Ep. 16 - Intersection Economics: A New Way to See the System

What if the economy isn’t a maze to solve but a city to manage, one intersection at a time? We take a practical lens to markets, debt, and reform by introducing “intersection economics,” a rule-set that prioritizes safe, efficient flow over ideology and quick fixes. Instead of arguing about who should drive, we define how to keep the lights timed, the lanes clear, and the incentives aligned so people and capital move where they create the most value.

We start by confronting a hard truth: meaningful reform rarely happens without pain. From the Great Depression’s sweeping changes to the 1970s fight against inflation and the partial clean-up after 2008, crises created the pressure to act. With structural deficits, compounding interest costs, and entitlement promises colliding with demographics, the signals are flashing again. The question isn’t whether to choose winners; it’s whether to design the intersection so winners emerge from clear rules and transparent trade-offs.

Our framework breaks down three failure modes you see in the wild: chaos (no lights), overreach (everything stops for perfect safety), and corruption (the “cop” waves through whoever pays). We map those to economic realities, laissez faire blowups, paralyzing regulation, and regulatory capture, and then lay out a better role for government: set the signals, update them with data, and measure success by flow. That means adaptive fiscal rules, countercyclical safeguards, and visible triggers that adjust benefits and contributions before a crash happens. We apply this concretely to Social Security, proposing automatic, transparent adjustments that protect the vulnerable while restoring balance.

If you’re tired of doom without direction, this is a blueprint you can use to judge policies and demand better ones. Listen to rethink how markets, policy, and incentives fit together, and how smarter “traffic lights” can cut crashes, speed recovery, and grow opportunity. 

Enjoyed the conversation? Follow, share with a friend who loves pragmatic policy, and leave a review with the one “light” you’d retime first.

Transcript

Setting The Stakes And Bias

SPEAKER_00 0:07

Welcome back, everyone, to the Radical Minor Podcast. I'm your host, Pat O'Brien. Today, uh I'm gonna talk about economics. And I'm gonna do that because in the last episode, we talked about the scale of the US debt and how different this moment is historically and why meaningful reform keeps failing politically. And basically, I went along with uh the evidence and basic predictions that we're probably where we're headed is an economic depression by 1930 or thereabouts. And I want to be very clear about my bias going in. I'm I'm skeptical that the United States can self-decorrect before a meaningful uh turnaround uh or or before a serious depression. I just think the chances of a depression happening and that being the cause of why we choose to reform our ways is much higher than the chance that somehow we're gonna self-correct. So we're gonna be forced to do it, is basically. And I'm I'm not trying to be cynical. I'm basing this on history, I'm basing this on incentives, I'm really just basing it on math. So that that's the starting point here. Uh I want to talk about economics. So I'm gonna get to that in a second. But to talk about uh why, you know, I think that it's gonna take some massive event for us to change our ways. Because if you think about it, just even recent history, um, go back to the Great Recession, we had a massive economic downturn and you know, starting with the housing bubble and then all the Wall Street shenanigans that went on with that. And there was some reform, but I wouldn't say there was massive structural reform, even in that sector. And what there was, everybody who took kicking and screaming with the extent of reform that we had. Then we had COVID, and while not specifically dealing with economics, it had massive economic effects. And for a short period of time, we were all together fighting this. And then very, very quickly, it went to everybody went to their corners, and it was like, well, some people are like, if you're not wearing a mask, you're a bad person. And others are like, if you think this is more than a flu, you're an idiot. And and we didn't get much done. So we didn't politically and culturally, I think we actually came out of COVID a bit weaker and probably less prepared for the next pandemic. And there's likely to be a next pandemic, hopefully, not for another 100 years. And speaking of a hundred years, I'd mentioned this in my last episode. I just got uh almost done reading uh the book 1929 Fermit by Andrew Sorkin. And I wanted to start with the fact that I think these are non-controversial examples of when our country has decided, hey, we need some big solutions to big problems. Post-Great Depression reforms, the the government was pretty much not involved with the economy mostly up until the Great Depression of 1929 and there and forward. So all of these things, the New Deal program, the jobs program, Social Security, they all come out as Great Depression reforms. And most of them, I mean, rural electrification. Think about that. Like just putting investing in your infrastructure, that's just so smart. But it took a massive economic depression to get everybody to agree to do that. To a lesser extent in the 1970s, inflation reform is something that we, I think we did come out of stronger in the 1980s and 90s. For those of you who don't know, you didn't live during that time period or you hadn't studied it much. The interest rates in this country were just really insane. Um, so for some perspective right now, if you want to get a commercial loan, it might be 7.5% to 8%. Maybe, maybe you can get it sub-7%. That's probably historically just fine. But going back not even five, six years ago, there's people who are getting 3.5% to 4% commercial loans. And and that was the money was cheap. But I remember uh, you know, going back to the early 19, really the late 1970s, early 1980s, there were interest rates, commercial interest rates, that hit 20%. That I'm not kidding, I'm not exaggerating. That's the just go look it up. It's a fact. I remember my father one time got a 13.5% interest rate on an office building, and he thought he had won the lottery. You know, he he just it was unheard of to get a rate that low during that time period. And and now you're talking about you can go get most people in his position could get an interest rate of, you know, 7.5%. And he was super happy about 13.5%. So we we did beat back inflation mostly uh in the late 1970s, and that led to a lot of economic prosperity for almost over 20 years, I would say, bubbles notwithstanding, like the tech bubble. So, and then post 2008, you've got financial regulation, uh, but not as much, I would argue, as we needed. And so at the end of the day, none of these big reforms happen economically at least without massive economic depression. People have to know there's a big problem to be solved before they're willing to do anything about it. In other words, the pain has to happen, and the pain has to be so substantial that there's a political will to say we need to do something to fix the clear problems that are going on. You know, in undergraduate, I took a class called Political Economy, taught by this wonderful professor named Conrad Walogorsky, and it really helped clarify for me that politics and the economy are always inextricably tied together. They're never divorced from each other. And if you pay attention to presidential races every four years, it's always comes down to the economy. It's either the usually the number one issue, sometimes the number two issue, uh, but never lower than the number three issue in any election that I've seen. It's always the economy, and the two things are always tied together. And that is how societies work. And so political economy is a thing that has to be studied. It's a thing that has to be nurtured. And during this episode, I at least want to offer some type of problem-solving metric, some type of solution. But what I will say is uh the federal budgets have really been structurally in deficit for most of the last 25 years. Entitlement spending just continues to grow automatically, and there's no mechanisms in place to really stop that. And then the interest costs keep compounding regardless of the politics. You know, the weight of that debt, that debt upon us just keeps growing, even from just the standpoint of interest. And when you're paying someone interest, you are you're losing, right? Like that's just that's the wrong direction. So when the cost of delay is abstract, delay is going to win. When the cost becomes unavoidable, reform suddenly becomes possible. And what I want to I want to introduce to you today a concept that I've thought about for probably 15 years. And it's just my attempt to contribute something back of a positive thing that, you know, could could be tangible for someone to utilize. Like most of the things, as I've realized in these podcast episodes, with a lot of the things that I talk about, I'm not all that optimistic that anyone's going to take action upon these things in the next year or two. But I'm maybe more so with this. I am trying to throw something out there that years from now, maybe five, 10 years from now, somebody could pick up and say, wait a second, that is a tangible way to move forward. That is a uh rubric for economics that that we can pick up and start utilizing immediately, but you got to have the political will to do it. So what am I talking about here? Well, I want to kind of get some pictures in your mind. The first picture is uh the invisible hand of Adam Smith. So go back to 1776, the wealth of nations, and the term invisible hand is something that is forever going to be connected with Adam Smith. And many people believe that Adam Smith uh is kind of the father or the patriarch of modern capitalism. So let's just use that structure. And and the invisible hand, uh, it's kind of the book's a bit of a boring read because I would say it's kind of dated. Uh, but it it's the idea that, you know, the the person who cuts your hair shouldn't be your plumber. And if I'm the baker, you know, like I'm the baker because I'm a lot better at baking than I would be at cutting hair. So cutting my own hair or doing my own plumbing is a bad use of time. But me baking the bread and then the plumber coming and I'm giving him the bread for him to do my plumbing, that that makes so much more sense. That's kind of just the quick economic uh the way to look at that economic frame. So, what I want to talk about today, I call this intersection economics. The easiest way to think about it would be rules of the road economics. And so I'm gonna start off with I want you to kind of think to yourself that you're in a city of any amount of size. It could be a really big city, but let's just say uh, you know, a city of 100,000 people. So you've got a lot of traffic and you have a lot of intersections. Uh, you've got areas that are more the road is is straightforward and there's no stop signs, there's no intersections, but I want you to really frame your brain around the idea that there's intersections. So you're in your car and you're at an intersection, and it's one of those that has different things going on, meaning you've got, say, a protected left turn, and then of course you can go straight, uh four-way intersection, and you're sitting there and you've got time on your hands, right? Like to think about does this make sense? And so that thinking, that way of because we we've all been there, we've we've all been in those situations. That's the way I want you to think about this economic model that I call intersection economics. So when you come to these intersections, you want the traffic to flow smoothly and efficiently. It's in everyone's interest that that happens. Uh, you don't want a situation where you're stuck uh behind, say, a broken light or that sort of thing, and because that makes everything very confusing, dangerous, et cetera. So now that you've you've mentally uh whether you're listening in your car right now, to this podcast driving around the road, maybe at an intersection, or you're just, you know, sitting at your office, wherever, you got this picture of you're in an intersection. So I'm gonna give you three examples to kind of drive home the collane. So the first example is you come to a really busy intersection and there's no lights at all. There's no direction at all. You're just there and you realize, okay, we got to figure out what to do. So go further. Let's say you don't even know that generally the person who's on your right who stopped first has the right of way. Like let's say you don't, you're not even, that's not even a known rule. You basically just have to figure this thing out completely on your own from scratch. So what is this environment gonna look like? Well, think about it. If you're in a, if you got an 18-wheeler and that 18-wheeler is, you know, at this intersection, they're like, I will be going through this intersection, I got to get where I'm going. You're probably just gonna back up or let them go. And if you're in a big SUV, you're gonna be more aggressive, probably, than uh if you're in a small Kia or you know, compact type of car because you're worried that those the bigger vehicles are you're basically gonna give the right-of-way, probably. Um, it's gonna be incredibly inefficient, though. You could be literally sitting there for 15 minutes and then say to yourself, finally, I gotta, I gotta get out there because I'm never gonna get through this intersection. This is, by the way, this is just one intersection. And what's likely to happen at this intersection, most likely, there's probably gonna be a wreck, right? There's probably gonna be a wreck because there's no direction, there's no plan at all of what people, there's no rules of the road. And so that's an extreme example. And you're hopefully not aware of any intersections like that. I can talk about maybe a couple when I was young, probably in the mid-1970s. And the way it happened was, and my town wasn't super big, maybe 25,000 people at that time, but there was an intersection where it was just dangerous and people kept getting in wrecks. And you know what they did? They they built some traffic lights because they understood there was a problem to be fixed. And I don't even remember the last time anybody's gotten in a wreck at that intersection, and you know, since the time that they installed it. But so that's example one number one. No lights at all. Example number two is where it's overly regulated, where the only concern is safety, and there's no concern for efficiency. There's no concern for flow. And in that environment, everyone is literally just sitting at this intersection looking at each other, saying, Hey, we'll go one person at a time, because that's the rule. To the right, every car to the right gets to go. Well, it would be incredibly inefficient, right? Maybe it would be fair, right? Maybe. Well, when you arrived at the intersection, determine when you get to go through the intersection and you don't know everything about somebody's story at the other side of the intersection. You're like, I don't know, man, but just it's incredibly inefficient. It seems very, very over-regulated. And you wouldn't put up with it. You would be communicating with city officials and saying, this just doesn't make sense. Like, I got to get to work. And in both examples uh that I'll that I'm talking about, you would also just try to avoid the intersection, right? Like you'd say, this is just so inefficient. I'm not gonna play here at all. I'm gonna figure out a different way to get to work or the grocery store. So that's the over-regulation isn't gonna be good at all either. And then the completely no regulation isn't gonna be any good. The third example I want to introduce is the uh intersection where it's clearly corrupt. Let's say there's a traffic cop out there and he's moving things very efficiently. He's waving people forward, you go left, that sort of thing. And you've seen this even at uh after a large event, like a large sporting event or a huge concert where there's 50,000 people trying to leave a certain area. They typically have traffic cops out there helping. That makes perfect sense. But imagine if that's just every streetlight that you ever came to in a city of any size, there was a cop there directing traffic. On the one hand, you might say, well, that's actually pretty good. Like this person's helping things move along more efficiently. But what if that person's corrupt? What if that person stops the traffic and then walks up to the first car in a long line of cars and says, Hey, if you give me 20 bucks, I'm gonna let your line go through and I'm gonna hold everybody else. But we're gonna, we're not gonna tell the other people that you gave me 20 bucks. We're just going to have a little secret agreement here that you get to move. And the person sitting there has to make a decision and they say to themselves, well, 20 bucks isn't a ton of money. This is clearly corrupt, and I don't want to do it. But also, if I don't, this corrupt traffic cop's going to go up to a different line and I'm just going to be held back. So you probably pay the 20 bucks. And it works for a while until people figure out what's going on. And then one of two things happen. Either they say, Well, I want to pay the 20 bucks, you know, because I want to get to where I'm going more quickly. Or when everybody's paying the 20 bucks, you say to yourself, No, what this isn't any more efficient than if we just had a traffic light and nobody had to pay the 20 bucks. It's a corrupt system. And so that's that's hopefully you've got that picture burned into your brain. Hopefully you've thought of examples in your head of situations that have happened uh maybe even in the last week to you at traffic intersections. So what is the role of government? The job of government is not to drive the car. The job of government is to keep the intersection working. So I would argue to you that pre uh, let's say go back to the early 1900s when the government basically said, we we don't have a role in the economy. That's the private sector, laissez faire. We don't have anything to do with it. It's going to operate most efficiently if we're out of it. That's the intersection where there's no traffic lights. And what happens? You get the Great Depression. It didn't work at all. I mean, it worked for a while until it completely overheated. And the stories of corruption in the 1920s, just that alone that I've read in this Sorkin book recently, you know, will knock your socks off. Uh, you know, it it it it's it's just very, very, very corrupt. Uh, and this was, you know, very Wall Street focused. And I'm sure that all these stories, I feel confident that they were accurate. So that's that's a government that doesn't regulate at all, is no traffic lights. The over-regulation, and I I'm not going to continue to use specific examples, but there are definitely times the government just over-regulates something. I think somebody on the conservative side of the aisle would probably say there's, you know, sometimes the Endangered Species Act, for example, that there's some spotted owl that is stopping tremendous economic activity and there's alternative solutions. And the environmentalists have gone and conservation conservationists have gone crazy. I I use that as an example of just maybe there's some over regulation there. You'd have to look into your yourself. But Government can absolutely overregulate things and crush industries that otherwise would be vital and would be working within a good, uh, sound basis of capitalism. And then, of course, corruption, which I know many people think corruption happens in every sector all the time. I I don't agree with that generally, but I do think when you start to see bubbles and we start to see irrational behavior, that the incentives for corruption get a lot higher. And certainly corruption happens. It happens everywhere. It happens in private companies. I mean, it happens inside of religious institutions, and it certainly happens inside of the government because we're all of those things, the thing they have in common is they're all populated by humans. So that intersection economics, and I hope you hope you've been able to follow along with this, is my contribution to say that there is a better economic system than what we're currently using. And I did try to do some research to find out if anybody's talked about the exact thing I'm talking about now. And I really couldn't find anything. So I I if there is, I'd love to talk to someone and have more deep conversations about it. But for now, what I I used to call it rules of the road economics. I realize that kind of only applied to cars. Uh I'm now calling it intersection economics because whether it's the intersection of in banking, you know, and or the intersection of uh international business of, say, what the United States and the European Union have to coordinate on, there's intersections there. And everybody, I think most people just want to know that there are rational rules that make sense that are designed to have a proper flow and a level of efficiency, just like a really well-performing intersection. And I haven't mentioned roundabouts because I'm quite frankly, I'm my view of roundabouts is still developing. But from what I've been told, the data is there's less wrecks at roundabouts and that they're safer and that there's a pretty good flow. And and my small brain right now hasn't probably been able to wrap itself around that. But let's say that they're right, and and that's a a way to say that's a better intersection than the traffic lights. Whatever works. I'm good with it all. But someone, and that someone is in the government, made that happen. So if you ever you ever go to a traffic uh light, that traffic light was designed by someone, whether it's a state highway or a city road, there is some type of engineer who was is trained in such things and they're regulating that flow of traffic. And you may or may not know that it depends upon the time of day. Many traffic lights will change uh how long they're read based upon whether it's morning, noon, or rush hour, because they the engineers know the flow of traffic, which way it's going. Some now have smart technology where they can see the amount of cars that are lined up. And I think most of us would say that makes perfect sense as the technology has grown to allow for better efficiency in traffic. Let's do it. But then, you know, I could easily expand the analogy to subways and buses. And in really, really big cities, you need that too, because there's all types of intersections. Everybody's still on the same road, uh, unless you're you know in a subway underneath the road, you're getting from one place to another. And that's how an economy works. And it should work efficiently, effectively. And the government is really the entity in charge of making that happen. So intersection economics. So it's my big contribution to you this week. And I, you know, if you ever, if anybody wants to get a hold of me and have follow-up conversations about it, I'd I'd be delighted to talk about it. So why am I bringing it up in this particular episode? Well, I guess having looked back at my last episode, I said to myself, you know, am I really optimistic about the future or not? And I think my, well, my answer is I'm always optimistic about the future. And kind of the reckon where I've resolved it for myself is I think there will be an economic reckoning. Let's just call that a depression. I think that's gonna look like 15 to maybe 20% unemployment, foreclosures, uh, lots of unhappiness, lots of pain, but also lots of recognition of, well, this was kind of predictable. Like people were telling us this was gonna happen, and now it's happened. So we maybe are surprised by the timing, but we're not necessarily shocked that it happened at all. I think that there then becomes an opportunity for people to say, what do we do next? And the what do we do next doesn't need to be, well, the Democrats have this great plan and the Republicans don't, or vice versa. It needs to be, we as Americans need to think about this differently. So going all the way back to Adam Smith, I think that his economic formulation was proven through the test of time from say 1776, let's let's give it 200, uh, 200 years or so that it kind of worked out. I think it's antiquated now. I don't think it works out. I think we need a more advanced theory of economics. I'm gonna go with intersection economics to take us to the next thing. But for us to have any kind of reckoning, which means we've got to address our debt. We've got to address, you know, the level of inflation that we have. It's all kind of tied together. We do need to grow the economy. I think the next big chance for people to say, hey, there is a problem to be solved is after some big negative event. I wish it was different. I just don't think it is. I think that that that is the the way that this is gonna go down. I think Social Security is an example of that. And I've talked about that multiple times, but basically the math doesn't work. You know, 1960, you had five people to working for one person getting a benefit. Now it's three people working for one person getting a benefit. It's gonna be two to one in the next 15 to 20 years. None of that math works. And so intersection economics is a way of saying all of the stuff has to work. The math has to check out the flow, in this case, the in the incoming revenue has to generally match the outgoing revenue. Otherwise, uh you're out of balance and it's unsustainable structurally by definition. And so I think that you know, Social Security might just be the easiest way to think about a big problem that we could all fix if we would just make the decision to do so. But I think that, you know, I haven't talked about kind of international business and things. I certainly haven't talked about tariffs, which I just generally think are probably a bad idea. But, you know, maybe it works out, maybe it causes some new way of looking at uh international economics. I don't really think so. But regardless of all that, that's the little specific items. You need a broader approach. And so this week I'm gonna leave with this idea of what I originally called rules of the road economics, what I'm now calling intersection economics. So whenever you pull up to a traffic intersection for the rest of your life, I'd like you to just kind of sit there, take in the time to see uh what's going on and think to yourself, was this a well-designed situation, or is it a poorly designed situation? I bet more than not, you're gonna say this is fairly well designed. I might tweak it here or there. You know, maybe it's a Sunday morning and I'm sending a light that was designed for a Friday afternoon rush. And don't, you know, maybe reach out to your city planner or city administrator and say, hey, would you look into this? They probably would, because quite frankly, nobody ever has anything constructive, usually, to say to those type of folks. Intersection economics equals efficient flow. Efficient flow equals the best opportunity for our economy to grow the way it needs to grow, with their individual talents and passions. I think the way that Adam Smith originally intended it all to work out, poor guy's just been dead for 200, you know, 200 plus years now and never never got to see the internet. Folks, uh, you know, I don't know if this stuff interests you at all, but if it has and it peaks some some thoughts in your brain, uh that I've accomplished my mission for the week. It's just something that's been rattling around in my brain, like I said, for about 15 years. And with that, uh, this week I will leave you uh with that's the the POV of P.O.B.