Ezra Klein on the Future of Supply-Side Liberalism

of weak points. Yeah, so I called this the choke point economy, um, which maybe I should have come up with a catchier title, but it was basically the idea that the extraordinary events of the pandemic had exposed the shortages or choke points in things that the economy actually

really needs. Everything from semiconductors, which is kind of where we started our supply chain exploration two, I mean vaccines themselves, right, some countries couldn't get enough vaccines, others had too many, and you can expand it to tons of different things, everything from housing to healthcare. Right. It's kind of like this running joke of Odd Lots listeners on Twitter, and you're like, this is this is the new thing that's broken. When our Tracy and Joe going to do a show

on it. But it also does you know when you when you have this like these myriad broken aspects of the supply chain or shortages or choke points or bottlenecks, you know, it's sort of like gets the question like is there like a bigger effort that can be made because you can, like you can tackle these one at a time, and of course that's being done in private companies and governmental work on that one at a time, But is there like a broader, a broader effort that

can be made where large maybe government involvement, regulations, something such that we just have like more robust supply, more robust supply side of the economy. Absolutely, and I think for the past year or so we've certainly seen pockets and indications of that, right like the Biden administrations Build Back Better Program, the Inflation Reduction Act, all of those are to some extent aimed at increasing capacity, building out

vital infrastructure and things like that. So it does feel like there is a recognition that this is an issue, but the solutions are still kind of tricky, and even if we all agree to build more capacity, it's going to take a while. There's still going to be questions over how best to do that. It's going to be tough to identify some of those cassidy constraints, like what

actually is the constraint exactly? Um, you know, it's funny because for years there was, you know, supply side economics in modern parlance, has this very specific idea and I think of like the Reagan era and a bunch of people's economists who sort of made their bones in that era.

But really it just made like tax cuts, like really like when people say supply side economics, they say tax cuts, tax cuts for companies make them more company, right, just make it easier for everyone to produce more by by cutting text. Now there is this sort of revival of so called supply side economics, a certain supply side progressivism. We've heard Jenny Yelling talk about it, which is no, actually, supply side economics doesn't have to just be tax cuts.

It can actually be about all this the Chips Act, etcetera, active efforts in which the government, in theory can play a productive role in making more robust, resilient, and abundant supply side capacity, which speaks about the shortages the inflation that we're experiencing right now. And just like what does it mean to have an economy that just delivers more goods for the public. Yeah, and to some extent, it's almost a return to Kynesianism, right, It's about smoothing not

business cycles necessarily, but smoothing like the investment cycle. If markets aren't doing it by themselves, then maybe the government can step in and say, actually, we need to build up this specific area of the economy or this particular

piece of infrastructure. Absolutely. So, let's our guest today is someone who I think has been very influential on building out in public this idea of like a new supply side progressivism or reclaiming supply side economics is something that's beyond just cutting taxes or cutting interest rates and actually optimistic about the role that governments can play and alleviating some of these bottlenecks and shortages and you know, not

running into all these scarcities again and just delivering more stuff, more housing, more goods for the public. We're going to be speaking to Ezra Cliin, columnist at the New York Times and the host the podcast The Asraclient Show. So uh big voice on this topic. Ezra, Thank you so much for coming on Odd lots will to be here on one of my favorite shows, thank You, Thank You. You know it's funny when we first talked about coming on the pot You're coming on the podcast, He's like, well,

the Democrats build back better climate plan. It's it's completely failed, so let's talk about where they go next. But I guess you in saying that a completely side like this is like what duped Mitch McConnell and why they sort of got this done because the Democrats did a very convincing job convincing the public that it had failed and then only to turn around at the very last minute.

So we had to sort of like rescrap even what we're going to talk about because the premise of our initial plan was undermined by the fact that the Democrats passed Yeah. I didn't mean to rope you into my ultimately completely successful scheme to pass the inflation production that, but but you know, they had to do all damage

in this kind of work. So okay, maybe just to begin with, give us like the definition what what is modern supply side economics or supply side liberalism versus uh, you know, demand side economics, and also the supplied side economics of your the you know, the things that are often considered a dirty word associated with Reagan tax cuts, that sort of thing. Yeah, the definitional work is always

little trick here. So modern supply side economics is johnet Yellen picking up sort of some of this framing and and bring it into Treasury and around the Biden agenda, and we can we can talk about that, but sort of before that, what I've been trying to push for a while what I call supply side liberalism. It's pretty simple. Um, Look,

I'm a liberal. I have spent most of my career arguing and still argue that we should subsidize this for that, do that cash transfer, expand health insurance to more people. But liberals, i think, over decades, have become very used to looking at the economy and looking at demand side problems, looking for what we can subsidize a solution. Right. Do people need health insurance, Let's give them a check to get more health insurance. That's fundamentally Obamacare. Do they need housing,

let's give them a section eight boucher. Do they need schooling? How about a Pelgram. What we're not as good at is looking and seeing first where the problem is a supply problem, we don't have enough of the thing we want to give people um or the thing doesn't exist at all, because pulling technology forward to me is a

very very important piece of supply side liberalism. Um. And secondarily, we don't have very good language and certainly not very good attentiveness to seeing when our own policies have made a supply side choke point worse, where say subsidizing something like maybe housing in very hot housing areas, where we've also constrained the supply and thus we're pushing up prices for everybody. So part of this is trying to add

a new lens or an old lens. Maybe many people would say from new deal liberalism to sort of modern liberals, men say, a lot of the problems now are supply side problems, and we need both language and policies for fixing them. So the liberal or progressive impulse remains the same, which I imagine would be characterized as some sort of more egalitarian distribution of the fruits that the economy produces.

So whether it's literal things, whether it's homes, whether it's child care and healthcare, like the more equal distribution of these things, the goal is the same. But we're used to talking about, Well, the way to do that is checks, so that someone can have a voucher for childcare or something, but in a capacity constrained environment. And I you know, one of the things that didn't get into the IRA

I believe was anything having to do with childcare. And in theory it sounds like, yeah, sure you could like give people check and give people more access to childcare, but without more childcare facilities, without more teachers, without more people who can look after children, you're gonna just run into constraints. You may not actually get the outcomes that you're you're hoping to see. Yeah, a hundred percents. Let me say two things about that. So number one, I

don't want to say this is simply about distribution. A lot of it is about the ability to have flourishing lives in ways where we don't currently have the thing we want to distribute. So if you think of, say, what is happening in the i RA with a lot of the clean energy infrastructure they want to build, some of that is of course making it easier to get

things we have today. Actually, you're really not going to be able to use these subsidies for the current generation of vv cars, but in theory an electric car subsidy could get you an electric car soon. Though we can talk about supply bottle next air, but much of what that is doing is trying to create clean energy options. It don't really exist right now. UM certainly at the level of plentitude, we need them to exist, things like hydrogen um you know, things like next generation. You know,

basically pick your next generation energy source. They're trying to least subsidize it somewhat. So I do want to know that the ability to pull forward um innovations and possibilities that would allow for all kinds of goals that that that I have, that that many I think liberals share that could not be achieved now or the politics of them would not work out now. I think it's an important piece of it, and it gets too things that might need to be rethought or thought through on the

level of institutions and grant science funding. But then your other piece of it on childcare, I think is exactly right and a lot of the for me, I mean, I live in San Francisco, California. I come from California. I grew up in Irvine, California, so I to watch how liberal, how blue California is, and how badly it fails at a lot of the basics of progressive outcomes of making a middle class life affordable for people is to really force yourself to reckon with some things that

have gone pretty profoundly wrong in liberal governance. And one of them is, yeah, we have looked around. We keep seeing demand side problems, and we don't see the role that some of our governance institutions and other things have created on supply side, with housing in California and in New York and another kind of rich or blue areas being I think example number one, but but child care being another. You can talk about higher education. We've not

built a new UC in California. There is an amazing, amazing, amazing like jewel of like the global public education system. We've not built a new UC here since the sixties. Except from me said, um, it is very Once you begin looking at the paucity of ambition on the supply side, it becomes a little bit hard to stop seeing it. So I'm just going to jump in real quickly and

ask one of the devil's advocate questions. You know, one of the traditional criticisms of this kind of government intervention would be that, well, why not just let the free markets do it? You know, the free markets should be efficiently allocating resources to the things that we need, like housing and healthcare and childcare and things like that. What's your response to that criticism? Wouldn't it be nice? There are places here where I do think the regulation is

a big part of the solution. So I think housing has a very very big component where if we let the market do more of the work, the market actually respond not immediately, not perfectly, but help a lot better than what we've allowed to have happen in places like, um, you know, northern California. On the other hand, there are things where the market won't do it, So I think clean energy being a big example. Now increasingly over time you have enough market signals being sent that there is

a lot of investment in clean energy. But it took a long time, and we're nowhere near where we would have wanted to be in terms of the market deciding that, you know, ruining the planet is actually a bad thing for long term for for long term profits, So that kind of thing is not nearly as punished as one would hope that to be. I actually think a huge amount of the shift towards industrial policy and that I'm

trying of coalition. The shift towards believing that the government does need to be able to set long term goals, does need to be able to infuse the productive policy and direction of the country with the values of the polity comes from watching the market's failure on climate. So one difficulty of this kind of of this way of looking at the economy is it doesn't give you a

one size fits all policy solution. A little bit unlike the old supplies side economics reagular or supplies side economics, where you just sort of wandered around looking for taxes to cut and companies to deregulate. There are places here where you need to deregulate the private sector, places we need to deregulate the government, um places here where you need to spend more, places here where you actually need

to spend less. It's much more playing bottleneck detective and asking what is something we wish we had more of, or simply wish we had altogether, right, it's something where we really should be investing a lot of money and trying to make some kind of technological breakthrough or make something affordable that is not currently affordable, and then trying to ask what is standing in the way um and that answer, very frustratingly, is extremely different for for different things.

As I begun doing this work and it sort of I'm working on a book in this era area, you really have to look at different case studies and you can't extrapolate across the entire range from them. They just begin to overtime accumulate to a sense of a way of looking for a problem as opposed to a singular way of again and again solving a problem. So this is really key because you know, whether we're talking about all right, the old supply side just cut as many

taxes as you can. This sort of traditional progressive demand side is well where there's a group of people who have inability to access something, cut a check, and both of them may have their roles, but the solutions aren't clearly as simple when we're talking about something as sprawling as lack of supply side capacity. And your turn, bottle neck Detective is good in all of these things. We talked about them all the time on the show. You know it's like, okay, we seem to have gotten bad

at chips manufacturing. There are a lot of people waiting. Uh. You know, last year we saw dwell times at the Port of Los Angeles each weeks because we didn't have uh pork throughput. It's like one thing after another, and as you say, they're all very different. But what is

a good bottleneck. Are there certain broad principles that a good bottleneck bottle neck detective could have that would start to like, you know, a general theory perhaps of being a bottleneck detective six that you start finding these and identifying good solutions in a timely in a good rhythm. Yeah, I think so, um, and I'll that brings up a lot. So let me say a couple of things, uh quickly. So what is one dimension of this is outcomes people

actually want? Right when people organized to stop dense development from coming into their community, that isn't some accident. They actually want the outcome we're getting. Now, we may say that as a as a political system, as a polity, as the state, as opposed to the city, we don't want that, and we're going to try to pull the

responsibility or pull the voice away from them. But but that's a case where you're looking at we have many many, many, many, many institutions meant to raise up different voices, particularly than not only marginalized voices. A lot of this comes out of a sort of liberal counter movement in the sixties and seven and these you know your Ralph Nader, is

your Rachel Carson's, etcetera. UH that was correctly responding to a period not just in American politics, but in liberalism where the building really was quite heedless, where the needs of communities really were run over, where people really were dumping toxic poisons into streams and into waterways and into the air with no real look at what it might mean.

And so a lot of institutions, a lot of nonprofits, a lot of statutes were passed to make it easier for people to to jump in front, to be conservative about it, to jump in front of these UH mechanisms, and you'll stop. And now, at a time when we need to do things really fast, say to de carbonize, those exact same problems, I'm sorry, those exact same solutions have become today's problems. So it's part of it is

looking for you know what I think of his institutional crusts. Right, where do we have long running processes that were maybe passed correctly, or maybe passed with all good intentions, or maybe passed and even solve the problems there are meant to solve, but have now become captured for other reasons. One piece I did that I think is a good example of this is in New York, and I think it's twenty nineteen, they pass congestion pricing, which is like

the most pro environmental idea you can possibly have. You're gonna tax cars coming into New York City and you're gonna move that money over to the m p A. And congestion pricing has been held up now for four years an environmental review because and I've spoken to the Biden administration and I've spoken to the players in New York about this, and everybody wants to get it done.

And what you'll hear is like, well, we're just afraid we're going to get a lot of lawsuits, and so we have to do this, you know, very very lengthy environmental review with all these meetings to protect ourselves, which is fine on some level, but on another level, when you're environmental bills are blocking pro environmentalist policies, you have to begin to ask what has gone wrong there? And

so another place I just look at is affordability. When you have a big affordability problem, and I think we know where we have very big affordability problems. We have them in many areas in housing, we have them in childcare, we have them in higher education, we have them in healthcare. I think that is a place to begin looking um for supply side problems as well. Now you'll get different

ones in different spaces there. But I think just in general, and we can talk about this more broadly, I think just affordability crises should be a signal that something has gone wrong. If there's a reason we can't produce more of a thing, well, okay, like fair enough, but a lot of those things we know there's no you know, it's not like the only way to get more childcare centers is to get more lithium out of China, right. I mean, we we have like the technological means to

set up a daycare. If there aren't enough daycares, then the question of why becomes very salient and should be an answerable question. I just had a vision of a daycare with all these little toddlers like driving tiny electric vehicles around, and this is a future liberals want, okay, But I just want to pause and dwell on that timeline aspect of it for a second, because I think

this is really important. And you know, Joe mentioned this idea that tax cuts can be an attractive policy solution because you know, they're pretty one size fits all, the same for cutting people checks like those are fairly simplistic answers to sometimes complicated problems. But when you talk about increasing investment um and building out capacity, it does feel like the timeline starts to look very different. Like the speed at which you can do that versus just cutting

a check or reducing taxes is vastly, vastly different. So how do you overcome that? Because, especially in an inflationary environment, you have people who really want to see things that are going to have an immediate impact versus waiting two or four years for new housing supply to be built out or something like that. So this becomes a cliche example if you use it enough, and I probably have, but I think it's always worth remembering that it doesn't

have to be that long. We built the Empire State Building in about a year um we built the New York Subways in if I'm remembering the number that the early New York subways in about four. It takes us longer than the and that now to open a bathroom

in a subway station. So there is a delta, a pretty tremendous delta between what we've been able to do as a poorer country with worst building technology, what other countries that are poorer and have worst building technology than us were able to do, and what we're able to do now. Some of that is reasonable, right, we want to build things more safely now, we want to build things up to higher code now. And some of it you have to ask is it is it really serving us?

So part of it is asking this question of are we our time and simply too long now? I think Tracey, you're also getting it something a little bit separate than that, which is within the horizon of political accountability. How quickly can you execute a policy that you may get rewarded for?

And that's a hard question, although I would have thought two years ago in a way it was a harder question than I think it is now, not because you are able to build more quickly now, but because my estimation of how much reward there is for um tax

policies basically has gotten pretty far down. So I think the the expectation among the Biden administration, and to be honest, my expectation was the child tax credit, which was a very simple, like direct, like here's a check, policy would be very popular and it would create a feedback loop of its own popularity which would lead to its extension. It did not do that. Um, it just did not

do that. And if you go over the past couple of years, it's actually very hard to find big tax side policies that seem to have created a very strong political feedback effects. The Trump tax cuts in eighteen didn't do all that much for for Donald Trump. You know, we can argue about the stimulus checks and the Cares Act and and in the um subsequent um you know acts too, but it really doesn't look like it's saved

anybody's bacon exactly. So I actually find this worrying for a bunch of other reasons that I think there is a very very very tenuous connection now between the policies either side passes and political and the political feedback's rewards

or accountability for them. Um. The real exception is being when you make a policy highly salient through a very big repeal fight like Obamacare but the but in general, it isn't clue to me that politicians are getting obviously rewarded for the tax side policies either, So you know,

you may as well try to do a good job. Well, you know, speaking of policies, let's just pause right here, because we did have two pretty extraordinarily big pieces of legislation passed in the last I don't know, two months basically, And you are the original wonk, and you made your career because you're extremely good at sort of taking these big policy things and writing about them and talking about

them in a way that people can understand. So these two bills, Chips and I ra Someone comes to you, says, Ezrael, like, what's in these bills? What do they do? What are they gonna do for me? How are they going to expand supply side capacity? Why do you give us like this short, asra klient summary of these pretty extraordinary legislative accomplishments that up until very recently people thought there was

no chance of this administration getting sure. And I think we should actually put the infrastructure bill in here too. So if you if you take the three of them together, what you have is about four hundred and fifty billion dollars in climate investment UM, roughly three five in the ira A. UM. It's really weird to keep saying the I r A and the Irish UH, and then a fair amount more in the Infrastructure bill. And then Chips has a bunch of you know, we're going to set

up an agency, inter agency process, that kind of department. Here, we're going to give a direction, but they don't actually authorize the money for it, or rather, in technical terms, they authorize the money, but they don't spend the money. The other ones are actually like, here's a check. One tricky thing about these bills is none of them do one thing as a want. I find them very very

hard to explain because there is no central architecture. But the major happened, I know, right well, I've I've moved on much easier, UM. But I would say there's been a huge move in climate policy. And and this goes actually a little bit too to the question of letting the market work. You go back to you know, two thousand and um, what was it two ten or eleven when they were doing uh Boxman market, the Big Captain

Trade Bill. The theory for a long time was we were going to price the externalities of carpon as such, the market would then begin sending signals across the entire market so that the response from from both government and consumers and private uh you know, companies would be to begin investing much more in clean energy and infrastructure for clean energy and products that use clean energy, and you know, less in things that they used a lot of fossil

fuels for a bunch of reasons. There's been a big movement away from that. And so now what they're trying to do in the i RA and to some degree in the Bipartisan Infrastructure Bill is there they're trying to sort of wander around with checks, with tax rebates, with tax credits and say, look like, if you can set up domestic and it's actually pretty important because they are putting a lot into the bucket of not just trying to create clean energy infrastructure and supply chains and product chains,

but create them in America. If you can create enough of this chain here, like, we will give you a tremendous amount of you know, subsidies or will be guaranteed purchasers or whatever it might be. So they're basically just trying to spend their way to a very very very large UH decarbonization both UM push but also industry in America. I really think you have to understand what Biden is doing here as also an idea about the future of the economy. And I've been thinking about how will we

know in ten years of this world. One way to think about it is we will know because we will have gotten you know. I think the estimate out of the group in Princeton and others is about two thirds of the way to the Paris climate. UM are are our target under Paris Climate. I think another way though that that I think, you know, if it doesn't happen, we're all going to have to answer for it a bit. Is is there a really strong domestic next generation battery

manufacturing sector in America. They're putting a lot of money into that and some other things like that, and if those industries don't build up here, then there will be a real you know, that would be a real point for the people who say, you know, you can't use industrial policy to create these kinds of industries. That's one

layer of this. The bills do a bunch of other things that should be said, so there's a huge amount of tax policy in the IRA to pay for not just the climate investments, but also to um uh, just pay down the deficit a bunch, to make Joe Mansion and to sunder Christian cinema happy. I would want to bone up on that more before I talked it through right here. And then there's obviously a fair amount of extension of Obamacare health insurance subsidies. Chips um is primarily

a little bit to the side of this CHIPS. It comes out of competes and the I think it was called the Competition and Invasion Act, this huge Christmas tree kind of legislation for every R and D idea and domestic manufacturing idea anybody in Congress had that eventually got whittled down to primarily being an idea about reconstructing domestic semiconductor manufacturing and innovation, with the idea being these are such a critical component of the both the current and

the next generation economy that to be dependent on other countries for them, partically other countries either they don't like us, or that could be easily invaded by countries a tone that that we have a complicated relationship with like Taiwan, UM is a critical national security, uh, not just failure, but vulnerability. And so I think Chips sits a little bit differently, whereas the IRA, I think of it is

very much like a supply side progressivism bill. Right, We're going to invest hugely in the supply side of this very very central progressivism no goal, which is decarbonizing the economy and slowing climate change. Chips is very much am

a national security. You know, the two parties can still somewhat come together to try to pass anti China or compete with China kind of legislation, and there are two a little bit like batteries are gonna be a really big test for for the IRA, whether not we're able to create the semiconductor capability and industry in America is going to be a really big test of whether or not it is possible for this kind of industrial policy

to work. So, speaking of China, that's my queue to ask another Devil's advocate question, which is, you know, normally when I think of large scale investment or infrastructure spending things like that, I think of China, and China has sort of a mixed record on success on that front.

UM And my favorite example of this is um the swine fever epidemic where a huge chunk of China's supply of pigs got wiped out by this pandemic, and then the government intervened and said, we have to rebuild our herds, and then they rebuilt them so quickly that they had too many pigs, and we had a bunch of pig farmers and pig farming companies that ended up going bust. And so if you look at the supply of China's heard of hogs, as I do regularly, it's just it's

spikes and then it troughs. All made hobbies, right, and then it spikes and it troughs. So for them it's been very hard to smooth that particular cycle. And so I guess my question is, like, how difficult is it to calibrate this kind of supply side intervention and how do you ensure that you don't contribute to a boom that then ends in a bust? I think you might.

I have two thoughts on this one. It goes back to something you were saying at the beginning, Tracy, about this in some ways being a rediscovery of Kanes people. You know, it posts great recession thought a lot about Kanes in terms of smoothing business cycles. But I in many ways think of the central contribution of modern monetary theory to tart discourse, being that the rediscovery and the central and central focus on the old Kanes quote. Whatever we can actually do we can afford to do, which

I might have slightly wrong in in memory. But after that, all my my new KEYNESI and friends, you know, you're Larry Summers and Jason Furman's and everybody said, oh, yeah, we've always believed that, and well you never never mentioned it. Actually it was not something you all said. But to take to to open up that quote a little bit. There are things we want to do that we cannot

currently do. We either don't have the capacity, we don't have the market, we don't have the manufacturing skill and the supply chains, and we worry those chains are gonna be vulnerable to future geopolitical shock. And so there is a real effort here, I think, not to smooth out right. I mean, as you say, China had a pig industry, right,

they they did have hogs. We just don't have a lot of the capacity we want to have, and so the theories to build it now I do think the worry, which is similar, is we will build the wrong things. You know, We'll put all this money into e v s, but it turns out everybody is going to be on the bikes, you know, or something, and so the government will in picking its you know, winners, have actually picked up a bunch of losers. And this gets to something else.

And I talk a lot about supply side liberalism, but there's a lot of pickup for this idea on the right, and a lot of people on the right like to say, yeah, like, you know, finally liberals are taken, are taken the supply side seriously, and there's a pretty deep critique and for me, a pretty deep frustration towards my conservative friends, who on the one hand want a government that plays a more serious and I think risk tolerant role in backing up

and accelerating the frontier or expanding the frontier of the supply chain. And on the other hand, they have themselves created an unbelievably risk intolerant, terrified of its own shadow government. So whether you're thinking about you know, things like the loan guarantee program that everybody knows from backing Cylindra, but

that also was an incredibly important lifeline to Tessa. Or you're thinking about things like the incredibly heavy level of peer review and consensus oriented decision making at the NIH or the n S, which I think of as pretty big problems for a bunch of things I care about. But these places are terrified of funding things that then members of Congress on the right get up and say, what a stupid thing. These are shrimp running on treadmills or whatever. It is a lot of science looks weird.

We need a government that the role government should be playing in a lot of these areas is to be investing in things that might fail to to your point about the government earlier, I'm sorry the market earlier. There are things the market does really well, and the market is really really really good at betting on things that are pretty likely to turn a profit. And there are places where maybe we need to deregulate or places we need to give a little push or make things a

little bit easier. But in general, you know, if you didn't do anything on electric vehicles right now, the market is moving in that direction, maybe a little slowly, you know, compared to what we were like, but it is definitely moving in that direction, um with of course we should say a huge amount of government help up until now, um. But there are things that are just too risky. There are things that just you know, if they haid off, it would be unbelievably great, but they very likely won't

pay off. And we need a government able to make a lot of bets like that and absorb not just financially, a bunch of failure. But and this is a much harder part, and the part where the right place a very toxic role. It needs to be. It needs to

be able to politically absorb a bunch of failure. If you spend all this money and you don't get any big failures, right, you spend all this money and you do all this backing up of things, and you bet on all these technologies, and there's nothing we can say at the end of it, hey, like that really didn't work out, Like you really picked wrong there. Then we have way, way, way aired on the side of making

overly safe bets. You really want a bunch of things where if one of the fifteen pan out, it's transformative, as opposed to fifteen things were fourteen of the fifteen obviously pan out, and as such, the market could have done it just fine. The market has never, as far as I know, funded a shrimp running on treadmill startup, which is an obvious market failure and clear reason why we did the public sector. I believe, I'm not I

believe I'm pulling that from something real. There are all these things there are There are all these um uh congressmen who give awards for dumbest no like there used to be like the cow farts one, but all this stuff. Um. You know, I here's a question, and I don't you know uh where I feel like you're probably uniquely positioned to answer um for us, which is within the Democratic Party.

You know, there is there was a lot of reservation, particularly on the left, I think, towards chips, even though it's about public investment, the idea like private companies theoretically are going to benefit a lot from it. You know, you were like, are they going to use this money for stock buy backs? Etcetera? And so like within the Democratic Party right now, it's not like everyone has suddenly become supply siders, and that sort of old school do

it on the demand side is pretty strong. How would you rate you know where the center of the Party. I don't mean centers and centrist although maybe implicitly it is, but the center of gravity within the Democratic Party, which you're much more plugged into than we are in terms of like taking on this supply side framing two problems. I have found on a bunch of these issues that there is more interest and less resistance than I expected,

but also, in a funny way, less eventual pickup. So I thought a lot of this stuff would cause, frankly, a lot more blowback. Like I've been very critical of things like the National Environmental Policy Act, to the California Environmental Quality Act, think the Clean Air Act to some degree, things that are very central parts of the environmental movement legacy in this country operating today that are now being wielded against clean energy, or like my favorite example in Minnesota,

they banned Minnesota. Minneapolis banned um single family zoning and there that policy got an injunction based on environmental review, like they they can't move forward on their band of single families owning because it didn't go through enough environmental view, like it's just crazy making. People have been more receptive to that, though not that interested in doing anything about it.

I think of This is more of a problem of attention and what gets people into liberalism, um, you know, kind of liberal or democratic politics and to something even how the uh the machinery of government is set up, and I think of it is really a very tough

ideological fight. So this is something I'm sure you guys ran into, but I was really struck over the last you know, it's called eighteen months as inflation got worse and worse and worse, talking to members of the Biden administration and just really realizing how much they were having to try to retool themselves bureaucratically, institutionally to just understand

the productive side of the economy. Where you weren't trying to do efforts of macroeconomic stabilization, Um, you weren't just trying to kind of ask what are the big trends, but you're actually having to kind of figure out the ports. And the people who got charged with figure out the ports like that had not been their job. There was no person who that was their job, and like they had that information streaming in in a very usable way, and like they had a bureaucracy well set up to

do something with it. So to some degree there is simply a mismatch, I think in the motivations and structures of the Democratic Party and also for that matter, of the Republican Party, and some of these problems in health care, for instance, which I know very very well. The amount of organizations, groups, non profits, people um talent that has gone in for decades to the question of how do we get more people health insurance is really really traumatic.

The amount of people who got into that to go to war with the American Medical Association over how many doctors we are credit every year and what kinds of regulations we have on other qualified practitioners like nurse practitioners, so we could expand primary care um such that prices would fall on that UM. Nobody's in it for that right there in it to get health insurance to poor people, not to fight with doctors who are actually their friends

on a bunch of these issues. And so it's more about that if you say this and not exactly against it, I mean the fact that we have capped the number of residency slots, and there was actually this big fight from the a M A years ago and others to convince politicians, and we had a problem with doctor over supply and now we have a problem with particularly primary

care under supply. It's not people disagree with you, it's just, you know, it's like a company trying to do something that wasn't set up to do it, doesn't really know how to do it the right. People aren't that interested in it. It's coalition splitting work as opposed to coalition uniting work. So the problem isn't so much like the counter argument. The problem is almost like the argument has nowhere to go, like it's not well structured in the

congressional committees. Um. So I've actually found that to be to be more of the difficulty here. So I realized we've been very focused on US policy for obvious reasons. But the problem of under investment is not exclusive to America. And in fact, you know, one thing we've learned over the summer is that it very much applies to places like Europe. Um, with their energy supply and energy policies and things like that. What accounts for that under investment

in Europe? Like, what is the condition that is I guess common to both the US and places like Europe when it comes to under investment, Because when you look at Europe, you can't just say Oh, it's you know, Democrats and Republicans fighting and they can't agree on anything, or you know, we can't agree on how to fund it and things like that. Europe already has a slightly different approach when it comes to that, and yet they

also seem to have struggled over the past decades. I don't know how to think about the question of under investment as both a sort of macro and international phenomenon, and I mean that in the sense of I'm not sure how useful I think under investment is as a concept. So some countries in Europe have done a lot more to invest in green energy than we have. Some countries in Europe invested a lot in nuclear energy, you know, like France over time, you know, and some have been, obviously,

like Germany, going in the opposite direction. So one thing is I think it is worth looking at the sort of differences that are exploitable there. Something has been very, very helpful when thinking about infrastructure build is that, you know, lots of countries in Europe do rail train bridges, etcetera. We can actually look at proclometer costs and it's not perfect, but but there are people have been doing this like Alan Levy, and you can really see unbelievably large differences

and how much things cost. But within that, I do think there's probably a consistent issue of simply rich society is becoming affluent enough that things are broadly good enough that what people want is not actually all that much change, and a lot of say infrastructure build is a among

other things, a lot of disruption. I mean, it's all great to talk about infrastructure in your head, and then they're ripping up all the streets near my house and it's an unbelievable pain in the ass, right, Like, nobody actually likes it when infrastructure is being built near them. Um. And similarly, you know, I go back and forth on

this old book by an economist named Manser Olson. I think it's called The Rise and Fall Nations or The Rise and Decline of Nations, and I think it's published in the seventies, if I'm not wrong, and it's a classic in public choice economics. But it you know, he's basically trying to explain why are Japan and Germany, which were bombed out during World War Two, growing so much

quicker than the UK, UM and some other countries. And he comes to this argument that is wrong in a bunch of its particulars now that we have a longer time series on it, but it's clearly right in its general thrust that stable, affluent societies build up these very very thick networks of interest groups that are trying to

get their bit of pie. I think misses that they also get a lot of actor networks that they're not just trying to redistribute money to themselves, but also just are trying to get their values instituted in society, even when that would be bad for their bottom line. But we have a lot of that um, you know, where people are trying to fight for the way they want a community to be as opposed to what they're housing. You know, values could actually be UM. He talks about

complex agreements. As countries become, you know, again more affluent, more stable, they begin to become very you need a lot of complex negotiations between different players who, due to their longevity, due to their power, due to sort of move towards more small d democratic processes, have a real hold in the system, and so being able to negotiate these increasingly complex um negotiations becomes a core thing that ther rewarding people for and a lot of your talent

goes into those areas as opposed to say engineering. I think it's Patrick Collison of Stripe who has made the point that if you're really into high speed rail in America, you're just not going to be very productive because it is in a lot of hi speed rail being built, and even though they are still working on things like the California High speed Rail initiative, uh, it's really really slow, it's really expensive. Like we've made a lot of engineers here unproductive, and it's a big pain to be an

engineer working on these things. I'm just flooded now with people working on domestic infrastructure projects who want to tell me about how miserable their lives are where It's like working on crypto up until a couple of months ago was super fun because nobody told you know, and I would just shoveled money on you. So I do think something.

It's probably consistent, you know, whatever the I think. The reason I'm a little skeptical under investments sometimes is that there's what our investment could be getting us at its current levels, and what it is getting us. But nevertheless, like there is clearly a these societies are all turning dials in a billion different ways against building, against risk,

and it just becomes sludgy. And then you know, you're a young person thinking about where to go and like where to make your mark, and it's like, you know, you go into these mediator industries, like you know at law and management consulting and finance as opposed to the actual building stuff industries, and that stuff you know, cycle off, the cycle, you know, begins to have a real effect.

I think this is the second episode of Late where the conclusion is we had to kill this crypto thing so people can work on something productive as a client. It was so great to have you on. We're out of time, but we could actually go for a long time, and as all the good conversations, all our best conversations, give me like five ideas for episodes including you know, we got to talk more about environmental review and we got to talk about old environmentalism versus new environmentalism and

all this stuff. So great to have you on the show. Really appreciate you coming on out lots, Thank you. I love being here. So should we do spin off the Bottleneck Detectives? That would be a fun show. Like a TV show. That would be a great name for a TV series or even a podcast. So yes, yes we should have like some like haunted, you know, sort of like mysterious music, like the Scooby Doo. We're wandering around

with like big magnifying glasses looking for supply side constraints. Okay, on a serious note, there was a lot that I found interesting in that conversation. But I did think Ezra's point about the government being willing to finance and support failures and politically failure, yeah, I thought that was really interesting.

And also, can I just say that that shrimp treadmill study is a real thing, and there is a video of the shrimp running on the treadmill, and I have to say they move kind of like I do on a treadmill, which is which is to say, reluctantly, extremely reluctantly. But yeah, that does plice in some of the video

for the video version of this episode. You Know, something I was thinking that I thought was very powerful is like this idea of there's a lot of openness to some of these supply side ideas, but whether that openness actually turns turns into action is a very separate question, and you know, just recording this August yesterday we had the New York primaries and one of the candidates in New York twelve and maybe he never had a shot of winning anyway, but one of the candidates, uh in

New York call made a point about like repealing the foreigne Rege Act of clearly an odd lots fan um sarage pateel Uh. Maybe we should have on at some point and talk about that. But it was interesting because it's like that's not a big vote mover, you know. And granted he didn't make that like the centerpiece of his campaign, but it does seem to you know, get more, take take home more of your money, tax cuts, etcetera.

The language exists, to Ezra is in initial point the language of these sort of like taxes or vouchers that exists. What is the political language of talking about dredge capacity? Right? I think that's a really important point, which is that you know, as are mentioned that info gathering idea that all these politicians in d C have had to suddenly get up to speed on things like the ports over

the last couple of years. But then it's also the voting population, right, like all of these people are suddenly going to have to form opinions on things like the Foreign Drudge Act and how do we actually do the voters are not it seems unless they listen, it seems tough. But on the other hand, you know, if the pitches this is something that can help the economy and push down prices, then maybe that's a simplistic way into it. Yeah, a lot there. Okay, are we going to leave it there?

Let's leave it there. Okay. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Isn't All. You can follow me on Twitter at the Stalwart. Follow our guest As Recline on Twitter at as Reclined, follow our producer Kerman Rodriguez at Carmen Armand, and check out all of the podcasts at Bloomberg under the handle at podcasts. Thanks for listening.