As the former chief economist for The New York Stock Exchange, a longtime economics editor at Barron's, and author of Econospinning: How to Read Between the Lines When the Media Manipulate the Numbers, Gene Epstein has been locked in an intellectual battle with Keynesians and big-government conservatives for decades.
He remains a fixture of the New York libertarian scene as the co-founder and moderator of the Soho Forum, a monthly debate series designed to hash out pressing issues among libertarians and their ideological opponents on the left and the right. A devotee of the Austrian School of economics who has called Murray Rothbard his "intellectual mentor," Epstein is also an associate of the Ludwig von Mises Institute in Auburn, Alabama.
Reason's Nick Gillespie spoke with Epstein about the curious lack of inflation (so far), why he thinks Donald Trump is a "lunatic" on free trade, how military spending is ruinous to the economy, possible solutions for native workers displaced by immigrants, and whether the general public is more economically literate than in generations past.
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This is a rush transcript. Please check for accuracy.
Nick Gillespie: Hi. I'm Nick Gillespie, and this is the Reason podcast. Please subscribe to us at iTunes, and rate and review us while you're there. Today I'm talking with Gene Epstein, who's been writing about economics, the Austrian School, and libertarian ideas for decades at Barron's and in books such as Econospinning: How to Read Between the Lines When the Media Manipulate the Numbers. We're going to talk with him today about Donald Trump's economic policy, the Soho Forum, a New York-based monthly debate forum that he cofounded, and the general state of the media, especially as it relates to understanding and explaining economics to the general public.
After a quarter century at Barron's, Gene has been bought out and is moving on to a new phase of his career, and we'll see if that's reflective of a larger trend away from really incisive and knowledgeable commentary to something else. Gene Epstein, thanks for talking with Reason.
Gene Epstein: Nick, it's a pleasure to be back with my favorite podcast interviewer, the guy who listens, engages, argues, and if he interrupts you, it's almost always for a good reason.
Gillespie: Ah, well, you're full of it, but I don't see how this can … It can only go down from here. But, let's start talking about Donald Trump first off. I mean, you … You've been writing professionally for what, like 40 years, something like that?
Epstein: Yeah, I guess you could say that. Although, well basically you might say I was new to journalism. I'd been a senior economist for the New York Stock Exchange's studies. I joined Barron's in February of 1992, before a lot of your listeners were born, so it's been a long time. That's 26 years.
Gillespie: Yeah. And, what does an economist at the New York Stock Exchange do?
Epstein: Oh, well, it was a really cushy job for many years, before new management came in and fired me from that job. We did studies of the economy, to sort of enhance the prestige of the New York Stock Exchange. And there were aspects, probably not worth going into, aspects of those studies that I didn't like, so I actually publish articles under the pseudonym Winston Smith–
Gillespie: Oh my gosh. The last man, yeah.
Epstein: What was that?
Gillespie: It was the last man.
Epstein: Had a lot of time on the job.
Gillespie: Did you ever … I mean, Winston Smith is the protagonist in 1984 by George Orwell, so it's a pretty obvious pseudonym. Was it openly pseudonymous, your articles, and what would be a typical Winston Smith essay?
Epstein: What was I writing at the time? Well, what I was trying to write at the time was that the problem with investment was not so much that investment was inadequate, it was actually quite adequate. The problem with investment was that entrepreneurship was getting squashed, and that was not really put forward in the New York Stock Exchange studies that I was a part of. I was making my point clear to my colleagues … I was actually publishing in Challenge Magazine, I think it's defunct, under Winston Smith.
And by the way, in the year 1984, when I was doing it, the novel 1984 became a bestseller, so it was then that people knew where I got the pseudonym from. One of the funniest moments was, I made my feelings clear to my colleagues about how we're really suppressing the crucial point about investment, about unleashing entrepreneurship. One of my colleagues read the Winston Smith article, and recommended it to me, as an article I would strongly agree with, not knowing that I myself had written it.
Gillespie: Oh my gosh. So, what was the … Well, let's talk about Trump's economic policy, but before we get to that, so in 1984, you know, it's Reagan, it's morning in America, he's running, the economy has turned around. Did Reagan's policies, or one of Reagan's policies unleashed entrepreneurship in your estimation, or did it never really get to that?
Epstein: Well, no, it helped. No, it definitely helped, but really, the only real achievement that I would handle Ray again was that he gave the Federal Reserve chairman, Paul Volker, who I gave very low grades to recently, but at the time, Paul Volker had a green light under Reagan to break the back of the inflation that was going to double digits, and that could climb into triple digits. So, Volker broke the back of the inflation. It did lead to a serious recession, but he stayed the course. And, that did indeed, certainly make it possible, and there's no way for entrepreneurship, certainly for new business, to function easily in an environment where inflation is running 10, 12 percent, and could indeed, if left unchecked, have climbed into the 30, 40 percent region. So, really that's it. For Reagan, he's an endless discussion, but by and large that was his achievement.
Gillespie: Can I ask, with Volker, I mean, one of the ways that he's credited with killing inflation is by allowing interest rates to rise, or stoking–
Epstein: Well, allowing … yeah, basically he pulled off a bait and switch. You know what he actually did was he told Congress that he would not talk at the interest rate anymore, he'd only talk at the money supply, but actually of course, he hiked the said funds rate to 22 percent, unimaginable. That's what he did, yeah.
Gillespie: So, that squeezes inflation out, because it gets rid of cheap money, but how does that help entrepreneurs exactly? Because it also makes investment capital so much more expensive. I mean, when you're borrowing money to start a business, or investors, they're going to demand so much more in return. How does that work to help entrepreneurs?
Epstein: Well, of course 22 percent obviously kills the small business. That's exactly what did happen. It killed like half of the economy, but I mean, so to speak, didn't kill it, it killed a good part of the economy so that we did have, and hurt, of course, some large business. But, the point is that you did need to do that, and then set the stage afterwards for this inflation, for lower inflation. The point is that small business cannot function in an environment of double digit inflation, because it's not just prices they charge that are going to the moon, it's prices they pay.
Small, startup businesses cannot function in an environment where the spreads between the one and the other are so volatile, and so unreliable. So again, understand that that's not just price inflation, it's the cost of the factors of production labor as well that is way too rocky for small business to function.
Gillespie: And so in a lot of ways it's the volatility that … I mean, obviously inflation is, you know, and Hayek and Mises talked about this based on their experience in interwar Germany and whatnot. I mean, inflation is a true debilitating factor when it's high and sustained. But, you get rid of inflation, you get rid of volatility, you get rid of the, you know, kind of the lack of predictability in the economy, and that sets the stage then for a true economic expansion and recovery, which we did get.
Epstein: Yes. To put an even finer point on it though, bondholders were blindsided by the inflation that started in the 70s, but going into the late 70s, they were over anticipating. So, the cost of borrowing was exceeding the prices you might be able to charge if you're going to launch a business. So indeed, I'm sort of saying the squeeze is already beginning to be solved. But, you basically have it right, it's the rocky shoals. So, by 83, 84, 85, the recession ended in late 82, there was a slow restoration of a reasonably rational economy, and that helped greatly. I credit Reagan with that.
Gillespie: Yeah. So, and I know a few years ago when we interviewed him about it, Robert Samuelson, the Washington Post journalist, columnist, wrote a book called The Great …
Epstein: Pretty good book, The Great Inflation.
Gillespie: Yeah, about the great inflation and its aftermath. In there, it's kind of taken for granted. He gives a lot of credit, as you do, to Reagan, not so much for anything else other than giving Volkor cover to squeeze, you know, squeeze inflation out of the economy. How certain was it that, okay, letting interest rates go up, or jacking them up would actually squeeze inflation out? You know, one of the things that it seems now, we're in a period where any pretense to knowledge on the part of macroeconomists seems to be out the window. Did these guys all know somehow that, you know, letting interest rates go up … I can remember days of, you know, high double digit mortgage rates, I can remember my parents in the 80s paying, you know, 21 or more percent on credit cards, and things like that. I mean, was it a foregone conclusion that a sustained period of high interest rates would actually break inflation's back, or were they kind of bullshitting and just hoping for the best?
Epstein: Okay. Well, yeah, it's a good question. Robert Samuelson did write an admiral book by the way, although in a way what you're going after really was the only weakness in Robert Samuelson's book, which is that he credits, you know, he sort of thinks that they were all well-intentioned, and they were in power hungry. He tells too benign a story about what the economists were really doing, and how Keynesian economist. He doesn't even put a fine point on the fact that Keynesian economists brought about the inflation, which is a story in itself.
But, to get to your question, I'd have to think about it. Obviously that is what happened in retrospect, so that's a cheap answer on my part, but certainly, again, 22 percent on the short-term interest rate, that's obviously going to squeeze … And then what was happening, I guess another way to put it is that, why the inflation was such a danger is that it was feeding on itself, that expectations that had finally stayed at … It was actually, by the way, Ludwig von Mises, my Austrian thinker, to whom I swear, had it right, that there are different stages of an inflation. Prices go up, and business and consumers think, 'Well, let's not by now, prices will go down.' Prices continue to go up, and they realize, 'Well, I think we better by now, prices are going to continue to go up.'
Then, the third stage is, 'Buy anything, for Christ's sake, because everything's going up,' the panic ensues. So, that was what was happening. But then, if you come along and you suddenly have interest rates at 22 percent, then an awful lot of suppliers are just sort of cut from the market, and you realize that it's almost impossible now to plan and advance, because the interest rates are so high, so that you therefore just cut those expectations. That's probably a glib answer on my part, but it did happen, and I think that it wasn't too surprising if you think about it, when suddenly the cost of capital is 22 percent.
Gillespie: But now, you know, and I like to think, you know, in hyper-inflationary scenarios, the thing to do is to always buy wheelbarrows. To buy, own, and rent wheelbarrows, you can never go broke.
Epstein: Not gold, but wheelbarrows. Okay, that's the Nick Gillespie recommendation.
Gillespie: That's right, always buy wheelbarrows, yeah. So, what is going on now? We had a massive expansion after the 80s, and now though, in the 21st century, and starting in the postwar era in the 60s I guess, inflation started creeping up, and then economic growth was generally robust. Then, we had high unemployment, and high inflation, and low economic growth, and you know, and stagflation took over. Now, we're in this. Where the economy is more or less expanding, but at a very slow rate. You know, in the 21st century, it's a very low state of economic growth.
We have a shit ton of free money, and reduced price money floating around between the Fed, as well as the fiscal policy of the United States, which is just borrowing between 20 and 40 percent in a given year of what it's spending. There's just so much money being pumped into the system, and yet interest rates are effectively zero. What is making sense of this? And then, once I hear your wisdom on that, let's talk about if Trump is doing anything right or wrong.
Gillespie: But I mean, are we in a post … You know, macroeconomics is always kind of suspicious, but I mean, have we lost the ability to explain what's happening in the large economy?
Epstein: Well, I don't think so. No. I will try to answer your questions. I do think, and of course the last time you interviewed me, I mentioned this as well, I do think that the Fraser/Cato Economic Freedom Index accounts for a lot of it. I want to correct you on one point. I guess you were implying that actual capital investment is down, I think you are implying that. That is not true. It's belied by the Bureau of Economic Analysis numbers. Capital investment as a share of GDP for example is quite robust.
But, it gets back to the same thing I was saying under the pseudonym Winston Smith, which is that what was suffering at the time was entrepreneurship, that the quality of capital investment, you could have a lot of investment, you can have Soviet style notion, that just invest again, and there's no problem, but where's the quality of that investment? While we do obviously have innovative sections of the economy, the Economic Freedom Index seems to be telling us that we're not getting the bang for the buck. Of course, that's also measured in low growth of productivity.
And so, I blame the decline in the Economic Freedom Index, the increase in, and of course, this is going to segue nicely into a Trump question, the increase in regulation for example. That is a problem. Credit markets have been … Dodd-Frank has definitely since the Great Recession–
Gillespie: And before that, was Sarbanes-Oxley also earlier?
Epstein: Yes indeed. I was about to mention that. So, all of those things have been happening. We had a slowdown in growth under George W. Bush, coincidence, was actually a bigger decline in the Economic Freedom Index, and then the expansion since '09 has been even slower. Although, by the way, it does get some marks for longevity, which is kind of interesting. I want to mention one point about inflation, which is that the end of the Cold War, starting of course at the fall of the Berlin Wall, in 1989–
Gillespie: Let's correct … Can we correct it? The Berlin Wall didn't fall, it was pushed. Like they used to say about Humpty Dumpty, it was pushed. But yeah, there really was a piece dividend, where you know, we were able to, and George H. W. Bush actually talked about that, and ran on it, and he started cutting defense spending, as did, you know, that continued under Bill Clinton, and Newt Gingrich, who never wanted to talk about it, but that's how they trimmed government spending, was by stopping …
And, what would you say that military defense spending, and government spending in general, but certainly defense spending is a classic example of where, you know, Keynesians of the right or the left will talk about military spending as some kind of multiplier, or accelerator of the economy, but really it's wasted money that doesn't really end up creating anything of economic value for the most part.
Epstein: No, it is indeed. But, I want to go back to one point, Nick, about what I meant about the end of the Cold War. You put your finger on about, you know, 20 percent of the story. The 80 percent of the story was that the end of the Cold War basically started the ball rolling for an integrated global economy. Cheap labor and trade with the Eastern Bloc, that had been under the thumb of the Soviet Union, the rise of free markets in Russia, in China brought maybe, what, a billion people into the labor market as cheap labor, Walmart moves into China.
The integration of the global economy, and essentially boiling down to the availability of cheap labor, and also because of the potential for the disinflation, not just of cheap labor, but of global trade was a powerful disinflationary effect. So, it was primarily that, in terms of the integration of the world, which started with the end of the Cold War. That's essentially it.
Gillespie: Yeah, is that a one-off gain though?
Epstein: Oh, yeah.
Gillespie: And then after that gets absorbed, and we essentially trade tariffs for all of the talk about the TPP, and all of that kind of stuff.
Gillespie: I mean, trade barriers are as low as they've basically ever been, certainly in modern times, and probably in human history.
Epstein: This inflationary, yes.
Gillespie: But, have we squeezed all of the energy, and all of the productivity out of that, and then later, in the late 90s and early 2000s, we did have the shift to computer technology and network computers. Have we squeezed that out, and are we just at a, you know, are we waiting for the next big technological or structural breakthrough, or you know, and until we have that, we're going to be motoring along at, you know, zero, to one, or maybe if we're lucky, two percent economic growth in the developed world? I mean, oh what needs to happen to …
You know, and you talk about stuff like Dodd-Frank, and Sarbanes-Oxley, regulatory regimes, as well as a loss of economic freedom. Will it be enough to simply kind of restore economic freedom, and what are some of the policies that would lead to a restoration of economic freedom?
Epstein: Yeah, no, I want to answer that question, that last question that you asked, but I do want to, opine that, that indeed while the disinflationary effects of the exploitation of billions of cheap workers, of global integration are so to speak a one-off, I do think that one-off is still in process, that it is continuing, and that the entrepreneurial potential from India, China, Vietnam, the Eastern Bloc, even Russia, all of that I think is continuing to happen. The push on the part of American multinationals to invest abroad, the competition that's coming in from abroad, all of that I think is continuing to happen.
I recently predicted, actually in line with, of all people, Alan Greenspan, that the inflationary problem will really erupt about 15 to 20 years from now. About 2030, 13 years from now approximately. I think then the one off will have been played out, and the debt of the US government will be simultaneously exploding, and there, maybe inflation will explode before then, other things can happen, but I believe that the stage is set about 13 years from now, in 2030, for inflation to really erupt. So, I don't think that that process is obviously slow to happen, happens gradually, and I don't think that the disinflationary effects of the globalization are completely played out by any means.
But, getting to your question, of course, we do need … You know, it's death by a thousand cuts. We do need various reforms and rollbacks of regulation, and it's very, you know, I mean, some people had reasoned, others, even to some degree the Wall Street Journal are covering the sort of granular events that are taking place at various agencies under Trump. I mean that's, you know, Trump's economic policies are indeed, obviously, the good, the bad, and the ugly, and he seems to be on the one hand undermining the free market at the same time that he's helping it, and it's difficult to know at this point where it's going to net out.
Of course, when you read that deregulatory initiatives are taking place in the agencies, that's good to know, but unfortunately I wish I knew, in answer to your question, to what extent are they actually tangible, meaningful, and it's a little difficult to tell at this point.
Gillespie: If you had Trump's ear, and you could whisper, and you know, he would actually follow, what would be your first order of business to successfully or meaningfully either deregulate the economy, or … And we're going to talk about the Austrian School. I mean, you put entrepreneurs and economic innovators at the very center of kind of human enterprise more broadly than just economic activity, but what would be your one policy suggestion that Trump should follow?
Epstein: Well, if it's only going to be one, Nick, then obviously it's got to be trying to teach him about the basics of free international trade. He's obviously a lunatic on the subject, and you know, he's citing NAFTA, and you know, our only hope is that … I mean, he talks about how, you know, NAFTA will have a five year, you know, what is it, it has to be renewed every few years. I mean, does it occur to him as a businessman that if you have a NAFTA agreement that could be reversed in a few years, even that compromise, that how is a multinational going to plan to invest abroad if they know that NAFTA could dissolve in a few years? I mean, that's just sheer insanity, and you can't let it go.
Gillespie: Let me play devil's advocate now, now you're just talking like a coastal globalist, because you want cheap stuff. Yeah, you want cheap carp or something, you know carp nuggets from China …
Epstein: Cheap wheelbarrows? I'm sorry, what I want?
Gillespie: Yeah, carp, fish, I don't know. You know, whatever fish they grow in China.
Epstein: Oh, carp.
Gillespie: Yeah, but you know, it's kill the American economy. That's why we don't have people working in the, you know, participating in the labor pool anymore. What is the case to be made, I mean, not from a libertarian dogma, that free trade is good trade … What were the gains from NAFTA? What were the gains from the integration of a global economy? Of trade, as well as free movement of people as well, as well is capital, and goods, and services?
Epstein: Well, I guess this gets back to, and maybe I'll throw in sort of aspects of another question. When people ask me, is the consumer price index, or the personal consumption or labor, are they overstated or understated, I say, 'Well, there's reasons for believing that the price index is understated.' However, the fact is that the absolute Walmart revolution, which is overwhelmingly enriched, Walmart being the biggest poverty fighter of the past 20 years, overwhelmingly enriched people of limited means, is all dependent on global trade.
The supply chains that we're speaking of, where manufacturing by the way is that it's peaked domestically, in the US, but essentially it consists of finishing the products, of the high-end finishing, because all of the parts come in from abroad. Come in from Mexico to some degree, also come in from China. And so cars, not just carp, and not just that cheap shot of yours, Nick, has to be exposed as a cheap shot, just go to Walmart, and ask yourself why those prices are so low. And by the way, the Walmart revolution was not captured in the consumer price index for funny, technical reasons.
So, all of that enrichment that people of limited means feel as consumers is unstated, and overlooked, and that's the reason why global trade disproportionately benefits the lower half of the population in terms of income. And so, that's what we need to hold onto, and that presumably is what Trump's constituency also wants to hold onto. Now, they're a little confused, and so our only hope is that business that does depend on these supply chains, and does benefit from free trade is going to pressure Trump to back off about this stupidity on his part.
Gillespie: How does immigration play into that? Because along with, you know, hating foreign goods, he also seems to really have a dislike for foreign people. Is immigration as important? Is it more important, is it less important, is it all part of the same problem?
Epstein: Well, that's a good question. I mean, I guess I'd have to agree that the only, I mean, the interesting thing about immigration is that apart from the blowhards who bloviate about it, who don't really study this … Any bona fide economist on the subject of immigration, like George Borjas, who's my favorite example, a Harvard economist who ironically is a Cuban immigrant, came here when he was nine years old and florist, he's been the biggest critic of open immigration. He doesn't want anymore Cubans in, just him and others, but nobody else.
But, even he and others who agree with him, sophisticated economists, they do agree that immigration substantially benefits the overall economy, but the only argument they have is that it hurts receivers of lower income. So there, they may have a talking point, but of course, there are fixes for that. You know, we can help low income receivers in different ways, who by and large, even they can exceed, people of lower income, they basically just get hurt from, you know, they get dislodged from their jobs just by robots, just by automation, not really by immigration.
But, you're right of course, that obviously importing people to work here, and importing goods, you could put that in the same essay. It's essentially the same topic. But of course, obviously, the immigrants … But of course, with respect to its effects on low income earners, even that of course is an area for debate, and whether it really hurts low income earners in the long run is very, very dubious. But conceivably there is some, because obviously they're competing with the unskilled immigrants. By and large of course, as you know, the immigrants who come into the country are not the not the high-skilled HBV1 Visa people, but the poor people of the world who are semiskilled.
And of course, we're not supposed to think, since we're told that we're Americans first, and screw the rest of the world, we're not supposed to think that it's good that poor immigrants come into this country, and see an enormous boost in their income as a result. And of course, I can't think that way, being the grandson of immigrants. You know, I do think it's been wonderful for the world.
Gillespie: You know, one of the … You mentioned Ludwig von Mises earlier as kind of your intellectual lodestar. You know, Mises was, you know, the quintessential this cosmopolitan, and he was interested in, you know, not in denying that there are different regions in the world that have different customs and traditions, but he was very much of a globalist, and an internationalist, and he believed that, you know, ideas, and people, and goods, and services should be able to move around freely around the globe, and that that enhances peace and prosperity.
You're following very much in those footsteps, how do you convince somebody who is saying, 'No, you know what, we gave you guys, internationalists, we gave you globalists free reign, and look at what has happened now. We live in a country where we're getting our asses kicked in foreign countries by war, by military, by rag heads chanting, "Allahu Akbar," you know, the Isis fighters, where we're losing economic power to China, and to Russia, and even to Mexico.' How do you convert people from nationalists to globalists? And I think we agree, that being a globalist is better.
Epstein: Yes. Of course, there is a strong … It's an interesting strain among libertarians. Certainly, I know that, you know, my favorite libertarians, of course, you Reason people, just tend to be sort of knee-jerk globalists, and of course, I applaud that. Somehow or other, you know, you can become a flag-waving nationalist, even though of course I know some free market people who are just pure nationalists. 'What's in it for Americans?' And, 'Who cares if starving people come here and get jobs,' it doesn't give us any pleasure to observe that.
But certainly, powerful arguments can be made to the nationalists, those people who are, you know, who put America first, that global trade and even immigration is usually beneficial, because certainly anybody whose income is in the top half of the population, probably even in the top two thirds, they will most probably even, may even have first-hand experience of benefiting from immigrant labor, not infrequently from illegal immigrant labor. So, they must know that.
I think an argument, and on top of that of course, the global supply chains that enable us to buy cheap goods, were unambiguously it's probably in the Trump voter, since the Trump voters disproportionately is in the lower half of the population, benefits from that. So, that argument can be made, you know, that appeals to their selfish instincts. And then, of course, when I write articles about free trade, and I get letters from people who lost their job, and who blame it on competition, or on immigrants, of course they write me, you know, they're pretty angry, and there's very little that I can say to them, except of course to sympathize with them, and to tell them, you know, I kept getting fired from various jobs, and struggled to find another job, and you know, 'Just hang in there.'
And of course, we have to say to Trump that what he's got to do is make it possible for people who lose jobs to find other jobs. Various ways you can do that is, for example, to deregulate restrictive licensure, to make it possible for people to become beauticians without going to school, or to become morticians without having to go to school. You know, just on-the-job training. You know, I would even say of course, since I'm an extremist about that, while of course I want to see doctors and lawyers get certified, you know, because that's important in any complex economy, we like to know, 'Were you certified by this person, certified by that person?' But, there should be no restrictive licensure on any level, so that we can enhance job mobility.
What's been happening over the last 10, 20 years is just more of the same. People lose their jobs. You know, if half of the population was on the farm, and moved to factories, and then the factory jobs are going the way of farming, and now people are moving to new jobs, but in an economy with insatiable wants, labor is always scarce, the scarcest resource of all. There are more than enough jobs, as long as you don't prevent the free market economy's ability to make it possible for labor to move where the jobs are.
So, that's the ultimate solution, I guess you would have to educate people about the benefits of labor mobility. You know, of course when you hear people, you know, tell you that people can't be expected to move from where they live in order to take other jobs, then of course you're throwing up your hands. You just can't imagine what's happened to self reliance. Then, of course, we also have to take on the housing problem. We have to be able to instruct Trump and others, and in all the states that the reason why people moved to Texas is because of the zoning laws and other restrictions on building housing are practically nonexistent or loose, and that's where the affordable housing is.
You have to start telling those people who push affordable housing that in order to make housing more affordable, government has to do a lot less, rather than a lot more, and once government does a lot less, housing in all areas of the country will become affordable again. So, I guess that's my agenda, Nick.
Gillespie: Okay. No, no, it's small, and it's humble, you know, like yourself, Gene, and I think it's doable in like, you know, two or three months. It is fascinating to me, the idea, you know, and I was just in England at a conference, and I was speaking on a panel that was titled 'The Rust Belt and the Deplorables,' and it was talking about, you know, Hillary Clinton obviously referred to Trump's followers as a basket of deplorables, but a lot of focus was given to the Rust Belt. You know, the old industrial Midwest and Northeast.
And when people say, you know, 'We've got to bring jobs back to upstate New York, we've got to bring jobs back to northern Wisconsin, and the upper Peninsula of Michigan,' it's like, you know, a lot of these places didn't have jobs, or they haven't had them for years. You know, and I don't mean to sound cold about it, but it's like, the jobs are never coming back, and people have to move to where the jobs are. And of course, that's happening.
The industrial Midwest, postindustrial Midwest is a place that people are leaving in relatively high numbers and percentages for places like Texas, and Florida, and states that seem to have lower regulation, and hence kind of more robust job opportunities, cheaper housing, lower costs of living. And we may be witnessing, you know, the end of the kind of New York, California model of governance, where you have a high-tax state, which you know, and high regulation, and a high level of promised government services for one that is lower. And of course, then those states get fat and lazy, or happy, and they start jacking up rates, and then people flow back to other areas. So, it's kind of like a organic–
Epstein: Yes, although you touch a button … Basically, of course, you're right, but of course with two provisos that those who think that zoning restrictions, and smart growth, and all the rest are good should recognize how it jacks up the cost of housing for people who want to move to the area to get jobs. But secondly, when you mentioned up in New York, you know, Governor Cuomo solution was bring gambling to upper New York, I guess more or less, whereas if he'd only submit fracking, and the oil reserves in upstate New York would provide some decent jobs that would pay well for people if he'd only allow what's been happening in Pennsylvania, the rural Pennsylvania, the boom in oil production, which of course has been just a totally inspiring a series of events, that the price of oil is now down to 50 bucks, and we probably will never see triple digit oil again, because of those entrepreneurs who are known as frackers.
Gillespie: Right. And yeah, you know, and we've effectively achieved a long sought for, and possibly erroneously sought for, but the goal of an energy independent America. It came about not because of solar energy or anything.
Epstein: We basically have North American independence and that, if Canada, US, and Mexico were cut off from the rest of the world, essentially they could live on just the oil. Because obviously Canada and Mexico are huge exporters, and so it balances out. So essentially, North American independence is already here because of the frackers, and to some degree by the way, because of deep water, as well as oil sands in Canada.
Gillespie: Well, and it's fascinating that the energy revolution, you know, which obviously, you know, we have record low energy prices, which help power a lot of economic activity, but it's often times seen as a bad thing, because it's deflationary, and it seems that a lot of people like inflation, because it at least seems to make things like we're growing, and we're getting richer or something.
Epstein: Oh God, yes, indeed. Of course, obviously, that's a very sick attitude. Growing economies should see … You know, a Misesian would say, and by the way, you mentioned that point about Mises, of course he was an Ashkenazi Jew, very smart guy, and he was a wandering Jew, because of the Nazis. So, I just wanted to point a fine point on his history. The irony is that he fled to New York because the Nazis, he left Austria for Switzerland, and then came to the US at the age of 59, and then spread the word in New York among the other guy whom I highly respect. And even you admitted that Murray Rothbard's book For a New Liberty, was a major reading event in your life, if I heard you correctly.
Gillespie: Oh, absolutely. Yeah, absolutely. If I had read it five years earlier, I would've become a Rothbardian. Of that, I'm almost certain.
Epstein: I see. So, it was five years too late. We'll have to work that out. I don't know why the five years makes such a difference. But, you know, you don't have to be a pure Rothbardian. You know, he was an anarcho-capitalist. But anyway, go ahead, what else were you going to say?
Gillespie: Well, let's, you know, talking about Mises and Rothbard, you know, and particularly Mises put a lot of … He was a rational man, man of the Enlightenment, but also somebody who understood that argumentation and life is not simply about winning arguments based on logical reasoning. You have cofounded the Soho Forum, which is a monthly debate program, and you had me on about a year ago, talking about Trump just before the election, where I had a memorable debate with Walter Block, who is certainly a protégé of Murray Rothbard himself, and we had quite a spirited debate. But, what is the Soho forum, why did it come about, and what are you hoping to achieve with it?
Epstein: Well, I did think that it would be important to set up a forum in which mainly I could get progressives to debate free market people, and libertarians on issues of the day. To some degree of course, I would have internecine battles between libertarians, and I did between you and Walter block, because I also wanted to …
Gillespie: The topic of our debate, it's an Oxford style debate, but the resolution was 'should Libertarians should vote for Donald Trump,' or something along those lines.
Epstein: Yes, yes. In the actual style of course, is the before and after voting, where the audience votes for, against, or undecided on the resolution, and then after the debate votes again, and so part of the game is whoever moves the needle wins the debate. And, I had also felt that one-on-one debates would be good, because then people could speak in paragraphs, and not in soundbites. Each person gets 12 minutes, you know, there is enough time at least to have some kind of intellectual sprint over the issue, and I was very pleased to find that I was getting …
And I went to the great man, Donald Smith, who is a ribbed libertarian, who has a few bucks, and he decided he would give it a try, and give me some backing once I could assure him that I could bring it in for under $100,000 a year, since Don washes every nickel, and I don't blame him for that. So, I started it downtown, and people started showing up. In fact, the crowds we were getting were so huge, of sign-ups, that we decided to charge for tickets, $18 for most people, $10 for students. You know, when people pay a few bucks, and they say they'll show up, it's amazing what 18 bucks can do. They actually do show up, so we could plan on our crowds in a theater that seats 200 people.
Gillespie: Yeah, and you're pretty much selling out. You're selling out most of the debates. It's a wonderful scene.
Epstein: Yeah, and we want to move to … The next debate, which is going to be with Don Bordereau, who is with a guy named Rick Manning, on free trade, and the resolution is going to read, 'The US government should unilaterally abolish all tariffs and duties on imports, and all subsidies to exports.' So again, the word unilaterally is a unitarian point, because it basically means that while NAFTA and TPP are good ideas, steps in the right direction, we libertarians of course believe that all trade agreements should read, maybe be five words long, 'Anything goes with respect to free trade.' No restrictions.
Gillespie: And no subsidies, that's a huge deal. You know, on the part of the US government, no Import-Export Bank, no subsidizing of cigarettes, and cheese being sold overseas.
Epstein: Precisely. Yes, indeed, and that's in the resolution as well. Don Bordereau actually challenged Rick Manning, president of Americans For Limited Government, on this. I said, 'Well, guys, you want to have it down south, in Fairfax, Virginia. Why not come north to the Madison Square Garden libertarian debate at the Soho forum,' and they agreed to do that.
Gillespie: And Don Bordereau, of course, is the former chair of the George Mason Economics Department, longtime writer, thinker, academic of libertarian causes, broadly defined.
Epstein: And also, that's indeed right, he's at George Mason. He does a blog called Cafe Hayek, which is very good, and then his special niche is he writes these missives, these letters to the editor, and challenges other people. Beautifully crafted stuff, which I very much enjoy. Often very funny, and reminiscent of the great Frederic Bastiat, the French guy who wrote satirical pieces on the free market circa, you know, 1830, 1840, back in France.
The next move for the civil forum is to try to get more global with our debates. I believe that we should be getting, at least for the next debate, a video feed, and we're going to feed into the Bastiat clubs. Bastiat clubs both in this country and national, and we're going to have them watch us on their feet, on the video feed, and possibly vote as well.
Gillespie: I can add to that, you know, that the Soho forum is now partnering with the Reason, or whether Reason is pardoning with the Soho forum, and will be running a live stream. When is the Bordereau and Rick Manning debate?
Epstein: It's going to be Monday, November 13th. Go into Sohoforum.org to get tickets. Of course, partnering well indeed, of course we're basically Whole Foods to your Amazon. You've taken us over, and we love every minute of it.
Gillespie: Not at all, not at all, taking it over, but this is in onshlush. It's just a friendly coming together of, you know, of people with similar goals and ideas.
Epstein: But, it's a big challenge. Go on, yes.
Gillespie: Oh, I was just going to say. I mean, having been to a number of the Soho Forums, which are held in the subculture theater in the East Village, just off of Broadway, just off of Bleecker Street, I mean, or on Bleecker Street. It is just an electrifying environment at atmosphere, and you know, the times that I've gone there, I've met people who are longtime hard-core libertarians, you know, that are fascinating and interesting, and the conversation is tremendous. The debates, which Gene moderates expertly, the way they're framed, and the way they're conducted is just, you know, you can learn a lifetime of knowledge in a couple of hours, and a wonderful environment. So, kudos on all that.
Epstein: Let me add, that the subculture theater, where we have these debates is 45 Bleecker Street, has a bar, and has enough space for a party, and probably key people come for the food, which my wife Hisako loves to prepare. I know that Don Smith makes a beeline for the food plate, the food table. So again, before and after, we have a party, and the debaters normally stick around to talk to the audience, so it's both a debate and a party.
Gillespie: Let me put a terrible turn of phrase on this, as delicious as your wife's food is, which it really is, the real feast is the debate itself.
Epstein: That's beautifully put.
Gillespie: People will be able to livestream, watch on a livestream, and actually even ask questions remotely as well. But, having said that, you know, the event itself is something that is just a wonder to behold. It's so exciting, and it makes me feel good about somebody who grew up in the New York area, and would read about, you know, the intellectual ferment of the 20s, 30s, 40s, 50s, 60s, you know, 70s even, and then it's like when I got to New York in the 80s as a young man, it seems like all of that was in the past. The Soho Forum really brings so much of that back. It's just very exciting.
Epstein: Well, thank you. Yeah, indeed, and coming to the Soho forum means that, you know, you can drink some wine with people, and get to know people. I'd like to see jobs, romances, all kinds of things, friendships ensuing from the Soho Forum …
Gillespie: Fistfights, gunplay, you know, the whole shebang right? Chandeliers swinging, that type of thing, right?
Epstein: The challenge at the Soho Forum, which you know, my labor of love is to make sure the content is good. I actually, over the past few months, I basically nag, and nudge, and kivitz with the debaters, to try to get them good, to try to prepare them, so that they will be at their best. I do a debate every year. I did a debate last year at the Soho Forum, and I'm doing another one in January. I do one a year of my own. I'm going to take on Yaron Brook, of the Ayn Rand Institute, who will defend the resolution, 'Selfishness is a virtue.' Of course, the reverse of the famous Ayn Rand book, The Virtue of Selfishness. He's going to take the affirmative about selfishness being a virtue, I will take the negative about selfishness being a virtue, and that should be entertaining.
But, my point though is that the real challenge at the Soho Forum is to get progressives, get, you know, or whatever you want to call them, left-leaning people to come debate libertarians at the Soho Forum. Many of them chicken out. I tried to get Nancy McLain, who wrote Democracy in Chains, to come. I offered her a ridiculous sum of money, and she refused to step into the arena. I shouldn't, and perhaps it's unkind to mention her. You might make allowances to some of these people who chicken out. My tendency is to think that, you know, they are baloney, and I don't want to get caught up in public by meeting some of our debaters, but I guess it's possible that even the Harvard economist who turned me down, who made up the most lame excuses for not showing up at a debate I proposed, that perhaps he just isn't good in a debate format, and didn't want to come for that reason, even though I suspect not.
But, I do pray, and I do have a high regard for a lot of the progressive-leaning people who have been willing to come to the Soho Forum, to take on libertarians–
Gillespie: And certainly, you show them, I mean, you pick smart people, and you do encourage them … I mean, what I love about it is that, and again, you know, I can read libertarian arguments online all day. I can write them, you know, and it's like what is really special is that you do bring out great representatives of different points of view, and you have them give their best case. That's how we learn, right? There are things that are clearly askew with libertarian thinking, or understanding of the world, and so, you know, we don't gain by having fake debates, or low energy and low intellect debate.
Epstein: That's right, that's right.
Gillespie: I want to move into, you know, again, go to the Soho Forum. Google it, go to Sohoforum.org, and you can get ticket information.
Gillespie: TheSohoforum.org. Let's talk briefly, before we run out of time, about the state of media. Now, obviously you have had an incredible run at Barron's, which is one of the highest, you know, both in terms of price, but also in terms of quality, of investment information, and kind of analyzing and explaining the economics of the world to its readers. You've been there for 26 years, you recently accepted a buyout.
Do you worry, when you think about your time at the New York Stock Exchange, and your time at Barron's, you know, and we're looking at a long period of time now, is the understanding of the economics, of the economy, is it at a high point, or is it at a low ebb? Are individuals getting smarter about the economy, and about the effects of government policies, or the effects of kind of, you know, businesses, and innovation, and technology on the economy? Are we in a better place, you know, then say 1984, when you are psuedonomously writing articles as Winston Smith?
Gillespie: Or are we still in the two plus two is five phase of things?
Epstein: I wish I could give you an unambiguous answer to that question. I guess, what's interesting to me is that, here, I think of myself, and wherever I worked, people do think of me as sort of a lab mouse and a troublemaker, which is once I was literally once called by somebody at the New York Stock Exchange. And yet, I've had the rare good luck of actually working for some name brand institutions, which you would think would be very odd, but here I had to write, as Winston Smith, when I was up in New York Stock Exchange, on the side.
When I was hired at Barron's by the late, great Alan Abelson, who was, you know, the guy who was most associated with Barron's, when he made me the first and only economics editor up until now, he didn't even realize I was a libertarian. Alan was a kind of an FDR liberal. Then, when I got launched, and then Alan got demoted, and the new editor took over, and they realized they had a libertarian on their hands, I kept saying, 'Well, you know, Barron's does have a libertarian tradition.'
And then, of course, they felt, you know, that this loudmouth is attracting an audience. A columnist with a strong voice, and you know, love him and hate him. You know, people love to read you in part because they hate you. So, I had a very odd and lucky run, and I'm wondering if Alan really knew who I was. I think he looked on me, he continued as a columnist, I think he looked on me as his Frankenstein monster. You know, he couldn't stop me, because I was now under a different regime, and they thought, you know, 'This guy seems to be helping sales, he's kind of helping our subscription base, so let's keep him on.'
So, that was a kind of an odd run, which I guess essentially means that I doubt very much that the tradition that I started, and then kept going for 26 years is going to continue in the future editions of Barron's. But, just to put a fine point on your question, I do think that there's good and bad. The bad is, for example, that you know, Paul Krugman became the first and only, the first economist to have a column at the New York Times, starting in 1999. He has a huge following, and he does write well, and over the past 12 months, he has so outdone himself for inconsistency and flip-flops that you have to wonder how anybody could take him seriously. But, somehow or other, people still do.
But then on the other side of it, of course, nobody has to read, nobody needs to read the op-ed page of the New York Times to get interesting opinions, and interesting analysis, because of course, there's been the flowering of the web. Of the podcasts, and of people like Don Bordereau, and you have a good person whom I know well, with whom I share mutual admiration, that's Veronique de Rugy who writes a lot for you people. You guys opine, Dave Smith, Nick Gillespie, you guys will pine on economics. So, you really don't have to go to the standard publications.
I would also add, for example, The Wall Street Journal does have some good coverage, but it's a very, very, to some unusual and uncomfortable degree, its coverage is predictable on the basis of who's in power. They will contradict themselves based on whether there is a Democrat or Republican in the White House, which is of course exactly what Krugman does all the time. And so, while some of it is good, a lot of it is appalling. The Economist I think is the most overrated weekly. They wrote this stuffy, stupid defense of hiking the minimum wage based upon their pensions for being cute and daring, and so I wouldn't go there. But, I do think that there's a lot of good stuff coming out.
So, in a way I ducked your question, which is do I have my finger on the pulse, and do I know whether people are more sophisticated or less sophisticated about economics than they used to be? The only thing that I do think is a good thing is that you do have, you know, much greater access to an audience by the Cato Institute, by Reason, by others. Although sometimes, of course, because I love these people, I listen to them, although sometimes, and they do know a lot of economics, but sometimes I cringe a little bit. Dave Smith, for example, had me on his show for an extended period once.
And then he did his own economics once. He was half right. I cringed to some of the things he said. Nick Gillespie knows a lot about economics, although not long ago, a couple months ago, when Andrew Heaton tossed you a question about the debt, I cringed a little bit, because I thought that, you know, you should've called me up, had me whispering in your ear about the real reason, the real issues that were raised about the debt deniers who seem to think that the federal government will never have any problem paying its debt, because after all, 'This is the federal government, doesn't it own a lot of land, a lot of resources, a lot of gold, a lot of oil? How could we ever worry about the debt?' Of course, that's ridiculous, but–
Gillespie: Oh, but wait, let's not leave the impression that I was somehow a debt denier. I'm a debt alarmist.
Epstein: No, you're not. But, the point, Nick, is that … A couple things. You were quoting the debt as a share of GDP, and indeed that's fine to do so, but of course that's a little bit ridiculous, because it implies that all of GDP is going to go to pay the federal debt. And of course, if that happens, we're all going to starve. Only 20 percent of GDP can ever go to government, that's what the CBO projects. They start taking more, we're going to go nuts.
Gillespie: Well, we've been trying. I mean, you know, the government, the federal government has been trying for decades to take more and more. They are lucky when they get above 17 percent for any extended period of time.
Epstein: Well, indeed. Of course, and partly because they kill what they task. But then beyond that, all of their other stuff, which people have in their minds, the government owns gold, it owns oil, it has a lot of buildings, the federal government, it has a lot of land, and …
Gillespie: I would love to see the government sell off a lot of military bases, or just shutter them, and accept some cost. You know, rent them out, something.
Epstein: There'll be a fire sale of military bases. I recently did a rough calculation of all the collaterals. You know, does the government have collateral on its debt that's sufficient to meet that debt? Well, the most generous estimates you can possibly make is that, you know, it's got all ready about 15 trillion worth that's uncovered by all the collateral you could possibly imagine.
Gillespie: So, that's pretty good. That just leaves 5 trillion there in the red that they can't cover.
Epstein: It's got about 5 trillion of collateral.
Gillespie: Oh, I see, okay.
Epstein: Against about 20 trillion.
Epstein: And the commitments are rising.
Gillespie: That's true.
Epstein: But, the point is that doing that calculation is important. But also, by the way, the one though you struck, which is you said, 'Well, libertarians are on the case about this debt.' The interesting point is that the Keynesian organization known as the nonpartisan Congressional Budget Office, the very green eye shade analysts who actually believe that deficits always stimulate, they've been warning, they've been warning about this debt for years. If they understand the debt is a huge threat to the US economy, then that's probably a good source to use. They've been wearing about it, and they just …
In 2010, they wrote a position paper talking about the danger of a fiscal crisis as the debt rises, and they keep citing that same paper. So, when Krugman and others, I published a story, when Krugman and others called me, called Barron's, you know, Cassandra, to actually analogize the US to Greece, I pointed out to them that I didn't make up that analogy. That originated with the Congressional Budget Office. So, that's, I think, an interesting point to site, that it's not just libertarians who see the problem. When the congressional Budget Office starts to worry, we should all be worried.
Gillespie: All right, and we will leave it there. We have been talking with Gene Epstein, a longtime columnist, and books editor, and economics editor at Barron's, as well as a cofounder of the Soho Forum, a great monthly debate society that is based in New York City. Gene, thank you so much for talking to Reason.
Epstein: A pleasure, Nick, and hope to talk to you soon. I think I'll see you this Friday night, when you debate capitalism.
Gillespie: One hopes. You know, you debate capitalism, you always win when you debate capitalism.
Epstein: I hope it won't be a socialist circus, Nick. We'll see how it goes. See you then.
Gillespie: I am Nick Gillespie, and this has been the Reason podcast. Please subscribe to us at iTunes, and rate and review us while you're there.