Meeting People
Amul Pandya converses with independent, adventurous and sometimes courteous free spirits. Creativity is an act of rebellion. Whether they are entrepreneurs, artists, athletes, investors, chefs, or corporate antagonists, Amul's guests all share a common disposition of not just pushing boundaries but re-drawing landscapes.
Meeting People
#24: Dr Eamonn Butler: Rescuing a rotten Britain, schools of economic thought, a case for optimism
Dr Eamonn Butler is the co-founder of the Adam Smith Institute and has dedicated decades of service in spreading economic freedom. He is the author of several books including 'Foundations of a Free Society', 'The Condensed Wealth of Nations', and 'The Best Book on the Market'.
Our conversation includes his latest book "An Introduction to Schools of Economic Thought". We also coverhis return to Britain to advise the Thatcher administration on market reforms having done so in 1970s for the US House of Representatives.
If you've been unsure of how to distinguish between your Adam Smiths to your Friedrich Hayeks, then this conversation is a great place to start. We also use Eamonn's knowledge of economic theory to discuss the issues of our age - a broken Britain, the absence of risk taking, the flaws of direct democracy, and the law of Economic Rent holding back our youth.
You can find Eamonn's latest book here: https://iea.org.uk/wp-content/uploads/2025/07/Schools-of-Thought-Interactive.pdf
This podcast was produced by https://linktr.ee/thisismattcooper with music composed by https://open.spotify.com/artist/6mH930VvONxn76Kqpnixjy.
00:00:00 - The Rotten State of Britain
00:06:34 - Britain’s welfare state
00:10:28 - What got Eamonn into Economics
00:12:30 - Coming back to rescue Britain
00:19:10 - Why big companies hate competition
00:21:30 - Who was Adam Smith
00:24:45 - Schools of Economics Thought
00:33:15 - Hayek, Friedman and Keynes
00:40:15 - Did Marx get anything right?
00:42:17 - What is behavioural economics?
00:46:45 - Why no mention of Georgism in Schools of Economic Thought?
00:57:30 - Why don’t we take risk anymore?
01:10:05 - Is democracy inherently flawed?
01:15:10 - The long bet
Hello and welcome to Meeting People with me, amol Pandya. Meeting People is a podcast where I have long conversations with rebellious, adventurous and sometimes courteous free spirits. Eamon, thank you very much for sparing the time. Great to see you this morning. So, principally, I've got you on to talk about your most recent book, which I'm going to hold up to the camera, called Schools of Economic Thought, an Introduction to Not in that order, but I thought a fun place to start actually would be a book you wrote back in 2009 called the Rotten State of Britain. So here we are 16 years later, 2025. And state of britain. So here we are 16 years later, 2025. What made you write that book at the time and how has things played out since then?
Speaker 2:well, you are asking me about something I did 16 years ago and expecting a coherent answer.
Speaker 2:Um, well, of course. Uh, 2009 it was the closing year of the um, of the brown government, I guess, um, and I really did that book the rotten state of britain. I wanted to call it still in a rotten state because, uh, um, uh, someone else had written a book called the state we're in and, uh, it was a sort of left-wing book and I wanted to do something that would rebalance that but would actually also go through all of the institutions in Britain at the time health, education, welfare, justice, government and so on and just show what a sorry state they were in and then maybe to offer some solutions as to how to improve that. So that really was the thinking. I mean, it came out just before the general election of 2010, but that wasn't the aim. The aim was to really set the record straight.
Speaker 1:After how many years of a Blair and Brown government, and I guess maybe um a tired conservative administration as well, from sort of 92 to 97.
Speaker 2:Well, you, you had, you had the major administration. Well, obviously you had Mrs Thatcher, and then Mrs Thatcher went a bit strange at the end, to be perfectly honest. But then you had the major administration, which did a few good things but didn't really have any ideological focus and of course it had quite a narrow majority and it was riven by disputes about the European Union and you know so it wasn't exactly a very exciting uh government, and blair, of course, was exciting yeah uh, but you know, he came in.
Speaker 2:I, I do remember it because I we thought, frank, frank field, the member of parliament was, um uh, appointed as the the welfare minister and he was told by the blair administration to think the unthinkable on welfare. And he thought the unthinkable and a year later he was fired and we thought, well, that's the end of that.
Speaker 2:Then what did he think he wanted, I think, to go very much more back to Beveridge, who was very realistic about welfare and that you don't want people languishing on welfare for their whole lives and you don't want their children languishing on it and their grandchildren languishing on it, but you do build up that culture. And he was fully aware of that. And he was fully aware that the incentive structures were such that you were absolutely mad to save for yourself and invest, because if you save to most people, if they save to a pension, they'd get no benefit from it because they'd be below the minimum income anyway when they retired and the government would simply make it up so they might as well spend it on beer. And so he was very much of a realist on that kind of thing. But of course it meant a shake-up in the welfare system and, uh, the Blair administration just didn't feel comfortable doing that. They wanted more showy stuff rather than stuff that would be very difficult and divisive and a lot of people would say, well, I'm losing my benefits.
Speaker 1:This is outrageous, right and we wind the clock forwards now and I suppose one in five or one in six households is completely workless. So I mean, obviously it's concentrated in areas, but you know, if you walk down the street, every sixth house you walk past there. According to the numbers, well, no one in there is working. And you know we talk about unemployment but the reality is it's the participation of the labour force which is kind of shrinking.
Speaker 1:And I'm reminded of a story that my wife's grandfather told me, who was selling insurance in the 70s and up in Nottingham, in the Nottingham area, and the miners would go to the doctor if they were having certain health problems and they'd be told by the doctor well, if you say you've got this, you'll get a higher payout. And therefore generationally he said it created this For them. It was like gaming the system. But then it kind of became accepted in their family that you kind of you know granddad had worked very hard and is now getting his payout through, kind of you know granddad had worked very hard and you know is now getting his payout through, kind of gaming the system. But it created this, you know, almost normalization of not working and that's perpetuated to now where it feels like you've written a book 16 years about the rotten state of britain. Are we more rotten now? How much more rotten could we have?
Speaker 2:gotten. If we're already rotten, uh, yes, we're even more, even more rotten actually. I just looking through the table of contents and I see economy. Well, we're much worse off there, you know, we're deeply in debt and getting deeper in debt. And uh, government, well, it's bigger than ever. Um, and uh, less responsive than ever. Uh, justice oh go, don't get me started. Snoopers and nannies, for goodness sake, we're very much in a surveillance society. Health, education, welfare, all of these things seem to have got a lot worse. We've just let things drift, I'm afraid.
Speaker 2:So it was interesting what you were saying about the sort of normalisation of fiddling, and this is a problem. I think it's always a problem when you are getting benefits from other people's money rather than your own. My mother lived on a council estate in Aberdeen and you know she told me you know everybody he's on benefits, but he goes and he works at the docks and you know he comes home with lots of fish and he's stolen and all the rest of it. And you know, she's on benefits but she's actually got a part-time job somewhere and so on and so on, and everybody seems to be on the fiddle. In fact, I told my colleague about it and he wrote an article in the times or something somewhere about it, um, and so that that that becomes normal because it's somebody else's money, and and then it becomes a kind of conspiracy between, as you say, between the doctor and the and the patient, and and, uh, uh, you know that that's, that's a real problem.
Speaker 1:How do you control that and, to be more precise, it's someone else's money who you don't know, who you can't see, you've never met, whereas the benefits system if you want to call it that before the welfare state was. You know you would be getting a handout from someone in your village or your church or community or whatever it is. So you knew that person. You were like okay, I need it. I need this handout because I've fallen on hard times or I need it, I need a leg up, but I know where it's coming from.
Speaker 2:So I feel kind of compelled to sort of make good by that, that benefit you know, I mean my father used to pay his I don't know sixpence a week, or whatever it was, into a friendly society, and a friendly society were working class welfare. They were driven out of existence by the beverage reforms after the war, but because it was a society and you were paying in, you didn't abuse it, because you knew that you were part of this club, so to speak, and that if everybody abused it then you know it wouldn't exist anymore. So that struck me as being a very, very good system which, beveridge, you know for the best of intentions, unfortunately killed off.
Speaker 1:Yeah, and here we are today.
Speaker 2:I guess, yeah, here we are with a welfare system which is rules driven, not principles driven or morality driven. And if you qualify by the rules one of the things that you know frank field, who I mentioned, uh, was insistent on that if, if you have a system where you get benefits, if you fall below a certain line, people will make sure they fall below that line. You know they'll rearrange their affairs so they do good hearts law.
Speaker 1:You set a target, yeah, exactly, gets gamed um and undoing things is much harder than doing them, I guess, is the issue, because I think everyone in principle wants a welfare state, whether whether it's local or state-run, that is fair and is just to the payers of that welfare and the recipients of it both of them. And why is it so hard if the will is? There for that to change.
Speaker 2:Because you build up an interest group. You've got several million people who are dependent on the welfare system and they don't want it to change. They want it to get more generous. Similarly, in healthcare, you've got more than a million people who work for the National Health Service. They don't want you to rock the boat and introduce something which is actually going to be much more efficient for patients, better for patients and cheaper for the taxpayer. Of course they don't.
Speaker 1:So nothing comes from nothing. Where have you formed, how have you formed all these views that has inspired you to write this stuff? When did you first realise that you were interested in economics? When did you first realise that you were interested in economics? If you could wind back the clock and just give the audience a sense of you know what was the genesis of your interest in this, rather than becoming an astronaut or a tech founder or whatever it might have been that the options were given to you.
Speaker 2:Well, I mean, I think that all young people are idealistic and most of them are quite libertarian. They don't see why older people should push them around and they think that that should be a general principle not to push people around. Most of them fall into a sort of left-wing economics. But my parents ran a small filling station and so I understood something about business Because you know, the takings came home every night and they were counted and then they were paid into the bank and all the rest of it and you get to understand, yeah, we need to do this and we need to be nice to customers and you know, provide all the things that they want, provided and open up early if they need to be there. You know if customers want you to open earlier, up early if, if they need to be there. You know if customers want you to open earlier.
Speaker 2:So, being responsive to to customers very, very, very important, um, and that sort of made me understand business a little bit. And, uh, then I I went to sanders and there was a, uh, an association there which was a student association, which was very interested in the ideas of fa hayek, the, the economist, and, and milton friedman, the american economist, um, and so I started uh reading these guys and uh I thought, gosh, this is the bee's knees and uh.
Speaker 1:You therefore left university and just went into sort of what. Did you come down to Westminster straight after?
Speaker 2:No, I joined the brain drain. This is the mid-70s we're talking about here.
Speaker 2:The country was going that way and everybody was saying, oh, you know, we're going to end up nearer to Eastern Europe, as it was at the time, rather than Western Europe at this rate. And the trade unions were running everything and there was strikes all over the place and so on and so on. Winter of discontent, blah, blah. But so, with colleagues I well, with my brother and another colleague, madsen Piri we all, one by one, went to America, immigrated to America because we had friends in America, and so I spent a year on Capitol Hill working for the US Congress on policy, and I spent a year teaching philosophy believe it or not in Hillsdale College in Michigan. But, one by one, I think we all thought, yeah, you could spend your life in America and enjoy the sweet life, but what will be written over your gravestone? He enjoyed the sweet life, you know.
Speaker 2:And this Britain was our country. And we thought, ok, it's worth, it's worth a shot. And we'd seen lots of interesting things that the Americans did that we thought should be done in Britain. We saw the Americans thinking about things that we knew didn't work in Britain, and so we thought what we should do is to come back and start an institute and swap ideas over the Atlantic, and we started doing that. And then, of course, very shortly afterwards, mrs thatcher was elected, so we had a bit of an open goal for um. You know, free market, liberal ideas.
Speaker 1:You had an inspiration that was receptive to new ideas it was.
Speaker 2:Of all the administrations I have known, which is quite a few over the over many years, it was the most interested in ideas and that was really exciting and refreshing and we produced all sorts of weird and wonderful ideas for them, as did other people like the Institute of Economic Affairs and so on.
Speaker 1:So give an idea of an idea that you proposed. That was seen as radical at the time. Maybe it seems normal now, but that was.
Speaker 2:Well, you know, contracting out of local government services. Um we uh, with an american friend who'd who'd done a study on this, we looked around the world and um uh saw that, uh, you know, in this country, things like road maintenance, garbage collection, uh, all of these, you know, abattoirs, all sorts of local government services, were run by the local council housing and all the rest of it. And you look around the world and you discover in umpteen places, no, this one is done by a private contractor. There was even a place where the fire service was contracted out to a private contractor, for example in Scottsdale, arizona.
Speaker 2:And so what we did was, instead of arguing theory, we argued reality. That in Germany they do this, in America they do this, in other countries they do, that They've all contracted out these services. On average, they've saved 40 percent, and it's a better service too. Why don't we do the same? And we'd produce a very slim little booklet which we called resurfacing britain, and mrs thatcher, against every copyright law, produced 20 000 copies and sent them to every Conservative councillor in the land and told them that's what they had to do.
Speaker 1:So that was quite exciting and just to kind of give a sense to the younger audience of the flip side of what you're saying was that the council employed council employees were running, you know the buses and the abattoirs.
Speaker 2:You know like people fixing the buses and the abattoirs. You know like people going Fixing the roads and you were a council employee doing this stuff.
Speaker 1:And it's sort of it feels so dissonant now to think that, I mean, we know we don't get value for money from councils at the moment, but even compared to then it's still a big step up.
Speaker 2:Oh, yes, that's right. Well, you know, britain in 1979, the year after we came back from America was very largely run by government employees. There were huge industries shipbuilding, coal, steel and all the utilities. They were all public sector and they were all run by public servants. And they were all run by public servants and, of course, the incentive structure then was to not to look down to the customers but to look up to the government. They're the guys with the money, not the people that you're serving, and so the whole focus of the nationalized industries was upward. You know how much more money the government's got deep pockets, how much more money can we get out of it, and you know how can we organise our work to make it easy for ourselves. Adam Smith wrote about this in 1776. It's nothing new.
Speaker 1:And so you have this, the old trope where you know the Department of Education is not there for the benefit of the pupils, it's there for the benefit of the teachers, or for the department of education is not there for the benefit of the pupils, it's there for the benefit of the teachers or for the department of education, whatever, and the same applies to every other government run sort of, you know, you end up running upwards, as you say, not for the customer who's dislocated and sees this sort of faceless bureaucracy. And that and has actually happened in the private sector now as well. I think the private sector is more like the public sector than it's ever been.
Speaker 1:You try and call someone up or you get accountability through a human. It's just not there.
Speaker 2:Well, you're talking there, I think, probably about things like utilities, which are very highly regulated businesses, and that is a problem. And we were also instrumental on privatization and we kind of worked out that you know, people like Milton Friedman would say well, it's very easy to denationalize the steel industry. You just send everybody a share certificate. Well, sorry, milton Middlechap, most people don't know what a share certificate is.
Speaker 2:So what are they going to do with it? And you know, you saw later what happened in Russia, where that's exactly what happened, and people would sell their share certificates for a bottle of vodka and a few people got exceedingly rich.
Speaker 2:So you know you didn't want that, and so we regarded it really as being a political strategy as much as an economic strategy. And you had to do it in such a way, firstly, that it was hard to reverse, but secondly, that you had to cut with the grain of the existing organisation. In many cases they should have been split up, especially some of the utilities and so on, and made much more competitive, but you couldn't necessarily do that politically. So our view was that what you should do is to get these things into the private sector somehow and then, once they're exposed to the chill wind of competition, competition will do the job for you, competition will do the job for you. But of course they were very heavily regulated and the regulators pretended to be competition, but sometimes they didn't make a very good job.
Speaker 2:Well, most times they didn't make a very good job of it.
Speaker 1:No, I mean I work in a very regulated industry, which is the investment industry, and the more regulated it gets, the harder it is for new competitors to come in to kind of try new things and experiment.
Speaker 2:Oh, absolutely.
Speaker 1:Because the money flows to the people with the most compliance officers and for them adding an incremental compliance officer is a basis point of their margins. But for a new firm it's a huge obstruction.
Speaker 2:So we know it's not real competition just because you're private?
Speaker 2:Oh, absolutely. And Friedman is quite right Competition is a good thing and every business person will tell you it's a good thing, except in their own industry. There's always some reason. I actually, when we came back from America, we didn't have any money and I took a part-time job in the city editing an insurance magazine for the British insurance brokers, and one of the things that they were proposing is to have an insurance brokers registration act, which was yes. The argument was it's designed to raise standards and make sure you know there's no fly by night operators and things, but also it was to keep out the competition, so you had to go through. They would be the regulator, basically, so they could. It's just like the medieval guilds that, again, adam Smith used to complain of that. They would decide who gets to be an insurance broker and you think, oh, for goodness sake, that's just simple protectionism.
Speaker 1:And the preference for the regulator is for there to be one company to regulate.
Speaker 2:And you have one regulator one company, one customer.
Speaker 1:Yeah, exactly, and all the customers are viewed as the same, not kind of divergent needs and desires. And if something like the airline industry took that approach, then we'd be you know, if there was only one airline, we'd never have new, we'd have a safety record, we'd probably be terrible.
Speaker 1:So wind forward to today, you set up something called the Adam Smith Institute, and you've mentioned him a couple of times. Let's talk about your most recent book, schools of Economic, an introduction to Schools of Economic Thought. But maybe kick off with why, adam Smith? Why did you set up an institute that was named after him? Who was he? For? People who don't know, who are new to economics and kind of want you know. They've heard this. I mean, I was talking to Matt on the train on the way up and goes. I think I've heard of him, but only through you but I know it's an important name, so what?
Speaker 1:what's his relevance today?
Speaker 2:well, when we, when we set up the institute, we called it something else. We call it the chatham institute, okay, I thought we'd have something nice and bland, uh. And then everyone said, well, you know what's that all about? So I thought, right, well, if we call it Adam Smith Institute, at least people have some vague idea, mostly, about what Adam Smith is all about. He's about free markets and all of these good things and trade and competition. So we were in favour of free markets and trade and competition and lower taxes and less government and all these good things too, and so it was a natural choice and it also had the amazing benefit that if your name begins with A, you end up at the top of every alphabetical list.
Speaker 2:So when we would give evidence to the House of Commons. For example, our name was at the top of the list, so that was quite fun. But you know, as a name it wasn't our first choice, but I'm very glad that we settled on that.
Speaker 1:And he, I mean obviously he came from nothing. Economics as a discipline. Actually, let me ask another way Was Adam Smith an economist or was he a philosopher? Uh, or was he?
Speaker 2:both. He was actually. I would describe him as a social psychologist, okay, um, he started off looking at, uh, philosophy, moral philosophy, and he was trying to work out how the human mind works and how society shapes that mind. Um, and you know, in, in, in moral philosophy, for example, he says, uh, you know, we behave in certain ways because we, like you know, we are creatures who are built to like the appreciation of others and we, we don't like offending others and therefore we behave in certain ways. We put pressure on people if they don't behave like that, and so on. And he couldn't understand it because he didn't have the theory of evolution. But he said you know, providence has made us like that, that's what it is. And then, of course, he moved on to economics like that, that's what it is. And then, of course, he moved on to economics. But he also was interested in, he wrote on art and literature and taught on art and literature and on jurisprudence, governance. So you know, he regarded these as all different parts of the human social psychology.
Speaker 1:So I think that's really where where he stands, interesting and so take us through a kind of high level summary. Don't give too much away, because we want people to read the book, but kind of what? What are the various schools of economic thought that people should know about? And you know what? Um, what's the kind of history of economics, let's say as a whistle-stop tour, and I'll kind of butt in where possible.
Speaker 2:Well, yeah, I'm just reminding myself by looking at the contents page. But you know, I start with pre-classical economics, ancient views of economics, where, again, people were trying to work out what the value of things was. It's something that runs through economics what's the value of something? And the classical school, adam Smith and Malthus and others, they took up that theme and there was, I mean, it had been through. The ancient Romans had the same problem and the Greeks had the same problem what is it that makes something valuable? Why is that glass of water valuable? Why is this piece of paper not valuable? And they thought it was some property in the thing itself. So there are lots of debates about that.
Speaker 2:Adam Smith was interesting. I mean, he was a pioneer in economics, because I keep saying he wasn't really, he wasn't the first economist by any means. But what he was very good at, rather like Ludwig von Mises, is to take lots of ideas that are floating around, you know, and lots of people say, oh, so and so anticipated Adam Smith. He wasn't original. Yeah, what he did was to take all these ideas and weave them into a coherent structure, which we now know as modern economics, and and that was, that was his genius.
Speaker 1:Which is what creativity is. No one creates something out of pure ether. You've got to spot the relevance and connections between various disciplines and what's happening in the world to kind of create rather than True.
Speaker 2:There's a lot of grunt work as well, of course. Yeah, that's right, and you know, smith, if you would read the Wealth of Nations. Well, don't read the wealth of nations. What you should do is to read my summary of it, which is a tenth of the tenth of the length.
Speaker 1:I did try to read the wealth of nations, probably about 10 years ago now, seven years ago, and, um, yeah, I didn't make it very far, not, but I feel, I still feel like I should try, because it's so seminal, but it's so weighty and the language is so….
Speaker 2:Read my… it's called the Condensed Wealth of Nations. Okay, and how did you?
Speaker 1:go about doing something like that kind of condensing.
Speaker 2:Well, I had to read the book and then work out what the salient points were, and you know so I did actually neglect the 70 pages digression on the price of silver, for example. I didn't think that was terribly relevant today. But there were a number of things like the division of labor, specialization, which Smith comes up with, and the importance of trade and the fact that in trade both sides benefit, whereas people had always thought, well, it's the person who gets the money that benefits and the customers, you know, worse off. Smith said, no, the customer gets the goods or the service, um, which they value more than the money. So both sides, both sides are better off. It's like kids swapping toys in the, in the, in the playground. And he was really the first, I think, to come up and make that a coherent uh strategy.
Speaker 1:And he, so you. You pointed to this, this issue that's been boggling people for millennia as to what is the value of something, which is effectively what, and the classical school argued that some, really, it's a really off-putting term called the labor theory of value, right, so that adam smith argued that the amount of work that went into this mug, uh, gives it an exchange value versus the amount of work it went into putting that camera together. And that's what the value is, and that is that's that was. That's a bit out of date now would you say, oh, highly yes, absolutely.
Speaker 2:It's very interesting. I mean, adam Smith he was, if you like, raised in the labour theory of value that people assume that well, it's the amount of work that goes into something which gives it its value. And Smith sort of starts like that and there is a famous little example that he mentioned and people say, oh well, he was in favour of the labour theory of value.
Speaker 2:But then, as he goes, on he says well, there's lots of problems with this. You see, it doesn't really work in this case. You know why are diamonds so expensive and water is cheap, you know, and except maybe in the desert, you know it'd be the other way around, that water would be extremely valuable and diamonds, you know, wouldn't. So he was very confused about that. And then I think Ricardo, who followed him, was just as confused. And they were trying to, if you like, they didn't know anything else. So they were trying to, in Ricardo's case, particularly trying to save the labor theory of value by bolting on all sorts of ifs and buts and conditions on it. And it was a bit like, you know, the theory of the Earth-centered theory of the universe. Yes, you know, you can argue.
Speaker 1:You had Aristotle trying to kind of do the ifs and buts.
Speaker 2:You can argue that, but you've got to have, you know, orbits within orbits, within orbits within orbits, and it gets terribly complicated and it's much easier if you conceive of it as being, uh going, everything goes around the sun yeah and yes, it turns as uh, it still moves yes, so, so you know that was a problem and it was only solved.
Speaker 2:It was solved. I'll tell you the exact year 1871. It was solved by two people Stanley Jevons, in Britain, and in the same year, by Karl Menger, the Austrian economist. And of course it's become associated with the Austrian school. And that's utility analysis. It's not that the glass of water has value. It is that I value the water because I'm thirsty, I need, I need water, um, and if I'm not thirsty, then I don't need water. And and of course they, they had the idea of diminishing marginal utility, uh, that the more water you have, the less you want.
Speaker 1:And there are limits how much you can drink and how much the first big mac is really enjoyable, the second one is not so much, and the third one you don't want, right?
Speaker 2:yes, so, so, and, and that was an absolute breakthrough, of course, uh and uh, and it just got economists out of so many problems. The, the only well, not the, but the most significant person who adopted the old thinking just before, of course, this revolution happened, was Karl Marx, and he made the labor theory of value into a whole political and indeed economic system, political and indeed economic system. So the whole of his politics is based on the idea that, yes, it's work, it's labour, that's the important thing. But then even he has to talk about socially necessary labour and things like that, because he knows well, if you spend three years digging a hole, is it valuable? Well, no, it's not. And he says that's because it's not socially necessary. And then you think, oh golly right, what's socially necessary? How do we know? So Marx was actually much derided and overlooked in his lifetime, and it was really only in the 1920s that he started to become popular, after the Russian Revolution. So you know, he was a convenient philosopher, if you like economic philosopher, for the Russian upheaval.
Speaker 1:So the Austrian school I mean Jevons out of interest has become very popular again today because of AI and the kind of infrastructure build-up with the Jevons. Everyone needs to know about what the Jevons paradox is, which is a good question to answer.
Speaker 2:I have the faintest idea myself. Oh, okay, fine, Very quickly if you're interested.
Speaker 1:The Jevons paradox is the cheaper something becomes, the more you end up using it, or the more efficient something becomes. So it's like LED lights, for example. We now spend more energy on LED lights because they've become so efficient, so people kind of carpet their gardens with it.
Speaker 1:Absolutely stuff, absolutely which is great in in many ways, why not um but no um. So, basically, value becomes this thing that you ascribe. It's in the mind, it's, it's, it's it's not subjective, but it's got that quality to it. That's hard to predict, because a certain thing will have different values at different points in time, depending on what's going on and what's popular, what's not popular and all the rest. Why, therefore, did mathematics have such an impact on economics? Thereafter? And I've heard a story, and I don't know if it's true or not that the Chicago School, which was run by Milton Friedman, if I'm Well, he was a leading.
Speaker 2:He was a leading.
Speaker 1:Refused to have Hayek in it because he wasn't mathematical enough, because he was an Austrian economist and he didn't. And then he did this big speech for his Nobel Prize saying, look, we've turned economics into this thing. That's science. And it's not science, it's different, it's psychology. And so it felt like, anyway, can you riff on that?
Speaker 2:Well, look, hayek and Friedman were great friends I knew both of them and they got on famously. But they did disagree on economic policy. It wasn't a case of somebody shutting out somebody else at all, but Hayek really did find it difficult to get a job in America, as a lot of the Austrians who went over during the war years or just after did, of course, because their thinking wasn't the same. And Friedman, co and Frank Knight and all the other people in the Chicago School, which I'll also cover in the book. Yes, they took the view that, right, we're saying all these things about economics. Let's have a look at the real world and just see whether that is actually true, that what we're saying is true. And so, starting from the principle that people are basically rational, they don't do things stupidly for the most part, um, then you start to say, right, well, how do they then behave?
Speaker 2:and that and it was, you know, very productive, but, you know, trying to put numbers on it. But it did have a downside, which is that economics isn't actually like physics, for example. It's more like medicine. You're trying to understand and do something with an organic system. It's not like bricks and, uh uh, ball bearings and things like that that you study in physics. Um so, uh, there were problems with it.
Speaker 2:And I think again, kane's another keynesian, another school of economic thought um, you know, they took this thing on and tried to make prescriptions for the economy based on numbers, about people's propensity to save and things like that. And of course there are so many different circumstances that those numbers never really add up. And of course, the the Keynes although Keynes was exceedingly influential in the 20s and 30s and 40s to some extent, and his followers were exceedingly influential in the 60s and 70s, it basically all felt a bits because you just got the wrong numbers that you could say, right, well, let's, let's spend our way out of a depression, but if you carry on doing that, then you simply get inflation, as Friedman realised and Friedman had done his own numbers and realised, and as we've had in the last two or three years oh, yes, absolutely, but there's a famous Keynes quote about him going to some conference in America and he said he was the least Keynesian person in the room because people have sort of taken on his.
Speaker 1:If he was alive now, looking back at his legacy, do you think he would be slightly disappointed with the way that his work was?
Speaker 2:Oh, yes, yes.
Speaker 1:He wouldn't have imagined government spending at these sort of levels.
Speaker 2:Oh goodness no absolutely not, uh and uh. Well, hayek uh has an interesting, had an interesting take on this, which was that they were, they were really the two leading economists in in the uk and at the they were pretty equal. It was only later, once Keynes had died, that the Keynesian ideas became much more prominent. And Hayek said to Keynes you know, because he knew Keynes and Keynes had found him accommodation in Cambridge when the London School of Economics was evacuated during the war and things like that, so they knew each other. And Hayek said basically look, Keynes, I think you argued that in a time of depression we should be spending more money, but we seem to be spending more money even though we're not in a time of depression, and don't you think you should? You know, tell your supporters that you know, this has gone too far.
Speaker 2:And Hayek says and Keynes said yes, I can see the problem, I must do something about that. But then he died very, very shortly afterwards and it says Hayek, he couldn't do it, so you got, if you like. It was one of these things where Keynes had started off quite cautious. His first in the 20s, he wrote about money as an important instrument of economics and then he moved on to fiscal policy. If he'd lived longer he might have gone back to money.
Speaker 1:Yeah.
Speaker 2:And say, no, it's you know, you've got to keep the money supply under control, and that's the important, that's the important thing, and that's what's friedman and hayek kind of yes, so that was the whole argument in the 60s and 70s that uh, and certainly on well, uh, hayek was was saying that, that it was credit, and uh, friedman was saying that it was money.
Speaker 2:But it's pretty much the same thing. It's it's banks, or, in fact, just creating far too much liquidity. And money is like everything else If there's lots of it around, it's cheap.
Speaker 1:So you've got a chapter on Marx, I believe. Let me just double check. Yeah, chapter four, Karl Marx. Yeah, they made me do that. Was there anything Karl Marx got right?
Speaker 2:Oh, yes, I mean, I think he was right on some things sociologically that you know he talks about. The social relations depend on the production relations relations. In other words, if you rely on agriculture as your main source of income, that's going to produce a sort of feudal society, a rural society. If you rely on steam hammers as your main industry, then that's going to produce a completely different sort of society. So that sort of explains the difference in societies between the rural areas and then the new cities that we're developing.
Speaker 2:And I'm sure the same is true today that when you've got technology, that makes it much more easy for people to do their own thing. You don't have to go into a factory and be part of a huge enterprise, you do your own thing. So I think, you know, we're getting much more self-employment, we're getting more innovation. Uh, we're getting, uh, people going from one job to another, to another, to another. Um, so it's really quite a different society.
Speaker 2:Um, and it's, I said, but you know it, it has its pluses and minuses. It's, you know, people are free and they, they do what they want. They don't feel as if they're chained to a factory bench anymore, but at the same time it means that people travel, so they're away from their families and their old parents get sick and you know there's nobody to look after them. So there's, you know there's things that you have to manage, but I think that was, you know, quite an insight in fact, from Marx, that, yes, it wasn't just that there's a class of landowners, there's a class of merchants and there's a class of capitalists.
Speaker 1:No, these things change. Well, we're going to come to landowners shortly. Behavioral economics, which you've included in your, in your book only because, well, for many reasons, but it's become, it's very much part of the lexicon. Now you know everyone who is a dilettante or is a sort of. You know, radio for listening economist reader likes to talk about confirmation bias and you know that's classic.
Speaker 1:Yeah, it's become a very a useful and interesting way to look at the world, but it's become very trendy as well. And what is the heritage? The austrian school where, like you know, values in the mind, and so therefore we need to know how the mind works to be able to understand how economics works, or is is. Are there dangers to taking behavioral economics, economics too far and assuming that we can kind of almost control people by using their own brain against them in many ways?
Speaker 2:To be honest, I'm not quite sure where it came from public choice school who looked at the way that political decisions are made and and used economic tools to demonstrate that yeah, okay, you've got public, you you've got a commercial economic failure, but you've also got government failure as well, because there are all sorts of biases in in government, and I think it might have sort of come from that, really, and that people were looking at the Chicago type of rational, individual, very, very productive way to look at things. But of course we all know the reality is that people aren't completely rational. And so the behavioral school started looking through all of the biases that are in the human mind. I mean, it's very Smithian, this, you know going into the human mind and the sociology of it and saying, well, no, there are all these biases. And when you're trying to make economic calculations or you're trying to make policy changes, you've got to be aware of things like that.
Speaker 2:People have their own incentives and so you know, just to take the trivial example, if you put the healthy food right in front of the kids and the not-so-healthy stuff at the back, they'll tend to choose the healthy stuff. It'll make it easier for them to, exactly because it's easier. And how do you get people to pay their taxes? Well, you send them a note saying well, everybody else in the streets paid their taxes, except for you.
Speaker 1:You know, don't you think you should pay it Exactly?
Speaker 2:And so people have these cognitive thinking biases that push them into doing one thing or another. It goes right back to Adam Smith. But of course I mean you're right that you can go too far. I mean there's a nudge unit, or was a nudge unit, in 10 Downing Street and the idea was to try and design policy to nudge people into doing certain things, like if you get a driving licence license, you have to tick a box if you don't want to have your organs donated on your death, kind of thing, and if you want people to save into a pension.
Speaker 2:There's a interesting American examples of this. Now you don't say to workers oh, you should save more into your pension, you should. You say, well, after your next pay rise, do you think that you might save more into your pension? And they all say yeah, absolutely, yeah, yeah, sign here. And so you get huge amounts of pension savings because people they don't have to make an immediate choice, they don't have to think they're giving something up. What they're thinking is okay, I'm going to get a pay rise, right, well, I'll devote a part of that to my pension. So some of that policy is very good. But then of course you do get ideologues who say things like oh well, we know that smoking is very bad for you, so you know people should be forced to fill in a medical questionnaire before they can buy a packet of cigarettes. And you think no, that is not nudging people. That is, then, nannying them.
Speaker 1:Yeah, yeah, okay, and so we've covered chapter nine there as well, because you talk about the public choice school in this book as well.
Speaker 2:So we've done a real whistle-stop tour of what's included.
Speaker 1:Can I talk about something that wasn't included? And I know you know space is a big issue when you're trying to cover something as oh yeah, meteors as schools of economic thought. Adam smith spent a lot of time in france, didn't he? Before he wrote the wealth of nations, and he was influenced by the physiocrat school, which I don't think should have probably got a space. And in this book, but what? What one maybe they should have done, I don't know.
Speaker 1:But um, one figure who's not here that sort of sticks out to me is henry george, who was sort of that's true um you know, immensely popular in his time and one might say prophetic to the kind of a lot of the issues that we're facing today, with rent seeking and the issues of land as a distinct sort of factor of production which has been lumped in with capital, maybe by sleight of hand. And it to me, if I had a criticism of the kind of free market community here in westminster and Westminster and with the various think tanks that do lots of great work, is that they've maybe not spent enough time focusing on the kind of land issue. And yet they say we need to build more houses and that's important. But the kind of enrichment of landowners at the expense of risk takers and capitalists and labourers, I think is kind of one of the big injustices of our time. Agreed, um, why?
Speaker 1:And just to you know, one of the one of the at the time when adam smith writing I remember him begging william pitt the younger kind of not to introduce an income tax because most of the state was funded through land taxes and some tariffs on overseas kind of strategic industries. It sounds like kind of very familiar to where we are today and I know they had a water fund and all that kind of stuff. But the moment that tax on labour kind of came in, it was sort of only one way and we've lost that sense of justice in the tax system or a moral sense of economics, because people are now effectively only working to pay their rent, I feel. So how do you feel about, you know, this need to kind of revert back to classical economics, particularly with this question of housing and land and rent-seeking? I've touched on a lot there, so just take any bit.
Speaker 2:Well, I think you're right. Yes, I did, I suppose, overlook Henry George, because he doesn't really fit within the existing you know, the normal schools of thought. I think he's a one-off with his idea of land value taxation. What you say about income taxes is very interesting. It was introduced in, I think, 1912, 1812, as an emergency tax to fight Napoleon, and it was sixpence in the pound on incomes of more than £50. And a year later the parliamentary commissioner complained about the number of members of parliament declaring their income as £49.
Speaker 2:And it's like all of these temporary taxes. Actually, in America they introduced an income tax and then it was abolished as being unconstitutional and it was brought back again, and so on. So they've had various fights about it. But once you have a tax like that, it's very hard to get rid of it. But I always say why do we tax income? We want more income. You know. We want people to work. This is a tax on work. National insurance is tax on work, tax on jobs, tax on creating employment. Uh, you want more of these things. Tax the bad things, not, not not the good thing, capital, like.
Speaker 2:We want people investing in businesses yes, oh, capital gains tax and so on, and stamp duty and all these silly things um are the most damaging uh taxes because they break up uh concentrations of capital and you need more concentrations of capital, because capital is what allows you to do things better and easier and cheaper. You build, you know you don't try to catch fish with your hands. You know you make a net and you catch them with a net, and then you build a ship and catch them with an even bigger net. So that is capital, and that's what capital is all about Making your production much more efficient, which means that you become more prosperous as not just an individual, but as a society. So taxing capital is is hugely damaging for the economy and it would be the first tax I would get rid of and the layer before the efficiency gains is that experimentation that happens in the economy when there's capital that's available oh yes.
Speaker 1:So you try, there's, there's a, you try things out, you try a different type of fishing net yeah that didn't work. Okay, let me adjust that. And the moment you just you, you restrict that availability for experimentation, that the free market is basically an experimentation mechanism in many ways or a discovery mechanism through absolutely innovation, which is through kind of trying new ideas out and seeing what sticks and winding the clock forwards.
Speaker 1:It feels like so much of our most investment goes into real estate. Now the bank will lend you 10x your salary to buy a property. But if you ask the bank to lend you any part of your salary to invest in Amazon shares or, you know, buy a coffee machine to start a business or whatever it is, you get laughed out the house. Because the rational thing to do in this system is to buy property. Because sorry, going back, I'm getting a bit of a soapbox here but like ricardo's, law of economic rent spells this out and I just feel, you know, I don't know if you've come across peter teal, but his, he's a silicon valley. I really find his assessment of things quite compelling. So we had this sort of series. History of economics is putting the thoughts, economic thought, to one side, but like the practical implementation of economics, let's say, over the past 100, 200 years, has been sort of the series of one-offs, let's say so.
Speaker 1:One example of that is mass infrastructure build-out and the kind of proliferation of cars and trains and that kind of thing, and another is one-off is the reagan thatcher reforms that created this kind of boom of living standards and wealth creation. And then the next one was globalization. So the ability to outsource your manufacturing to kind of create freed up a lot of bandwidth to try other things. And now we're kind of waiting for that. We've had those, we're waiting for the next one off. And all through that time, henry George argued that whenever you get population growth we've had those we're waiting for the next one off.
Speaker 1:And all through that time, henry george argued that whenever you get population growth, whenever you get economic innovation, better technology, better infrastructure, ultimately that money goes. You know it creates a one, you know one off and peter teal argues this as well, that but then it ends up in landlords pockets. And why? When he invests in a silicon valley company, he knows that that's paying a high salary to the employees of that company. Why do they have a high salary? Because they need to live in silicon valley.
Speaker 1:Yes, to pay them yeah so it feels like the next one off could be, you know, and it could be the solution to this issue of our times, which is a very progressive but also free market approach.
Speaker 2:Yes, a lot of people are interested increasingly in the idea of taxing land values rather than other things, and it's got a lot going for it. I mean, I think Henry George thought that should be the only tax. As far as I remember, single taxer, uh, which it never would be, because we've got so many taxes on so many things.
Speaker 2:The governments aren't going to give them up, um, but um, uh, yes, and then it. Then it's the landlords. If it's it's the value of their land increases, then they, they, they pay tax and um, you know, of course, these. It's reached a um, a sort of crescendo recently, I think partly because of our planning system. You know the 1947 Town and Country Planning Act, which was highly restrictive, with green belts around towns and lots of restrictions on how far out you could build and how high up you could build and how densely you could build.
Speaker 2:Again, all done for the best of intentions, but it doesn't suit the way we live today and it's Marx's social relations again. We live in a different way and the cities aren't all about, uh, factories. They're about, in particular, young people who want, you know, who don't care whether they have a garden or not, and perfectly happy in an apartment, uh, but who want to be there in the center of things, because that's where the ideas are and that's where the creativity is, is generated, um, and and so. But we've still got this town and country planning act idea and we've got the uh, really very harsh regulation on on new building, and of course, you've got, uh, lots of people who've got very nice houses looking out onto fields who don't want other people to build smaller houses in front of them. And so the Conservatives, which should be the party that should have been doing this, just couldn't tackle it because, although it was proposed under the last government, they couldn't get it through their own troops. And then I can't see the current government doing it. I can't see reform doing it, so I don't, you know, it's just not going to happen.
Speaker 2:But that's extremely bad economically and it's extremely bad socially, because young people can't afford to get on the housing ladder. They've got to wait until their parents die and then they inherit the house, and it means that people have to live further away from where they work ladder. They've got to wait until their parents die and then they inherit the house, um, and it means that people have to to live further away from where they work. It means that people, you know, so you're traveling more and uh, things like that, and you can't, you have to take whatever house you can find. You can't necessarily get one, that's, that's perfect for you, um, and we need a much more fluid market. So I think, once you've had that, I think that's a lot of the land problem goes Whether land is a good thing to tax. Well, you know there's different views on it.
Speaker 1:Yeah, fair enough, let's zoom out. Then I had Christian Niemitz, who's the IA Editorial Director for people who don't't know, on the podcast not long ago and I kind of asked him to your thing about the rotten state of Britain, kind of what is the issue? We all feel something is wrong and his kind of answer was you know, we don't build anything anymore.
Speaker 2:I think that is the main problem of our time, whether it's houses or nuclear plants or factories or labs or whatever.
Speaker 1:But let's take a step further back than that. Why don't we build anything? And yes, we can say regulations and nimbism, but even we used to build things and take risks. You used to teach philosophy at Hillsdale, as you mentioned earlier. Can you try and give a philosophical answer to why? What kind of it feels like the west is sort of committing suicide? Right, and we would. We walking here today, we walked past a, a protest about the assisted dying bill, which I think is a symptom of I think I mean mean we may have different views on this, but like as symptom of the West kind of committing suicide literally in its most manifest way, by allowing us to make it easier when things don't feel right, to kind of top ourselves and I know I'm oversimplifying a very complicated topic there but why is there no risk taking?
Speaker 1:Why is there no imagination?
Speaker 2:ortaking. Why is?
Speaker 1:there no imagination or intuition.
Speaker 2:Is it the?
Speaker 1:Sorry, go on.
Speaker 2:I think I can probably give you a political answer rather than a philosophical answer I suppose slightly philosophical, but I think there has grown up over the decades an idea that as the government has grown, there's been a sort of belief that, um, yes, the government is there to to do everything, it can do anything, anything it likes it, and, and so, you know, in john stewart mills time features in the book uh, in john stewart's mills time time you had turnpike roads, people paid to travel on main roads, and he says you know, if the roads and the schools and lots of other things, you know, if they were run by the government, you know freedom wouldn't exist in this country except in name.
Speaker 2:And so that's really where we have that.
Speaker 2:Once you had the, in particular after the started earlier, but but particularly after the second world war where you had the atlee government nationalizing all these big industries um, then you got a sort of psychology that, um, yes, you know, utility investment, uh, investment in, in employment like car making and ship building and so on, all of these things are government functions.
Speaker 2:Of course, governments don't do these things very well and they don't spend enough on capital in particular. They just let the capital run down because things get worse and worse and worse and nobody really notices very much, because things get worse and worse and worse and nobody really notices very much. But if you don't put wages up every year, then there's riots and strikes and all the rest of it. So the incentives on governments are quite different from that of the public sector, and so you've got the private sector and so you've got this sort of elephant just squashing the whole system, and so people are much, much more reluctant to, uh, to invest, because they think, well, you know, it's the government's job, um, and it all, you know, it all comes with lots of regulation and all the rest of it and again.
Speaker 2:You know, we do so many of these things. Public choice school goes into this in great detail. We do so many of these things. Public choice school goes into this in great detail. We do so many of these things for for noble reasons. You know, we don't want people to work in unsafe conditions. But then you, you put rule after rule after rule after rule on it, and and then you know, I mean we're just in this country, we're just discussing an employment rights bill which is 300 pages. You know what corner shop has?
Speaker 2:the time to read 300 pages of legislation on top of all the other legislation, and so people look at it and they just say, oh, I'm going. You know, I'm going abroad, I'm going somewhere that's kind of easier where there aren't all these restrictions.
Speaker 1:And another second-order impact. I suppose I see a lot of people working very hard but starting businesses which are designed to help you navigate the planning system or help you be a compliance consultancy firm that helps you make sure. So that's normally the private sector, let's say. But actually, or you're a cleaning company and your main contract is the council, so your main customer is the government, and then your employees are therefore one derivative away from being government employees. And you see this in parts of the country where most of the local economy is purely funded by the government, which is therefore funded by a small tax, shrinking tax, base.
Speaker 2:Yes, Well, you know some of the public choice economists talk about productive and unproductive labour and yeah, making stuff is productive. Navigating through rules and regulations so you can make stuff is not productive, and and the amount I mean. I started a business and I think the first three months our discussions weren't about what we were going to do. It's about how do we structure that business in order to be most efficient tax wise. And you think what a complete waste of human ingenuity and time and effort that one has to think in those terms. But of course you know people do, and so you've got vast numbers of accountants and you know setting up trusts and goodness knows what else all completely unnecessary, especially things like inheritance tax. It's a huge industry to help people avoid inheritance tax because people want to pass their capital on to their kids.
Speaker 1:They want their kids to be better off than they did, it's perfectly natural or big companies with big legal teams or tax teams that help them coordinate their revenues in such a way to kind of like rather than spending that money on trying new products out.
Speaker 2:they've got a sort of Absolutely, and this, of course, is anti-competitive because, yes, the big industries, the big firms, can afford the fleets of compliance officers and all the rest of it. Somebody starting up can't. In fact, somebody starting up might have a model that isn't even covered by the regulation and the rule would be well, you can't do it unless there's a regulation. It's quite a turnaround in Britain that this has happened, actually that I think they want to get into the politics of the EU, but the legal systems on the continent and in the UK are quite different, and in in England in particular, it's law has been principles driven yeah whereas the continental the Roman law is basically that Napoleonic War is that unless there you've got specific permission to do something, you can't do it.
Speaker 2:so in in UK UK, it's permissive Do what you like. If there's a problem, you'll be in court and we'll stop you doing it. On the continent, it's more, you can't do anything unless you get a law passed saying that you can do it. So that's terribly anti-innovation.
Speaker 1:So that's why Britain's actually in a good place for the next years yeah, I mean I just before we try and answer what we do about it. Um, I want to throw in some optimism, because you can have two opposing things in your mind at any one time. And, on the one hand, britain is rotten and it's in a rotten state, and it's even more rotten than it was 15, 16 years ago, but on the other, I mean there's probably no better time to start a business or be alive, or the technology that's available to you the services, the communications, the customer base, accessibility, all that kind of stuff compared to trying to do something in the 70s.
Speaker 1:so it's important not to get too depressed about things, I guess, and maybe that's what will set us free and bail us out. But because it sounds like what you're saying is the moment the state kind of gets involved in terms of taking taking this off, in terms of taking this off making all these decisions for us, there's no going back, is that?
Speaker 2:fair to say, it's very hard to get back. I mean, you know, mrs Thatcher famously got back. Mrs Thatcher, when she was Education Secretary, of course, famously removed free milk from schools. Yes, milk snatcher, the milk snatcher. And I think it's about the only example of a welfare benefit that's ever been removed and it was absurd at the time. So it's very hard because, as I say, you build up an interest group that is going to lobby against you and if, as has happened at the moment, if you've got an unlimited democracy, then it is you know who's got the biggest and noisiest gang, and so you get interest groups making a lot of noise and politicians naturally respond to the people who make the noise. They don't respond to the ordinary people. I think it's one of the reasons why, you know, so many people throughout Europe and indeed the world are voting for third parties now, because they feel that the mainstream politicians just don't represent them anymore.
Speaker 1:They're in hock to interest groups and that's why I feel I mean I don't know if you've been following the New York mayoral election at all this socialist is doing incredibly well In the polls. It's very slick, very impressive media operation, fundraising operation from a very wealthy background, as socialists tend to be, um. But this is where I feel again, the kind of the free market community needs to pivot and tack, because there's no use saying free markets are good for you when you've graduated from university and you can't get access to a house or your salaries, you know it's not that the socialist rise is always a symptom, not a cause, in my, in my view, um, because people don't want to be radical unless they have to, or radical in terms of like throwing the baby out with the bathwater um, it's, it's quite it's.
Speaker 2:It's quite difficult to explain to people that most of our problems are because we don't have enough markets and most of our problems are because we don't have enough personal freedom. You know we have a problem with drugs. If drugs were legal like alcohol is legal we'd have much less. You know people don't shoot each other in gangs over the supplies of alcohol to hotels and restaurants, but they do with drugs. And again, planning. It's because we don't have enough market. It's too controlled Environmental policy. It's because if you allow the market to do these things instead of trying to regulate everything, you'd be much better off. You know, if, if you think that co2 is the problem, have a tax on co2, you're using the market to deal with the problem. People will produce less co2. It's as simple as that. So I think we need more markets.
Speaker 1:Very difficult to tell that, especially to young people yeah, I think, because young people don't yet have a have skin in the game. So the moment you feel part of the part of the system you want to, yeah, then you're more likely to want to say once you start paying taxes, you know then you realize wow, you know how much am I paying. I'm conscious of your time, so I just would like to.
Speaker 2:Sorry, rivers dry up, but never me.
Speaker 1:No, no, no, no, it's been fascinating, but I just before I get onto my traditional closing question. I mean, you mentioned something about democracy. Is there an inherent flaw in the system that eventually you end up voting for everyone else's money?
Speaker 2:Yes.
Speaker 1:And is therefore, it's perfectly obvious, inevitability to all of this?
Speaker 2:Yeah, it's perfectly obvious. You know, when you look at the ancient Greeks and Romans Romans in particular you know they didn't want democracy. They thought that would be ruled by the mob. What they wanted was a republic. When the founding fathers created the United States, they didn't want democracy, they wanted a republic. In other words, they wanted a democracy in which everybody has a say, but limited in terms of the range of things that it could do and the power that it had to do them.
Speaker 2:And I think that that's been our problem. And the wider that the franchise has got, the more we have justified the democratic system. And fine, it's good. My great aunt was a leading suffragette and it's good that we should have a very wide franchise. But when we had a narrow franchise, I think the few who had votes realised that well, we couldn't do everything because there's lots of other people around and we don't really represent them, whereas today, politicians assume they can do absolutely everything, because all they've got to do is get a majority in the country and then a majority in Parliament, and that's licensed to do whatever they like. So it's licensed to say how big your Coca-Cola can, should be, and whether you can smoke in public or not and all sorts of things and how much you should drink. So that is our problem that we have democracy and democracy.
Speaker 2:I always say I wrote a book on this for the IA. Actually, democracy is a very good way of deciding things that you can't decide in any other way Collective decisions like you know. What do we do about defence or policing and courts, things like that. It's a very bad way of deciding how people should run their lives. People are much better at doing that themselves.
Speaker 1:You mentioned defence just very quickly. In the recent round of NATO talks. I remember something that's something the spanish prime minister said was well, we can't spend five percent of gdp on defense, because we've got a welfare system that we need to fund and so effectively, you know, putting words into his mouth.
Speaker 1:We're going to free ride off everyone else's spending and europe has offensively free-rided off the american taxpayer. To keep us safe is one of the issues where, no, we've not been. One of europe's biggest strengths was paranoia about the germans or the french or the italians, whatever or the brits getting one up on you. So you better, you know, you know, innovate and you know. And the moment you kind of outsource your manufacturing to china and your defense to america, um, you, you. What's left to spend money on other than welfare?
Speaker 2:yes, well, yes, I mean I, I think that. Look the wealth of welfare system, state pensions, see this in britain, see it in spades, in in france. These are ponzi schemes. Right, you know, we are asking young people today to pay my pension, right, and okay, yes, I, I did in my lifetime pay taxes, but the pension money that I'm going to get is far more than the taxes that I've paid during my lifetime On average. That's true of people.
Speaker 2:It's a Ponzi scheme, it's a pyramid selling, as we used to call it, and it was introduced as such when Lloyd George said oh, we'll give you sixpence for fourpence. You pay in fourpence over your life, we'll give you sixpence. It's obviously nuts, but you know, it is so massive and there are so many millions of people who depend on it that I mean, you know, getting rid of the triple lock, for example, which is complete injustice um, I mean it would. It would hurt me, I'm a pensioner but but, uh, you know it's a huge injustice and it just means that we're running out of money. And you know, people have done studies on this in uk and they and they've done studies on it in the united states. Sometime in the 2030s, we're going to run out of money and I kind of get it.
Speaker 1:If you fought in the war or you're a young person who was affected by that, then you know kind of fair enough. But if you're a baby boomer you sort of had the benefits of free university, free, you know, healthcare.
Speaker 2:I'm a baby boomer and we've had it brilliant, you know we've had all this free health, free education free universities.
Speaker 1:Anyway. So, look, as you know, I like to wrap up these conversations with something I call the long bets, which is, you have a 10-year horizon to make a prediction either of something you think will happen, or you've already alluded to it about 2030. But, uh, something you think will happen, or something you would like to happen, or both, um, just for a bit of fun well, uh, you said that you were an optimist and I think so am I.
Speaker 2:I mean, uh, I'm. You know, by nature I I'm a kind of fun. Well, you said that you were an optimist and I think so am I. I mean, you know, by nature I'm kind of depressive, but I think, intellectually, I'm an optimist. And I look at the world and, despite everything that's going on, the world's getting to be a much better place and, in particular, I think the poorer countries are coming up. So I think, if you're talking 10 years' time, places like Africa, for example, are going to be booming. Africa is, at the moment, a very young population. As people get older, they build up capital, and that's going to happen there and I think probably well, maybe not by 2035, but sometime after that I think the world population is going to top out at about 10 billion, which could be very interesting, but it will be a much more equal world and I think, in individual countries too, I think there'll be much more equality. You know too, I think there'll be much more equality.
Speaker 2:Piketty and his Capital in the 21st Century book completely wrong. It's not the rich. The rich aren't getting richer. Well, unless regulations and such and taxation helps them to do so, which in many cases, of course, it does. But in a market economy, the rich don't get richer. It's the poor who benefit most. It's the poor who get all these services and new products and processes that become cheaper and cheaper and cold running servants instead. So I think that that's going to be the case and I think much more self-employment and more creative industries.
Speaker 2:I think uk in particular is going to in 10 years time, it's going to be a leading place for genetically modified organisms we're already bringing back the dodo and it's going to be a leading place for AI, because we have, despite everything, we have a more liberal, permissive system where you can come up with ideas and try them out, and so I think all of that will will generate wealth, not just in the uk, but but over over the over the whole um world, really. Uh. So I I think, I think the future's going to be exciting. It usually is brilliant.
Speaker 1:Well, look, it's not often these uh predictions are optimistic. So it's nice to, for a change, have someone come on and say keep calm, carry on, keep doing your thing, keep fighting the good fight. And likewise to you, eamon, thanks for years and years of public service and getting the ideas out there and fighting the good fight. And I look forward to what's coming up soon, which is competition and public sector. You said the two different things.
Speaker 2:Well, my next one is, I hope to be a graphic novel version of the Wealth of Nations, adam Smith's Wealth of Nations, and then a book on the public sector, which is much underwritten, and on competition, which I think is much misunderstood.
Speaker 1:Great. Well, if you need a good graphic producer, I'm going to do a shameless plug for my podcast producer, Matt Cooper, who will do the best illustrations you could possibly find for this, so we can talk about that offline.
Speaker 2:Yes, absolutely We'll do that.
Speaker 1:But for the time being, thank you so much again and I felt like we scratched the surface, so we'll have to have you on again soon when you've, um, when you put those things up, and would love to hear from you again soon. Thank you very much. This has been meeting people. I've been your host. Amal pandya. This is a podcast produced by mass cooper with music composed by lover man.