Capitalisn't

In his new book, "Power and Progress: Our 1000-Year Struggle Over Technology and Prosperity", renowned MIT Professor of Economics Daron Acemoglu (with co-author Simon Johnson) argues that the benefits from technological progress are shaped by the distribution of power in society. 

In this episode, Acemoglu joins Bethany and Luigi to discuss the key challenges of ensuring that this progress benefits everyone, not just the wealthy and powerful. They discuss the rules, norms, and expectations around technology governance, the unintended consequences of AI development, and how the mismanagement of property rights, especially over data, can reinforce inequality and exploitation.

Show Notes:

• In case you missed it, revisit our recent episode with David Autor, referenced in this discussion
• Revisit "Democracy and Economic Growth: New Evidence," co-authored by Daron Acemoglu, on ProMarket

On this episode, our hosts Bethany McLean and Luigi Zingales sit down with renowned MIT economist David Autor to discuss the impact of technology, labor markets, and immigration on wage inequality and the economy at large. Autor is best known for his work on the "China Shock," the impact of rising Chinese exports on manufacturing employment in the United States and Europe after China's accession to the World Trade Organization in 2001. His most recent work sheds light on which groups have seen the largest nominal wage gains during the COVID recovery, the connections between wage growth and inflation, and more. Autor discusses how advances in technology have disrupted traditional labor markets, how to make better policy choices about the future of work, and the challenges and benefits of immigration in a globalized economy.

Show Notes:

Revisit our conversation with R. Glenn Hubbard, which is referenced in the interview with David Autor

Read the Autor's paper discussed in the episode here.

It is hard to think of an idea more central to capitalism than economics, particularly economic efficiency. Similarly, public policy is now — and has been for a while — conducted in the language of budgets, models, and cost-benefit analyses. But how accountable is this idea to the public?

Elizabeth Popp Berman is a sociologist and historian of economic thought at the University of Michigan and the author of the new book "Thinking Like An Economist: How Efficiency Replaced Equality in U.S. Public Policy." In this episode, she joins Bethany and Luigi to discuss this history of economics as a pervasive influence in the halls of political power in Washington and the challenges of believing in economic models as "truth" in an increasingly complex world. Using case studies in health care, debt forgiveness, pandemic economic recovery, and beyond, the three of them debate whether there are spheres of public and political life where economics has overstepped its bounds and if it belongs there altogether.

Several questions continue to swirl around the collapse of Silicon Valley Bank and its larger implications. In this special episode, Chicago Booth’s Raghuram Rajan – former Governor of the Reserve Bank of India and IMF Chief Economist – joins Bethany and Luigi to explore the risks in the financial system and possible solutions.

Rajan discusses a paper he presented (with NYU Professor Viral Acharya) at the Federal Reserve’s Jackson Hole conference in 2022, arguing that the Fed’s liquidity provision left the financial sector more sensitive to shocks, and suggesting that the expansion and shrinkage of central bank balance sheets involves tradeoffs between monetary policy and financial stability. Together with the hosts, Rajan discusses the path forward on inflation, given economic and political pressures, and his recommendations on how to manage risks and tradeoffs.

• Link to the advertised Chicago Booth Review podcast:https://www.chicagobooth.edu/review/podcast?source=cbr-sn-cap-camp:podcast23-20230320
• Check out ProMarket's ongoing coverage of the recent banking turmoil, including a summary of Raghuram Rajan's paper and new research by Luigi, referenced towards the end of the episode, on the new dangers of ‘bank walks.’

• Read ProMarket's ongoing coverage of the Twitter Files, including the research summary of the Twitter Files prepared by Stigler Center Research Professional Utsav Gandhi in preparation for this episode
• Read the Stigler Center's 2019 Report on Digital Platforms, addressing many of the underlying issues discussed in this episode: trust and transparency in social media, business models of journalism, platform regulation when it comes to content moderation, and more.

We had initially prepared an entirely different episode for today, but last week's Silicon Valley Bank collapse, the largest in U.S. history since 2008, meant a quick change of plans.

What happened? What is unique about this bank run, and what isn't? How much should regulators be blamed, and how much should bank management be? Do social media and today's frantic digital environment mean this is the end of banking as we know it?

Luigi and Bethany talk to two experts with unique insights into the crisis: Chicago Booth Professor Douglas Diamond, who won the 2022 Nobel Prize for his decades-long work on bank runs, and Eric Rosengren, former Boston Fed President, for his view as a regulator. They discuss the factors that led to the collapse, including risky lending practices, lack of oversight, and the challenges of regulating the rapidly evolving world of banking. They also explore the broader implications of the collapse, including the impact on the broader financial system and the role of regulation in promoting financial stability.

Show Notes:

• Nobel Laureate Douglas Diamond on How the Fed Could Have Prevented SVB’s Collapse, by Brooke Fox, on ProMarket
• How Do We Avoid the Next SVB? by Chicago Booth Professor Anil Kashyap, on ProMarket

Any discussion about the costs and benefits of capitalism is incomplete without a conversation about the costs and benefits of consulting especially global consulting behemoth McKinsey & Company. The firm has consulted with over 2000 institutions — ranging from Presidents to CEOs, including 90 of the top 100 corporations worldwide, and acted as an accelerant to nearly every trend in the global economy. But, do consultants make the world a better place, or is their advice solely geared towards making their clients (and themselves) money in the short term, without regard to any potential societal damages? In recent years, the New York Times has published several exposés on McKinsey. On this episode, Bethany and Luigi speak with the Pulitzer Prize-winning investigative journalist behind those exposés, Walt Bogdanich, about his new book “When McKinsey Comes to Town: The Untold Story of McKinsey & Co., the World’s Most Controversial Management Consulting Firm” (co-authored with Michael Forsyth). Bogdanich traces the history and culture of McKinsey and some of the shocking stories he uncovered in the book. Our hosts then discuss the ethical implications of the consulting industry and the questions raised about the accountability of powerful societal institutions, including the role of business education.

Read the following articles in ProMarket:

1. There Is a Direct Line from Milton Friedman to Donald Trump's Assault on Democracy, by Martin Wolf
2. George Stigler and the Challenge of Democracy, by Anat Admati
3. Corporations Are Not “We the People,” by Geoffrey Stone
4. eBook: Milton Friedman 50 Years Later, a Reevaluation

Also, check out relevant past Capitalisn't episodes:

• Martin Wolf: Is Capitalism Killing Democracy?
• Why Capitalism Needs Democracy
• The Breaking Point Of Democracy With Morton Schapiro and Gary Morson

Read the following articles in ProMarket:

1. There Is a Direct Line from Milton Friedman to Donald Trump's Assault on Democracy, by Martin Wolf
2. George Stigler and the Challenge of Democracy, by Anat Admati
3. Corporations Are Not “We the People,” by Geoffrey Stone
4. eBook: Milton Friedman 50 Years Later, a Reevaluation

Also, check out relevant past Capitalisn't episodes:

• Why Capitalism Needs Democracy
• The Breaking Point Of Democracy With Morton Schapiro and Gary Morson

 

1. In a Wall Street Journal article about Google’s Secret ‘Project Bernanke,’ Jeff Horwitz and Keach Hagey quoted Google Chief Economist Hal Varian's answer to a question he was asked during the Stigler Center's 2019 Antitrust and Competition Conference. Watch the video excerpt here.
2. "Why Google Dominates Advertising Markets," by Dina Srinivasan, Stanford Technology Law Review, December 2019
3. Read ProMarket's ongoing coverage of Google here.