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Is Alex Tabarrok the Most Honest Economist in Academia?: Podcast

The libertarian went looking for the reason for entrepreneurial decline. The answer he found went against everything he believed. He published the results anyway.

When George Mason University economist Alex Tabarrok went looking for the effect of regulation on declining rates of entrepreneurship, he had a pretty good idea of what he would find. A libertarian since his childhood in Canada, he figured that federal rules would be a major part of the explanation. To his surprise, that isn't what he and his co-author, Nathan Goldschlag, found. To his immense credit, he and Nathan Goldschlag published their paper, "Is regulation to blame for the decline in American entrepreneurship?"

Tabarrok, a co-founder of the immensely popular and influential economics blog Marginal Revolution, talks with Nick Gillespie about the thrill of being intellectually confounded and the importance of following data, not ideology, when it comes to academic research. He also talks about other possible reasons for the decline in entrepreneurship, what his recent stay in India taught him about real-world economics, and whether Donald Trump's presidency has been good for the economy.

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Audio production by Ian Keyser.

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  • Longtorso, Johnny||

    I thought he hosted Jeopardy.

  • Think It Through||

    Damn beat me to it.

  • Brandybuck||

    Sounds like a heretic. May we burn him?

  • Anastasia Beaverhausen||

    So where's the transcript?

  • Dick Puller, Attorney at Law||

    Doesn't matter. Interviews with economists are about as useful as interviews with astrologers. The main difference being that astrologers cause less damage, because nobody is crazy enough to take them seriously.

  • Anastasia Beaverhausen||

    Well, thanks for attempting to make that decision for me, but I'd still like to be able to read the interview on my own.

  • $park¥ leftist poser||

    To his surprise, that isn't what he and his co-author, Nathan Goldschlag, found.

    So what did they find? Was the answer that people just can't even right now?

  • Fist of Etiquette||

    A libertarian since his childhood in Canada...

    He had me then he lost me.

  • BestUsedCarSales||

    I think it's cool to finally see what Rufus is like in real life.

  • John||

    Most economists are nerds and really don't have a very good understanding of most people. They all have PHDs and have no problem understanding and following complex rules. They also have no real understanding of how complex regulations actually are. They see them in the abstract. So, they, as a rule, have no clue how daunting regulations are to the average person and how the prospect of being subject to them prevents people from even trying to start a business. They also too often forget that startups run on incredibly tight margins. So, even the smallest cost can be the difference between success and failure. Only an economist could be surprised to find out that regulation discourages entrepreneurship.

  • Snorkle||

    Except that's the opposite of what Tabarrok found.

    And is accurately reporting research findings that big of a bar to jump?

  • Iheartskeet||

    So, you just like to offer up ad hominems without, apparently, even listening to the podcast ?

    Noted.

  • vek||

    No clue what he found, because I haven't followed the links yet, and there's no transcript... I don't listen to things, I prefer to read.

    BUT as a business owner I can tell you 110% that regulations fuck up the world. I'm moving away from where I currently live almost exclusively because of over taxation and regulation. Regulations have stopped me from even attempting business ventures I cooked up in my head because I knew after red tape they wouldn't work, even though in a free market with minimal/no regulation they would. Regulations (and taxes) have slowed the growth of my businesses that I do have a lot too.

    So whatever his findings are, there IS a correlation between business formation and regulations... It just might be weaker than some have presumed. Which I can buy. For many types of businesses it just causes you to raise the price, which ultimately reduces demand, but you still end up with a market of sorts and some businesses, just fewer than there might be in that segment if it had less regulation.

  • Weigel's Cock Ring||

    Now that deep-pocketed, left-liberal, crony capitalist megadonor Jeff Bezos is on the verge of completing his full-fledged transformation from a creature of Silicon Valley to a creature of Washington, D.C., Beltway "libertarians" have suddenly discovered that they've been wrong all these decades and target federal regulations are really a good thing.

    Knock me over with a feather!!

  • John||

    If he had suddenly found that tariffs don't have a particularly negative effect on the economy, I bet he wouldn't be seen as such a "hero".

  • Iheartskeet||

    I have my problems with ReasonMag, but don't see any sympathy for regulations, either generally or in this specific podcast. I am afraid you are simply delusional.

  • Iheartskeet||

    Interesting podcast, but I don't think Tabarrok makes the regulation case convincingly. We don't know if, in the absernce of heavy regulation, innovation etc would have declined LESS than they declined. I don't think there are ways to do blinded studies in macroeconomics. Since our county is aging, its no surprise to me that there is less risk taking. I'd argue that it would be lower still with more regulation, and better with less regulation.

    The other thing is he compares industry-to-industry, but some things like health care regulation (and the way our current system drives up cost and raises the risk associated with entrepreneurship) are nation-wide, and therefore not captured.

    I think some of the explanations he offers are good ones, and I'd add one more. People may simply have wised up to the fact that most new businesses fail and are simply not good ideas. An acquaintance of mine opened a restaurant, sunk his savings in to it, and it failed. If he'd been smart, he would have realized what a crazy risk it was.

  • JFree||

    I said at the time of TARP that bailing out big indebted entities would hurt the small and non-indebted. In the same way that Japan killed itself long-term by allowing its big banks to live on as zombies. We now have a decade of bailing out the indebted via subsidized interest rates. Basically keeping the status quo entrenched and in place - in hopes of avoiding a long-overdue actual recession that creates churn/change.

    That has a huge impact on entrepreneurs. They do best with new decision-makers or new asset owners or a new generation of customers. Something new and different on the customer side. Because the new product/service is rarely so obviously innovative that it sells itself to everyone. And that subset of entrepreneurs is always able to compete in the rather limited VC/IPO type financing market. Most other entrepreneurs start out filling niches that haven't been served - and it is only new deciders who recognize that what IS isn't working as well as they want. Who become amenable to what the entrepreneur offers.

    And where on the production side, those changes also allow the entrepreneur to combine old assets in new ways because the price of them is low enough to 'experiment'. Interest rate and cost of capital subsidies are intended to keep those prices high.

  • Iheartskeet||

    That sounds plausible, and doubtless explains some of it.

    Two things:
    1) I think a lot (most ?) new businesses are rather mundane things like real estate brokerages, restaurants and other service businesses, and I doubt these are affected a whole lot by the customer base side, so much as the risks/rewards profile for the entrepreneur. Hence, our aging population and high fixed costs (health care) have a bigger effect. I also don't think many (most ?) are really innovative in the sense that you mean.

    2) We seemed to be able to generate lots of new businesses in past even without extinction-level die-offs like we would have had without TARP.

    I agree on TARP though...it preserved the wrong things, and we probably were overdue for a herd-thinning. Economically speaking.

  • Eidde||

    "Is Alex Tabarrok the Most Honest Economist in Academia?"

    Yes, he gives proper credit to whoever answers the question first.

    Or is that Alex *Trebek*?

  • EscherEnigma||

    In reminded of the article a while back about the "backlash effect".

    For this that don't remember, the "backlash effect" is (supposedly) the way folks, upon finding new information that challenges their views, dig in their heels and reject the new information as, to use a relatively new term, "fake news".

    The article was about how this effect wasn't a real thing. It was hilarious.

    Anyway, I suspect an article about regulations aren't strangling invocation will be widely accepted on face value and libertarian commentators here will drop the economic arguments re: regulations and stuck to the idealogical ones.

  • The Metonymy||

    Atlas can't shrug if he don't pick up the world in the first place.

  • LifeStrategies||

    Could the declining rates of dynamism and entrepreneurship be related to the shamefully poor performance of the government-run education system over many, many years?

    Cato's Dan Mitchell says: "More and more money gets plowed into the [educational] system but the only effect is that school systems hired more bureaucrats."

    https://danieljmitchell.wordpress.com/2018/01/21 /the-global-version-of-more-money-better-education

    Then there's the vast political correctness and political indoctrination movement which aims to stifle original thought. I recall one professor saying that his institution hires more and more people, but he has no idea what they do - although he knows they do NOT teach.

    The extra money also goes to hire ostensible educators, but actually indoctrinators, who simply brain-wash our children into learning what to think rather than how to think! They mostly teach students to believe rather than how to think for themselves. see

    www.lifestrategies.net/education

    The long-term effect of such educational policies would, I imagine, have a significant effect while the vice-like grip of the unions means incompetent teachers cannot be fired. Did this paper explore the results but not identify the causes?

  • aajax||

    No more Koch grants for Alex!

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