Jason Hartman’s introduction is about house prices that are still considered cheap even with the runup in amount. In the interview segment, he welcomes Mike Munger, Professor at Duke University and author of the new book Platforms: The Perils and Promise. The two talk about the 3rd revolution, Universal Basic Income, and capitalism.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it on. Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome to Episode 1669. And on Wednesday, we will have a 10th episode show that you are not going to want to miss because you know what we do on 10th episode shows? Yep, Good stuff, good stuff of general interest. Anyway, greetings from Sin City, Las Vegas, Nevada, my hometown for as long as I could stand it a year and a half. Now, that’s a virtual greeting. I must admit, it is a virtual greeting. What does that mean? Well, it means by the time you hear this episode, I will be in Las Vegas. I’m not there yet. I’m on my way today. But I’m there for a conference for three days, a mastermind conference. And you know, folks, it does seem like we are back into the era of travel. Even Delta Airlines, one of the better airlines for sure, was the last holdout in saving that center aisle of seats and not putting anybody in it. Now even they have capitulated. And they’re going to fill up those planes. And they’re going to give everybody COVID. And they’re going to make as much money as they can. So that’s what they’re doing. I’m not saying that’s a good thing. I’m just saying it is what it is. So today, we are going to talk with Mike Munger, who’s been on before we’re going to talk about transaction costs. Is capitalism sustainable the sharing economy and more. But before we do that, you know, last week when I was in Tampa, I gave two speeches on the true cost of housing, and how so many people just do not get it. But I want to share with you in our intro portion today, someone who does get it. Now they don’t get it the same way I get it, but at least they get it. Why don’t they get it the same way I get it? Well, because they haven’t compared it to other things like I have. They haven’t compared it or adjusted to inflation. But it least at least they get it that they are comparing prices and interest rates and mixing that into the equation. And you’ll find that amazingly, housing is actually still pretty cheap. Yes, it is. It is and that’s why the market is booming. It’s not going to last forever.
Of course, there will always be a time of adjustment, but all the doomsayers out there. I’ve given you all the reasons they are wrong, wrong wrong. They’ll be right eventually. I you know, I love hearing these interviews with and I’m just gonna pick on him. He’s a smart guy. He’s been on the show, and that is Peter Schiff. But you know, every time I hear someone interviewing him, and I probably got to have him back on just so I can hear this again. I’m a glutton for punishment. I’m a glutton for Bs, and this is BS. He predicted the housing crash. Well, not entirely false. But remember, you can hear the dogs that don’t park and what are the dogs that don’t bark? He’s been predicting a crash for 25 years. Okay, so the broken clock is right twice a day, right? Yes, that good old analog clock that you probably don’t use anymore. You know, if it’s broken, eventually 12 hour segments are going to pass and it’s going to be right twice a day. And 10 years from now. We’re gonna be hearing all about how Peter Schiff predicted the COVID recession that didn’t last but about a month. Well Depending on how you look at it, and you know, it’s just, oh drives me crazy. I have explained to you how houses on a monthly payment basis are cheaper than they were 14 years ago, when you adjust for interest rate, price and inflation. Now, don’t take my word for it. I want you to listen to a group we’ve had on the show before. And that is first American, their chief economist. Here’s what he says right here. Okay, now, I just want you to know, he’s not adjusting for inflation. But he partially gets it. Here is a 40 ish second clip. Listen to this. As consumers, we obviously care about how much something costs when it comes to housing is the most expensive thing we’ll probably ever buy. But it’s not the price level of houses that matters. It’s how much it costs you on a monthly basis. And that’s really a function of your income and the mortgage interest rate. As your income goes up, your ability to buy increases, as mortgage rates go down, your ability to buy increases. And so when you combine all those things together and measure prices on a consumer buying power adjusted basis, what we find is that house prices are more affordable than they’ve ever been in over a generation. Our real house price index is really a valuable tool that helps us to understand one’s real affordability for housing in the market today.
That’s Mark Fleming, Chief Economist for first American and they publish v. r HPI. The real house price index. All right. And, you know, I agree they are right with the rhpi. But it even gets better if you adjust for inflation, faded and adjust for inflation. So here’s what they say in January of 2021. Right this January, house buying power $516,000 average household income $72,639 mortgage interest rate 2.7% now it has it has inched up a bit from there, but still very low. Now, the year over year difference in the real house price index says that housing got 4.8%. Cheaper, yes, cheaper, not more expensive, cheaper. Tell all the idiots on CNBC that don’t understand the way people buy houses based on a monthly payment, that they actually got less expensive in the past year. No wonder the market is booming and going crazy. Gosh, this stuff drives me crazy. Alright, I think I made the point. And listen to this one. Are you ready for this? Folks, we need a drumroll. I have a drumroll. I do have a drumroll. Now this one, before we get to our guest, this one is really gonna blow your mind. You’re ready. Real house prices from January of 2001 31 years ago. According to first American and their real house price index, they are down by 26.8% 26.8%. Now remember, they don’t even adjust for inflation, which would make all of these numbers substantially more attractive. However, I do want to give you one caveat. They also don’t adjust. And this would make the numbers look a little worse. Okay. They don’t adjust for higher property taxes, higher association fees, which you know, that’s marginal, and you may not even have an HOA, and likely, although not for sure. Higher property insurance cost. So there are some costs that they’re not adjusting for. But again, those are relatively nominal in the overall scheme of things in the overall scheme of things. They are correct. So before we get to our guest, I want you to go and sign up for this week’s webinar. Yes, this one is good. It’s on lease options, something we have not taught before. And this is for investors, clients, who want to be a little more involved. In maximizing their returns on real estate deals, it’s good stuff. So go to Jason hartman.com slash option, Jason hartman.com slash option and learn about lease options.
I have been wanting to teach this topic for years. And we are finally doing it. I partnered up with a true lease option expert. I’ve known this guy for years have not done anything with him yet. And I finally decided I want to be teaching you about lease options. And there is a new thing we are going to be starting, we are going to be starting a division of the company that will hopefully be buying property inventory from you potentially Ladies and gentlemen, yes, you can sell through our network. And if you are a little more of an activist, investor, okay, if you if you want to be more involved than the typical turnkey investor, which is most of our clientele, okay, turnkey investor, we have some good opportunities for you coming up to where you can be involved with us. And we can help you move properties through the system and make money. So really exciting stuff. Go to Jason hartman.com slash option for this week’s webinar and learn more about how to do lease option deals, you’ll learn about the seven step process where you can close your next deal in the next 30 to 45 days. And why this is a really fast, and a really easy way to earn profits in the real estate business. So check it out Jason hartman.com slash option. And with that, let’s get to our guest. And let’s talk about whether or not capitalism is sustainable. the sharing economy, transaction costs and more. Here we go.
It’s my pleasure to welcome Michael monger to the show. He is director of undergraduate studies professor of political science and director of philosophy, politics and economics certificate program at Duke University. He’s a senior fellow at the American Institute of economic research, former Libertarian candidate for governor of North Carolina back in 2008. He’s the author of several books, including is capitalism sustainable tomorrow 3.0. And that is about transaction costs in the sharing economy. And his upcoming book platforms, perils and promise. Mike, welcome. How are you?
Mike Munger 12:46
I’m just great. Thanks for having me on the show.
Jason Hartman 12:48
It’s good to have you on the show. We have to of course, do what everybody’s doing nowadays, and censor ourselves lest we may never be heard by anybody. Because the new TASS News Agency, the Ministry of thought, is evaluating every word said on every publishing platform nowadays, it’s absolutely scary time. Where do you want to go first? Do you want to just sort of talk generally, and give us some of your thoughts on what’s going on in the world or dive into some of the books?
Mike Munger 13:18
Well, let me give a little background on what led me to write the books, I have become interested in the problem of commodifying excess capacity. And that sounds sort of complicated. But what it really means is we have a bunch of stuff in our closets in our garage. And we don’t use it very much. And the reason we don’t use it is that it’s cheaper to store it than it is to rent it out. But there’s a bunch of apps and a lot of entrepreneurs thinking of ways to help us share things. And so the sharing economy is to the extent that it has not been regulated out of existence, the sharing economy has made a lot of progress in helping us share things in new ways. And the result has been there, there’s been a disruption to traditional capitalism and to the way that we think of jobs. That mean that the regulations are never very nimble. They’re always fighting the last war. But I worry and the reason my book was entitled tomorrow, 3.0 is that I worry that we’re on the verge of the third great disruption, the first being the change to agricultural society, the second being the Industrial Revolution. This third one may mean that traditional markets and jobs are on the verge of disappearing. If that’s true, then things are gonna get a lot worse before they get better. And of course, on top of all that, having the virus and the economic overreaction and locked down and the attempts to censor and control speech in the political frame mean that we’re this is these are very interesting times
Jason Hartman 14:48
an interesting is a very soft and friendly way to put it but I understand that Chinese reference May you live in interesting times. So we are definitely living in them. But when you refer to The disruption, are you referring really to the sharing economy or the gig economy, I know those overlap to some extent, but maybe you can smoke that out for us a little more, the by
Mike Munger 15:10
the administration is going to try to pass a $15 minimum wage, because for reasons that escaped me, they think that a 17 year old teenager in her first job should earn PE that’s high enough to support a family of four, I don’t get that it seems like a lot of people pay to go to college, they want to get training. So the gig economy is a series of relatively short jobs for people that are highly specialized. But think of it this way, it used to be that you would go into McDonald’s, and you would look up on a board and say some words, and the person behind the counter would look for the corresponding words on her cash register. And then she would press those buttons, Big Mac fries, all you have to do is turn the cash register around. And now instead of looking at the board, you can press those buttons on a kiosk. So the result is service jobs, the things that used to be the gateway, the entry to the life of work, are fast disappearing, the unemployment rate is 25 30%, for people from 18, to 25. And it’s going to get much worse, quickly. If we have a very high minimum wage,
Jason Hartman 16:11
I was actually going to make my snarky remark, when you first open that statement, I was going to say that 17 year old high school student that you refer to, with a $15 an hour minimum wage, we won’t have to worry because she won’t be offered a job, job will disappear. it’ll it’ll be automated out of existence, whereas now we’re in this era where Yeah, there’s definitely some automation, but employers can still justify paying a human to and having the human touch. You know, this also goes into and I don’t want we don’t have to jump down this rabbit hole unless you want to. It goes into something I’ve been talking a lot about recently, Mike, which is real inflation, everything nowadays. Yeah, maybe there’s not as much inflation as we would think with all this fake money creation. But we’re doing everything ourselves. Now. Everything is self service. I mean, you know, you’re punching in your own order at McDonald’s, you’re pumping your own gas, you know, so no one’s counting this in inflation. All these even fancy restaurants are like these minimum service restaurants. You know, I just stayed at the gorgeous, iconic fountain blue hotel last week speaking at a conference here in Miami. And there’s like no people there, there’s no staff. There’s nobody to help you with anything. It’s like everything’s being run on a skeleton crew.
Mike Munger 17:26
That’s partly because of COVID. And partly because of the increased cost of labor. So I actually think that the traditional economic aggregates that we used to use inflation, money supply GDP, those are all on the verge of being meaningless, which means that we’re operating in a fog. And so we have regulators who think they should do something political pressure to say, well, you have to do something and fix this because we’re in trouble, and no useful information about what to do. So it’s a recipe for disaster
Jason Hartman 17:54
with the minimum wage discussion, connect the sharing economy with that, and that sort of big statement you open with, if you would?
Mike Munger 18:02
Well, the sharing economy is we use apps and software to do things that human beings used to do. So suppose I were going to buy a house, I can now do it on Zillow. I don’t need a broker. Suppose I want to get some food delivered. I can use Uber rather than the pizza company having a delivery service. So what used to be jobs I now can use an app instead of and so the sharing economy, there’s a lot of good things about it. There’s a app called
Jason Hartman 18:34
Truffaut Turo, I’m sorry, sure, where you can share your car. Yeah,
Mike Munger 18:37
the Miami airport, there’s a whole bunch of cars in the hurt slot. And then right beside it, there’s a whole bunch of cars that people are paying to park, if you could combine those two things, you could get by with a lot fewer cars. So that’s the reason that they connect, we only need something like 40 50 million cars in the United States, most of the time they’re parked. If we were using all those cars all of the time, we could get by on far fewer cars, but then that means we need a lot fewer people to make cars. Once we start sharing things, we need a lot less of it. And that’s true of almost everything. It’s true of power drills. It’s true of lawn mowers. So all of the things that now we paid a store, we could be sharing. And so the consequence of that is, the number of jobs is just going to plummet. And so you talked about inflation, I think what’s going to happen is the price of many things is going to fall and wages are going to fall. The question is, what will happen to real wages, real wages are my wage rate divided by the price level if prices fall, but my wage falls by less than that will happen to me. I have a very specialized job. That’s great. However, if your wage falls to zero, then there is some question about how we’re going to handle that. And notice that the minimum wage does nothing to solve that. If you don’t have a job. It doesn’t matter what the minimum wage is. And as you said, minimum wage means you’re less likely to have a job in the first place.
Jason Hartman 19:58
Yeah, right. Right. Minimum Wage maximum stupidity. It’s a terrible idea. It doesn’t know what we’re going to do instead, what business is about the government to get in the middle of somebody who wants to work and someone who wants to hire, right?
Mike Munger 20:12
Sure, but that ship has sailed. We’re going to do something we have to pick the least bad thing. Sure. Okay.
Jason Hartman 20:17
So what do we do?
Mike Munger 20:18
I have actually decided that I’m in favor of universal basic income.
Jason Hartman 20:22
Oddly, I can’t believe I’m coming around to that. I just think it’s sort of a foregone conclusion. But why are you in favor of it? I had Andrew Yang on the show, he ran for president that was a big part of his platform, as you know, why are you in favor of UBI? I mean, being a libertarian, it seems rather amazing, you wouldn’t be in favor of it. So tell us,
Mike Munger 20:42
I’m a directional libertarian, not a destination, this libertarian. So I’ve made this distinction, a number of things that I’ve written destination, as libertarians have an idea that the only things that we should do mean, the complete elimination of the state and taxes, well, actually ran for office twice, once for governor and most recently for the North Carolina General Assembly, not many people are persuaded by that platform. However, if you’re a directionless, and you say, here’s a direction we can take, let’s go this direction, we already spend enough money to eliminate poverty in the United States. If you look at the total level of poverty programs in the US, and divide by the number of poor people, if we just gave them the money, there wouldn’t be any poor people, but we don’t we send bureaucrats to pester them and look under their bed and say, does a man live here? Do you have a job, because if you’re married, or if you have a job, you lose your benefits. So we have a remarkable system where I have called the state of bad polygamist. That is the state has all of these common law wives that completely depend on the state for support, you have three children, you live in section eight housing. But if you get a job or you get married, you lose your benefits. And so what happens is the people who if you get a job that pays $12,000, you lose $14,000, in benefits. So the reason to have a UBI is to make it not contingent on not having a job and not getting married, even if you get a job or get married, you still get it. The second reason that I’m in favor of UBI is that it would be portable. Right now we have a bunch of people who are basically trapped in cities and they go somewhere else, they’re going to lose their benefits. There’s a lot of places where there are jobs. So if we had a federal send notice that this argument has become more powerful. Recently, we’re arguing about sending a check to every person in the US for $3,600 per child, we’re gonna send out 1200 or 1400. So what we’re doing, we’re doing that in a haphazard way that people can’t really predict. Now, the thing that I often get from people on the left and the right is they’ll kind of say under their voice. Well, we can’t give them the money. You know how they are? No, please tell me how are they the paternalism of the current system is remarkable. I admit some people are going to fail. Some people are going to crash.
Jason Hartman 22:57
That’s, that’s going to happen anyway.
Mike Munger 22:59
happening now.
Jason Hartman 23:00
Right? Yeah, yeah. Now I agree with you. And, you know, what you didn’t say, though, is that the reason we have the programs, the way we have them now, is because with all that bureaucracy in the middle, and all those iron triangles, you’ve got all this opportunity for corruption. And who wants to miss all that corruption, but the people that benefit from
Mike Munger 23:20
everything that you and I think is a cost the state thinks of as a benefit, right? Those are a bunch of employed people are gonna vote Democrat.
Jason Hartman 23:27
Yeah, it’s crazy. I would
Mike Munger 23:28
rather give the money to the poor people. If you care about poor people, let’s make them not poor.
Jason Hartman 23:33
Right. Yeah. There’s another interesting thought about UBI. And I’m kind of surprised at myself that I’m coming around to this too. I just think it’s, you know, we got to have what we have and understand where we are, right? We’re not going to have this idyllic free market, get rid of the state, it’s just not going to happen. Okay. So let’s be realistic, right. The other thing about UBI is it would encourage, potentially encourage more entrepreneurship and more risk taking, you know, if you knew you had the basics covered, right, then you’re willing to go out and maybe invent something great. And like, at least you’re not gambling your life, right? You’re just gambling, you’re upside potential, but not your downside potential.
Mike Munger 24:16
You’re not going to lose your house, you’re not going to lose your apartment, you can continue to live. Yeah, yeah.
Jason Hartman 24:21
So in today’s era, I mean, this will vary by inflation, and so forth. But, you know, what would be the ideal amount of UBI now? And would it be the same for everybody? And, you know, just give us some details?
Mike Munger 24:33
Those are really hard questions. So I would say let’s start at $1,000 a month per person, and we’ll just put it on the 1040 form right now. I think it’s 7000. So we’ll make it 19,000. And it’ll be a credit if you don’t have a job. So it’s pretty easy to implement. Well, what
Jason Hartman 24:49
are what are your 19,000 1000 7000? What even what I don’t get it so forgive
Mike Munger 24:53
me, the standard deduction on your tax form is $7,000 per person, okay, and so it’ll be $1,000 in That’s 12. So $12,000 plus seven would be 19,000, we would change the standard deduction from 7000 to 19,000. And then make it a credit so that if you don’t have a job, you actually get a refund for that amount except you only get the $1,000 once a month. I don’t know if $1,000 is the right number, but it’s less than we’re actually talking about paying out now. And we’re making it predictable. You just made the argument for why making it predictable is useful. I think that the difficulty is we’re going to do something much worse politically, the pressures are to do something much worse pretty quickly. And I think there’s going to be a set of regulations that are likely to inhibit entrepreneurship, whereas if we can get a UBI. And that’s Andrew Yang’s argument, also, I’ve actually worked with him a little bit on this. It is interesting that some people on the left who are relatively pro market think that this would open up some chances for people
Jason Hartman 25:55
you alluded earlier about in technology and prices declining because of technology. You know, I just bought a new car, it’s sitting in my garage, sometimes I don’t even use my car for four or five days at a time. This is absolutely ridiculous. And before that, it when life was normal, everybody’s car was used about 4% of the time on average, so 96% of the time, that expensive asset is unused. So the sharing economy makes a lot of sense to me. And you’re saying the sharing economy is deflationary. Right?
Mike Munger 26:30
Yeah, you’re paying to rent and share instead of own. So not only are you not paying for the car, you’re not paying for a garage,
Jason Hartman 26:37
right? You’re only paying for what you need. Yeah. And so that’s good. That’s efficient. That’s logical. But you know, there’s always been, as I’ve explained it, Mike, there’s always been this war. And the war is between these two opposing forces. On one side of the ring, you have technology and technology is deflationary. On the other side of the ring, you have bad monetary and fiscal policy, and that’s very inflationary,
Mike Munger 27:02
who’s gonna win, I have been predicting outrageous inflation now since about 2010. And it hasn’t happened. So the the government has completely lost control of the money supply. And for reasons that are complicated, we haven’t seen substantial inflation in commodities. Now, there probably are some things like assets, the stock market housing prices, so that it’s not that I think it’s not a problem. I think in real terms, people are going to become wealthier regardless of what the inflation rate is. So it’s not just that it’s deflationary. It’s that actual costs are going to fall, people are going to become wealthier, because it’ll be so much I have so much access to so much stuff. And that actually, I think, is the story of the 20th century is the great enrichment, the decline in poverty in India, in China, in the United States, you’re much better off being a poor person, now, the United States then being wealthy in 1890. So the stuff that we have almost for free, is the big benefit of capitalism. I think that’s going to continue. So yes, sure, there is always this contest for prices. But I think overall, the effect, if you look at wages and prices, the the effect for most people is going to be an increase in wealth. However, we’re going to get some people that don’t have jobs, have no hope of jobs and have no health care. And if that drives politics, and we’re going to be in trouble.
Jason Hartman 28:21
Okay, so we’ve had the sharing economy with us for give or take 1213 years now, you know, do you think we would have had much higher inflation, given all the money creation we’ve had, if we didn’t have the sharing economy? Is that what’s tamped it down?
Mike Munger 28:35
Nope. I’m confident that I don’t know the answer to that. I do not understand why that monetary policy we’ve been, we’ve increased it in some cases, 10% per month with no inflation,
Jason Hartman 28:45
right? Well, you can’t say no inflation, we’ve definitely had some inflation, but it’s not the hyperinflation some have predicted. And you know, so Peter Schiff, spend very wrong, for example, but, you know, you look at asset prices, and asset prices, cause wealth inequality, they cause a concentration, they cause a cantillon effect that Richard can tell you in the economist. And so the rich do get a lot richer, and asset prices are going through the roof debt is so cheap, it’s like free to buy assets now. So that causes a concentration of wealth, because the people at the lower end of the spectrum can’t take advantage of all that stuff, like the people at the higher end can. So you know, even the measure of inflation, is it is it even right the way we measure it,
Mike Munger 29:30
but remember, I said we’re in a fog. We don’t know what value is. We don’t know what inflation is. We’re not even really sure what employment is because I think we’re going to start moving away from the 40 hour a week job towards gigs.
Jason Hartman 29:41
Interesting. Okay, so we’ve been in the gig economy for a while too, though, don’t you think?
Mike Munger 29:46
Absolutely. And there’s some industries that have been dominated by what in effect is the gig economy, people that are self employed and so you see, assembly bill five in California, the history of Eb five was the disaster. The legislature says we’re going to make these people employees and not contractors, right. And a whole bunch of writers and contractors said, Are you kidding? That’s a catastrophe. Yeah. And so eventually they pulled it back. But I really think those legislators thought that was the right response. They’re mistaken. We’re living in a fog, the regulatory authorities have no idea what to do.
Jason Hartman 30:20
They’re operating on an old model. They don’t know how, how the economy needs to work with, you know, all this new stuff.
Mike Munger 30:28
It isn’t just the economy, it’s also antitrust. So we should break up these companies. And so one other aspect of this, that’s interesting is how should we think of these enormous companies that dominate data and the ability to put information out into the world? So the usual sort of libertarian I being a libertarian, usually, I think, well, as long as the state doesn’t control things, it’ll turn out pretty well.
Jason Hartman 30:53
Yeah. But these companies are so big, they’re a proxy for the state.
Mike Munger 30:56
You can say that my first job was at the US Federal Trade Commission in the first Reagan Administration.
Jason Hartman 31:01
Oh, you know, about a time Yeah,
Mike Munger 31:03
I worked in antitrust policy, and the Trust has to do with raising prices and limiting innovation. Does Facebook do that they’re not raising prices, what they’re doing is something else. It’s just the bigness that comes from power. And so this is actually a criticism of the left that I think many people are sort of coming around to maybe bigness itself is enough of an offense that we should worry about it. Do these private companies that they become large enough that they can actually control our access to information in ways that should consider I don’t know if you want to call it censorship, because the New York Times did that the Washington Post did that. But there were other newspapers. There’s not a competition for Facebook, there’s not a competition for Google. And it’s hard to find another network to watch videos on. It’s not YouTube.
Jason Hartman 31:50
I know it said these companies, I’ve been saying this for 12 years, that these companies need to either be busted up under antitrust laws. And that’s your expertise. You and Elizabeth Warren, you know, I like a few things about Elizabeth Warren, for sure. But not just that, there’s there’s three things I talked about, or they need to be regulated under common carrier laws. You know, for example, if the phone company, if we’re talking on the phone, and the phone company doesn’t like what we’re talking about, say we thought, you know, Trump won the election, Oh, God, I can’t even say that, because the video will be deleted from YouTube. You know, if the phone company doesn’t like what we’re talking about, they don’t get to cancel our phone service as long as we pay for it. Okay. And with Facebook, and YouTube, and you know, Google and all these others and Twitter, we are paying for it, we’re just paying with our data, not our money. And that’s what makes it so difficult. I think for regulators to get their head around. It’s bumped up under antitrust regulated under common carrier, or have their algorithms exposed and public. So everybody can know what they’re doing. And there’s no secrets. So we can know why we see certain things in our newsfeed and why we don’t see others, why certain emails get filtered. Why others don’t, you know, nobody knows why all this stuff is happening. It’s just this big secret in a star chamber. It’s ridiculous. I do worry
Mike Munger 33:05
that things may not be so bad that involvement by the state can’t still make them worse. So I remember when we were worried about Microsoft, and it sort of seems silly now that there was no fawful about Microsoft having a web browser. Yeah. So the the idea that competition over a web browser was the key to this seems sort of silly. So I wonder if in a couple years, this, there will be something else that will now be worried about. And I also think that the arguments about section 230. There’s two ways we could do this badly. One is to say the companies can do whatever they want. The other is to have the state compel speech, and say you must provide a platform for these people. And that would be the common carrier approach. That was true under the Bell Telephone monopoly, it isn’t really true now under cell phones, because no cell phone company would do that. Because it’s competitive. I don’t think there can be a competition in these big network economies like Facebook or YouTube, because having one that we can all go to is a benefit. I also think that breaking it up, are you having the state compel certain actions may have consequences that are hard to predict. So I know how I’m conflicted about those things. I admit there’s a problem, and we need a new way to think about it.
Jason Hartman 34:23
Yeah, we should do what else do you want to share particularly about your book? Is capitalism sustainable? You know, that whole concept? What do you mean by that? Are you talking about the environment? Or what
Mike Munger 34:33
was sustainable? Such a buzzword about the environment? No, I mean, capitalism is capitalism, will it survive in its own terms? And so the usual story that we tell about capitalism, and in fact, what I as an economist, when I teach about markets, I say the advantages that markets are people who are acting in their own self interest, and yet the benefit is to the entire society, somebody invest in a new product, and we all benefit from it. Well, the problem is that capitalism can turn into crony As a, which means that at some point it becomes more profitable for large companies to invest in lobbyists and lawyers than new engineers and sales people. Well, once you do that, then the story about capitalism doesn’t really work anymore. The story you tell the story I tell about markets is we have competition. The result is lower prices, better quality. But if I can get subsidies from the government, basically, I’m selling my product to the Congress, and then money is being taken at gunpoint from taxpayers and giving to corporate CEOs and stockholders. Well, that’s actually not capitalism. So I have friends who are lefties, and I’ll say, you know, socialism doesn’t work. Look at Venezuela. And they’ll say, well, but that’s not socialism. Well, I’m doing the same thing. So I’ll see Solyndra, or I’ll see one of these companies that’s accepting subsidies, the bailouts to Wall Street. And I’ll say, well, that’s not capitalism. That’s cronyism. It struck me that capitalism is becoming cronyism in the United States. And if capitalism becomes cronyism, if these large companies depend on subsidies from the government, then the story that I tell about capitalism is not really right. And my defense of capitalism is assuming something that’s not true. And so I think those of us who are defenders of markets need to recognize that some of the criticisms on the left that are inherent about capitalism, capitalism seeking out benefits from the state, because you can increase your profits, there’s something to it. And so that means that and this sort of this goes back to your your point about the large companies in speech, it may be that some of the solutions about bigness make more sense than I would have liked to admit, 10 years ago.
Jason Hartman 36:38
Yeah, no question. I mean, cronyism is not capitalism. We don’t have capitalism, show
Mike Munger 36:43
me capitalism. Where does it exist? Yeah,
Jason Hartman 36:45
no, it’s it’s not here. It’s definitely not here. What else do you want to share? I mean, you’ve got such a great body of work and your your career in politics, and so forth, that short career as it is, as it were, but tell us anything you want to share.
Mike Munger 37:01
My next book is about the platform economy. And I’m, I’m interested in platforms, because platforms are things that solve the problem of triangulation, we find each other transfer we can deliver the service are good, and we can collect the money and trust we can rely on each other. And so apps and access to the internet have made platforms possible. I think that platforms are going to be awfully disruptive, but they’re also going to allow new forms of cooperation. So Wikipedia, for example, is a platform. And so a lot of us look at Wikipedia, what’s the value of Wikipedia, it doesn’t appear on GDP. Now you can say it’s not a great source of information. But pretty often, if I want to start learning about something, I’ll go look it up on Wikipedia, it’s not a bad place to start. You shouldn’t end there. But it’s not a bad place to start. So we have a bunch of people that are finding new ways to cooperate, that don’t really involve markets and prices. So I my book about platforms is, I think that the next step in the evolution of voluntary private cooperation, because this is not the state, this is more like Alexis de Tocqueville, this is groups, associations, finding ways to cooperate with each other, we need to unfetter the creative abilities of individuals to work together in cooperation. And I think things like platforms are going to have a big so that one of the reasons I’m optimistic is these large companies that are network driven, yes, they’re a problem. But we’re going to have a bunch of new platforms that are going to enable us to create communities of meaning around other dimensions.
Jason Hartman 38:32
I agree with you, as long as we can overcome the censorship problems and the bigness problem and the cronyism problem. You’re absolutely right. I
Mike Munger 38:39
mean, there’s there’s always two things. There’s always a thesis and alternative.
Jason Hartman 38:43
Yeah, no, fair enough. Definitely. Definitely. My give out your website,
Mike Munger 38:47
Michael monger.com. And the next book, which is platforms, the perils and promise, we’ll be out in May.
Jason Hartman 38:56
Excellent. While we’re looking forward to that, and Michael Munger, thank you so much for joining us.
Mike Munger 39:00
It was a pleasure.
Jason Hartman 39:03
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