't last very long it's not it it's not a position you can hold to maybe you could hold to it in other Cycles the other thing that was interesting is I found very few Americans um saying this it most who were were kind of small town electeds or the most famous is Andrew melon quoted by Herbert Hoover so so not directly we don't have him on record saying this but apparently Hoover records in his Memoirs that melan said something like liquidate real estate liquidate stocks you know Purge the rotness out of the system people will live a healthier life and certainly there were members of the Federal Reserve who felt like it would create they didn't say moral hazard but it would create what we now call moral hazard bad habits were we to intervene and to save failing Banks because failing Banks need to be taught a lesson they need to be taught discipline and so a lot of people I think saw it in the context of discipline this is discipline and if you remove the discipline um you'll be taking away something fundamental in society so Milton Friedman never quite went all the way to L Fair no no he didn't see that and what's really interesting is the number of incredibly radical proposals that he and his teachers were floating so I've mentioned Frank Knight another really important influence on fredman was Henry Simons who was a junior professor Chicago and Simons had this idea for what he called 100% money which would be a law that says banks have to hold 100% of the deposits they receive they can't loan them out on the margin this would completely and totally have overhauled the US banking system and he would have said there's a category of things called Banks where you get deposits and then there's going to be a category of sort of he didn't say investment Banks but investment vehicles that will invest so similar to what did happen in in some ways in the banking reforms in that in the 1930s the the investment Banks were split from the deposit banks and the banks that took deposits were much more highly regulated and they were supported by the FDIC but the point being The Chicago School had these very radical proposals for reform go off the gold standard um you know restrict the currency you know change the banks um immediately relief payments now what is important to note though is that they thought all of those as emergency measures to get through the emergency not as permanent alterations in the state of of what had to be and not permanent alterations between State and Market where the Keynesian assumption is things have changed times have changed we're in a new dispensation and we need a new relationship so fredman is very uh Milton fredman is very open to doing things differently in a state of emergency he will have different IDE is during World War II than any other time and that's why I argue I think he would have been supportive of at least the first rounds of coronavirus relief because I think he would have put his emergency thinking hat on so in that way he was definitely more flexible you mentioned Hayek who is this guy what's his relationship to Milton fredman in the space of ideas and in the context of the Great Depression can we talk about that a little bit sure so fa Hayek is an Austrian Economist who takes up a posting in London and you know he's he's in a mentor of a mentee rather of lud Guan mises he's writing about business Cycles um Austrian Capital Theory and the depression hits and he's one of the few you know economists who in the beginning really is not calling for much intervention although as he realizes how politically unpalatable that is he will develop more softened version of Austrian economics that has room for a whole range of Social Services What's significant about Hayek is that he is also watching what's happening in Austria what's happening in Germany and he's really worried the same thing is going to happen to the Western democracies and he sees the root cause of this is socialism the shift towards an expanded role for government which we've been talking about it's happening in the United States it's also happening in Britain and so he writes this book that becomes is incredibly famous the road to serfdom basically saying taking these steps towards a a planned economy or an economy that's a modified form of capitalism is going to could he's very clear that this is not an inevitability but if the same steps are taken and people follow the same line of thinking we may end up in a sort of coercive um totalitarian state so this becomes enormously popular in the United States first of all he's in good touch with fredman's teachers even before this book comes out they see them as Kindred Spirits Frank Knight is in touch with him Henry Simons is in touch with him they all see themselves as liberals they call themselves old-fashioned unreconstructed liberals and so even before he becomes famous Hayek will be trying to kind of organize thinkers and intellectuals who he believed shares his values of what we would call today Classical liberalism and to kind of create a counter consensus to the one that's Gathering now Hayek also chooses not to argue against canes and he feels that this is a huge missed opportunity that he should have staked out the case against canes and that because he did not people come to believe there is no case against Caines canes is literally unanswerable so Hayek will have this great regret he will Channel some of his regrets into sort of community building specifically developing The Mont Pellerin Society um and it will fall to fredman to really make that case against canes but Hayek will end up at Chicago and Hayek really influences fredman to think about what hay calls the competitive order and how the state can and must maintain the competitive order that is the system of laws of norms of practices that makes it possible for markets to function and this is one of these key differentiators between the older philosophy of Le far and the newer reconceptualization of liberalism which says yes we need a state we need a state that's not intervening in markets under Social Democratic aaces but is structuring and supporting markets so that they can function with maximum Freedom keeping in mind that if there aren't basic social supports needed the market is apt to generate the type of either inequality or social instability that will the whole system into question so Hayek is really key in promoting this modified liberalism but from being a very prominent Economist in the 1920s and 1930s as mathematics becomes the language of eon economics hyek is completely left out in the cold now fredman to some degree is left out in the cold but fredman at least has proved the mathematical Economist that he knows what they're up to and he's rejecting it from a position of expertise and knowledge and he literally drives the mathematical economists out of Chicago they're clustered in a group called The Kohl's commission and he makes their life hell they they they have to they flee they flee the fredman ons slot but then when Hayak arrives at the University of Chicago he would like to be considered for a position in the economics department and fredman Milton Freedman says no way you're not really an economist because you're not empirical because you just develop these theories so so he has an appreciation for hyek as a social thinker but not as an economist so what fredman decides to do his answer to KES will be deeply empirical but it will also be theoretical and it will create an alternative intellectual world and approach for economists who aren't satisfied with keynesianism and almost singlehandedly Freeman will introduce sort of political and ideological diversity into the field of economics because from his Beach head in Chicago he will develop the theory of monetarism so what is monetarism the easy way to summarize it is this famous dictum of of Milton fredman's inflation is always and everywhere a monetary phenomena and it's fascinating that he becomes an expert in inflation because the first research and the first major research product of monitormusicpatternphotographyproductssci of the Great Depression in a monetary History of the United States and that is a theory of a deflation all prices going down and he will go back to an idea that Irving fiser had popularized but a very old idea almost a truism the quantity theory of money which says the level of the price level is related to the amount of money circulating in an economy so if you have more money prices go up if you have less money prices go down now this seems like very basic and almost almost too basic to bear repeating but fredman is saying this air basic relationship holds true even in an advanced industrial economy and that is what people have started to doubt and if you think about money you think about Banks you don't think necessarily about the federal budget spending and Taxation and what you see happens in American economics the textbooks previous to the Keynesian Revolution they spent a lot of time on money they spent a lot of time on interest rates you can C you can do word counts and and other Scholars have done the word counts and then word count for money after World War II just plummets and you start seeing things like taxation budget those things go up so that the what happens is the the economics profession shifts its attention it just looks away from money to other things and fredman is one of the few who's saying no money still matters money still counts and it's a very counter intuitive argument to make it's a very historical argument to make and this is absolutely fascinating to me with Anna Schwarz he develops this 150e time frame he also has students working on episodes of hyperinflation in different periods of time he's also looking back to like ancient history inflationary episodes there and he's saying this is a this is a law of Economics this is something that recurs throughout time it's not historical right it's not contingent it's to law of economics and you know his keyy and counter points are saying no that's not relevant any longer maybe once it was relevant but it's not relevant today now in some ways they have a point because the in order to pay for World War II the federal government sells a lot of bonds IT issues a lot of debt and it wants to pay this debt back at a low interest rate and it wants people to keep buying it it wants the low interest rate to be competitive with other interest rates so it wants in general low interest rates throughout the economy and the Federal Reserve has been so discredited by the Great Depression that the treasury basically runs the Federal Reserve and says keep interest rates low and so that's what it's doing and so the Federal Reserve has stopped being an independent entity it's it's just a sub sort of Department of the treasury but in 1951 they negotiate What's called the treasur fed Accord and the Federal Reserve gets its independence but it doesn't really use it but statutorily it now has it and so most economists are just observing a regime in which the Federal Reserve has no power a regime in which there is really little inflation the inflation that is seen is post a little burst of inflation in the Korean War um and there're saying inflation's not really important it's not really relevant and money's not really relevant and important and so to break through and to make the argument that's why fredman and Schwarz go to history and they're able to make that argument for history so then fredman is coming out with a variety of papers that are saying you know when I look at economic fluctuations he Maps them side by side to fluctuations in the money supply and says look they fit and other economists remember they're building complicated mathematical models and Freeman's doing extremely simple stuff and they just think it's dumb it's not interesting it's not true they just they don't buy it at all and so um but after a monetary History of the United States they have to pay attention so it's really in those years Freeman is hammering this idea of monitorisation you're heading towards a monitor position now at the same time Freeman comes out very publicly in 1964 is a supporter of Barry Goldwater and keyy and economics has found a home in the Democratic party its probably brightest moment in the sun is the administration of John F Kennedy who brings in a lot of Harvard and Yale professors to the Council of economic advisors he proposes a series of spending programs that are really guided by the Keynesian philosophy and iberry Goldwater is tremendously controversial part for his votes against civil rights which fredman really supports in part because he's a hardcore libertarian in an age when that's not in the political mainstream or not discussed in the political mainstream and I mean he's just tremendously unpopular particularly in all the educated precincts where fredman lives so fredman is like an outcast on a pariah for his support of Goldwater and so that actually really affects mon ISM because people feel that this is now becoming a package deal and so there's a great reluctance to embrace freedman's ideas because it seems like you would then have to embrace his politics uh so it's associated with with conservatism so this is the years when conservatism there is a movement that calls itself conservatism and fredman is very tightly allied with this movement from the beginning partly through his friendship with William F Buckley and a lot of people say to me yeah but fredman's not conservative and this is like a bigger we have a whole separate podcast on this but for now I'll just say that conservative in the United States becomes a political brand that contains elements of conservatism that are recognizable across time and space Embrace of tradition or comfort with hierarchy Etc and it also has something new and different which is fredman's ideas is about Milton fredman's advocacy of more free markets less government regulation and the benefits of capitalism and the benefits of freedom and that gets folded into American conservatism in part because Milton Friedman is such a powerful intellectual figure and after his advocacy of Goldwater the media realizes this guy's really smart he has really interesting things to say he makes great copy he makes a great guest and he starts writing a column for Newsweek magazine which is very big deal in a much more Consolidated media environment and he's quoted in all the newspapers and so his public profile really starts to rise right as he's pushing monitormusicpatternphotographyproductssci sell stuff and there's this fascinating complex dynamical system of people um Contracting with each other in this beautiful way I mean there's so many pothead questions I want to ask here about the nature of money I mean money is fascinating in that way and for I think for for Milton fredman uh trusting the the flow of money is really important yeah and the signals that pricing and money in general provides is uh really important so yeah and some of this uh I could take some of this back again to Frank Knight so one thing Frank Knight said to all his students was the market is the best allocation mechanism we have the market is what allocates resources in a situation of scarcity the market allocates them the best and Hayek will add to that by saying prices are information signals and a price sends information to buyers and sellers about how they should act act and these are the two of the strongest Arguments for why the government should not intervene in the price system because it will blur information or because it will allocate less efficiently than Market allocation will and so what Freedman is really going to add to that is maybe going up a level and thinking in the macro about the whole economy and how money circulates through that economy as a whole and so what he and hna Schwarz do is they construct what are called monetary Aggregates this is adding together say all the money that's on deposit in Banks and all the money that's believed to be circulating in people's wallets and you also have to really go back in time you know we don't have credit cards um there is a stock market but it's tiny in terms of the number of people who invest there aren't mutual funds uh you know like when Travelers check checks are introduced this is like a big deal um so we have a much a very simple monetary system and so um shorts and and Milton Freeman start measuring what they call the monetary Aggregates they focus on M1 and M2 and their favorite aggregate is M2 which I believe is encompassing sort of deposits and circulating medium the other thing to recall it there's some fine distinctions between um uh money in savings accounts and money in checkings accounts and money in savings accounts can earn interest and is generally believed not to circulate or money in checking accounts does not at that time bear interest and cannot legally bear interest and so is thought of is circulating and then there's different institutional architectures of postal Savings Banks and Credit Unions so but fredman is one taking the focus to these aggregate amounts of money and saying um these really have a lot to do with economic booms and busts when we have an expansion in the amount of available money we see an expansion in economic activity when we have a contraction in available money we have a contraction and so he says at this stage the government through the mechanism of the Federal Reserve and its influence on interest rates can either make money more cheaply available and more freely available in the economy or can make money more expensive and slow things down but the the central core idea of monetarism is this is potentially very bad if the government can hit the gas and then hit the break and hit the gas and hit the break based on say what a politician wants or what somebody the Federal Reserve wants you have a lot of instability in the system and so one of the core policy proposals of monetarism is let's grow the money supply at a steady rate and in the beginning fredman just says K percent he doesn't even put a number on it because he says the number doesn't matter what matters is the steadiness in the growth rate because if it's a steady growth rate it will fade away and then people will make economic decisions based on the fundamentals not based on what they think is going to happen not based on hedging against inflation or hedging against deflation they'll just be able to function so this is sort of the Paradox of monetary policy when it's happening right you don't see it you don't notice it when it's happening wrong fredman argues it can just fundamentally destabilize everything it can cause a Great Depression can cause an artificial boom and so he's taking monetary policy at a time when most economists think it's completely irrelevant and saying this is the central game of the economy now we live in a world where we believe this and the Federal Reserve chair can't open their mouth without headlines being generated m fredman is saying this at a time when the Federal Reserve is like a mysterious and secretive organization it's not welln it's not deeply appreciated some of the only people who appreciate the fed's power are like hardcore rural populace um who have constituents you know who think the banks and money power are the problem who are like you know Throwbacks from the frontier days so fredman in the beginning has no constituency for this policy he has no constituency for this analysis and so just going back to summarize monetarism it's looking it's using the quantity theory of money to analyze the macroeconomy it's proposing a policy of slow and steady growth in the money supply and then it is arguing that inflationary episodes when they emerge are profoundly driven by changes in the money supply not by anything else I mean and going even up a level as we started how epic is it to uh develop this idea to hold this idea and then to convince the United States of this idea that money matters uh that today we believe is mostly correct uh for now yeah and so like just this idea that goes against the experts and then eventually wins out and drives so much of the economy the biggest the most powerful economy in the world so fascinating yeah so I mean that's a fascinating story and so what happens is fredman has advanced all these ideas he's Royal the economics profession he's built a political profile and and then he becomes the head of the American economics Association and he is asked in that role to give a presidential address and so he gives his presidential address December 1967 and he says um I'm going to talk about inflation and I'm going to talk about the tradeoff between inflation and unemployment and this is what's generally known as the Phillips curve and the Philips curve in its original form is derived of post World War II data so it's derived of about 12 years of data and it shows that when inflation goes up unemployment goes down and the idea you know would make sense that as the economy is heating up and lots of things are happening more and more people are getting hired and so this relationship has led policy makers to think that sometimes inflation is good and if you want to lower unemployment you could let inflation kind of go a little bit and in the crude forms it becomes to seem like a menu like you could take your model and you could plug in I want this much unemployment and it would say well great this is how much inflation you should do and so then you would Target that inflation rate so Freeman gets up and he says this is wrong this might work in the short term but it's not going to work in the long term because in the long term inflation has first of all it has a momentum of its own once it gets going it tends to build on itself the accelerationist thesis it accelerates and once inflation gets going it and the reason it gets going is because um you know workers go to the store and they see the price level is gone up things have cost more they asked for the wages to go up then um you know people eventually the wages will go up too high and they will no longer be hirable or companies will decide at these high wages I can't high as many workers I'd better lay off so if inflation keeps going eventually over the long term it will result in high unemployment so he says theoretically you could end up in a situation where you have high inflation and high unemployment this hasn't been seen but he says theoretically this could happen and then he goes and he says and the government has started expanding the money supply started expanding the money supply in 1966 so we're going to get a bunch of inflation and then we're going to get a bunch of unemployment and he he estimates about how long it will take and then he says once this all happens it will take about 20 years to get back to normal and and he predicts the stagflation of the 1970s stagflation of the gangster is that for an economist do that again against the the mainstream belief represented by the Philips curve yeah and what's really what really makes it happen is that many of the economists who most deeply dislike fredman and most deeply dislike his politics in the 1970s as as they're running their models they start to say fredman's right they start to see in the data that he's right and a very parallel process happens in Britain Britain is going through a very similar of burst of spending burst of inflation and so Freedman is Vindicated in this very profound way in the way that he himself said would be the ultimate Vindication which is my theory should predict so that prediction of stagflation is really the sort of final breakthrough of his ideas and also you know their importance to policy um and to thinking about how we should intervene or not in the economy and what the role of the Federal Reserve is because he's saying the Federal Reserve is incredibly powerful and finally people start to believe him and I don't know if we said but to to make clear stack infation means high unemployment and high inflation which is a thing like you mentioned has not was not seen before and he predicted accurately and it also disproves the sort of the the relationship the inverse relationship between um unemployment and inflation yeah now I should say the Philips curve is still out there it's been expectations augmented and it is relevant in the short term but fredman's warning is still very much apt that if you get too focused on unemployment you can let inflation out of the bag and so until very recently the Federal Reserve tradition has been focusing on inflation believing that's fundamental and that will keep unemployment low rather than trying to lower unemployment at the cost of raising inflation can we go back to uh Frank Knight and the big picture thing we started with which is the justification of capitalism yes so as you mentioned Milton Freedom search for a moral justification of capitalism Frank Knight was um a big influence on Milton Friedman and including on this topic of understanding the moral justification of capitalism I I think you spoke about ni's case for capitalism was grounded in the idea that the ability to act in the face of uncertainty creates profit and it should because taking risks should be rewarded so like this idea that taking risks in the face of uncertainty should create profit and that becomes a justification that it the the ethic of capitalism can you just speak to that yeah so Knight is talking about where does profit come from and to his mind it comes from the entrepreneurial function and the risk-taking function and so he kind of weaves that into why you know capitalism works works best and why it's the most effective allocation machine and why it it assigns responsibility in a way he believes that a socialist system never could now night though is not a booster of capitalism he could be in part because he's just a Darkly pessimistic kind of depressive guy and so he's afraid capitalism is going to collapse and Socialism or fascism is going to take over or communism and so he kind of descends Into Darkness there fredman as as the more Optimist believes with Hayek that you can develop a different approach to capitalism that would preserve the price system preserve allocation but build in Social supports build in a social minimum things like this but there's a moment in his career where he's really struggling to figure out like how do I make this case for capitalism and basically uh the whole sort of conservative movement or people who we later call the conservative movement are struggling to make this case and he starts thinking about what makes capitalism work is that if you put forth effort you get a reward so then you could say well people get what they deserve under capitalism but then he kind of stops and he says that's not really true because we're born with such different endowments and there's a huge quotient of luck right so some people are just in the right position and some people aren't so if I say capitalism is moral because people get what they deserve that's not really true and he also kind of has like a an ethical reaction which he ends up calling like an aesthetic reaction he's he's kind of like it just doesn't feel right to say that and so he struggles for a while with like what do I say and then he basically says capitalism it can't be the core discipline the market can't be the core to your ethics it has to be something else so that's when he will decide it's Freedom it's individual Freedom that's really the ethical core and capitalism makes individual Freedom possible because capitalism is dedicated to maximizing that and so the defense of capitalism comes through freedom and at his stage in history he's able to set aside nice worry about inequality and say when I look at the data and this is true for the macro data Century incomes are actually converging right and it also if you look historically if a country goes from say a more feudal agrarian society to a more market-based Society incomes will converge now then they might start to diverge but fredman's in the moment when he's seeing the convergence and so that's what he's really focused on so he believes he can justify capitalism through the ethic of freedom and he also believes that inequality um is a problem that can be addressed through specific policies and it's not a fundamental feature of capitalism in other words he doesn't see capitalism as an engine of inequality the way that Frank Knight did and the way that you know maybe some Critics on the left would how did he conceive a freedom so individual Freedom economic freedom political Freedom civil Freedom what was the tension the dynamic between those different freedoms for him so he really begins focusing on economic freedom and he says it's really important to focus on economic freedom because in the United States we don't value it enough so by economic freedom he means the ability to um keep what you've earned um the ability to make decisions about your business the the ability to make decisions about the work that you do so this will translate into things like um there shouldn't be a minimum wage he believes the minimum wage has bad social effects but he also believes you should be free to accept a job at a wage that you yourself have determined is acceptable to you um and there should be very minimal regulation questions around safety and other things because the market will ultimately if you create an unsafe product it won't sell and that will be that's sort of your incentive so so he he really centers economic freedom because he thinks especially and he's really speaking from his vantage point in the universities and speaking to the kind of liberal consensus of the 50s and 60s he thinks economic freedom has been undervalued in the American context so he really wants to push that forward he's really kind of taking political freedom for granted now later in his career when he becomes famous he's traveling the world he spends time in Chile and this country is now being ruled by a dictator uh gustu P who starts introducing economic freedom but there's no political freedom and Milton Freedman believes eventually these two things are going to go together he tells P you've got economic freedom and eventually it's going to bring it's going to mean political Freedom p is like okay fine not really interested in that I want to know what I should do about inflation but then when Milton Freeman leaves Chile he is attacked and vilified for having been a supporter he's is interpreted that he's a supporter of the regime which he's not but he realizes he has talked too much about economic freedom and he hasn't talked enough about political freedom and he's kind of assumed political freedom because he's come from the American context so then he starts recalibrating them and saying you know what if you don't have political Freedom you're never going to be able to hold on to economic freedom so he sees that they need to go together and they don't naturally go together and so he starts to become more clear in talking about political Freedom now let's fast forward to the end of his life and he's witnessing the emergence of what we call the Asian tigers so capitalist economies that are doing very well but they don't have political freedom but then he observes they don't have political freedom and that you can't vote in a free and fair election but they also don't have a statti they don't have a KGB they're not you know hauling people off for their wrong opinions so then he says they have something called Civic freedom and so he kind of defines this third sphere Civic freedom of you know debate discussion interpersonal relations but you can't be political so this is a late in life addition I don't think it's fully theorized I think what it shows is that during the Cold War he very much believed economic and political Freedom you know capitalism and freedom democracy the United States capitalism this all went together and he starts to see at the end of his life the emergence of different social systems that are using market trading and allocation but aren't giving people similar freedoms and he's kind of puzzling over that now he always believes that China will democratize and he thinks China's on the path to democratization in part because Chile does democratize eventually p is voted out and it's become a democratic capitalist and very prosperous country and he thinks that's exactly what's happening in China he sees tenanan and he doesn't live long enough to get to where we are now in which doesn't look like political or Civic freedom is coming to China anytime soon and he did oppose the Dual track system of China meaning like the market is bottom up the government in China is top down and you can't have both he thought you couldn't have both yeah he thought eventually the market would Triumph well it's a really powerful idea say okay maybe there's not political freedom but just hold on to the economic freedom and eventually that's going to give political freedom is that is that correct to say like start to work on the economic freedom and the political Freedom peace will take care of itself that's what he believed that's what he believed yeah I think it's it's more complicated than that right the the people who gain out of a system of economic freedom could decide to collude in a system where there isn't political Freedom um that's certainly a scenario so but but that that was again that's that core idea of freedom right and that core belief that people want freedom uh and that people are drawn to Freedom just to go back to Frank Knight a little bit he wrote an essay called the ethics of competition the metaphor that economic life is a game and then maybe that extends the society as a whole like the entirety of it is a competitive game and uh and Milton Freeman I think adapted some of this appreciated some of this as can you speak to this metaphor yeah I think what the metaphor of the game does is it asks you okay well what are the rules then um and let's focus on the rules that keep the game going so he didn't use the concept of an infinite game but I think that's an interesting one you know a game that all the players are in and keep going again and again and again and so that helped Knight along with hyek shift from the allocation question who's getting what is are things allocated Fair to the more structural question of like what are the rules of the game that we need to keep this system going and so for a while that led to the discussion of Monopoly well we need rules against concentration um or we need the rule of law um everyone needs to be treated equally people need to know what um you know what they're up against and then going back to monetarism the core of monetarism is a rule Freeman called it a monetary growth Rule and so again what keeps the economic game going is a rule about how much the money grows that everybody knows nobody's guessing nobody's changing the rules to help their side or to help you know the people they're friendly with we all know it's there it's clear it's easy and so that emphasis on rules I think really has a through line it goes into highx competitive order and then it goes into the monetary growth Rule and then you know today monetary policy makes use of monetary policy rules we have not abandoned discretion but rules are used as a heuristic or a check and those come out of freedman's thinking and so um it's something it's it's really profound and it was always counterposed to discretion which Freedman worried would be subject to capture or political corruption if you had discretion in policymaking if you had discretion in these very big areas um then people would stop competing against each other in a market and they would turn their attention to getting control of the rules or the rul makers so if there's clear transparent rules then you're free to play the game yes exactly but then depending on the rules the the game can turn out the equilibrium that it arrives at might be different right so that that's speaks to the the mechanism design the design of the rules yeah and that was again to go back to the idea separating new liberalism or neoliberalism from Classical liberalism was more of a focus on what are the rules that are needed what is the competitive order that we want to set out how do we design in Social safeguards um how do we think about it and so that shift towards monetary policy and focusing on stable monetary growth that becomes really important in the post 70s era is one of the basic rules of how capitalist economy should function and it becomes really important because I see the example of say countries most notably in Latin America where monetary rules weren't followed and different governments played politics with their currencies and that created huge upheaval and huge social loss economic loss just economic disaster so uh my friend Liv she's a poker player philosopher of sorts great human being she has a podcast called win-win that everybody should listen to and uh the whole purpose of the podcast and her whole way of being in spirit is to find win-win Solutions so do you think of economic life as having such win-win Solutions so being able to find rules where everybody wins or is it always going to be zero some I definitely believe in win-win but with a big asteris like you can have win-win but it can feel like win lose which is it's not just are people getting more it has a lot to do with do people feel they're getting more and do people feel they're getting what's fair and equal so you could have a situation um you know for instance if you look at the history of going back to Chile it has steady growth steady income growth steady dimunition of inequality and a high level of discontent within the society and a high level of belief that the society is corrupt and unfair and that's what matters how people feel about it how people perceive it matters and you can't you know we saw this recently you can't just come out with a bunch of statistics and tell people you're winning in this game if they feel like they're losing so that goes to all the nonrational factors and all the comparative um factors that people have when they think about where they are Visa other people in society so we're just incredibly social creatures we're incredibly attuned to our status to rising and falling to where we sit Visa others and so that absolutely has to be attended to it can't just be an economic analysis that's so interesting that the experience of the economy is different than the reality of the economy you know on the topic of corruption I think the reality of corruption versus the the perception of corruption is is really important in a lot of these nations you take Ukraine for example the perception of corruption has a big impact on the economy you don't want to invest you you're very cautious as a business person the reality of corruption could be way different than the actual perception but if narratives take hold it uh it's a self-fulfilling prophecy that it has a big effect on the the psychology of the people involved it's interesting yeah I mean this goes back to K's analysis of the Great Depression right if people won't invest if they're spooked if the investing classes are spooked you could be in real trouble and in some ways the simple analysis of the problem and proposal of a solution was enough to restore um eventually the path to economic Prosperity right that's Franklin Roosevelt nothing to fear but fear itself you know the sense of we know we have a future we have optimism then you believe in it and to go back to like thinking about money right money works because we all believe in it you know it's it's a form of social trust and it's a it's a form of belief and faith in our society and in the other people in it and when that breaks down the money system will break down as well is there something that Milton fredman said and thought about you know how to control the psychology of humans at scale no I mean it what's interesting is he does talk especially in his later work he says we have fiat currency and this is an experiment you know and don't know how it's going to turn out and it's turning out okay right now but we've always had a commodity B based or backed currency of some form or another and this is the first time and so so who really knows so far so good um and he also is very attuned it's interesting in his later writings when he's thinking about this to sure I could design a monetary system that would be different but when I look at history I see that monetary systems have always say Incorporated the role of the state um because it's so important to people and so therefore my theoretical designs really have to be tempered by what I've actually seen happen in history so maybe we could speak to this tension between how much government intervention is okay for Milton freed so he was against minimum wage but he was for guaranteed minimum income can you explain actually the difference between the two yeah so this was one of the discoveries I made in my research I found a paper from 1938 he wrote advocating what we would call today a universal basic income a minimum income and he basically sees this as part of the effort to create a new liberalism right and he basically says we have advanced societies we have prosperous societies we have decided in keeping with our morals and our ethics that people should not be starving in an advanced Society like this the question is how are we going to make that happen and he ended up believing the best thing to do was to put a floor under everybody and he said you can get that based on your income if you have a lot of income you don't get it if you have a little income you might get a little bit of it if you have no income you get enough of it and he believed in the beginning you should base that on you know what was required to buy food right that that would be kind of an objective you could objectively determine the nutrition and the price of food and so that for him it's important he says it's keeping with a liberal polity because it's not intervening in the price system it's not intervening in economic relations and it does not in his view require a bureaucracy to administer it is not in his view require that you qualify for it by virtue of being in a protected class you just get it as kind of part of your membership in this General citizenship body and so that did him was really different than a minimum wage because it did not interfere with the work bargain his belief about minimum wages was specifically that it priced out unskilled labor that what an unskilled laborer had to offer was the willingness to work for a very low wage and if you set the minimum wage too high businesses instead of hiring that higher pric labor would not hire or like we could think of today right they put an electronic checkout you know or something like this where you don't actually need the labor so he really believed the minimum wage had that per verse incentive now there's this is a live debate on what minimum wages do and there seems to be a level at which you can set them that they can not have that perverse effect and in fact can kind of create people with more spending money that then Powers the economy so he had a a very sort of clinical analysis of that uh rather than an empirical one or a really abstract analysis but the the minimum income is fascinating because it seems very leftist to us but what it is is it's purely individualistic and it it never really happened because it was so purely individualistic because American social policy T typically identifies like this group of people is deserving and we'll give them benefits so the classic example is soldiers veterans another example is Mothers raising dependent children these people deserve money the rest of you you better go out and work and so fredman's proposal it really caught on in the 60s It ultimately went nowh but it was no litmus test um no income analysis just we're going to give you this much everyone's going to get this much and he decided once Mass taxation had come in you could do it through taxes and you could just rebate people who didn't pay income taxes got a rebate that actually came to pass it's the earned income tax credit and it's considered extremely successful you know by policy analyst it does what it's supposed to do it's not that expensive and so I see that as a kind of paradigm of his thinking in that instead of creating a bureaucracy that does some form of redistribution or instead of trying to intervene in the market for labor or the market for something else the market for housing you provide a cash grant that people spend for themselves and so interestingly that's what happened in the emergency situation of Co right that's exactly what people did they follow that model we just get money out quick and there's a lot of disc still about Ubi is something that should be done and I think it's always going to be hard to pull off because I think Americans and their elected representatives don't want to provide a universal benefit they want to provide a targeted benefit because they believe there's like a moral component here and fredman advanced a policy that was really abstract and really just you know kind of it was devoid of judgment it was like pure and beautiful in that way but like utterly impractical and and it really focused on not interfering with the market and the signals that the market provides like it was really against price controls the kind of Reason yeah exactly and you could say okay but how does this not interfere with the market right if you provide people with a minimum income won't that change their incentives to work etc I mean there's a big body of research on this most of it seems to show um one it's way better than the current benefits Cliff where you have to not work to get your benefits um and any incentive impact on working seems to be much lower than than would be expected but I'll let the uh you know the economists and the social scientist fight that one out and figure it out empirically hopefully we should be able to yeah there's been a bunch of studies it's interesting even just how you conduct studies like this how you do these kinds of experiments especially if you're empirically minded you know CU these a lot of the studies I saw are pretty small right and so how do you make big conclusions about um about how to run the world how to run economies from such small studies it's all a fascinating experiment of ideas and it's also inspiring to see individuals and maybe small groups of individuals like The Chicago School of Economics to sort of shake up what we believe and how we run the world yeah inspiring yeah you call Milton fredman the last great conservative um maybe to be a little bit sort of controversial and make bold statements that get everybody excited but uh what do you mean by that and what makes a great conservative so I was really thinking of that in terms of kind of American political identities and particularly the 20th century conservative movement which you know people are always saying this isn't conservatism and I yes in America conserv ism is different it looks different it feels different conservatism in America builds in a big component of what we could call libertarianism Pro capitalism anti-government ideas and and you know critics will say but conservatism is about conserving institutions and practices and it has a role for the state and an organic Community but in the United States it's always had since the 20th century this also this anti-statist um let's let the Market rip let's not worry about what the market does to establish Traditions the market is our tradition capitalism is our tradition so that was really synthesized you know many people were there but fredman and the importance of his books um freed to choose capitalism and Freedom the television series he did all of these were like core components of this American conservative synthesis as it evolved and I really see that as having broken down it it is is scattered into different pieces and we don't know where they're going to come back together again but you know fredman's push for open Global markets unfettered free trade that's getting push back on both the left and the right um you know that I think is just a major sign that you know both parties have turned away from this Vision I don't know what they've turned to um but the way that fredman brought these pieces together I think that political moment is passed so that's what I was trying to talk about um with the book title there's another way though in which I think of him also as a conservative which is that within the field of Economics he went back to this older idea the quantity theory of money and said this still has value this can be applied in the modern day it is something to teach us and he you know pushed back against this trend towards mathematization so he kept writing books he can still pick up a Freedman book and read it you know where's of Economics articles and output it's like unreadable unless you're in the field and so I think in that way he was trying to conserve methodologically and intellectually the traditions of the field the work that he and particularly Anna Schwarz did that literal recounting of things and deep analysis of data from the field that was like completely unfashionable and it's time now we've sort of gone back to it with big data and with computers but he helped bring that forward and preserve that tradition so I think of him him kind of intellectually as a conservative if you think of the mode of his thought and so I mean what makes a great conservative is one who takes those older ideas and makes them fresh for a new time period I think that's exactly what he did you've also spoken about the fact that the times when he was sort of out in public the there was more of an open Battle of ideas where conservatism often had you know William F Buckley he had a more uh vibrant deep debate over ideas where it seems less deep now I mean that is the thing that it's hard especially like for you know for the students I teach today to be like you know there were arguments about ideas and conservatives won a bunch of them you know and that happened in the' 70s late 1960s to 1970s when they you know one set of arguments was about economics like okay this idea of stimulating the economy by spending more it has a downside the downside is called inflation um and the downside is called too much regulation and you know you you've gone too far in kind of bottling up the actual sources of economic growth and dynamism and we have to let those free um in social policy there was also a critique you know the the Great Society had all these ways of ideas of ending poverty and you know people came and analyze them and said the programs aren't helping in some ways you've actually created engines to trap people in poverty because you've given them a benefit and said if they actually start to work they lose the benefit you you created these these all these perverse incentives and these ideas were fought out they were empirical they were controversial um and they were based on really deep research and really deep argumentation and so um it seems that era has passed it seems like we're driven much more more quickly um by moods rather than thought through ideas right now it seems like the ideas come after the they follow the political mood and try to put together the underpinning of it where it really was the opposite for much of the 20th century it does seem like we lead with emotional turmoil right and the ideas follow versus lead with the ideas and the sort of the the emotion of the masses respond right exactly so if we think of the evolution of conservative ISM it was a whole set of ideas that was crafted refined the 1950s 1960s 1970s sort of really found their emotional standard Bearer translator salesperson in Ronald Reagan who incidentally had been following these ideas as they developed and had been honing his ability to express them and apply them politically you know it's a very opposite if we look at Trump as the political definer of the era you know there's a set of ideas but it was more attitudes impulses Vibes and the ideas are coming after that trying to figure out how they patch on so um it's it's interesting to watch to see that difference and I Hazard that a lot of it just has to do with the immediacy of the media environment we're in and it's just power of the media messages to get out so fast what do you think Milt Freeman would say about Donald Trump about uh him winning in 2024 and just in general this political moment I think he would love Doge I think that's you know goes without I think he would focus on that part because I think he would I think he would really love it he would be very alarmed by the idea of tariffs and very alarmed by the return to protectionism I mean I think he believed that part of what made the world peaceful in the second half of the 20th century as opposed to you know during World War two was the world was knit together more by trade and that was the great hope that people traded with each other they wouldn't fight he was also you know a proponent of the free movement of capital you know he would absolutely oppose this idea that you know nipon steel wasn't allowed to invest in the United States you know um I think he would struggle and he wholeheartedly embraced Reagan and he worked to minimize the parts of the Reagan Legacy he didn't like I think he would find it harder to embrace Trump because he's not of that style and he just had a different style but I'm guessing he would have come around through the an I think he would just say okay we have a chance to reduce the size of government at the same time the spending plans of the Trump Administration are not fiscally conservative in any way and that was his concern was not so much with debt but with the feeling that there's no mechanis is M to stop the growth of government that it just grows and grows and grows and so he ended up believing like even deficits aren't so bad because they make politicians cautious he thought about continuing to spend um but I have to believe he would be concerned about the potential threats to the US currency's position as the world's Reserve currency with increased levels of debt and spending um he was concerned about low interest rates you know in the you know he he died I think it's 200 2004 2006 but it was in the beginning he didn't see the zero low bound but he saw low interest rates and he said this isn't necessarily good everyone's talking about low interest rates as if they're good but there should be a a price on Capital there should be a price on this it shouldn't be so low and so um you know he had he had some of still the kind of macro insights that I think are important you wrote uh the Wall Street Journal essay titled how inflation ended neoliberalism and reelected Trump so can we weave that into this discussion in terms of inflation and uh Trump what's the main idea of the Essa so the main idea is kind of looking back and saying so today we have been living in a world where people have been you know focused on um monetary policy uh steady monetary policy free trade reducing regulation this is all called the neoliberal era and my argument was a lot of that arose was driven by inflation so we have Milton Freeman predict inflation in 1967 it starts breaking out in the 1970s Britain and the United States and every institution was designed around stable prices and once inflation broke out prices were no longer stable so for example um tax rates weren't inflation adjusted so if you're um income went up because of inflation you might bump from a low tax rate to an extremely high tax rate but you don't actually have more money on paper you have more money but everything costs more so you don't actually have more money and your taxes have gone up that kicks off the taxpayer Revolt there's a whole shift of American corporations towards focusing on financial investments because the tax breaks they used to get for depreciation for building new factories are not inflation adjusted so they no longer pay off in an inflationary environment and then when Paul vulker comes in in um 1980s early 1980s and starts fighting inflation really pushes up interest rates to bring down inflation and that completely reorders the banking sector because Banks had statutory legal limits on the interest they could charge and once General Market interest rates exceeded that this proliferation of new Financial forms to take advantage of that so my point was the era we live in was ushered in by inflation and then everyone turned against all the formulations we had and said well these have hollowed out our industrial base these have um we've got too much immigration we've got too much economic openness we need to reshore we need to focus we need to turn against all these things we need to spend more we've disinvested and the net result of that turning away I argued is people forgot about inflation they really forgot it could ever exist and you had a whole set of theories on the left modern monetary theory that basically said we don't really need to worry about inflation we can spend what we want and lo and behold inflation came back and so my argument is that is now open the door to the presidency of Donald Trump which is potentially a deeply transformative moment that will change the size and shape of government that may change our foreign policy profoundly that may change our immigration policy it may change the demographics of our country all of that in my thesis is that has all been made possible by inflation and so the great mistake of the past years was to forget how fundamental inflation was to the rise of the last political order and to profoundly underestimate how much inflation would change the current political order so I just think it's one of these things this is why I think you should study history because I think if you had studied history you would be aware of this and it's so easy for people to forget just like the banks forgot that interest rates could ever go up they got so used to it and it's it's only a 10 15-year thing but to them that seems like forever so I really do believe what history teaches you to is just have a much vaster scope in your vision and then take into account the possibilities of so many things happening that are different than what's happening today and so I just hope we don't forget about inflation entirely but here's the thing is a quite a strong chance that Trump's policies will initiate even worse inflation and then they will prove to be his undoing so the ironies of inflation could be continuing like you said Milton fredman would be a big fan of Doge so if you was still here today and rolled with Elon Musk and um what advice would he give what do you think he would focus on in terms of where to cut how to cut how to think about cutting you know his his signature policy move I talk about this is taking um the price mechanism and trying to make that into the policy and that seems sort of obvious to today but in the era that he came in so um there would be rent controls let's take away rent controls let's let housing prices set themselves or um he was very against national parks I actually think the national parks are good so I hope the Doge people don't take this up but that rather than an allocation to fund the national parks they should be funded by the revenue that they bring in when people visit them and so I think he was always looking to let's let prices make the decisions here so I think that would be one of the key pieces the other thing I think you'd really be thinking about he he wrote about this a lot about um occupational lure and barriers to entry and he felt like one of the worst things that government does um and sometimes it's private entities that do this is create barriers to entry to protect Industries and markets so he talked about this in the case of the medical profession which I think is actually not a good example because I think we all have a collective investment in having medical doctors be highly trained but so for instance you could look at um you know nail technicians or hair cutting there's often these licensing requirements or there's a sort of big Kur fuffle I think it's the DC passed a law that to run a child care center you have to have a college degree well what does that do I mean that disenfranchises a whole bunch of wouldbe entrepreneurs who don't happen to have a college degree but probably could be really good at this particular business so I think he would be saying um look out for where private interests have used the state to protect themselves and clear away those types of barriers and let um competition through prices guide outcomes yeah so open up for more competition and allow for more signals from the market to drive decisions and so yes which would actually naturally lead to uh cutting a lot of The Bu bureaucracy of government I think the other thing he would probably be arguing for is again going back to the design of of the the minimum income or the negative income tax that there's a way he R and ultimately decided to run it through the tax system right the government's already collecting this data they already have your information and they can just send the money out through the system rather than having a social bureaucracy where you have to come in in person you have to fill out forms you have to document do you own a car what's your income who lives in the household so I think he would say and his analysis of that was what that who that really benefited was the the bureaucracy that processed that paper you know that implemented those norms and that if you could pull that away you could get help out where it was needed much quicker without having this drag of people doing sort of unproductive work of administering these systems so I think trying to cut administrative overhead and what he didn't have then which we have now is the technology that we have and the ability you know to send benefits out via smartphone or um just to just to move so much faster and to handle information on a mass scale so much faster it's painful but I think one of the big things you can do is just that which is digitalize I don't know if that's a word but just convert everything to where the speed of signal can be instantaneous so uh there's no paperwork it goes immediately and then that means that uh the pricing signals and all these kinds of things are just immediately available to people that seems to be the lwh hanging fruit government you know it systems could be vastly improved him on but that would result again with a lot of um people getting fired and I think somebody submitted a question for me saying like where's what are your thoughts as a person who cares about compassion what are your thoughts about government employees which there's a lot of that are going to be hurt by Doge yeah that's it's always a really difficult question a lot of people get fired to make room for a new system that's going to lead to a lot of pain there is going to be a lot of pain I don't know what the solution is I think I think that's also part of why Freedman favored a minimum income he talked about it being sort of counter cyclical in other words when things were really bad the spending level on it would naturally go up this is what economists today call an automatic stabilizer um and then when it's not needed the cost of it goes down um I mean maybe there's a way to make it sweeten it with honey and have people take buyouts or things like that that would certainly be a way better way to go I did a podcast with Javier Malay he has consistently praised Milton Friedman and cited him as one of his Inspirations so uh what do you think Milton fredman would say about what's going on in Argentina and what ja Malay is trying to do in Argentina yeah I think he would appreciate it I mean I think Malay is much more of an Austrian inspired thinker um but I think he definitely appreciates fredman and on the macro level fredman always understood it's really painful to treat inflation um but the more you put it off the harder it is so I think he would be trying to get him as he's doing to just message that short-term pain long-term gain um I think he'd be very supportive I think he'd be thrilled to see also that Malay is very good at explaining these abstract ideas and putting his policies in the framework of the bigger picture that was really meaningful to fredman I don't know how politically persuasive it is overall um you know Malay is very intense he doesn't have uh the same sort of gifts of salesmanship and setting people at ease that say someone like Ronald Reagan had but it seems to be that's what his country was calling for right now so yeah he's yeah he is more chainsaw less like warm blanket yeah uh he uh Javier recollects this this line from Milton Freeman I don't know if this is accurate but if you strive for equality over Freedom you often get neither but if you strive for Freedom you often get both do you think there's truth to this you know I think on the big picture definitely I mean we've seen focusing too much on equality can be because equality is such an alluring word it can lead you to downgrade all kinds of other things that are really important but I really think it depends on how you're defining freedom I mean this the statement is too is too big and too broad right so um you know if you're talking about Freedom if by Freedom you mean um not having to pay taxes if you're successful you know I think that can have all kinds of knock-on effects right the idea that people are able to prosper when they're educated where is education going to come from um how is that going to be paid for and supported and again to go back to night if you're generating too much inequality or people are feeling that you're generating too much inequality um sometimes they value that more than they value freedom and so I think the balance I think there has to be more of a balance and it's just it's hard to make such Global statements and you have to break them down into what actually do you mean but again Malay is coming from a very different context a very different country that has seen so much upheaval so much government intervention so much inflation so much political turmoil um he's probably thinking about it differently than fredman was thinking about it yeah I mean there's a there was there probably still is a real threat of hyperinflation there seems to be a very high level of corruption or the capacity for corruption so it's a it's a really messy situation so Javier Malay likes to recollect this uh great line from Milton Freeman that if you strive for equality over Freedom you often get neither but if you strive for Freedom you often get both do you think there's uh truth to this yeah I think in the macro for sure I mean we've seen if you really put equality as your goal it's such a it's it's such a seductive ideal and people believe in it so much that they can they can carry out horrible crimes you know in the name of equality but then focusing on freedom I just these words are too big they're so hard to Define and so I think you have to ask sort of like what is the freedom you're talking about right if you're talking about the freedom of ordinary people to be entrepreneurial um to make their own way to start new things to continue what they're doing to keep what they've earned for sure I think that can increase the equ overall if you're talking about um lower taxes if freedom is just a code for lower taxes there has to be I mean lower taxes in general great but if you're one of the top uh generators of wealth there has to be some way to ensure that say education right people Prosper when they're well educated that's when economies do better education is generally state funded and you need some way to support that and um provide for those inst tions that structure society that make competition possible so I think it's it's just a really broad statement um but again Malay is coming from a really different context you know he's coming from the south american context from such upheaval such economic Devastation in pursuit of the goal of equality that I think trying to rebalance with that emphasis on freedom I definitely see where he's coming from if we can pivot a little bit we've talked about Reagan uh what are some interesting stories about how Milton fredman navigated the Reagan and maybe even the Nix administrations and how he was able to gain influence well the Nixon Administration is an interesting case because so I've been talking about inflation and the different consequences it had one consequence it had is that it began to undermine the brettonwoods currency system that was established in the wake of World War II now Breton Woods what it did basically it it ended up inadvertently putting the US dollar at the center of the world economic system but under Breton Woods countries of the industrialized West agreed to trade their currency in set ratios that government set so um a Frank was worth so many dollars or a German Mark was worth so many Franks and then also under this system countries could come to the United States and they could trade um the dollars that they held for gold because the US was on a sort of modified gold standard there was uh ratio of gold to paper money and so this system was set up and very quickly most countries were the dollar was at the heart of it and that the converting into and out of dollars was really the mechanism of trade for many of these countries so fredman said you know what we should have is floating exchange rates this is an idea again of instead of having a top- down design of policy an administered policy we will have policy set by prices and you should be able to trade currencies on an open market they should trade and they should fluctuate and that would be fine totally outlandish idea but he was pinpointing the fact that Bretton Woods had an instability and that instability began to emerge in the time of inflation so you have more and more dollars being printed they're worth less and less if European nations keep trading their currency for dollars they're going to be importing inflation into their own economies so they say we don't want these dollars we'd like some gold instead and they have the right to go to the treasury send in an order and get gold out and so they start doing this more and more and it becomes it's called the gold drain and the United States starts running out of gold they're aware this is happening through the 60s they're trying various things to fix it and when Nixon comes into office in 68 fredman sends him a memo and it says um this is going to be a real problem he says something like it ah this is a running soar and you have to Lance it right away you know some very graphic very nice metaphor uh otherwise it's it's going to you know it's going to explode and and Nixon just you know files the memo away Nixon loved people to think he was influenced by and following the wisdom of Milton fredman but he didn't actually want to do that he he just wanted the a political benefit that came from it so then comes the moment where the US Treasury Department realizes we're going to run out of gold what should we do and they everybody decamps to Camp David and Nixon decides we're just going to stop redeeming uh currency for gold it's called slamming the gold window shut done and and he also at that same meeting decides to Institute price controls he does a whole bunch of stuff it's an emergency he calls it the new economic plan which is an unconscious echo of the Soviet new economic plan so uh a problematic name a problematic policy and Freeman is livid at the price controls but he's like actually it's great that you close the gold window let's go all the way to floating exchange rates and this idea was heresy within the treasury Department everyone's very um committed to the idea of the gold standard convertibility possibility the United States at the court the financial system kind of hem andha but at this point fredman has a very close relationship with George Schultz and George Schultz is a high level appointee who will eventually over the course of an N administrations become the treasury secretary and so fredman is feeding Schultz all his IDE ideas about how we should move to floating exchange rates how we shouldn't try to reconstruct Breton woods and the people in treasury it's it's funny because I've read some of their accounts and actually Paul vulker is in the treasury Department at this time and he can kind of sense that fredman is in here somewhere you know like feeding a boss ideas he doesn't quite know and you know then in in the oral history Schultz talks about this quite a bit so at any rate fredman exerts this behind the-scenes influence and what Schultz does is just kind of lets Breton Woods fade away he doesn't make Grand pronouncements it just slowly the world shifts to um a regime of they for a while it was like a regime of steady prices then they call it a steady regime of changing prices or whatever the language changes the reality changes and they kind of end up where they are so that's a real measure of freedman's influence if there had been another Economist in Schultz's ear that said no catastrophe is imminent we have to go back to Breton Woods he probably would have worked harder the US government would have worked harder and so that becomes one of these pieces of globalization and you know what people don't realize is there used to be in addition to these floating set Capital ratios you couldn't bring capital in and out of different countries you know you had to register you couldn't invest were all these rules and strictures and the falling of Breton Woods really blows that all open it's it's a precursor to globalization so so fredman is right there now he's very ambivalent about Nixon I mean he sees that Nixon is not an honest person he thinks he's very intelligent um and Nixon Nixon's dream is to create a new Centrist majority so he does many things to go back on his supposed economic principles and ideas so fredman does not like this he doesn't like the price controls he's in communication with his old Mentor Arthur Burns who's now the chair of the Federal Reserve and burns is basically doing everything wrong in monetary policy and I described this in the book in some detail these anguish letters back and forth and basically as I see it bur doesn't have a solid theory of inflation and the more fredman pushes him it's almost like Burns is willfully ignoring fredman and kind of doing the opposite of what fredman says so Burns is running a very loose monetary policy inflation is quite considerable over the 70s I mean we were all spooked by what did it get to 6% something like that recently for a very short time this is inflation going over 10% hovering in 8% for the basically the Whole Decade of the 70s going up and down with extremely elevated rates and so the Carter presidency largely Falls foreign policy is a big part of it but the failure to tame inflation is part of it and then Reagan comes in and now Reagan loves fredman and fredman loves Reagan very mutual feeling the Reagan Administration creates like an advisory economic board fredman's on it he's he's retired now you know he's entering his kind of golden years he really has Reagan's ear and here what he does is he convinces Reagan of his theory of inflation which is inflation has been caused it's a monetary phenomenon that has been caused by bad monetary policy inflation has an accelerating Dynamic the only way to end inflation is by really showing and signaling that government policy has changed and when you do that it's very painful for a short amount of time people will suffer but then you will come out on the other side into stable prices and this is what you need for economic Prosperity so the man who implements this policy Paul vulker he definitely influenced by fredman buys a big picture of fredman he even buys fredman's specific technique of the monetary growth Rule and of the focus on monetary Aggregates which fredman has said right Money Matters Aggregates matter that's what money is pretty quickly vulker finds that because of inflation and the financial deregulation in response to it the Aggregates don't work the way fredman said they would and so the specific policy fredman recommends VOR tries it for a year or so doesn't work super well but what does work is letting interest rates go high go above inflation to a point where both the general citizenry and the financial markets believe like oh they're actually serious about inflation and and because we've had a decade of inflation with all these presidents saying you know Ford we're going to whip inflation now the monetary policy is lost credibility this is why people focus so much on credibility today because once it's lost it's really hard to get it back and one way vulker gets it back is interest rates over 20% unemployment very high as high as 25% in like construction sectors and as this is happening Milton Freedman is whispering in Reagan's ear this is the right thing stay the course this is going to work now interestingly he hates vulker vulker hates him and Freeman will never give vulker credit for this policy but he will give Reagan credit for this policy but he owes credit himself for keeping Reagan from wobbling on this policy and just pushing it through and he also tells Reagan very pragmatically you better do this now you've got a four-year term do this in the first two years of your term things will have turned around 1984 when you run for re-election and you'll benefit from it and that's absolutely what happens if we could take a small tangent yeah sort of a question I have to ask uh about since we mentioned Bron woods and maybe the gold standard maybe just have a general discussion about this whole Space of ideas there's a lot of people today that care about cryptocurrency mhm what do you think that Milton fredman would say about cryptocurrency and um what role crypto might play in the economy whether he would be for this idea against this idea and if we could look at it for today and also just you know 10 100 years from now there's a clip I think it's in 1992 where people say oh Freeman predicted cryptocurrencies because he's talking about how payments will eventually be electronic yeah um so in some ways he definitely as he was looking at the computer and money he knew these these would come together in some way you know I think um he probably would see a use case for crypto he definitely would not buy the stronger forms I think of crypto ideology in which we could be heading towards a future in which there's many different currencies that compete or that are distributed or there's a stateless currency and he addresses this very very clearly because a hyek denationalization of money it's a paper in the late' 70s you know Hayek argues for this kind of competing currency model or regime and so he's responding to that he's responding to people writing about Free banking and he basically says look even if you developed a variety of competing currencies eventually society would Converge on one and that's because people just want one currency that they know they don't want a bunch of different options even in places where there have been options to do that they've been used very minimally and then he says secondly the state always steps in he says technically theoretically it doesn't have to I could draw you a model I could tell you about how it could work without the state but in actual reality all human societies through time and space the state eventually becomes involved in the provision of money because it has so many KnockOn effects to so many people so sure I think he would again find a use case for crypto think it's interesting but I don't think he would see it as this is going to displace State money and we're going to have um you know a variety of distributed currencies the other thing he really stresses is that a change in a monetary system it only happens amid great great crisis so again you see in countries where the state is not controlling the money well right that's when people are more turning to crypto but he says because money is so fundamental there going to be so much political pressure on any country that gets the currency profoundly wrong that the government will fall and another one will replace it right so if you look at episodes of hyperinflation they don't go on very long because they're so upsetting to people if we can go back in time we've we've talked about it a bunch but it's still a fascinating time uh the Great Depression University of Chicago there's these folks like Jacob Viner Frank Knight Henry Simons all of these influen the thinking of Milton Freedman there's this room seven situation University of Chicago just going back there even just speaking almost philosophically what does it take to explore ideas together sort of like deliberate argue in that space and maybe there might be interesting stories about that time it would just be interesting to understand how somebody like Milton fredman forms the seed is planted and the flower blooms yeah yeah so he gets to University of Chicago he makes fast friends and in his his third and fourth year they become what I call them the room seven gang so room seven is they find an old store room in the basement they take it over and that's where they have their jam sessions and what made this world come together was Frank Knight there was a charismatic leader and there were a bunch of acolytes who clustered around him that I think was a key piece of the ingredient and then there was a sense that they were on to something that the rest of the economics field had forgotten or was rejecting so there was like that of mission so that seems to have been there was a formal education piece and then there was a parallel education piece rooted in admiration for a thinker a shared admiration and then what that led fredman to do you know what I I found um sylli you know that he had from non-economics courses lists of books and he'd written the prices of different ones he wanted to read so he had you know John Stewart Mill on Liberty like 50 cents written in the margin so he began to educate himself he gave himself a like parallel curriculum alongside this very formal economics curriculum he started reading you know the traditions of political liberalism and then talking them through with friends and developing like a shared sense of mission and that the incredible thing is of those friends in the group you know they scattered for like 10 years and then they all came back together you know George Stigler his great friend was hired at Chicago Aaron director who was his wife's brother was at Chicago so many of these people continued he became Frank Knight's colleague so that was the base that was what really grew him that really uh profound peer group now the other piece I talk about a lot is Freeman was a collaborator an open-minded collaborator and he had incredible connections with economists who were women and he basically found um first in the figure of Anna Schwarz later in the figure of this group of women who were his wife friends this kind of untapped pool of talent and so he immersed himself in this whole other world of consumption economics and that resulted in you know his more technical work on um a theory of the consumption function which is the theory of permanent income so for fredman intellectual work and intellectual production was always done in this very social context in a context that Blended like friendship and intellectual partnership and he really he only only had a handful of friends who were not also economists interested in the same questions he was so he just lived and breathed ideas all day long can you speak to the jam sessions like what do we know about the jam sessions what what what are we talking about here you're sitting in a room are they are they analyzing are they reading papers and discussing papers or are they arguing more like over beers kind of situation yeah more arguing over beers and in this case there's several people who say it was all about Frank Knight what did he say what did he mean when he said it is he right and so Knight was very he would say one thing and then say another if you read him it's very hard to follow what he's actually saying because he's full of qualifications and ironies and blends and so he would throw out these pieces and then the students would kind of clutch at them and then they would come back together and try to assemble this sort of worldview and then Frank Knight fell into this terrible depression and to cheer him up they planned a big party and they went back through all of his previous writings and they assembled them into a book that was published this is the ethics of competition and you can read the introduction written in part by Milton Friedman so not only were they talking about Knight and what he said but then they started pouring over his work and one of them described it as like a general equilibrium system where you like had to like know all the parts and then all of a sudden it all fit together in a hole so if we step back what they were doing was getting Inside the Mind of a great thinker and understanding the ways that all fit together and then kind of testing their ideas against Knights and what's fascinating is one of the first papers that Freeman publishes in statistics is a rebuttal of Frank Knight he publishes a rebuttal of Frank Knight's ideas about risk and uncertainty and then Frank Knight he kind of took a Black Swan argument you know he said risk you can calculate uncertainty you can't like existentially philosophically you can't get your hands around it it is the Black Swan and Freedman publishes this statistical paper and he says I can put uncertainty on a graph you know and so there's that sort of fian killing of the father element when he comes back and and he will you know in some ways turn his back on Knight's approach and knight's pessimism even while it's like a foundation of his thinking fascinating is there something you could say about the thinking process that Milton Friedman followed like how he developed his ideas you mentioned there's a strong collaborative component but there's another story I saw about that I think his son recalled about the argument number system that you mentioned which I by the way if if you can explain that as a tangent of a tangent that's really awesome I think it's like number one if the other person is right number two means um you were right and I was wrong and the number system evolved in some ways to be quick and efficient but in other ways they also really clear about it so you know something like there's kind of like three reasons behind it first is if you use a number it reminds The Listener that it's really hard to say the words I was wrong so you're kind of calling on their sympathy Yeah by using the number reminding them that you're doing a hard thing and then it's also reminding them that you're in this family with code and so you're you're signaling your membership and your closeness and your love really and so it's it's supposed to be an easy way to disagree without like breaking the relationship yeah so admitting you're wrong now comes with this warm fuzzy feeling yeah yeah and that's really I mean that's so powerful I think so much of the friction of human interaction could be boiled down to just not being able to admit that you're wrong efficiently and Qui quickly and regularly and just often and to be able to do that that's really that's really powerful yeah I think it's a really a really neat aspect um of their family life for sure anyway sorry that that's a that's a fun story but like can we just generalize to how he engag in collaboration how he developed his ideas is there like a thinking process so he taught at the University of Chicago and he tended to teach for six months and then have six months off and he spent the Summers um in New Hampshire or he had a right near that border they had two different houses and that to him was the deep thinking time and so when he's at Chicago he's teaching he's arguing you know some people loved his teaching style very much in charge very much keeping students on their toes confrontational others found it too much overwhelming kind of shut them down intellectually and they couldn't they couldn't cope with it and so I think it was kind of go time when he was teaching in that case he was that was a lot of social time interacting talking other professors going out and giving papers arguing with the people at Yale or Harvard then he would go and do these very deep Dives over the summer he would also regularly do these trips to New York to see Anna Schwarz so his 12E collaborator they didn't have phone calls were really expensive they did have quite an extensive correspondence but then they would do these meetings so he would basically come in at the beginning of the summer going to raway stop in New York see Schwarz and then again on the way back to Chicago so you'd have these deep check-ins at that point the other thing that happened is people would come visit him in New Hampshire and so he would have these he had a studio separate from the house he would go and he would work and then at night his friends would come his friends are all economists there's a whole like cluster of economists they all clustered within driving distance of the Dartmouth Library so that they could get their hands on books and so they would come over and then they would argue and talk into the night so I think he did need that that deep focus time but it was not like he also lived a very engaged very embedded social life a part of which was his marriage uh is there something you could say about love about marriage about relationship that made the whole thing work is it was vibrant and they wrote a biography together they did I mean they were very complimentary they were kind of the ying and the Yang she was very introverted somewhat suspicious of others skeptical and he was extremely extroverted optimistic high energy and they also were at a time when it was really clear like for broader Society these are the roles of a man these are the roles of a woman and they pretty much adopted those now now um Rose fredman did some very important economic work she's part of the early stages of the theory of the consumption function she didn't complete her degree because she really knew there wasn't if she wanted to be married and have children in the world she lived in there wasn't a real Pathway to also being an economist you know I do think that a lot of that it's not although it it feels very gendered like you know he's the man out in the world and she's in private it's interesting because her brother Aaron director was the same way he was very private man very shy very introverted and he exerted this like quiet intellectual influence on all of his friends so I think that was just kind of a family trait of being more quiet preferring to be behind the scenes it wouldn't have worked any other way because Freeman was so out there so um you know so extroverted and there's a bit of a sad thing she said she said um when I married Milton I lost half of my conversations when David came along I lost the other half so this a household that was just dominated by male voices and which she didn't have a lot of room what was tricky for me in my research is she didn't leave much of a trace she put together Milton Freeman's archive and she took herself out of it so I really had trouble finding her actual voice in the historical documents and she didn't want to leave that behind so um it's absolutely essential piece of his success because she's the one who pushed him to do the Newsweek column to do free to choose and she really wrote capitalism and freedom she took all his random notes and she put them together into a book and that became this kind of testimony of his ideas but she shared many of his ideas and she you without when I think of fredman if you take away schwar Anna Schwarz if you take away Rose fredman if you take away the other woman who collaborated with him you have a much thinner resume than the one he actually has yeah it's always sad and it always makes me wonder about the the the the private secret conversations between partners yeah because they're you know they're they might not show up in the record but they probably influence the person more than almost anything else those quiet little conversations yeah if we can switch our path to another uh great mind of the 20th century IR Rand we talked about some of the similarities here about them being Fighters for freedom and uh Fighters for capitalism what is Iran's philosophy if you can give a big 10,000 summary of objectivism yeah so she called it objectivism she used to do this thing like I can I can stand on one foot and say it so goes something like uh epistemology reason ethics selfishness politics capitalism that was kind of how she summarized it so what she did there's a couple things she did with objectivism first of all she says the key defining element of humanity is rationalism the rational faculty so that's what defines what a humanity is therefore there is an objective reality that we can access and know with our reason that's the objective epistemology and the one social and economic system that lets rationality flower and is based upon rationality is capitalism and then rationality only works in her view as an individual capacity and that rationality teaches that what you should do is pursue your interests and so she ends up calling that selfish now It's tricky because selfishness has so many strong and negative connotations and she meant I think something closer to like self-actualization because she really tried to create this idea and express the idea that to be truly selfish did not mean trampling on others it meant just being motivated by your own kind of internal measures and metrics and so in her fiction she tries to show this by by showing the false selfishness of some of uh Peter keading who's an architect who kind of steps over everybody to advance his career and she says it's not true selfishness because true selfishness would recognize it's it's false to take others work and pass it off as your own now the other big piece of objectivism is a very approach that's really inspired and and related to Friedrich nich's idea of revaluing values or a genealogy of morals and so she says what's happened here is Western culture has converged on this idea of altruism as good being selfless and altruistic is good and this has led us to Communism and has led us to devalue the individual in favor of the collective so what we need is a new moral code code which elevates selfishness which elevates the individual and which takes all the things that we have been told are bad and actually says their values this is what she's trying to do with objectivism I mean it is about as ambitious of an intellectual project as there can be and that's what really draws people in yet at the same time she's flying in the face of the way human morals and ethics and societies have evolved and she's not able to singleand ly recreate them the way she wants them to be yeah I mean she's not doing herself any favors by like taking on the words and trying to Rebrand them completely like writing the virtue of selfishness it's like can we just call it self-actualization yeah uh there's a negative connotation to selfishness and a positive connotation to altruism so she sometimes it seems takes on the hardest possible form of argument yeah I mean she had a a student and a you know who ended up being very close to her Nathaniel Brandon and he he was the Reverend adviser and he said can you please not use selfishness like just come up with another word but part of her liked it part of her wanted to provoke and unsettle she didn't want to give that up I mean people should listen to her her public talks the her her whole Aura way of being is provocative and she's a real powerhouse of an intellectual ual so like she loves the challenge and that just listening to her in itself is just inspiring cuz you could you could see the individualism ra radiate from her yeah I mean that was that was one of the things I found in in researching and writing about her like she's an incredibly unusual human being you know and so that was that was like her strength right because she's so unusual but it was also her downfall because she looked to herself as a model or to get insight about humanity and she never quite processed how different she was from other people so just because we talked about Milton Freedom so much can we just return to what to you given everything we've said is the interesting differences about IR Rand her ideas related to um to Milton Freeman yeah I mean broadly we could put Milton Freeman and Ein Rand in some sort of category together but she has this focus on ethics and rationality and this desire to be revolutionary that's much stronger than fredman fredman wanted to overthrow the economic consensus you didn't want to overturn the moral basis of of Western Society so she's also she does something so in in one of Frank Knight's essays he talks about the ethics of competition and he says you basically cannot build and ethics out of competition because it would be monstrous to do so because it would say the winner of this competition is ethically right and that would open the door to sort of Might makes right and this is what fredman struggles with and he says I can't take capitalist outcomes as ethical unto themselves I can't do it doesn't feel right and and there's this line where Frank Knight says no one would ever do this and I was like oh Frank Knight you haven't read on ran yet you know my beer yeah you're a little too early because that's what she does she takes the outcomes of capitalism and of Market competition and says these have ethical meaning and this is where ethical meaning inheres and it is ethical to try to succeed and to succeed in a capitalist Society now what she's able to do is create a fictional World in which people succeed in her fictional capitalist world through ethical behavior and so she doesn't really have to wrestle with a capitalist World in which people succeed through fraud and Corruption and uh you know uh all the other things that might go into someone's success so she creates the best possible take on success under capitalism and then she holds that up as an ideal and I think what's important is that so few people have done that and she comes at a time when everybody is emphasizing the downsides of capitalism and she says there's another way to look at it here are the good sides of capitalism and like you said she was operating which I really love the phrasing of that in the Mythic register yeah so she was constructing these characters these capitalists that are like the highest form these great heroic figures almost romanticizing them yeah yeah you mentioned we the living is one of the books that you like of hers uh the most but can we uh stay in the Mythic register with the Fountain Head and Al Shrugged uh what to you are some sort of memorable inspiring moments uh insightful moments from those books um that may be scenes or ideas that you take away uh from them that are important for people to understand yeah so the Fountain Head is this story of a struggling architect Howard roor and she kind of follows his life and his career and the message is really it's a version of to thine own self be true right and Ro's designs are to Avant guard nobody appreciates him and he just keeps doing what he wants to do and is just focused on his own Visions his own genius I think that's been really inspiring to kind of creators of all types I think it's barely unrealistic as a portrait of human achievement but it's an aspirational idea I I mean one phrase that comes to mind is there's a character I forget which one who who is in some sort of adversarial relationship with Howard roor and says something to him like well Mr RoR what do you think of me and RoR says I don't think of you you know and that tan was the ideal you're not thinking of other people you're you're an island unto yourself you know you're focused on your own goals your own capacities and you're not doing it to impress other people or to be better than other people or to dominate other people you're doing it because you're sort of expressing your inner your inner soul in a way so that has been very captivating to so many and the Fountain Head is one of those books we talked about that causes you know people read it and they make changes in their life or they feel called to their their higher self and I think there's also the scene or or with the dean of architecture school that's speaking to what you're saying I think to me is inspiring so this is the dean of architecture that expels oror and it brings him into a meeting thinking oror will plead for a second chance and the dean says that Ro's work is contrary to every principle we have tried to teach you contrary to all established precedents and traditions of art do you mean to tell me that you're thinking seriously of building that way when and if you are an architect and then in a gangster-like way roor says yes and then Dean asks my dear fellow who will let you and roor replies that's not the point the point is who will stop me yes I mean you know Ran's coming from communist Russia but it has a bit of the don't mess with with Texas flavor you know I might say that really resonates with this idea of anyone who's felt like they're you know fighting the powers that be um yeah it's interesting I I thought you might uh be going to the quote where he says something like I I inherit no tradition you know I stand at the beginning of one and I I really think Ran's thinking about herself you know when she says that she that she inherits nothing she stands at the start but you know the Fountain Head comes out in in the middle of World War II and it's it's not expect Rand is an unknown writer this is kind of a strange book it's you know classic story it's turned down by 12 Publishers before one takes a chance on it and Rand really loved this story the editor who read it said this book is great and his boss said no and he said if you don't take this book I'm quitting you know and so she you know she she idolized him for doing that so they print it and it becomes the best seller just through word of mouth so it's not advertised doesn't it gets one good book review but it it people tell each other how much they like this book and it keeps Printing and selling out printings it's made into a movie and so it lands in this time when Americans are engaged in this great Collective Endeavor of World War II they're making all kinds of sacrifices for the collective and I think paradoxically as they do that they're drawn to this vision of someone who doesn't have to compromise at all you know who is leading their life exactly as they want to you know meanwhile they might be sleeping on an ocean liner because they've been drafted to fight in this war and they're reading the Fountain Head and they're feeling better about the themselves and so it's also really interesting The Fountain Head is hugely popular in India which is fascinating and you know talk to people about this and they basically say this book comes like a breath of fresh air into a very traditional and conformist culture and people just latch on to it and they love it you know and it gives them that feeling of freedom and possibility that they're hoping for yeah I mean it really is a book Alice rug can be a bit of that too but it's more more of the philosophy objectivism the details and the Nuance of that seeps into outla Shrugged the The Fountain Head is very much like a thing that makes you change the path of your life yeah and that I mean that's beautiful to see that books can have that power and you know Rand knew that she was doing that and she she knew what she was doing you know she this wasn't an accident and people say oh she's a bad writer oh her characters are so heavy-handed you know she started as a screenwriter she started as a someone who analyzed films for movie studios she knew exactly how to manipulate plot and character and drama and she also knew that she was writing you know people say oh Rand is for you know adolescence adoles teenagers love Rand and that's kind of who she was writing for and she said you know I'm writing for people as they start out on their life and they're thinking about who they want to be um so she's not writing you know for the weary middle age she's writing for the young who are looking for inspiration you know people say that to me sometimes about certain books like Rand but also about The Alchemist I know a lot of people For Whom The Alchemist and they're adults and they brilliant people The Alchemist changed their life and the same can be said about the Fountain Head yeah I and I sometimes get criticized for using words that are too simple I think simple words can uh can have power and the cliche thing sometimes needs to be said as sometimes if effectively needs to be said in an over-the-top way in the uh in the Mythic register because that's the thing that resonates with us yeah cuz we we are like Heroes of Our Own Story and we need to hear that message sometimes to take the Bold step to take the risk to take the leap yeah and I mean the other thing she she knew she was doing kind of propaganda in a way she was like I'm doing Pro capitalist propaganda she has a degree from the University of Leningrad you know she's raised up in Soviet Russ she said we need to present the case for the other side in the same way and that's what she did why do you think she's so divisive people either love her or hate her I mean I think it's because of that Purity that I'm willing to say sort of you get what you deserve and that kind of lack of Charity and and part of that in her work is because she creates this fictional world where she can set everything up just so and so you don't have have um contingency or accident or bad luck or you don't really have a lot of children you don't have handicapped you know you you just have this idealized world and I think it's really infuriating for people who feel that so inaccurate how can you be deriving a social theory and philosophy around this and how can you be missing what seems to many people she's missing the kind of ethical instinct or the altruistic or charitable Instinct and so they just become enraged at that and they don't they don't want to see anyone go that far and they're outraged that someone went that far you know that did the thing that Frank Knight said no one would do um yeah it's just it it's very unsettling would you say that's her main blind spot the main flaw of objectivism is just how black and white it Paints the world or if not mean what what what would you say are the flaws of objectivism so I mean the big flaw is that it's justified through a fictional world you know it's not justified through reference to the real world you know it's it's not empirical in in in a way it's not um and and Rand herself would say this she's not writing about things how they are but how they should be and so that idealism just really undermines it as a mechanism to understand where we're actually living and that is a big contrast with Milton Freeman were who would focus on how things are versus how things should be and then I think it's the problem of elevating rationality over any other mode of insight or thinking and so what happens in Ran's life and I describe this in some detail in the book is she essentially creates a cult of reason around her and people who are drawn into this cult it's called the collective it's a group of young people in New York City who are drawn to her work and she's already famous but she's writing Atlas Shrug and so she's sharing drafts of Atlas Shrug as she goes along and one of the members of the collective to bring all of this together is Alan Greenspan who later be head of the Federal Reserve and he's incredibly taken with her he's one of these people who says I was a narrow technical thinker I never thought about ethics or politics or anything bigger until I met a Randon she really opened my mind so he's part of this Titanic group but over time in this Titanic group they think themselves we are all individualists we're dedicated to individualism and capitalism we're different than everybody else over time they all come to share IR Ran's views and opinions on everything from music to Art to clothes you know there's she gets a dining room table and a bunch of them get the same dining room table um and it becomes incredibly conformist because they've all believe they're acting rationally and they believe that to act rationally is to agree with Ein Rand and they believe there's no other way to make decisions than rationality and so to disagree with her is to be irrational they don't want to be irrational so people get really caught up in this very damaging cult-like circle around her Plus for for a cult of reason they get awfully emotional when there's any disagreement with I mean it's it's it's kind of hilarious it's absurd but it's um I mean it's also beautiful to watch this this singular figure we've talked about several singular figures a like Frank right that shakes up the world with her ideas yeah and of course it would form a cult and of course that cult would be full of contradictions and hypocrisies yeah I mean it's amazing there's um so Murray rothbard is a famous Anarchist falls into the irran cult and then he disagrees and it there's some type of show trial where he told he's wrong about everything and then he has a little sort of pseudo Cult of his own and two of his cult members switch over to IR Rand and then one of them to show the G to gesture their breaking of their relationship mails him a dollar bill that's been torn in half I mean this is high theatrics right okay sticking on the drama in the theatrics uh who was Nathaniel Brandon oh yes can you uh take me through the art of ir Ran's relationship with Nathaniel Brandon to their dramatic falling out in 1968 yes so so after the Fountain Head um The Fountain Head is auction to be a is sold to be a film so irran moves to Hollywood where she's going to help in the writing of the film she wants a lot of creative control and she's also still working in screenwriting and things like this and so she gets a letter from a uh there's a Canadian student who's written to her several times and then he writes again and he says I'm at UCLA and she's like young man you're so full of error why don't you come visit me and and I'll straighten you out so he comes and they have this real meeting of the minds they talk all night he comes again he brings his girlfriend she loves him and they start this very intense relationship of spending every weekend at her house basically staying up all night talking about ideas he becomes completely converted to the objectivist worldview um ran begins counseling him and his girlfriend about their relationship you know very intense thing then eventually they graduate from college and they both enroll in a graduate program in Columbia and they leave and after they've left irand is just bed and within a few months she packs up her home and she moves to New York here I am I like New York better and so that becomes the seedbed of the collective and the Brandon they get married they change their name to Brandon they've never publicly spoken on this but many people have pointed out it has the word Rand and in the name so it's some type of acknowledgement of how important she is to them and time goes on and romantic feelings develop between Ein Rand and Nathaniel Brandon who's some 20 years or Junior and they discuss them and they realize that rationality has led them to the conclusion that they should be lovers right right they've rationally decided this but because they're rational they um need the consent or at least to inform their Partners they're both married they're both married so they call a meeting and they obtain the consent or maybe simply inform the others of the rationality of the choice and then they say but this is only going to be an intellectual relationship but we'd like a few hours alone each week and we don't want to be deceptive so we want you to know and improve of this so the spouse is bought into rationality know and approve one thing leads to another it becomes a full romantic and sexual relationship and although it's open with in these four people it is not open more broadly and so in all these meetings of the collective got Allan Greenspan all these other people coming up you know drinking coffee all night talking talking they all know that Nathaniel Brandon is objectivist number one they don't know that there's a romantic and sexual relationship happening it's kept a secret and then when Atlas Shrug comes out it's panned by reviewers people absolutely hate this book and Rand is not Howard roor she falls into a deep depression because her Masterpiece has been rejected and so then the Romantic relationship ends but the close personal relationship continues and then over time Brandon who's still married to his wife begins an affair with another young woman and at this point he has started the Nathaniel Brandon Institute to teach objectivism and he's making good money he's becoming quite famous she supported the Institute she supported it and and at first it was to help her in her depression he said the world needs to recognize your Genius they missed Atlas Shrugged but I'm going to teach them I will bring the message and it's very successful it becomes its own business it has a newsletter it's a whole world so so that small cult around irand expands to this whole social network and it's very much a piece with this burgeoning conservative movement objectivists are involved in criticizing the draft and you know there's kind of a Libertarian objectivist world going on all of this is happening in the meantime the Brandon has found a new partner and he does but he doesn't tell on ran this because he knows she'll be upset and so it goes on for years and and and hran knows something is going on but she can't quite figure it out and it finally Barbara Brandon says to Nathaniel Brandon you know you have to tell her this has just G gone on too long so she finds out and the whole thing blows up and she Exiles him and she breaks off contact with him and nobody's ever told what happens it's called The Objective Schism you know objectivism breaks into two because some people say how could irran do anything wrong and other people say what is this letter all about and what did Nathaniel Brandon do and I'm not just going to take her word for it I need more information and then a bunch of people you read all the accounts of this a bunch of people are like okay they were having an affair and a bunch of other people are like no that couldn't possibly be happening you know and so the whole thing breaks up but but what I you know argue in my book is actually this is to the benefit of rand's ideas because Rand herself was so controlling over her ideas and now that she steps back from a public role you know objectivism flows into the student libertarian movement some objectivists become conservatives it just kind of spreads out more generally and you don't have to drink the Kool-Aid you don't have to take the official course Nathaniel Brandon goes on to be part of the self-esteem movement you know sort of human potential movement California and Ein ran lives you know another another 10 years or so but she doesn't do major work after that so since since we were talking about some of the uh although rationalized some strange sexual Partnerships that they're engaged in uh I have to ask about the Fountain Head and the the quote unquote rape scene in the F head uh was she intending to add that there to be controversial how are we supposed to read into it uh is it a glimpse into Iran sexuality and maybe broadly we can say what was her view on this on sexuality on sex on power dynamics and relationships yeah I mean there's also an objectivist theory of sexuality that probably the least convincing of all the parts of objectivism and it goes something like your sexual desires express your highest values and they are related in some ways to your rationality right which is also related to your highest value so so for her that explained her attraction to Nathaniel Brandon and Nathaniel bra Brandon's attraction to her was a function of their highest values and in fact Brandon emed this so deeply that the fact that he was later drawn sexually to a woman who was not particularly accomplished but was beautiful caused him deep anguish and guilt for me non objectivist so this is the objectivist theory then the gender politics are just crazy and we have to kind of back up and think okay so who is an Rand she's born in Lisa rosenb in Russia she is someone who stands out from the crowd from the beginning she never really fits in she's not conventionally Beautiful by any stretch of the imagination she struggles with her weight and she doesn't consider herself to have a beautiful face she's very independent she meets none of the metrics of traditional femininity at all she finds love with a man who is very handsome but very passive yet she writes in all her fiction about strong manly Heroes so this seems to be like a projection the man she's actually with is not a strong manly hero the heroes she writes about she probably wouldn't be able to be in the same room with them for more than one minute before they got in a raging argument right and then then she develops this theory about women and men in that a woman a woman should worship her man and a woman finds her true expression in worshiping the man she's with so again this is not at all how einan lives her life this is like this I would say a compensatory theory for her lack of ability to conform to the gender Norms of her day she then articulates them in a very strong and almost distorted and exaggerated way to compensate for the fact that she does and actually meet them and can't actually enact them the rape scene to some degree embodies that idea that the to some degree that the woman should worship the man I tend to read it more in terms of literary genre so Rand is a screenwriter you know a consumer of movies and that rape scene is like paradigmatic for the romance genre in other words he's like pulpy romance novels the hero rapes the heroine that and then they fall in love that's just the Trope of how it works so it's crazy when you read it but if you were reading a bunch of novels in this genre you would find this is like very standard and so but that is a huge part of his appeal at the time there's this feminist who hates rant Susan brownmiller and she wants to write an angry denunciation of the rape scene so she goes to get the Fountain Head and she's wondering how is she ever going to find scene in this you know 800 page book it's a library copy because she doesn't want to buy it and it just Falls open to the rape scene because everybody's gone and read it because it's very racy and explicit for that time so I'm I'm almost positive she also knew that like if I put in this kind of taboo breaking sex scene that's also going to probably be why people tell their friends about it so I just I think it's a mess I think all of the gender and sexuality stuff is that she states is just a total mess I think uh it also reminds me of of another guy related uh freeder n who had very strong opinions on women and wrote about what women's role in society should be and different Dy power dynamics and relationships and all that kind of stuff when he himself really had trouble getting laid Yeah and so you have to you have to sort of um always maybe chuckle or take with a grain of salt the analysis of power dynamics in relationship from these figures which which failed in in many regards in their own private life um you mentioned feminist would you consider irand a feminist I mean she's almost an anti-feminist um because she then goes on and um someone writes her a letter about like um should there be a female president or something this is like the beginning of feminism and she says um no um no woman should ever be president because if she's president she wouldn't be able to look up to any man because she would be so powerful and therefore she would be like corrupt and like rotten in the soul and like unfit to be a leader and it just it it just makes no sense um but that said she's a woman and she's one of the most powerful intellects in the 20th century yeah and so it's the contradictions I mean nich is full full contradictions of this sort that the the very fact that she's one of the most powerful minds in history to me means that she is a feminist in her in the spirit she embodies right in what she represents well I mean she lived the ideals of individualism in her life and set aside gender Norms in her own life but she did not see herself as part of any she did not see herself as doing this for the benefit of other women or to change society's views about women there was no Collective Essence to it so if if feminism has some sort of collective aspect to it or at least some identification one needs to identify with a broader category of women and feel they're acting in behalf of that she's definitely not doing that and she did you know she was fair to women in her life promoted them in her life but did not I mean she was very negative about feminism and then because like they dress terribly you know and then the other thing it's really interesting she had there's all these kind of homoerotic themes in her writing and for that reason many gay men were drawn to her writing and then she would say like homosexuals are dirty terrible people you know she would denounce people for being homosexual so there's a whole actual literature of like gay men wrestling with Rand and how she like what she says about gay people so um yeah it's it's hard to make sense of and I just I just think of the enous pressures if I want to be charitable I just think of the enormous pressures she was under in the culture she was raised in the expectations that were placed upon her and her just utter inability to meet any of them and it came out in this very tortured set of ideals that she tried to promote um and this kind of lack of ability to introspect in herself and to was probably too painful to introspect and to think about that so she just tried to rationalize is her way through it and it came out in these very strange theories why do you think that IR Rand is maybe you can correct me but as far as I can see never mentioned in the list of great thinkers in history or even the great thinkers of the 20th century or even the great female thinkers of the 20th century so you have somebody like Simone de bravar uh Hana Ren I almost never see her in the list if you Google those silly list top whatever top thinkers of the 20th century she's not mentioned why is that you know a lot of people just deeply dislike ran they deeply dislike her ideas they don't think they're profound because their disconnection from other ideas and other understandings of human society I think I think where you could look at them and say these are these ideas are very provocative and they're very deep because she's not taking anything for granted and she's flipping everything around and forcing you to really think to a lot of other readers to her critics they just look absurd like how could you even make these contentions um and I think that because she she's not without precedence and she's not without followers but she doesn't knit herself into an intellectual Community um the way that these other thinkers do very naturally that that can you can see who they influence you can see who they're in dialogue with you know I think my book was one of the first to really take Rand and say she's a figure in American history here's who she's connected to here's who she's influenced and I got a lot of push back for that you know I think now people are more open to it but I think the people who compile these lists really dislike her work and they think it shallow because they find her fiction overdrawn they find her work in the Mythic register simple and she's also a grand systematic thinker in an age that's over systems you know she's almost she's creating an inverse Marxism right Marx was writing in 1848 you know he's not a thinker of the mid 20th century so um I think that's part of it the lack of a legacy and the dislike of what she had to say and the feeling that she's too detached her insights are not insights because they're too idealized rather than being rooted in a theory of human nature that people find plausible you study and write about history of ideas in the United States over the past 100 years 100 plus years well how do you think ideas evolve and gain power over the populace over our government over culture just looking at evolution of ideas as they dance and challenge each other and play in public discourse um what do you think is the mechanism by which they take hold old and have influence yeah I mean there's a couple different ways I think it happens I really am interested in the relationship between the Thinker and then the reader and The Interpreter of the ideas and then the conditions on the ground that make that idea resonate or not resonate um and so I think I think a lot so so as an intellectual historian I'm studying ideas always putting them in their historical context like what is happening that is making these things resonate that is making them people seek them out um so for Ran's case she has this credibility because of her experience of Communism which is one of these defining moments of the time and then I think the idea comes out in a sort of pure form and then other people rework it and reshape it as they read it and I'm really interested in how people form communities around these ideas so a bunch of people started calling themselves objectivists and getting together to read Ran's work that was spontaneous and ground up and wasn't supported by any money nobody planned it it just happened fredman's a different case in that he joins an established tradition of thought that's been institutionalized in universities so people are signing up and paying money and getting credential to learn these ideas so to my mind these are two different ways but really emblematic ways of how ideas spread so Rand I think of as more bottom up like people encounter the idea in a book they're kind of Blown Away by it or they embibe it without even realizing they're eming it and then they're like well maybe I don't like Franklin Roosevelt so much or maybe I'll look SE another time at Berry Goldwater and then whereas fredman you get the idea more top down I know I'm getting the idea I know I'm being positioned within a sort of elite discourse of economics and so I think they kind of go top down and bottom up and then they hit the events right fredman's ideas would have gone anywhere without that episode of stagflation that really made people think they proved out and I think rand's idea's really caught fire in Cold War America that's looking for a statement of like what does it mean to be an individual what does it mean to live in this Mass Society because it's also a time of great social Conformity and where people are suddenly you know they're working for large corporations um they've been served in a large military you know they're the United States is stepping out onto the world stage everything is bigger what does it mean to be an individual in that world and that's where rand's ideas catch fire so I think a lot about about that about how they trickle through different levels of society and then how ideas collide with experience I think is critical what do you think about like when they actually take powering government so I think about ideas like Marxism and how that evolves into the bulvik revolution how how that like takes hold in its implementations or you can think about Nazism and with Hitler where it goes from a small number of people that get real excited about a thing and then like somehow just becomes viral and takes hold in power and then that has its consequences when I think about the sort of historical path of Communism and the kind of Logics and dynamics of Communism I mean in in many ways it has some Echoes with Rand in that you know the the ideology and its p form is is almost it's a it's a rationalist ideology of some ways it's an analysis of history and how things are supposed to be and I think you mentioned Hana aren I think she has one of the most kind of penetrating analyses of of Communism which she really puts in the category of like it's it's a it's a logical ideology logic leads inexorably to its conclusions and then experience crops up and experience is different and what is what is a a sort of cult of rationality do when it hits experience well it tries to bend experience to its will and that I think is really the story of Communism writ large um so the question though is why you know why does it catch fire why does it draw people into political allegiance I think in the case of Communism it's this dream of a more ethical world you know dream of equality dream of the powerless rising up against the powerful I mean that's very um that's drawn in so many and then you had the whole addition of leninism which gave a kind of international cast to that and helped people think about what are the relations between poorer and richer countries and what can we expect out of them and what might happen gave them sort of a framework for thinking about that in a time when those the world was becoming more interconnected and those differences were becoming more obvious you know fascism to me is unleashing more something Primal something sort of dark and Primal within people and and it's more a permission structure to indulge in that that is normally not there those impulses are normally channeled or held down and it seems that when the fascist regimes come into power they give people permission to let those forces out I think on communism going back to that uh lecture that IR R gave I think uh what Rings true to me a little bit is that uh it what fuels it is a kind of uh maybe not resentment Envy towards uh towards the people that have the have kns versus the halves and there's some degree to which Nazism has the same of Envy towards some group resentment towards some group so it's given the environment of Hard Times Hard Economic Times combined with the more Primal just Envy of not having and seeing somebody who has it and just constructing a narrative around that that can become a real viral idea yeah it seems like communism is more animated by this idea of Injustice you know the world is unjust it should be different and fascism seems like the process of scapegoating right we've identified the source of the problem and it's this group and they need to be punished for what they've done to the rest of us there is a primal thing is going back to literature in 1984 two minutes of hate get everybody real like excited about like hating a thing and there's something Primal about us humans where you once you're in that state of hate anyone can direct that hate towards anything yeah towards uh yeah towards any group towards any idea towards anything just because we're we could get caught up in the Massy Thea of the the hatred it's a dangerous thing yeah you uh you floated idea I forget where uh of pivoting for your next book uh towards maybe writing about postmodernism uh which is a set of ideas almost the opposite of Iran's philosophy so can you uh maybe explain your C curiosity about first of all spaces of ideas but maybe uh postmodernism yeah I mean I think in the broadest sense what I'm interested in kind of two Dimensions that guide me and doing intellectual history one is what I talked about like how does an idea go from a book an elite space out to more popular Dimensions like how does that happen What happens to the idea along the way how is it distorted or changed and the other is just search for meaning and of a post-christian era or a secular era like what are what are people coming up with and I think to replace that void in their religious or spiritual lives I think both Rand and fredman offered these sort of alternatives right objectivism quasi rationalist religion people take economics as a as a theory of the world that almost you can almost believe in it right it can almost take that place and in both cases how do those ideas travel when I think about postmodernism you know it first struck me you know these if you read the original postmodern thinkers it's really tough goinging I mean I make my students do it and they suffer I think they see it's worthwhile but it's no fun to read daah you know but somehow it's trickled down into how do we go from like Dairy da to Tumblr and I sort of realized like oh this has happened with postmodernism it's followed the same path you know that say from Milton fredman's economic theory to you know free to choose on YouTube we've had a similar path you know high French Theory down to Tumblr and you know I you know sexually identify as an attack helicopter or whatever it may be you know and so that was really interesting and then I also thought you know well at the same time um this is clearly a structure of meaning and I actually think it's followed the same path of objectivism which is turning into its opposite like distilled down and then turning into its opposite so if objectivism was a group of people who considered themselves individualists who ended up deeply conforming to the dictates of a charismatic leader you know postmodernism started about disrupting binaries that was we're going to be fluid we're going to go beyond the Border going to disrupt the binary and it's devolved in its popular forms to the reinscribing of many different binaries oppressor and oppressed you know has become this like paradigmatic set of glasses you put on to understand the world so I think this the Dynamics are very very similar so I think it's something in the traffic of the idea from its pure form to its popular form and then how gets it gets politicized or mobilized in different ways and behind it all I think is this human longing for meaning and the inadequacy of the traditional ways that need was met at this point in time by the way that uh going from Pure form to popular form I remember this might be before the internet but when I was in college reading dared Fuko and like not knowing context at all it interesting all right this is like I'm able to read pure encapsulations of an idea and just kind of like all right well that person believes that and you just kind of hold it but then you realize if if you actually take the pure form of that idea and then it creates a community around it you realize like what that actually becomes yeah and you're like oh yeah no I don't that's not although I do um consider myself sexually an attack helicopter that's it identify sexually yes beautiful okay um your process of researching for uh let's say the biographies of mil freedan IR Rand seems like an insane amount of work yeah you did incredible work there going to the original sources can you maybe speak to that what uh is required to persevere and to go to go for so many years to go so deep to the sources so I mean I I I go to the archive that's that's where I feel like I'm I feel like I'm communing with the dead in some ways you know I'm seeing what they what they saw in some ways reading what they felt and I you know I tell my my doctoral students it's got to be something that gets you out of bed in the morning because there comes a point in your doctoral career when nobody's there's nowhere to go there's nowhere to be you got to be getting up because you're interested in what you want to study and so with Rand it was this real sense of Discovery like I am discovering I want to know about this woman I want to know where she fits and the only way to find out is to do the research you know and so um yeah I I just I like to go deep it's it's really interesting to me um and I should say in both of these cases I've done it in an Institutional structure I don't know that I would do it independently so the first was a graduate program in history was at UC Berkeley and so I had coursework and then I had structures and I did have people to check in with and read but I had a great deal of latitude I'm very grateful for people are like you wrote a dissertation on IR ran at Berkeley I'm like yeah hell I did you know Berkeley's like it's a great place and it at the I was there there was absolute room for free inquiry oh can you just like Linger on that so when you said that you're doing that doing a desertation on IR Rand was there did people get upset no I did have a you know a friendly critic who who took it upon himself to throw at me everything he thought the outside world would throw at me I think maybe five or 10 years earlier it wouldn't have been possible and it but the most important thing I had to the person I really had to convince this was worth doing was myself you know because I knew it was uncon an unconventional choice for the field and for a dissertation but once I convinced myself I just said well we're I'm going to do this and see and because it was unconventional it it ended up standing out and and but it really was at time there was a was I was started it during Second Bush Administration second George W bush second term people were interested in just conservatism in general and felt no matter where they stood on the political Spectrum felt like objectively we don't know enough about this and this is a problem and so they were open to learning more so I really kind of caught that caught that wave in scholarship and caught that wave in American culture where people wanted to know more yeah we should probably say that I mean Iran is at the very least as you've mentioned a kind of gateway to conservatism yes I called her the gateway drug and that people start with Rand they're taken by her you know in some way she takes the worldview of Milton fredman in terms of what capitalism can accomplish economically and then she puts it in this mythopoetic register and she fictionalizes it so once people have absorbed that they want more you know they go on to learning more of the ideas behind that Vision or they have become True Believers they've converted and so then they head off to work for a politician to work for a think tank to work for a party it's absolute traffic now not everyone there's plenty of people who read on Rand who don't take the politics in it's a nice story it's interesting um just an episode in their life but for others it's really foundational really really changes them so those were the people I wanted to track very deliberately I wasn't trying to do in the round everything about irand I was like irand and the American right you know goddess of the market Ein Rand and the American right is a title so where did they where did they take her those who took her in this political Direction what difference did she make if we uh return to like the actual your process yeah so you're showing up you're reading sources and you're like is it kind of like the process of discovery you're just kind of like taking it all in and seeing what uh unifying ideas emerge or maybe Mo special moments that illustrate an idea emerge yeah I mean I know with the biography of a person I am already given a start and an end date and a rough Narrative of what happens so I have a kind of structure and then with Rand both with r and fredman I started by reading their major books before I really read anything about them because I wanted my own experience of the material to be fresh and I had read some irran but not a lot similarly I had read some fredman but not a lot so I had first is like let me read the major stuff get oriented and then just dive into the archive and see what's there um who are they talking to what's going on um in Ran's case you know I I was interested in in her in the United States not her in Russia I didn't have the language skills to do that so I start her in the United States and I start when she publishes her first book and she starts getting letters and who is she writing to who's writing to her and then I start to uncover this world of kind of nent conservatism and I'm kind of putting that together and once I have enough I say well that's a chapter I cover that chapter and then there's going to be you know the book has come out and so now I need to start a different chapter what's her life like after the book has been published you know and then I look for that but I'm really although I have this very high level structure it's coming out of the archive the material I'm finding and if I'm not finding the material there I won't cover it in great detail or if I've decided it's outside my ambot I'm not going to go into great depth on it and you're trying to understand their relationships it's so fascinating like reconstruct in a dark room trying to reconstruct shine a light on relationships through Reading letters it's interesting yeah yeah I mean correspondence is really really helpful drafts correspondence and you know someone this famous they have oral histories other people write about them so you're reading all these different things and kind of triangulating and trying to sort of put them together and then think about how do I present this in a compelling story and what do I need to explain and then also for me what was really helpful was is that because I teach and I am explaining the kind of broad sweep of 20th century history so you know I know that Ran's involved in a a labor at Warner Brothers but through my teaching I realized oh yes this is a moment of Labor strikes across the country and so then that really changes the origin story of Atlas shrub because she's looking at Labor actions and she originally thinking of the book as being called the strike so she's really responding in real time and being inspired by what's happening you know in the mid 1940s in the United States so then I can kind of take that and run with that and figure out where to go so you're super passionate about teaching uh you mentioned Milton Freeman had a very uh uh interesting way of teaching uh so what what's your how do you think of teaching teaching history teaching history of ideas teaching Bright Young Minds about the past yeah I mean it's great it's really inspiring the the ways the old school kind of dominating way in which Freedman taught would not fly in today's University uh wouldn't wouldn't be permitted and also the students wouldn't respond to it you know so um I try to share my enthusiasm I think that's like almost the number one thing I bring is my enthusiasm like look how neat and interesting these ideas are I try to keep my own views out pretty much I try to give the fairest possible rendition I can of each thinker if I if I find someone really disturbing I might sidebar at the end of the lecture and say this kind of you know I find this unsettling and this you know tells me something about myself but most of the time I'm bringing people into the like the biography of a great thinker the context of them and then we in the lecture we'll literally read the work together and we'll talk about it and I'll ask the students what are you finding here what's jumping out at you um kind of breaking down the language and and really teaching them how to do deep reading so I feel like that is my contribution right now we're having trouble reading collectively we're having trouble paying attention collectively and I'm trying to cultivate their skills to doing that and showing them how I do it and also modeling like this is how I would read a text this is what jumps out to me when I look at you know Thomas or something like this um and just show them that I studying a history of ideas is really fun I feel incredibly privileged to do it you know and the other thing is I think this is the time for for students in college figuring out who they are their minds are developing and growing they can really handle complicated hard ideas they don't always have the context behind them so I need to give them the hard ideas and then show them this is kind of the context of what's happening in the world but really I'm just I'm showing them the landscape I don't have time to go deep we have a 10we quarter you know I giving them a fly over and then I want them to know how to go deep and know where they want to go deep do the thing that Milton Freeman did which is in parallel yes do their own parallel curriculum exactly exactly what advice would you give in terms of reading about ideas you agree with than reading ideas you disagree with I mean even though I think the passion is important for the teaching of the ideas like dispassion is more important for the reading and understanding of them um so a lot of people have said to me like I could never write about Ein ran like she makes me so angry you know and i' I've never become I don't get angry reading her like I'm I'm like oh there you go again you know or like well that's going to cause trouble lady you know and so um I guess I'm approaching it with a sort of Charity but also with a I'm not I don't have huge expectations I'm not expecting to have the light shine on me I'm not expecting to agree I'm I'm like I can be very clinical about it so that's what's worked for me it might not work for others but and then I just try to find the humor in it you know like how how funny is it like these different aspects of them you know like I when teaching my students about Oliver Wendell Holmes like his his dad wrote a poem about him he called him the astronaut about how he came from outer space he seemed like he came from outer space I'm like this is his dad's view of his son like that's how weird of a guy he was you know and so I try to like find that keep alert for those funny kind of human touches that like these are ultimately just people you know people with ideas that they spent enough time polishing up and developing that we still want to read about them a hundred years later what about the dramatic formulation of that same question do you think there's some ideas that are good and some of that are evil do you think we can draw such lines or is it more complicated like the old soulen line between good and evil that runs to the heart of every person I mean I uh philosophically agree with souls and nen for sure I do think some ideas pull on the good side and some ideas pull on the bad side like absolutely and I think that's probably that's probably why people dislike ran so much as they feel like she's giving license to the bad side and she's saying it's okay to be selfish and it's okay you know they feel like she's unloosing the dark Forces um and you know in some cases that may be true but I also she's also un un loosing some of the light forces in terms of reflecting on yourself and trying to trying to be true but definitely there are ideas that are dangerous to play with and there are ideas that I think give license to the darker sides of human nature um but I think you can see that in the historical record so I think that it's possible to show that and obviously there's some places you know like Germany they're try they think the ideas are so dangerous they can't be allowed to circulate and in some context that may absolutely be true and then still even that we should take with a grain of salt because perhaps censorship of an idea is more dangerous than the idea so all of that that's the beautiful thing about us humans we are always at T at tension trying to figure out what ideas are the ones that are going to help Humanity flourish uh pothead question yeah do humans have ideas or do ideas have us so where do ideas come from you have Milton Freeman sitting there after rugger is trying to figure out what he can do about the Great Depression um what like where do you ever think about this like I I sometimes think that ideas are aliens are actually ideas they're just kind of like travel through human brains and like uh Captivate Us and we get all real excited uh like with a monolith in 2001 Space Odyssey a monolith lands and everybody gets excited and somehow this idea just gets everybody to be on the same page and it reverberates through the community and then that results in an implementation of some action that results in US figuring out that that idea was actually bad and we learn new ideas and but that it feels like the idea is running the show yeah I mean I think in a lot of is I think it's true you know there Kan has this famous quote like you know most men are slaves of some defunct Economist you know so um that's funny so I do think that we like it's really hard to have an original thought you know we are social creatures we encounter the same situations again and again um and so it's really hard you're born into these traditions of thinking and being and knowing and most people are never going to question them and most people are never going to become aware of them so again that's some of the work of what I do as an intellectual historian is like let's become aware let's realize that you're carrying a map that's orienting you to the world in a certain way right and so um I think you have to work really really hard to have an original idea and even then it's not a completely original idea it's a reworking and a reassembling of ideas others have had so I definitely think it's possible to create autonomy in the realm of ideas and to be an autonomous consumer of ideas but I think on balance most people are not and that's fine they want to have experiences they want to do other things with their life you know well Jennifer thank you so much for this journey through ideas today and thank you so much for your incredible work uh it was really fun and fascinating uh to talk with you today thank you thank you thank you for listening to this conversation with Jennifer Burns and now let me try to reflect on and articulate some things I've been thinking about if you would like to submit questions or topics that I can comment on in this way here at the end of episodes go to Lex freeman.com or contact me for whatever other reason at Lex freeman.com contact please allow me to say a few words about my interview with the president of Ukraine Vladimir zalinski now that a few days have passed and I've had the chance to think about the conversation itself the response future upcoming conversations and what it all means for the war in Ukraine for Global geopolitics and for us humans in general I've gotten a lot of heartfelt positive words from all sides including at least so far literally everybody who knows me personally inside Ukraine which includes a lot of soldiers and many high-profile figures some who are supportive of the president and some who critical of him literally all private community communication has been positive and supportive this is usually not the case with me friends usually will write to me to criticize and to disagree that's the whole point of friendship to argue and have fun doing it there was none of that here at least so far so thank you for your support and kind words it means the world the most common message was please keep pushing for peace I will but online on the interwebs I saw a lot of attacks sometimes from swarms of online accounts which of course makes me suspicious about the origin of those attacks one of my friends in Ukraine who by the way thinks the attacks are all propped up by Ukrainian B Farms said there's no need to say anything extra let the interview stand on its own just keep focused on the mission of pushing for peace basically he's a Ukrainian version of my friend Joe Rogan who to this day says don't read the comments this is generally good advice and I try to follow it but I'm also a human being I wear my heart on my sleeve and this interview this war for me is deeply personal and the level of vital misrepresentation and lies about the conversation and about me personally was particularly intense and disingenuous so I thought I would use this opportunity to say a few words just speak a bit more about how I approach this conversation with president zilinski and conversations in general this interview is something I poured my heart and soul into preparing a lot I've described parts of the preparation process I follow in the outro to this Zas conversation but in general let me say that I've read a lot listened to a lot and had a lot of private conversations with people on the ground I have many flaws but being unprepared for this conversation is not one of them two low effort attacks got to me a bit if I'm being honest though I am learning to take it all in stride first attack is that I'm unprepared uninformed or naive I don't give a damn about the Trolls but I want people who listen to me who support me who care about my words to know that this is not the case it never will be the case for future conversations ESP especially ones of this importance I work extremely hard to prepare second low effort attack that got to me a bit is that I'm a shill for zalinski or a shill for Putin both accusations were hurled readily and freely by the online mob of all Persuasions by the left and the right in the United States and Europe by the pro and the anti zaleski people in Ukraine or of Ukrainian Origins and by the pro and anti-putin people in Russia or of Russian Origins as I've said over and over this is not the case and will never be the case I'm a shield for no one more than that I just simply refuse to be caught in any one single Echo chamber it's an ongoing Battle of course because social media algorithms and the various dogmatic groups and tribes out there want to pull you in to their warmer Embrace of belonging and human want to belong but the cost of the path I have chosen is that I will never belong to any one group in the end like many of us must I walk alone and I try to do my best to do what is right to my independent heart and mind not what is popular with anyone group my goals for this conversation were twofold first give a large platform to president zalinski to explain his perspective on the war and to do so in a way that brings out the best in who he is as a leader and human being second goal was to push for peace and to give him every opportunity possible to signal that he's ready to make peace and to provide his vision for what that might look like and just to be clear by peace I mean longlasting peace that minimizes suffering of people in the region and maximizes the flourishing of humanity in the coming decades the war in Ukraine has led to over 1 million casualties and growing every single day for some people torn apart by loss tormented and forced into a state of anger and hate peace is a dirty word to them nothing less than Justice must be accepted I hear this pain I've seen the bodies and the suffering it's true peace will not bring back your loved ones but it will prevent further Slaughter of more people each of whom are someone else's loved ones so again the second goal of this conversation was to push for this kind of Peace so how did I approach it every conversation is its own puzzle so let me try to explain my Approach for this one as I've said I read and listen into a lot of material since February 24th 2022 there would be many weeks over the past 3 years where I would spend every day over 8 hours a day of focused reading and research there were several rabbit holes that I consistently returned to and researched but the most important line of inquiry was always peace talks not just in this war but in other Wars in modern history for this specific War as part of the background prep I would take notes on every single perspective I could find on every single major diplomatic meeting and negotiation that happened in Ukraine Russia relations since 1991 there is a lot of material to go through and there are a lot of perspectives even on the very 2019 meeting that President zalinsky spoke about in this podcast just as a small but important example Andre bokan was interviewed twice by Dimitri Gordon and gave a deep inside look of the administration of President zalinski including that very 2019 meeting the two interviews are 7 and 1 half hours by the way and from my interviewer perspective are a master class of interviewing Andre bdan worked directly with President zalinski as the head of the Office of the President of Ukraine he was there for the 2019 face-to-face meeting between Vladimir zinski and Vladimir Putin at the Paris Summit along with French president Emanuel macron and German Chancellor Angela Merkel this was part of the Normandy format peace talks in those two interviews Andre bdan gave a very different perspective on that 2019 meeting then did President zalinski to me in our conversation the perspective being that the failure to negotiate a ceasefire and peace was not a simple one-sided story I don't think this is the right time for me to dive into that data point and be critical I'm not interested in being critical for the sake of criticism I am interested once again in productive conversations critical or otherwise that push towards peace the kind I described earlier this is merely an example of a data point I was collecting in my brain there are many many others but all of it taken together made it clear to me me and I still believe this that it is indeed very difficult but possible to negotiate longlasting peace with Vladimir Putin it is certainly true that Ukraine is best positioned to negotiate from a place of strength after the invasion of February 24th 2022 I believe there were three chances where peace was most achievable first chance was March and April of 2022 with a successful defense of the North Second Chance was the fall of 2022 with the successful counter offensive in hon and Har the third chance is now as he has stated multiple times publicly Donald Trump is very interested in making peace it is likely that the US Financial support for this war will continue to dwindle so the leverage and the timing for peace negotiation is now there is unlikely to be another chance like this for a long time just to zoom out on the conversation piece of this I interviewed Donald Trump and may do so again I interviewed Vladimir zalinski and may do so again and it seems likely that I will interview Vladimir Putin in Russia in the Kremlin I understand the risks and I accept them the risks for me are not important I'm not important I merely want to do my small part in pushing for peace in a moment in history when there's a real chance for that peace to actually be achieved I may be speaking too long I'm sorry but I can probably speak for many more hours so this is in fact me trying to be brief so again my two goals were to bring out the best in president zalinski as a leader and a human being and to give him every opportunity possible to signal that he is ready to make peace and to lay out his vision for what that peace might look like like I said Step 1 through 10 is prepare well I did but Step 11 is the actual conversation there the specific psychological and personality quirks and qualities of the guest matter a lot my job is to try to cut through the  walls we put up as human beings and reveal directly or indirectly who the person truly is and how they think with zalinski he is a deeply empathic and emotional human being being who personally feels the suffering of the people of Ukraine in this war this is a strength and perhaps also a weakness but it is an important part of the reason why I said many times that he is a truly historic figure very few leaders in recent history would be able to pull off what he did to stay in Kiev to unite the country to convince the West to join the war effort to the degree they did he is also a showman to borrow the title of the biography I recommended a man with many layers of humor and wit but also ego and temper sometimes fully self-aware and sometimes losing himself in the emotional roller coaster of a painful memory or a turn of phrase that he can use as a springboard for a angry Soliloquy add to this the fact that we didn't agree to anything what we will talk about or how long we will talk about it the interview could have easily been 5 minutes or 3 hours so I had to quickly gain his trust enough to open up and stay for a long form conversation but push him enough to reveal the complexities of his thought process and his situation this is where humor and camaraderie was essential and I would return to it often though it was very difficult given the stakes the heaviness the seriousness of the topic of the war so in this case the approach I followed for this conversation is constant nudges and questions about peace often using almost childlike statements or questions I generally like these kinds of questions on the surface they may seem naive but they're not they are often profound in their Simplicity like a lot of questions that children ask remember it was a child who pointed out that the emperor was not wearing any clothes I like the simplicity the Purity the boldness of such questions to cut through the to the truth and that truth is that hundreds of thousands of people died in this war and are dying every day and all the other problems from corruption to suspended elections to censorship cannot be solved until peace is made I give the president every single chance to Signal willingness to negotiate knowing that both Trump and Putin will listen to this convers ation I don't think he took it and instead chose to speak very crude words towards Vladimir Putin this is fully understandable but not directly productive to negotiation to clarify I have hosted many conversations that were intensely critical of Vladimir Putin from sirohi to Steven ckin but this conversation is with a world leader speaking about another world leader during a historic opportunity for for peace crude words of disrespect while powerful May harm negotiations peace making in this situation requires compromise in order to avoid further death and suffering and I believe it requires treating the other leader with a seriousness you expect him to treat you with this is what I was pushing for all that while also putting my ego aside and letting the president shine which is necessary to accomplish both goals one and two that I mentioned previously this is also why I wanted the president to speak about Elon and Trump to extend the olive branch for further Avenues of peacemaking this is not about politics it is once again simply about peace now all of this my words my attempts were taken out of context and used to attack me by some online mobs as an example president zalinsky said in a mocking tone that he think thinks that Vladimir Putin is simply irritated by people who are alive in Ukraine and I answered quote if you believe this it will be very difficult to negotiate if you think that the president of a country is completely crazy it is really hard to come to an agreement with him you have to look at him as a serious person who loves his country and loves the people in this country and he conducts yes destructive military actions the president interrupted me at this point and said who are you talking about now who loves this country and I said Putin do you think he doesn't love his country and the president answered no again this is not a podcast conversation with a historian or activist and I somehow out of nowhere just for fun waxed poetic about Putin's or zalinsky or Trump's love of nation it is a conversation with a world leader discussing the opportunity to negotiate peace when a large number of people are dying every single day even if the heart boils over with hate leadership now requires sitting at the negotiation table and compromising this may be painful but it is necessary there are a few other places in the conversation where some online mobs took my words out of context and used them to call me naive and to call for more war saying peace is impossible with a man who they claim is the second coming of Hitler my friends if you make such attacks on this conversation it is in fact you who are naive and ignorant of The Facts of history and geopolitics peace must be made now in order for death and suffering to stop in order for Ukraine to have a chance to flourish and in order for the drums of a global war to stop beating a global war that would Humanity this was my goal once again to push for peace and I will continue this effort to the best of my ability thank you I love you all