Intro. [Recording date: May 20, 2025.]
Russ Roberts: Today is May 20th, 2025, and my guest is economist Noah Smith. Noah’s Substack is Noahpinion, N-O-A-H-P-I-N-I-O-N, Noahpinion. I recommended it; it’s fascinating. This is Noah’s fifth appearance on EconTalk. He was last here in August of 2024, talking about the challenge of escaping poverty. ß
Our topic for today is a recent essay that he wrote, “I owe the libertarians an apology,” which among other things is about political forces having unexpected consequences. It’s also a lesson in humility, which I deeply respect. And, I hope we’re going to grapple along the way with the power of simple economics, even when it threatens to become simplistic. Noah, welcome back to EconTalk.
Noah Smith: Thanks for having me back.
1:27
Russ Roberts: We’ve known each other for quite a while, mostly online, but occasionally we’ve met a couple of times in-person, and I’ve always been impressed that you are willing to both criticize, quote, “your team”–the people who you generally are going to agree with–but also show a rare ability to reflect on your own views. And this essay was really quite unusual in that sense, and I have tremendous respect for it. I hope we’re not going to beat you up, you and me combining to beat yourself up, with your mistakes. But, I think the intellectual journey and the insights that you have are quite interesting, regardless of where you are on the political spectrum.
I want to start with how you start your essay, which is: you’ve been in the past quite critical of libertarian thought. Why? Give us the critique as you saw it when you were writing in the past with what’s wrong with it intellectually.
Noah Smith: Right. Well, so basically I had a few critiques. I think one of them is that I read a lot of history and I have this keen sense that there’s bad actors in the world and that you need to defend yourself against them. And that if you–liberty today and liberty forever are different. I deeply value freedom as a good in and of itself. But then, the question is, how do I keep my freedom not just today, but tomorrow? And, if a conqueror, such as Tamerlane, is the example I use, is coming over the hill to conquer me, then I’ve got to be able to defend myself.
Of course, I think pretty much all but the wackiest, libertarian philosophers of history–but all the mainline ones like Robert Nozick and whoever, obviously Milton Friedman, support national defense. And, yet, if there are public goods–public production goods–that make a nation richer and better able to defend itself, then I think that you have to countenance those interferences in the economy, too, or at least some amount of them, in order to be able to defend yourself.
In other words, if industrial policy is necessary to have the peacetime manufacturing capacity to be able to surge production during wartime, like we did in World War II.
You know, World War II, of course we had defense contractors building stuff, but we didn’t have normal defense contractors. We basically took everybody from every job–like Ford just started manufacturing bombers and tanks. And then, we just–all these civilian companies surged production into defense manufacturing, because it was this giant effort to win this war against unthinkably evil people who would have destroyed us had we not been able to do that.
I think that that was, if you need to do industrial policy to keep a manufacturing base in order to be able to do that, then you do that. Because, there’s always totalitarians.
I think in the 1990s and the early 2000s we were lulled into this moment of thinking that that was over. End of history–where the totalitarians were gone. Yay, Nazis and communists left, and everybody’s just a nice, happy, peaceful capitalist now. We all have McDonald’s, and McDonald’s makes us never fight.
And, it was wrong. And even China–we opened up trade with China, and China’s going to become nice, happy, democratic, liberal, blah, blah, blah–but it didn’t work. That’s not to say we shouldn’t have opened up trade with China, but that’s another question entirely. But I’m saying, like, certainly, they are powerful, and not the nicest of guys. And, Russia is less powerful, but even meaner than them. There’s Iran, there’s all these other guys.
So, that was my first critique.
And I think the second critique was that I felt like state power was not the only kind of power in society. If the state keeps its grubby hands off everybody, then you have local bullies who can still oppress people. Before the Civil Rights Act you had restaurants, whole neighborhoods that would just say, ‘No Black people allowed.’ That’s bullying, you know. That’s power. Or churches or religious organizations that would cover up sexual assaults–you had that. That’s power, even if they’re not–there is power there. And, I think that libertarianism always under-emphasized the degree to which you need the big bully of the state to kind of countermand the little bullies; to which you need dad to say, ‘Stop beating up your sister,’ without being an abusive parent himself.
6:12
Russ Roberts: I want to talk about these first two and then you can add–I know you have a little more to say, but–
Noah Smith: Those are the main ones. I think I’m done.
Russ Roberts: Okay. We’ll go in reverse order, then. Let’s start with the first–the one you just mentioned. I accept the view that there’s coercion. I should just say, I am roughly a classical liberal. I’ve had my own changes in my own views over the last 20 years, but I’d say I’m more of a classical liberal than you are. I think that’s a safe thing to say. And, while I accept–and I think many serious economists who would describe themselves as libertarian or classical liberals would concede there’s power outside the state. They would then emphasize the ability of people to walk away–the power to exit.
You don’t have to use certain products, for example, even though they might have some market power. And I think we have to concede–our side has to concede–that in the short run there can be a lot of something unpleasant. It might not be coercion the way the state can do it, which–because it can kill you, execute you, throw you in jail, take away your house, and so on. But, there is market. There’s market power and there’s social power, the social forces that you’re talking about as well. The church, for example, and its tolerance of the certain scandals hurt itself. It did pay a price; but it didn’t disappear at all.
Russ Roberts: Similarly, the people who said Google is now going to rule the world, because: we have to have search, and they’ve managed to embed search and our need for search into everything; and we’re the customer. And that was somewhat worrisome. We’ve done a ton of episodes on that. All of a sudden AI [artificial intelligence] comes along and there’s competition in that space that was unimagined a few years ago, and it’s remarkably competitive.
When the AI started, ChatGPT [Generative Pre-trained Transformer] started, I thought, ‘Oh my gosh, the amount’–and people said this, and I don’t know how it got solved, maybe you know, but–‘the amount of capital it’s going to take to create an AI going through all the data in the world, it’s going to mean that only a handful of places will have it, and they can exploit us.’ All of a sudden, there’s–I have five different ones on my computer. It’s kind of amazing. It’s–you know, they’re losing money. It will get more expensive, probably. It may get cheaper because of technology improving it, but it’s–all of a sudden Google’s market powers suddenly much diminished.
And then you can debate whether those of us who are skeptical of government intervention into market power, whether we’re right, because, ‘See, competition does come along.’ Or you could say, ‘Well, it takes a long time and it’s pretty uneven, and along the way it’s pretty unpleasant.’
So, that’s the only thing–that’s my footnote to what you said.
And, on the first point about–I want to say one thing about industrial policy and see what you think. Kind of an interesting thing that the United States in the post-World War II era is the bulwark against tyranny around the world. Of course, it’s not the only thing it cares about. It’s not perfectly kind. It’s not run by benevolent dictators who are trying to save the world for freedom. But, there are good things that come from United States being strong. It’s not just about defending itself, your point, and–
Noah Smith: Global public goods, if you will.
Russ Roberts: Say that again?
Noah Smith: Global public goods–
Russ Roberts: Correct. And, I will have some negative things to say, I’m sure, about economic policy in the Trump Administration. But it’s striking to me that one of his themes is how the world has been a free rider on certain aspects of American exceptionalism–I would say pharmaceutical innovation, national defense. He’s certainly been outspoken in his desire for nations outside the United States to pay, quote, “their fair share.” And, it’s an interesting question of whether the United States needs to maintain industrial capacity for the kind of war that you’re worrying about; and other nations–but the other nations don’t have to because they could just rely, they can free ride on the United States. That’s a fascinating aspect of this. But, the other point I would just make is–
Noah Smith: Oh, I never said that.
Russ Roberts: I know you didn’t. I’m adding it.
Noah Smith: I wasn’t saying–in fact, when I talked about the need to defend yourself, I did not even mention the United States.
Russ Roberts: Well, I was having them in mind and I was thinking–
Noah Smith: I was thinking maybe Poland.
Russ Roberts: Say again?
Noah Smith: Certainly Poland.
Russ Roberts: What about Poland?
Noah Smith: Poland is on the front lines against Russia–
Russ Roberts: True–
Noah Smith: They know that if Ukraine falls, they’re next on the menu. They certainly are amping up GDP [Gross Domestic Product], defense spending, to 5% of GDP, 6%. It’s like they’re really going all in on defending themselves. And, I think that that’s–in a perfect world where you wouldn’t have to do that; but they do.
Russ Roberts: Well, a perfect world where people weren’t bad actors.
Russ Roberts: But, my point is simply that Poland could buy defense capacity from those who can produce it, who are friendly–and there usually are such nations–they could import it. But, it’s an interesting question of how many nations in the world need to be had their own industrial capacity versus a manufacturing ability versus relying on, say, the Big Brother of the United States.
A big issue for Israel right now, where I’m sitting: Israel has historically relied, you might say, on the United States. It’s not quite true. There was a long period of time where Israel relied on France. Only got weapons and airplanes from France. They got some weapons of [?] 1948 from Czechoslovakia, from the Soviet Union. But now the United States is its main supplier of military technology. And, given the pressure the United States has put on Israel in the Gaza War, many people here in–Netanyahu recently said, explicitly–‘United States: Israel needs to wean itself from its dependence on U.S. military technology.’ And that’s costly, to develop your own when you could buy it. But, if you’re worried you won’t be able to buy it or it comes with strings, it’s understandable that you might–
Noah Smith: Israel has done a very large amount of interference in its economy for the purpose of maintaining and expanding a defense industrial base in order to be able to defend itself.
Russ Roberts: Yeah, but it’s an interesting–the challenge with that argument is that it has a lot of applications that are, I would call bootlegger-and-Baptist applications. That have a strong self-interested component.
Example here that’s fascinating is that not many people live up in the northern part of Israel by the Lebanese border. So, there’s a policy here in Israel of keeping out eggs–eggs, eggs, chickens, chicken eggs–from foreign countries. The argument is: that way, the chicken farmers who tend to be in this northern region will be a bulwark against an invasion from Lebanon. And so we have securing of the northern border. Many Israelis have told that to me: ‘That’s a good policy, keeping out foreign eggs, because it makes sure that there’s population up in the north where people otherwise wouldn’t be so willing to live.’ Well, making eggs expensive for poor people in Israel doesn’t strike me as the best way to get people to live up by the northern border. I don’t think–
Noah Smith: That’s really a very bootlegged–
Russ Roberts: Yeah. Anyway.
So, do you want to add anything else that’s wrong with libertarianism?
Noah Smith: No, no. I think those are my initial critiques.
I mean, I think that there’s the standard welfarist critique of, like, if you have a perfectly free economy where poor people just starve, then maybe you want to give them–tax the rich–to give them some food.
You know, or other stuff. There’s the welfarist argument, like, poor people need that dollar more than rich people do. But of course, taking it from rich people requires distorting your economy. So, it has negative effects. And so, it opens leaky bucket is the idea right there, and you’ve got to balance the corrosive effect of economic distortions with the utilitarian welfare effect of giving stuff to poor people.
And I think you don’t see an advanced economy that doesn’t give a lot of stuff to poor people, really. I think the closest was Hong Kong, but it wasn’t really independent. And they would have if they could have.
But, you know, Singapore certainly rates highest on economic freedom. Singapore will give you a house, man–you get a house, you get one house, a government house. And they’re great. They’re great government houses, and the government officially owns all the land, although it’s more like condo kind of situation. But, yeah, so then Singapore will give you a house; and then that house becomes your pension when you resell it.
So, yeah: like, every society that gets to choose, chooses this. They choose welfarism. And they choose to take some from the rich and give some to the poor. Now, they make many different choices. If you’re Denmark, you do a hell of a lot of redistribution. And, if you’re Singapore, you do less. If you’re South Korea, you do less. And so, societies make different choices, and that’s fine. But I think that, you know, the sort of relentless drive to eliminate the welfare state that you saw from some people back in the day, I think was misguided: that, I think that by now most people have agreed that a welfare state is something we’re always going to have to some degree.
16:18
Russ Roberts: So, I’ve written quite a bit on the potential of private charity to solve that problem. I understand it’s not going to be nearly as large.
I think what’s interesting about the discussion of the welfare state is the nature of it. And, why it’s so complex, say, in the United States, as opposed to being replaced by a simple negative income tax: Just give people money. That’s a whole–maybe down the road you and I could have a conversation focusing on that. I think it’d be interesting.
But you’re right: Most cultures and societies use the power of government to put a floor under people’s wellbeing. They differ in how high the floor is. And I’m really only making the side-point that they also make some other strange choices: not just the size of the welfare state, but how it’s structured. And, some of that is presumably inertia and other inexplicable things. But, some may be political forces that are different across countries.
Noah Smith: Sometimes–you know, a lot of times the people will demand some kind of, like, in-kind provision from the government, like with healthcare. They’ll really want that. Like, and then, not every country in the world has government-provided health insurance, but I would say that of rich countries more than half do. And so, people, kind of, they really want that.
And then, you have Kenneth Arrow who is just sitting there. He’s a mathematical economist and whatever. He can talk to you about Pareto efficiency. And he just writes this paper about healthcare, and he is like, ‘Look, people want government to do this, man. They want it.’
Russ Roberts: Well, that’s, again, that’s a whole other Pandora’s box I’m not going to completely open–
Noah Smith: Smartest economist in the world you see shrugs. He’s like, look: Norms, people would expect this. And then, like, at some point, like, I can’t say that countries where the government does health insurance is terrible. All it can do–you know, because not. All I can do is say, ‘Look, you know, I’ve seen how Japan and Korea do this, and I’ve seen how Canada does this, and the Japanese way is better than the Canadian way.’
Russ Roberts: Yeah and I would say having friends in England and living here in Israel–both of which have large public intervention in healthcare, as does the United States–I would just add very important, people somehow seem to think it’s a private market for healthcare.
Noah Smith: We have the worst of both worlds.
Russ Roberts: Yeah. We’ll put that to the side.
But, the point I want to make is that I have, having lived here for four years and having good friends who’ve lived in England for longer, I would much rather be at the mercy of the Israeli healthcare system. So, it’s related to my point about welfare. The general economist simplified: The government should have a role in this.
The devil is in the details. And, there are ways of doing it that are very different, even though they’re both–government is very much involved in both Israel and in the United Kingdom.
19:16
Russ Roberts: Let’s–what changed for you? This article is a–you say, ‘I owe Libertarians an apology.’ What has happened in the world that has made you reconsider your critique? And, of course, I don’t think you’ve reconsidered the critique, but you missed something. What is it?
Noah Smith: Right. The critiques were fine as far as they went. But then, I think that in choosing to just focus on bashing libertarianism for so long, I ignored the good that libertarianism was doing under the surface in our society that I didn’t see.
I was thinking, honestly, too much on the margin. And I think in economics we teach marginal thinking as the way to analyze problems. And, I think it’s a great descriptive analysis of how people think. And, it is a great descriptive analysis of how I thought when I–because I was thinking, ‘From where our society is now, should we get a little more libertarianism or a little less?’ And, I was thinking, ‘Here’s some things I’d like to do with a little less.’
What I didn’t think about was the inframarginal part, the submerged bottom of the iceberg. The inframarginal effect–so, what happens when you have a large change in society. And, I didn’t really think about large change. I thought America is so good, why would you want to bring in some crazy, orange-skinned, like, guy who just does mercurial policies that destroy the economy for no reason? I didn’t think people would want that. And, I was wrong.
Russ Roberts: Yeah. I started our conversation by saying, we’re going to try to avoid ad hominem and stick with policy. But okay, I’ll let you get away with that one.
Noah Smith: Oh, no, Trump’s policies are not bad because his skin is orange.
Russ Roberts: Yeah. That’s all.
Noah Smith: If an orange-skinned man does great policies, I will sing the praise of spray tans. So, it was neither here nor there. I was merely identifying him in a humorous way.
But, no, I didn’t think people would go for that. I didn’t think we’d see some of the social upheavals and some of the policy upheavals that we’ve seen in the last decade in America. I did not expect it. I had no frame of reference to expect it, because I was young. And I didn’t see the 1970s. And I didn’t see Nixon. And, to me, I was like, ‘Ah, Nixon, big deal. He did some crimes. He resigned because of crime, whatever.’ I didn’t realize how close he came to going all in on what his advisors were advising him to do, which is basically declare himself a dictator. You know, like–Roger Stone was telling him to do that, right? The same guy who advised Trump.
Russ Roberts: I don’t think it was anything close. They may have advised that, I don’t know what that was, or he may have advised–
Noah Smith: They advised him to do it, and he refused. He was basically, like, ‘I’m not a dictator.’
Russ Roberts: And, I’m not particularly interested in how authoritarian Trump is. I am interested in–as we’ve talked a little bit; well, we might come back to it–but I think the question of the destruction of norms that constrain people in power in America until, I don’t know, it’s hard to say when it started. For me, it’s been mostly a slow erosion, and with Trump it’s become a much faster erosion. There’s a willingness of Trump–but there was a willingness in his predecessors as well–to skip this nasty, annoying thing called democracy or representative government or republican–republic, the republic that we’re in. You need to get things done. And, you heard this on about the Left and the Right, right?
My favorite example is Thomas Friedman, the, you know, the Times columnist, said, ‘Wouldn’t it be great if we could just be China for a day?’ Meaning: we wouldn’t have to do this checks and balances, and get a majority in both the House or the Senate, and override vetoes, etc., etc. And, I thought that was a really horrible idea.
Noah Smith: Did you see this under Obama?
Russ Roberts: Sure. Obama used executive orders, so did Biden, so did Bush. I mean, it’s a very tempting to–
Noah Smith: But they used less than presidents in the past.
Russ Roberts: Say again?
Noah Smith: They used fewer than presidents in the past.
Russ Roberts: Oh, that may be–
Noah Smith: Executive orders.
Russ Roberts: I’m not here to evaluate–I’m not saying this one was better than that one. I’m not saying this was a steady–
Noah Smith: Oh, I’m just saying, I don’t feel that I lived most of my life under creeping authoritarianism. I thought that the biggest–
Russ Roberts: I’m talking about two different things. We’re talking about two different things–
Noah Smith: the post-9/11 security state was concerning.
Russ Roberts: Yeah, I agree. But this is–we’re talking about two different things here. I’m going to make a distinction between creeping authoritarianism–which ignores some of the constitutional protections that you and I value–versus cutting political corners because it’s just a lot easier. They’re related, I don’t deny the–
Noah Smith: Give us an example of the latter.
Russ Roberts: Say again?
Noah Smith: So, that I know what you mean: What’s an example of the latter–of cutting political corners?
Russ Roberts: Tariffs. Let’s just have an executive order. Now, as we talked about recently with Doug Irwin, I think we got the history of this on that episode–
Noah Smith: Well, Biden’s student debt relief didn’t go through Congress at all. He just decided it.
Russ Roberts: Yeah.
Russ Roberts: And, those didn’t impress me. I didn’t feel like, ‘Oh my gosh, the state’s going to run–I’m at risk of losing my civil rights.’ It just was: ‘It’s annoying. Let’s just get it done.’ To go through the normal channels.
25:04
Russ Roberts: Okay. So, what’s interesting to me about what you just said is: I continue to argue–maybe I’ll change my mind at some point–but I continue to argue that Trump is more of an effect than a cause. Of course, he’s also a cause. But, when you said, ‘I never could have imagined people wanting this’–that didn’t happen in a vacuum. Right?
A lot of what we’re going to be talking about over the next half hour is how political forces–as economists, the way you and I look at political forces is kind of related. Right? Things change; that causes other changes.
And then, the famous question of–I keep forgetting whether it’s Thomas Sowell or George Singer[?]–‘And then, what?’
So, it’s one thing to say, ‘I want this.’ ‘Well, okay? fine. That might be good. And then, what?’
And so, what’s happened in the United States clearly is a remarkable change in the competitive political landscape where Republicans sound like the Democrats of five years ago–eight years ago, 10 years ago. And, the Democrats sound like the Republicans.
I mean, it’s just inexplicable. Not inexplicable, but a crazy set of political forces. People trying to exploit political opportunity the way in markets a company might look for a profit opportunity. We’re talking about political actors exploiting profit opportunities in the political marketplace. That’s the way I look at it.
Noah Smith: Yeah. I mean, I think that’s right.
Yeah. So what I didn’t understand, I think, was the political economy of libertarianism. I went to–I lived in Japan, you know. And I read about other countries, but I lived in Japan, and I saw the Right–the Political Right in Japan–was something much different than what the Political Right was in America. In America the Political Right, when I was young for my entire youth up until 2015, 1916, was broadly libertarian in its outlook. It was Reaganesque. You know? Reagan is the first President that I ever can remember. And, Reaganism sort of ruled the Right for all those years.
But, that was different. In Japan, the Right was corporatist. It was protectionist, it was corporatist, it was for heavy interference in the economy. And then, what it focused on in cultural issues was also different. But, I guess the point is, I didn’t realize how special it was to have a Conservative Movement that focused on economic liberty as one of its core pillars.
Then, how unusual and how weird that was, and how, you know, like, in France or in, you know, how in Germany or in Russia or in India, that wasn’t what it meant to be on the Right, on the Political Right. And I didn’t understand how unique and special that was for America and how important that was.
Russ Roberts: It’s a fantastic insight. And, it’s obviously true here in Israel. The Right is welfarist. The Right wants to support the ultra-Orthodox on welfare. It’s the Progressives who want free markets and high-tech flourishing and who like capitalism. They also are redistributive to some extent, but not necessarily the ultra-Orthodox who are subsidized often to learn in Yeshivas rather than in the marketplace. But, I think that’s a tremendous insight.
28:45
Russ Roberts: I just want to ask one piece of that, probe one piece of that, which I used to be sort of one of my pet peeves. You said it was Reaganesque. I want to put the emphasis on the ‘esque’. But it’s–Reagan, himself, was Reaganesque. He would talk about free markets, and he was broadly sympathetic to market forces. But, he would also put quotas on Japanese cars. And, you could say, ‘Well, that was just one small thing.’ And, in the overall picture, it was relatively small. It was a smallish intervention against free trade.
But, I do think the Republican Party, if we consider them the representatives of conservatism–which you have to, over the last 40 years, going back to Reagan, 50 years even–their devotion to markets was really rhetorical rather than in practice. And, one of the things that frustrates me, and I’ve written a long essay on it, and you’ve written recently on it as well, is that the idea that we lived in some kind of free-market paradise–from a libertarian perspective–and then all of a sudden it got ruined, is a lie. It’s not what America was like.
Noah Smith: It was a bit of hype.
Russ Roberts: Yeah, it was a bit of hype. So, I just want to put that in there.
But, what I accept is: That rhetoric was a very important part of the conservative movement. And, within the conservative movement, even though the main conservative actors–like Reagan, Bush, the successful ones, and even the failed ones like Romney, McCain less so–they would at least pay lip service to free-market rhetoric. And, the reason they did, by the way, is because they sort of believed in it, but not too much. The reason was, is there were viable, important, influential members of their coalition who felt very strongly about it–Jack Kemp being an example in the history of things, and many, many others.
So, the little digression I want to make now is: What happened to that? Why do you think that wing of the Republican Party suddenly became irrelevant? Which it is.
Noah Smith: I think that the short answer is immigration.
Russ Roberts: Yes. Well said.
Noah Smith: The short answer is that if you look at Reagan, he was the biggest supporter of immigration. And, it was one of his central issues, and it was one thing that made him palatable to liberals. And, it was one thing we could all agree on for a while.
You know, when I was a kid–you know, like, in the 1990s people were concerned about illegal immigration. But, in the 1980s no one cared. Like, no one cared about immigration at all. And then, in the 1990s, like, some people started to care; and you saw Pat Buchanan, you saw efforts to restrict welfare, which Clinton did actually in 1996. The Personal Responsibility and Work, blah, blah, blah, Act–whatever that was–welfare form, that also kicked all immigrants–not just illegal immigrants–off most forms of Federal welfare. Not all actually, but most. And so you saw that. And that went a lot farther than Prop 87 had in California.
Russ Roberts: Explain what Prop 87 is.
Noah Smith: Oh, it was this thing that Pete Wilson tried to do, the Republican Governor of California. He supported this, like, ballot initiative to, like, strip illegal immigrants of, like, all state welfare benefits.
And it failed. And it got Latinos really mad at the Republican Party. And so, it led to the death of the Republican Party in California, because Latinos started voting really strongly Democrat after that.
But then, Clinton comes along and does, like, something 10 times more severe at the national level, because it includes legal immigrants, too.
And then it, like–Federal welfare is more important, I guess, in many ways.
And then, Democrats don’t even get punished at all. And so–because it’s part of this larger thing. And, framed as this personal responsibility thing instead of this anti-Latino backlash, right?
Anyway, so then we go back to not caring about immigration for a while. But, we’re on the clock at that point. Anger is building up among the anti-immigrant people. And they haven’t been a majority of America. I think even now, a majority of America is pro-immigration. Even though a majority of America wants to stop the sort of disorderly, chaotic, asylum flood: they don’t like that Biden allowed that.
They want democratic control over who gets in. They want to have a border. They want to have a nation that says, ‘You may get in; you may not.’
But then, in terms of thinking that kicking people out is purifying our country and we need to defend Western civilization because these people are polluting Western civilization, that’s a minority of Americans. That’s not a big–and they know it. They know it’s a minority. But yet, it was perhaps at least a temporary majority of the Republican Party and the Conservative Movement; eventually, that’s what libertarians–libertarians were, too, were not sufficiently focused on the tribalism that a lot of the grassroots people on the Right demanded–
Russ Roberts: That’s a great insight.
Noah Smith: I think that’s what ultimately factored in.
34:07
Russ Roberts: That’s a great insight. I talked–it hasn’t come out yet, but I recently taped a monologue for EconTalk, that’s out now when this is being aired–a conversation where I talked about how in maybe 2015 or so as Trump was coming on the rise, as Trump’s on the rise, economic policy issues just suddenly became less important. Fiscal policy–who cares? Monetary policy–nobody cares. We went from a world where Alan Greenspan was the most powerful American and the most talked-about American to where I think most people don’t know who the Chair of the–I would guess a much smaller proportion of the American people know who the current Chair of the Federal Reserve is. But, that’s just an example of how we went from, ‘It’s the economy, stupid,’ which was James Carville’s portrayal of the 1990s political fight, to, ‘What does it mean to be an American?’
And, all of a sudden the economic policy issues that were the bread and butter of, I would say 30 years–1970s, 1980s, and 1990s–suddenly became, not just less important: irrelevant. No one wants to hear about Okun’s leaky bucket. And, you can google that and we’ll put a link-up to it. No one wants to care about, ‘Oh, well, welfare policies can increase these distortions.’ They only want to talk about, overwhelmingly: What does it mean to be an American? What’s our narrative? It’s a backlash against immigration. It’s a backlash in the Republican Party against the DEI [Diversity, Equity, and Inclusion] and Woke aspects of the cultural revolution of the early part of the 21st century. And those are the only things that get the oxygen. Everything else is irrelevant.
So, the advocates of market-oriented economic policy, they don’t get any airtime. Not because it’s a conspiracy. No one’s interested in it. And that change is, I think, partly what’s explaining what you’re writing about.
Noah Smith: Yup, I think that’s exactly right. Yes. And I think that issues of identity were important to people in ways that libertarian philosophy has essentially no way to deal with.
Russ Roberts: Yeah. Nothing to say about it.
Noah Smith: Nothing to say. Like, Milton Friedman just never talked about it. He never talks about identity.
Russ Roberts: I’d say less than nothing–
Noah Smith: Not that I’ve seen–
Russ Roberts: Less than nothing, because I have many, many friends in what we will call the libertarian movement or even the classical liberal movement. They don’t really like national borders. They don’t really like–it’s not just that they’re free traders, they also believe in the free flow of human beings. Bryan Caplan is the most outspoken on this, who says, ‘This is the way to make the world better. Let’s get rid of borders. Borders are artificial.’
And yet, that totally misread, in my view–and Bryan will be back on the program sometime in the future; he can defend himself–but, that totally misread the way people feel about where they live. And, we see it’s not just in the United States: it’s in England, it’s in Brexit, it’s in all kinds of countries now that have moved to the right–whatever that means.
And, what I would emphasize is, other than Malay and Argentina, moving to the right has nothing to do with free-market economic policies. It has to do with closing borders, preserving what is perceived to be, whether it’s right or wrong, a national identity. And, having a narrative about your country and where you live that makes you feel like you belong.
Noah Smith: Right. I think that’s right. Yeah. And so, of course, I don’t think that the Right has a good approach to that. But, I also don’t think that the Left necessarily has a good approach to that, either. And–yeah.
I have a question for you.
38:16
Russ Roberts: Yeah?
Noah Smith: I know you’re interviewing me, but I have a question for you, which is–
Russ Roberts: It’s okay. I love it when my guests turn the tables.
Noah Smith: Of all leaders, of all leaders in America–in American history–that you know of, who had the best approach to American identity?
Russ Roberts: You know, this is not my field, so I probably should not say anything. But I’ll take a stab at it, since you were so kind to ask me a question.
I think for most of American history it wasn’t the issue that it is now. Because, among the people who mattered politically–and that was mostly White people and White men–the narrative was pretty–there was a consensus about the narrative. And, what happened is that as non-white people got more political power in the United States–rightfully so–and non-men more political power, that narrative got a little harder to believe. There was a certain idealism about the United States. Somewhat earned. It’s an exceptionally great country relative to the alternatives. But, it’s not perfect. It’s deeply flawed. The way it treated Native Americans is horrifying. The way it treated Black people, horrifying. Could debate about Jews, gays–not a great story. It’s not as bad as the others, but it’s not great.
So, America had an ideal that it struggled to live up to, but you could argue increasingly got closer to that ideal over time.
And so, the narrative got richer. It allowed other people to believe in it–in principle, right? In theory. That’s evidently not so easy. And, I think the thing that fell apart in the 21st century for America–and we face similar issues here in Israel; they’re just different, they have different names–but the question is: When you have a diverse country–and America is extremely diverse, and it’s had a huge amount of immigration; it has lots of people of different races, it has lots of different religions, unlike say, many, many European countries that until recently were just very much more homogeneous–once you have that diversity, what’s your narrative? Who are we? What does it mean to belong, to be an American?
And, we’ve had different answers. Americans had different answers to that question. And, I don’t think there is one now that is remotely satisfying to the bulk of the people.
And, that’s the problem for me. And, it’s also, again, why free-market, libertarian stuff is out of fashion. It was never in big fashion, but it’s off the table. And, it’s because, as you point out, they don’t have much to say about it.
Noah Smith: Right. I think that’s right. So, where do we go from here?
Russ Roberts: What’s your answer to that? About narrative? Which leader, which–?
Noah Smith: Franklin Delano Roosevelt. Which, you know, I mean, his answer in terms of his rhetoric and the idea of American identity that he urged on people did not always fit the actions of his Administration, such as when they in interned a bunch of Japanese people. You know? So, I can’t say that his actual actions were ideal. Certainly that was really bad.
Russ Roberts: And he was the beneficiary of coming after a Depression and a World War where Western civilization was actually at stake. And, that made his ability to pull people together–it came easier. Not everybody liked him. Not everybody agreed with him. But he had a huge consensus; he won four terms in a row.
And, similarly, Reagan, I think, exploited the economic failures of the Carter years and then the Cold War to do a similar thing. Even though many people hated his guts, a non-trivial amount. Especially after he was gone, people were able to say–and he was dead–‘You know, he kind of, America was more,–‘ fill-in-the-blank. And, maybe you need external enemies and crisis to do that kind of more consensus narrative.
Noah Smith: Maybe so. But, you need leadership, too, because I think that we have had four singular figures in America who had the chance–singular leaders in America who had a chance to define what America would be like for the next era. For decades, let’s say–not centuries but decades, each. Who got a choice–who had a major crisis, and then also lots of popularity at the same time. George Washington, Abraham Lincoln, Franklin Delano Roosevelt [FDR], and Ronald Reagan.
And, those four people, they were able to choose what America would be. And, they didn’t always–there were lots of things to criticize about all of their choices. I mean, you know, like, George Washington chose an America, basically left the South alone to do slavery. Abraham Lincoln chose an America that focused so much on putting the Civil War behind it that it ignored a whole lot of other problems that started building up. You know, FDR, you could argue was too statused. And then, Reagan ignored these problems of identity. And yet, I think that they all overall chose well. I do not–I mean, yes, I know that the America that Reagan chose wasn’t perfect. And, economically speaking, too, I think there were mistakes that were made. Although, I think that Clinton attempting to steal Reagan’s thunder and triangulate made more of those mistakes than Reagan himself. I mean, it was Clinton who hollowed out the U.S. defense industrial base, not Reagan. Reagan would never.
Anyway, so that was that; but I think that Reagan made the American Right into a broadly liberal Right. And, not liberal in the American sense of Left liberal–
Russ Roberts: Freedom-oriented.
Russ Roberts: The original meaning of the word–
Noah Smith: A classical liberal Right. And, that was a very special, unusual thing that arguably only Britain had, other than us. And, even they didn’t do it as well as we did. They were a little hokier. But then, maybe, like, Milei, Argentina with Milei has this. But it’s rare. It’s very rare to have this kind of Right Wing. And, we did under Reagan. People do not remember, but they should read Rick Perlstein books. There were KKK [Ku Klux Klan] people who cheered for Reagan. They actually tricked Reagan into doing some speech on some famous southern KKK important day in some town. Anyway–and then KKK, people would show up to his rally. People would show up to Reagan rallies with swastikas. People are like, ‘Oh my God, there’s swastikas at this Unite the Right rally for Trump.’
People showed up to Reagan rallies with big swastika flags, and they were, like, ‘Okay, get the cameras away from that.’ And, Reagan himself was horrified and was basically like, ‘What?’ He was not even from the South. And, when he would go to the South, there would be these overt classic racists who would come out and support him. And, he would be like, ‘No, I don’t want those guys.’ And then, his advisor would be, like, ‘We have to not say anything, because it’s part of our coalition.’ And, he would just be, like, ‘Okay, well, I don’t want those guys in my coalition.’ But, Reagan forced the Right to be more oriented toward freedom–
Russ Roberts: Yeah. No, for sure–
Noah Smith: than it constitutionally or naturally would have been.
And then, it was in other countries, and that was a major accomplishment. FDR made the Left much more capitalist than otherwise would have been. And, he–you know, like, complain all you want about the New Deal State, but the America in the post-war years was pretty capitalist.
Russ Roberts: Well, and also we also, there were a lot of voices who wanted us to endorse Fascism in the 1930s. They didn’t want the New Deal. They wanted Mussolini and Hitler’s state control of industry. And so, in many ways, he was, again, a force against that.
Noah Smith: Yes. And, there’s a really interesting book called American Midnight about how America had been going in a more authoritarian direction since the end of the Civil War. And then, in the 1920–after World War I that dramatic–oh sorry, during World War I it dramatically accelerated. Woodrow Wilson–
Russ Roberts: Oh, yeah–
Noah Smith: accelerated–Woodrow Wilson controlled the press. He passed–Woodrow Wilson basically declared himself in charge of the entire media and censored the entire American media. And, the Supreme Court later struck it down, but it was press controls of a type that are utterly unimaginable today. And, he said, ‘It’s for war, and so I’m going to just decide what you can and can’t say.’ And, what he did was he covered up the Spanish flu. He said, ‘No one in America, no newspaper is allowed to write about the Spanish flu.’ And so, more people died. People couldn’t, like social distance or whatever they had to do. And so, a lot of people died. And then, a significantly larger percentage of the American population died than from COVID, from Spanish flu. And, one reason was because they wouldn’t let the information get out.
Anyway, we had the KKK marching in Washington, taking over whole towns and sometimes whole states. We had all this crazy stuff in the 1920s, we were–and then overt Nazis in America. You had Douglas MacArthur constantly talking about military coups and stuff. You had–America was sliding toward authoritarianism. And the 1930s would have provided a good impetus to slide–you talked about how the 1930s helped FDR. Well, yes, they did, but they also helped Hitler. They helped Mussolini. And, the 1930s gave rise to authoritarianism in every country–arguably every country–except ours, and maybe Britain. But, every country went more authoritarian as a response to the Depression. Except for us: we became more respectful–freedom and diversity, and a lot of the ideas of diversity that got repurposed for Woke stuff. And, people complain, everyone complains about that.
But, those ideas came from FDR. FDR was a–he created this idea–not him personally, but people in his administration–created this idea of the rainbow mosaic of America and how we’re all Americans, but we all also have our identities that we like. And, they created the term Chinese-American. And, I think the idea that ‘I’m fully Chinese, but I’m fully American.’ Of course, they did this for foreign–so they could support the Chinese Nationalists against the Communists. Sorry, that was Truman, not FDR.
But FDR and Truman, these New Deal guys created a vision of American identity that worked for a long time. And, it has been put under strain. But, if we went back to that, we would be a great nation again.
Russ Roberts: Yeah, I think it’s going to be harder to put that genie–I don’t know what the right metaphor is, but–
Noah Smith: Back in the bottle? I don’t know. I don’t know about that. Because I think he did. I think we didn’t have that sense of identity before FDR.
50:09
Russ Roberts: So, that argument–let me give you two versions, two different explanations; and then I want to move on to economic, Econ 101. And, I think you have some interesting observations, and I would add something to it.
You mentioned we had four singular leaders. America had four singular leaders–George Washington, Abraham Lincoln, FDR, and Reagan–over the life of the country so far. And, I think people would disagree with you about authoritarianism and FDR. But, let’s put that to the side. I want to give you two different theories of these four people and see where you stand.
One view says they were exceptional leaders. They were exceptional human beings. We can make a long list of what’s exceptional about all four of them. Reagan would be the one that I think people would struggle to accept. I think he was consistently underestimated, both intellectually and as a political genius.
And, Trump similarly is, I think, greatly underestimated as a political genius. That he has managed to get himself elected twice–he would say three times–but, that he’s won two national elections is a tribute to how skilled he is, as I mentioned earlier, at seeing an opportunity that no one else saw. No one else saw and it didn’t seem plausible.
But so, let’s put–I want to include Reagan. Let’s accept that these four people–Washington, Lincoln, FDR, and Reagan–were political, intellectual, whatever you would call them, exceptional and great leaders.
Russ Roberts: How much of that was who they were–America just got lucky that a great leader rose to the top? Versus: They lived in times of such crisis–the Founding of the country; the Civil War, the South versus the North, before the war and during the war; the Great Depression; and then the Cold War and the economic malaise of stagflation that Reagan confronted? That’s all. They just had that. Because of those external crises they were able to do things that other people couldn’t have done. And, it was that. That’s why we recognized them as great, not because they were inherently great. They were adequate. But, the crisis is what has enhanced our view of them, not so much the people themselves. What do you think?
Noah Smith: I think that the crisis is what enables greatness. But, the crisis does not confer greatness. And, I refute it by pointing out Adolf Hitler, and Joseph Stalin, and Vladimir Lenin, and Kaiser Wilhelm, Eric Ludendorff, and those guys. And, some guys in Japan, whose names you might not know, but they were there. And then, Pol Pot, Mao Zedong, and all these guys. And, people who–Augusto Pinochet: I don’t know, you can say, ‘Well, Pinochet is not the worst dictator in history.’ No, but it kind of sucks.
Russ Roberts: But, what’s your point about this list? What are you saying?
Noah Smith: My point with this list is these people all came to power in the middle of crises that tapped them on the shoulder and said, ‘It creates[?] crisis time. You need to rise to this crisis. It’s time for greatness.’ And, they were singular individuals, but they chose poorly.
Russ Roberts: They chose darkness.
Noah Smith: They got history. The crisis gave them a choice to choose what their nation would be. And, all those people I named chose poorly. And, the thing about the four people I named was that, by and large, they chose well– [More to come, 54:21]
