CARDIFF GARCIA, HOST:
Hey everyone. It's Cardiff. This is THE INDICATOR FROM PLANET MONEY. My compadre Stacey is on a much-deserved vacation this week, so I called economist Tyler Cowen to play another round of Overrated versus Underrated with us.
Now, this is the game where we ask our guest about something in the news or something that's on our mind - really anything. And the guest then tells us whether that thing is overrated or underrated by society. And we throw a bunch of stuff at our guest in rapid succession. It makes it really fun.
Now Tyler, as far as we know, actually invented this as a podcast game. And because he has such an eclectic mind, he's always fun to play with. So among the topics that Tyler rates in today's episode are Nobel Prizes, tariffs and economic anxiety as an explanation for the rise of populism.
Tyler also has a fascinating book, called "Stubborn Attachments," that's coming out later this month, so I saved a couple of questions about it for him as well. And all that is coming up right after the break.
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GARCIA: OK, Overrated or Underrated with Tyler Cowen. Let's get right to it. The Nobel Prize - any Nobel Prize.
TYLER COWEN: The Nobel Prize has now become overrated. It's no longer such a surprise who's going to win. You can read on blogs or on Twitter who deserves to win. You already think of them as Nobel laureates. By the time the actual announcement is made, it's really like, eh.
GARCIA: Does this apply to awards in general? Are they overrated?
COWEN: If a novel wins the Booker Prize, it was once a big positive. Now I regard it as a negative. I think that novel is probably too trendy. It had to get through a committee. Committees become more conservative. The most worthy people are picked early on, so most awards - over time, they decay in quality.
GARCIA: OK. Overrated or underrated - the damage from tariffs - the economic damage?
COWEN: I'm a complete free trader. I don't want to have any tariffs for the United States. But that said, I think the damage is somewhat overrated at the moment. President Trump is not very popular with our intellectual class. I am, myself, not a supporter. But I feel that people are being a little too dramatic about the problems that will be brought by our current trade wars.
GARCIA: OK. Overrated or underrated - economic anxiety as a potential explainer for the rise of populist sentiment across the world in the last few years?
COWEN: I think it's far overrated. To me, these are mostly cultural issues. In many countries, you have large numbers of immigrants who may be unpopular. In other cases, you have gender norms changing very rapidly, and people are rebelling against these rapid changes. It's not mainly about economics. And you see, say, in Poland, a country that's had 4 percent growth since the early '90s - they have their populist movement. They have their "alt-right." It's not mainly about economics.
And, you know, we're much better off economically than in the 1950s or '60s. And back then, we didn't have the current sort of populist movements.
GARCIA: OK. Overrated or underrated - conversations?
COWEN: Conversations are underrated, I think. If you imagine the world is changing in some critical ways and you need to catch up, that can be hard to get from books. But books are a very easy-to-control technology. We feel very comfortable reading a book if we're well-educated. Probably, we should be talking more to other smart people and actually listening.
GARCIA: OK, that's interesting, Tyler, because the reason I asked this question was that you wrote a blog post recently saying that most conversations are actually quite bad and that you should strive to end them as quickly as possible.
COWEN: That's to get to the really good ones, though, right? So it's like a power law. The best conversations are incredible. So if you're wasting your time with a conversation, you know, break off, right?
GARCIA: And I was going to say, also, that a strategy of trying to end a conversation because it's uninteresting actually might end up having the perverse effect of making the conversation itself interesting because you're introducing something unexpected by being weird or rude or aggressive or whatever.
COWEN: I don't think, you know, anyone should ever be rude. But just be weird. You know, talk about what you want to talk about. Be obsessive in certain ways. The other person will decide.
GARCIA: Yeah. And they might respond in kind, though. They might also be weird. And suddenly, you're in the middle of a fascinating conversation.
COWEN: Exactly. So people should be weirder in their conversations. That is underrated.
GARCIA: Underrated - weirdness in conversations. Overrated or underrated - the yield curve as a signal of where the economy is headed?
COWEN: Oh, it's overrated. The yield curve doesn't...
GARCIA: Oh, no.
COWEN: ...Show much very definitely. So there's an inverted yield curve, people get upset. It's like alchemy. We don't know. Recessions are hard to predict. They always will be. There's no definitive signal until a recession actually comes.
GARCIA: Until the recession actually comes. But, Tyler, it is the case that an inverted yield curve - a yield curve that, specifically, is inverted on average for at least a quarter - has predicted every recession for, like, the last few decades. And there have been no false signals. In other words, every recession has also been preceded by an inverted yield curve. That's pretty impressive. Don't you think we ought to be paying attention if that happens again?
COWEN: Well, the lags can vary. But keep in mind, there aren't that many recessions. So if you go back in time and you look for a pattern, you can always find a correlation with something, but it doesn't mean that's the right predictor next time around.
GARCIA: Fair. OK, overrated or underrated - academia as a career?
COWEN: Oh, I think it's underrated because of the personal freedom you have to shape your destiny. But what's weird is most people become academics, and then don't use that. They just become conformist. So in that sense, the career is overrated by those who do it, and maybe underrated by those who don't.
GARCIA: That's interesting. So you think there's something about going through the process that makes you sort of reluctant to embrace all of its benefits.
COWEN: It beats the life out of people. Academics don't take enough risk. You have tenure, right? And then people don't really do anything with that job security. They just keep on - same old, same old.
GARCIA: Overrated or underrated - blogs?
COWEN: Blogs have now become underrated. They were, for a while, massively overrated. People now think blogging is dead, but blogging is active in all sorts of areas, whether it be health care or how to raise your kids, or even economics. It's an economical way of presenting your thought to the world. And mostly, they're free and they're wonderful, and they will always be with us. And thank goodness for that.
GARCIA: OK. Tyler, a couple of questions about a new book that you've got coming out called "Stubborn Attachments." It's like your personal economic philosophical treatise. And it seems in there like there are two big things that are underrated and that really drive the argument. I want to ask you about those two things.
So one - our future descendants, including the people we'll never meet in like 300 years - right? - your argument is that we underrate their importance. How so?
COWEN: When future descendants or generations arrive, those experiences, those human pleasures or sufferings - they will be as real as our current day. We are, as human beings, awfully myopic with so many issues; climate change is just one obvious example. So in my book, I argue we should think much more seriously about the future.
GARCIA: It is kind of a weird thing where, you know, we have trouble applying the right discount rate to thinking about the future, but especially thinking about the very, very far future.
COWEN: You know, I also stress in the book the power of compound returns. Compound returns - you get, say, growth of 3 percent a year, 4 percent a year. And then you have growth upon growth. The power of that over decades or centuries is very much underrated. And when it comes to the future, we have the ability to apply compound returns to make the world a much, much better place.
GARCIA: In other words, policies that pursue economic growth - underrated?
COWEN: Extremely underrated. You know, any given year, you're only a little better off with a higher growth rate. But if you compound that over decades, it makes all the difference. Your economy will be two, three, five, even 10 times richer over enough time.
GARCIA: It kind of also makes it a little bit easier to reconcile what seems like a tension between pursuing economic growth and alleviating the harmful kind of side effects. But your point is that if you look at it in the really, really long term, both of those things need to be gotten right because then it's about sustainable economic growth.
COWEN: Exactly. So if you oppress people too much or ruin your own environment, after a while, your own growth is going to plummet.
And the title of the book, "Stubborn Attachments," refers to what I think should be our two stubborn attachments, namely economic growth and human rights. And if we were stubbornly attached to economic growth and human rights, the world, especially in the future, will be a much, much better place.
GARCIA: All right. Tyler Cowen, thanks, man. This was fun.
COWEN: Thank you, Cardiff.
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