Allison Schrager on Free Markets, Public Pensions and America’s Appetite for Risk

Welcome to the Future of Liberty, a project of Liberty Fund, hosted by Mitch Daniels. Welcome, everyone, to the Future of Liberty podcast, a presentation of the Liberty Fund, an organization committed for the last 60 years to the promotion and protection of those freedoms that have made America the great country it is and the beacon to the world that it is. And today, we're enormously grateful and fortunate to have with us Allison Schrager, one of the most knowledgeable, widely read, and insightful commentators and advocates of these points of view that Liberty Fund so actively tries to promote. Allison, thank you so much for coming to visit us. Thanks for having me. Let me start with this question. You have written about the virtues and the resurrection, I think, in one recent column of neoliberalism, which prompts this question, what is neoliberalism? Well, I mean, it's somehow become a dirty word, but really, I think of it as sort of, I guess it would also be known as the Washington Consensus, which emerged in the 80s and 90s, that the secret to economic growth is really freer markets. I think center leftists would have favored a little more government intervention, center rightists a little bit left, but it was mostly that free markets would grow the economy, that we should have more free trade. And it was really, I think, largely about economic freedom. Well, you're widely read on a number of subjects, but you're an economist first and foremost. I think you are a PhD from Columbia, if I remember correctly. So let's start there and with the economy. We're talking in mid-2025, and I think an open question that a lot of people are asking, the American economy, by most measures, performing pretty well, despite some predictions that it would suffer from uncertainties over erratic policies, the government, threats of tariffs, and so forth. So is the American economy sort of rewriting the rules as we thought we understood them, or are we living on borrowed time? I mean, you never know. I mean, the way I like to think about it is, you know, the American economy is really just extraordinary, despite sometimes I think what is our best efforts to otherwise. It's just we are so innovative. Americans really are such great workers and innovative and traditionally risk takers. But our policy choices really do matter. And the tariffs worry me, but I think the economy is showing to be sort of more resilient. I think you can never predict a recession. I think they're often, they say booms don't die of old age. And I think that's largely true. I think when you look at policies that maybe aren't ideal, they don't necessarily always cause a recession unless they're really horrible. Like 150% tariffs could cause a recession, 10% probably won't. It's that they do make the economies less resilient to what does come along. So we don't know what's going to happen in the next several months in the next year. You know, we could have a big shock. You know, China could invade Taiwan. A lot of bad things could happen. And the question for policymakers is have we made the economy resilient to that? So if we do have a recession or we can avoid a recession, it will be less bad. Is it fair to say that maybe we overestimate constantly how much government, how much influence government actually has on the economy? Maybe the free economy of hundreds of millions of people making individual decisions is a little bit bigger than government. Maybe this is part of government's instinctive hubris. It is. I mean, it depends, obviously. I think one lesson I've noticed people have failed to take away in the last several decades of policymaking is if you do something a little, that doesn't mean you can do it a lot. It's like, you know, a lot of Democrats were like, okay, we raised minimum wages 50%. Let's, or say 50 cents. Let's double, triple them. Because clearly minimum wages don't matter. And I think you could say that about a lot of government policies is if you tinker, yeah, I mean, the natural state of the market is stronger than sort of tinkering. But policies can be very damaging, I said, if they go really way too far. So I think we're suffering a lot from going a lot further. But again, we keep being very resilient. Like, for instance, you know, everyone keeps expecting, and I've been a debt hawk forever, even before everyone became one. Again, it makes us less resilient. It's, you know, everything's fine. Markets aren't freaking out about the one big beautiful bill. But the problem is, do we have an emergency where all of a sudden we have to issue a lot more debt? Are markets going to be less forgiving because we already have so much debt? So I think the resiliency is really, I think, the role of government policy and largely where we're failing. I always recoil when someone will say or write, you know, the president, whoever it is, is running the country or managing the economy. You know, you don't in those jobs. Yeah, they don't get credit locally. Most you can hope is not to do too much harm and possibly to nudge things in a different direction. But again, the inevitable tendency of government, too many of the people I think who observe it is to accept that. Yeah. The problem is you also don't have the counterfactual. Like, I mean, where we're probably going to land with tariffs probably is not going to cause a recession. Maybe it will increase inflation on the margin, but not enough that people will notice in a big way. But probably we would have been better without the tariffs. But you never know that counterfactual. And I think that's the way politicians really should be judged but can't be judged. I want to come back to tariffs briefly in a minute. But on the way there, you've written, I think, very persuasively about the centrality of growth, which I think when one thinks about it, it's not only important to people's material progress, but then to the confidence of people, to peace and serenity in our political process and so forth. So you mentioned the bill that, as we're visiting, has very recently passed. And one of the big arguments people were having is how much growth can we expect from this giant combination of so many different policies? The administration says, oh, well, 3%, and that's why it will not aggravate our debt problems. other models aren't that optimistic. Yeah, we're not going to get 3% growth from it. I mean, maybe we'll get 3% growth, but I wouldn't put it on the bill. At the same time, though, I feel like a lot of the criticisms of the bill are equally unfair. I have a very controversial opinion about the one big, beautiful bill, which is, you know, it's not terrible, but it's not great either. And everyone else seems to think one of the two things. And, you know, it does, like any big bill, it does some good things, which I think will be good for growth, like all these tax credits and write-offs for research and development happening in private corporations that when we instituted full expensing in 2017, that did have a very positive impact on growth. So I'm glad they've made that permanent. You know, everyone freaks out about any change to Medicaid, but, you know, that is a big program that's growing and sort of, you know, grows unchecked. There is a lot of fraud. So I think some of the changes to Medicaid are actually important and a step in the right direction. And extending the tax cuts or making them permanent from 2017, I have mixed feelings about it. On the one hand, I don't think this is a good time for a massive tax increase, particularly on the middle class, particularly with the tariffs coming. At the same time, we really can't afford it. So I would have preferred, and not that Trump ran on this platform or there's any appetite, but what we really needed was a bill that really did serious tax reform like we did in the 80s and really took a hard look at our tax system and made it better, made it more efficient, and also would increase more revenue. But that wasn't in the cards. So this is pretty much as good as we were going to get. Maybe it was a missed opportunity. First of all, as you say, for genuine tax reform, and some of us think the problem with the Medicaid provisions is they didn't go nearly far enough. This program has exploded in costs in recent years. It's not cruel to put it back where it was or on the track it was recently. And not to mention that the president himself took off the table, you know, majority of the dollars the federal government spends, the other entitlement programs, and just one more chance to bend down the debt curve. You talked about the importance of permanence in things like expensing. So businesses can plan. And we all know how important that is, and it's been proven. Now, nothing has injected more uncertainty, let's say, than the tariffs. They're on, they're off, they're on, they're postponed, they're on, but we've reduced the rates. What's your view of this? Is it really clever bargaining? And if so, how long can you do that before you impose costs that are worse than the gains? I mean, for me, the ideal tariff level is zero. So I mean, I would never say, oh, yeah, this is really clever bargaining. On the other hand, again, there's always something to what Trump's doing that's important. And I actually do kind of admire, although the uncertainty around tariffs, the high tariff levels aren't quite how I would deal with it, is these non-tariff barriers he talks a lot about. For instance, even in Europe, even within the EU, they have these huge distortions and regulations that have really hampered their economic growth. I read one study from the IMF that's the equivalent of a 40% tariff within the EU, which is supposed to be a free trade zone. So when he's coming after Europe for these free trade barriers, there's non-tariff barriers that act like tariffs. He's not wrong. I mean, I think the irony of it all is these non-tariff barriers actually hurt the country that has them more than they hurt us. So he might actually, if they actually do negotiate with him and get rid of them, it'd probably be the best thing for Europe that they've ever had, even more than for us. So, I mean, there is something to thinking about trade, to thinking about regulations that make trade harder. Although I think in the end we're going to end with higher tariffs, which, you know, isn't in the spirit of free trade. But at least it's sort of coming to the fore. And I mean, it is amazing to me. I would have expected, like most economists, I never thought tariffs would like destroy the economy or cause like runaway inflation or a recession. But I would have expected the economy to be weaker, at least from the uncertainty. And it's not. And it's remarkable. And I don't think anyone can really explain it. Well, maybe by the time this airs, we'll know a lot more and we'll hope for good news. Let me ask you a non question related to tariffs It could be asked in other contexts because there a lot of debate now among commentators about our constitutional framework about who should govern this or that Should Congress reclaim – whether the tariffs are a good or bad idea, should Congress reclaim the authority to set them? The president has asserted and nobody stopped him that he can just do this at the stroke of a pen. Is that good or bad, Governor? It seems bad to me. I mean, there's a reason why Congress is supposed to have the authority to tax, and tariffs are a tax. And I mean, having one person do it, you do have these sort of willy-nilly rates that move around, which I mean, I guess, in theory, might be good for negotiation. I'm not sure either way. So yeah, I mean, Congress really should take this power back. I don't know if they will. It might end up being the judiciary that takes it away, but it's hard to predict. You, in another of your special areas of expertise is fiscal, I'm sure public fiscal policy, in particular pensions. And you frequently sign off some of your posts and missives as fellow pension geeks, which is an appealingly self-effacing way. But I'm glad there are people like you paying attention because this is an under, I think, attended crisis of its own building. So I'm curious to know, won't hold you to this prediction, but which would you expect first? A run on the dollar, a crisis at a treasury auction or at the national level, or the collapse of a major state pension fund, many of which are deeply, deeply underwater? I would put it on the pension funds. Of course, these higher interest rates have been good for pension funds. So I sort of gave them some breathing room. But I mean, continue in paying attention. I mean, this is just another slow-moving disaster, which I think in the end, this actually does contribute to the first one, is going to, in the end, require a federal bailout. Anyway, the feds keep insisting they will not do it. Yeah, well, not so fast. I think – I've been worried about exactly that for 10 or 15 years. and in fact I've speculated we'll see that we could we should I give thanks to the found to the founders in the Connecticut Compromise which gave every state two senators I'm hoping at least that when that day comes when Illinois or California or somebody presents themselves that you got to save us from our own vote buying and the unconscionable giveaways that have created this problem, that you'll find 25 states or more that say, no, they live in the bed you made. Well, I mean, it sounds heartless to say, but I hope so. It just seems that no one ever lets pensioners go without. When you look at any sovereign debt crisis or any municipal debt crisis, it's like pensioners always get paid first, always, before bondholders. Don't you think there's a difference between an auto worker in Michigan and a $200,000 lifeguard in California? I mean a public employee. Yeah. No. I mean like honestly like I wish there'd be more accountability for the people who run the pension funds and that only happens when pension funds fail. That pain is felt. I mean which sounds cruel. I mean I guess another alternative. I think a problem with the public sector workers is a lot of them don't have Social Security. So if they lose their pension, they're really out of luck. But then again, I mean, why aren't states held accountable to actually run their pension funds properly? And I think there's just going to be a lot more pain to come, particularly with all these issues with private credit and private equity, which they've gone so heavily into in the last couple of years. They're now having problems getting their money back. They're not getting the returns they were promised. So it's going to be a really interesting... It probably depends, honestly, who's in office about whether or not there becomes this federal bailout and how that looks. And at the end of the day, I mean, these are very sympathetic people, even the $200,000 lifeguard in California. And I'm sympathetic to them that they were promised something. And they saved and made financial decisions throughout their whole life based on this promise. Well, no one said they get zero, but they might have to take a substantial haircut down to the level that some private sector pensioners would find a step up. Yeah. I mean, to some degree, there isn't sympathy because most people have a defined contribution plan. And they look at someone who, yeah, who is getting – especially a lot of the public safety workers retire when they're like 40 with a lifetime pension. Yeah. You say they didn't get Social Security, but a lot of them had that second career, double dipped, whether it was another public pension or a private retirement fund. Yeah, and it's becoming popular to put these people on Social Security, which is fine. But then my theory is if we put these public sector workers on Social Security, then that should come with a guarantee the feds never bail out their pension. Because they already have a guarantee, so they don't really in a theory need it. So if we're going to put your public sector workers in Social Security, they now have a guaranteed form of retirement income, then that comes from a rock-hard promise. I'm not a politician. I'm not sure if it's possible to make such a thing. Then we never bail out a public sector function. Well, if you're right about it being more likely to happen than I hope it is, then that guarantee might not hold either if, in fact, they're able to roll the rest of the country. Well, that's one. I won't say if we find out. We will find out at some point, just don't know when. Just before we leave this, and you just mentioned Social Security, what about foregoing taxes on Social Security, which this recent bill did too? Here we've got a system that's going broken or going bust in 2032 already, and now this. Is that a good idea? No. I mean, obviously not. I would have rather this bill actually do entitlement reform. The more we wait, the more expensive it is. I think people also underestimate how much uncertainty. you know this retirement situation is really interesting in america in a lot of ways it's never been better you know it's not like there was some golden age of defined benefit plans where everyone had one they were you know they were expensive and they actually pose a lot of risk to employers so more people than ever have retirement coverage people are retiring with more wealth than ever before but people also are convinced they don't have enough to retire they are convinced that earlier generation had more security and more money than they do and that actually isn't even true. And I think that is in part because no one knows what to expect from Social Security. Like my mother's in her 70s and she still like says, will make comments like, well, who knows if what I'll get Social Security. I'm like, no one's going to take away your checks. But the fact that people are supposed to have this stable certain source of income to be the foundation of their retirement planning and people don't know, sort of on the one hand, it's like a hands off, don't touch it. On the other hand, it's, well, we don't know if it's even going to be there for me. I think it could really, we just need more clarity around retirement income and people need to know what they're going to get, what they're not going to get, how to better manage their 401ks. And really people would then realize they're actually much better prepared for retirement than they think they are. Again, one thing I think we know with some real confidence is that these crunches are coming. And so the golden age of the pension geek is ahead of us. I don't know. I mean, the good thing about being a retirement economist is like the problems are like relatively easy. Like how to fix retirement isn't very complicated. You just have to save more and probably like consume less someday. And yeah. But Ronald Reagan, you say frequently, people say there are no simple solutions. No, there are just not easy ones. And this is a classic case. Exactly. Which is why pension geeks will always be employed and frustrated is that no one, we know what to do, but no one will ever listen to us. Well, your day is coming. That's my point. So hold on. You coined a term I really liked. You were, as you were in your writings about the recent arguments over, to use the familiar acronyms, ESG, also DEI. But let's talk about the first one first. And you said the only bubble you had ever correctly anticipated was the virtue economy. So I love the term and I love the notion you were presenting there, but talk about that. Yeah. So I can't call bubbles, but if there's one sign that something's amiss in a market is when someone says they're going to get something for nothing. That's why I love financial markets because they're just so pure in so many ways. And there's always this fundamental truth, that you don't get higher returns without risk. And if you constrain your portfolio, you're going to get a lower return. And so this is when you knew the virtue economy was just not working. And this is true of DEI or ESG, because they both effectively act as a constraint, right? Like on who you can hire or what companies you can buy stock in. And yet it was all being sold as somehow going to make things better. Like, oh, if you constrain your stock choices to these few companies, these virtuous companies, you're going to get a higher return too. That doesn't make sense. It's one or the other. If you want to, if you feel very strongly, you don't want to invest in oil companies, fine, you know, bless you. But you know, you have to understand you're going to get a lower return in exchange for putting that constraint on your portfolio. Or certainly as well with companies saying, all right, we're only going to hire, you know, certain people, you know, based on their race. Well, then that constrains your, the pool of people you can hire and it can put a constraint on the talent you can find. Yet this was always being sold as somehow, you know, I remember you read all these studies from these like big consulting firms that are very prestigious saying, well, you know, DEI also is going to like make your workforce more productive. And I think this is what I knew it was a bubble. I mean, one, I sensed people were getting sick of it because they would because it was always silly. But you also just know in finance, and this is true of any financial crisis or any stock bubble, is when people are convinced they're getting something for nothing. It's when they think, oh, I'm piling into this clearly risky asset, but it will never fall in price. Mm-hmm. And what – in both these contexts, now I think a question a lot of us are very curious about is, is the – is that conclusion, which is absolutely dispositive to some of us but not to many people, is this a lasting or temporary? So let's take it – it may be a different answer in the two related phenomena. So let's take ESG first. Some people say – I think maybe you have – this has settled the shareholder-stakeholder argument in Milton Friedman's favor. I'd like to hope that's right, but how confident are you that this all won't come back in some different day or form? I'm less worried about it in financial markets because you see it institutionally. Like you see Larry Fink trying to distance himself from the fact this ever happened at BlackRock anyway like a couple of years ago It was all he was talking about And I think just the fact one of the reasons they got away with it as long as they did with ESG is they just went in a lot of tech stocks and tech stocks had a good run So they could credibly claim, oh, look, we're getting more money too. But the test of any market strategy isn't how it behaves in one market, it's how it behaves in all markets. So I think it's now hard to act as a fiduciary and be an ESG. It's politically divisive and it's not performing as well. So I think that has largely been settled. On shareholder stakeholder value, I've always been a big fan of shareholder value. Milton Friedman's right about everything, at least when it comes to that. Although I myself am rethinking certain aspects of it when it comes to, I just read the Alex Karp book that really makes this case that companies need to be moral. And I still am not willing to completely go there, but that does seem to undermine some cases of shareholder value for certain companies, depending on what their activities are. In the case of ESG, and actually on the very day we're having this conversation, there's yet another story summing up the quantitative assessments, which are very definitive. That no, it doesn't work. It does hurt your returns. It certainly doesn't help your returns. There's no evidence of that. Markets can calculate and quantify that. Now switch to DEI, which is to some extent harder to prove one way or the other and an equally emotional appeal for some people. Are they temporarily in hiding? Are they playing possum or will they be back as soon as they get the chance? I think DEI certainly, at the very least in places like universities, is going to be very hard to dislodge. I think you have a lot of people in power who are really true believers and not only really believe this is morally right. Now, you know, it's hard to engage with them on this because they have they have a point, you know, of, you know, making workforces more equitable, more welcoming. You know, who argues with that? But I think the implementation and, you know, a DEI became became, you know, really everything it was supposed to be against. And unfortunately, a lot of people in these positions of power don't see that. and still think the means in which they did, like certainly universities like these loyalty oaths, race restrictions on who they'd hire. I think they still are big believers in that and largely still trying to do them to the extent they can. So that would be harder. I don't know about the private sector if they can still get away with it because I think we'll just see a lot more lawsuits. And I think, as I said, it becomes a constraint on performance because it becomes a constraint on who you can hire, and that's just bad for profits. Yes, and in the private sector, that's what ultimately matters. Your performance, higher ed, which we're just about to talk about, has benefited, frankly, from not being accountable, not being measured in terms of performance in the way that markets relentlessly do. Yeah, our friend and former guest here, Neil Ferguson, you know, suggested some time ago that we had the acronym in the wrong order. It should be diversity, inclusion, and equity. and now the real question is did DEI die or not? Yeah. No, I think unfortunately it's still around, certainly in a lot of sort of institutions. Yeah. So let's talk about those, including the one from which you have a very prestigious degree. You've suggested that using Columbia as an example, but just as an example of so many similar institutions, that it ought to be broken up. That's an interesting idea. So tell us why you think that. Well, you know, the university research model has been very important to economic growth and I think exceptionalism. You know, it really does produce a lot of the research that has made our country very economically successful. It's also been really critical in attracting talent from all over the world. It's one of the reasons why the most talented entrepreneurs who've really increased growth in innumerable ways came here as students to work doing research. So it's been, as I said, very important. And you know what? The University of the World War were rewarded for doing this very important function. They got a ton of federal money, and they really became the most powerful and influential institutions in the world largely on that federal money. And so the research is so important. And so when Trump's war on universities, and honestly, who've behaved quite poorly and done some rather shocking things, said, well, I'm taking away the money. It was largely research money because that's the money he had control over. People were like outraged. They're like, well, this was cancer research. So now we're in this position where we can't really hold universities accountable for their behavior because they're doing this very important function. So the question is, is why are they doing this important function? And, you know, the universities didn't have to do this. The deal was going back. I can't remember his first name. Vannevar Bruch. Yeah. Was he thought your research should go. Government supported research was important. He saw that and he thought it should go on. It had been to the World War II's, the victory in World War II. Yeah. And he saw where this was going. And he's like, this should happen at universities because it'll be less political than if it goes on in government. But now they've made it so political. They didn't have to do this. They chose it. I'm all for freedom of speech and I'm all for academic freedom. And I accept that universities are going to have some professors who say things I find very offensive and I think they should keep their jobs. I'm even open to them teaching students. Fine. Columbia certainly has a lot of professors I disagree with and I totally support them keeping their jobs. But the question is, is universities took their most insane professors' ideas and made it university policy and impose that on the sciences. Like we have all these stories of the years of sciences having to do these loyalty oaths, not having to hire the best scientists and said to fulfill some DEI quota. And so all of a sudden it was hurting science. And I think universities need to be held accountable for that. And some of them, it was actually cut from the column. I argued that like universities like Columbia, you know, maybe their sciences should be a separate university. If they want to do their activism thing, go for it. If you want to have these university professors who I think are crazy setting university policy, great. Just keep the sciences away from that. Don't harm them for it. If you want the federal money, then you have to keep it neutral. They're not able to do it. But one thing that was in the original column that got cut just because it's starting to get unwieldy is I argued that the breakup should mainly happen for the elite universities. I actually also argued that the funding should still go to public universities and land-grant universities, which actually do serve more of the public so that more of them can benefit from that. But, I mean, why are we giving so much money to schools like Columbia and Harvard when they've sort of really fallen down on their mission? I would hope you keep writing about this because, as you just pointed out, this to me is a broader subject than just the future of the academy. science itself has been polluted. Yeah. In fact, if you look at what some of the scientific organizations have imposed or recommended to their membership, if you look at some of the grants that have been given, there's no question that much of that was not in the public interest. It was politicized. And it's led, I think, people worry from the left about, they'll say about threats to science. I think they have posed in some ways the larger threat. We have these issues of non-replicability. What a schlock work being done. And so a reform like you've suggested might be the best way to get us back to science we can all trust and science, if the public's going to fund it, that advances the public interest. Exactly. They need accountability and they need public trust and they abused all of that. Yeah. Okay. You live in Greenwich Village. You told me before we started, that's a fun place to live. I'll take your word for it. But I have to ask you, and I've been a longtime fan of the Manhattan Institute, like the Liberty Fund, I think one of the most important voices for freedom and principles of liberty out there. But it was founded, at least as I recall, in hopes of bringing New York City back to some health, social and civic health. And it's had some great days as New York has had ups and downs, but some real ups. Now, we suddenly have a self-proclaimed – I'm not sure socialist goes far enough – Marxist by some measures as the odds-on choice at least to be the next mayor of New York. So are these glum days at Manhattan Institute and should fans of New York City be – how worried should they be? Well, fans of New York City should be very worried. I wouldn't say they're glum days at Manhattan Institute. I mean, everyone is telling you, everyone keeps saying to me who's not there, oh, you know, this should be great for you guys and great for your fundraising because, you know, you'll be for everything he's not. And it's going to be this disaster. I mean, I should say otherwise are illegal to kill me. We're a 5013C and we don't endorse any candidate. But I mean, I wouldn't say they're glum days. I think people are very worried. I mean, because anyway, I guess in some ways it would revitalize our mission, although it doesn't feel like it feels like it's been sort of how we've had a very strong mission as long as I've been there since 2020. I think one thing I've noticed is everyone who works there is very passionate about New York. We love New York and we want the best thing. So we desperately want the best candidate who supports and agrees with us on policy. Particularly, we take public safety very seriously and see who is harmed most from when public safety falls or sort of falters. So on the one hand, I think we feel very invigorated with our mission. We always do. Certainly, as I said, I joined in 2020. So we definitely were very invigorated then. But at the same time, all we want, we would love to have our research be irrelevant because the city is doing so well. There were days when it looked like you'd succeeded, but now here we are. Yeah. I think everyone wants the city to be successful, first and foremost. I mean, it's the best job I've ever had. I've never worked for a think tank before, but it's just – it's wonderful working with people who – and I guess you feel the same here – who just really share your vision of what you want the world to be. So let me ask you. Well, first, you want to make a prediction. Will this fellow prevail or are you – I think he will. I mean it's just – I remember when de Blasio won. I remember just being like, what are you doing, people? And like we had it pretty good with Bloomberg. Like what are we doing? and everyone, you sense this enthusiasm. People were really passionate I don know I mean they all disavowed it like five years later and they like I never voted for that guy And I like I remember you doing that But you have this people are so excited for this guy in a way that Some people. Let's insert the parenthesis that I think your calculation is maybe 8% or 9% of New Yorkers actually voted in the Democratic primary for this candidate. There's 91% who didn't. That's a phenomenon we see around the country, people getting elected in one-party settings with tiny percentages. That's a subject for the next interview. But with that proviso, you think he's probably got the best chance to win. He'll turn out. Some people aren't that engaged. You know, people also have a lot of motivated reasoning going on now. They're like, oh, well, he won't do the worst things he's saying he's going to do. Or, oh, you know, I'll never vote for a non-democrat or whatever. they're having problems getting excited about Eric Adams. I'm not sure why. I thought Eric Adams was actually a pretty decent mayor. Well, let's take that first point you just made. I think it's interesting beyond New York. So when not just Marxists, let's say committed leftists get elected, they typically, or they sometimes, pose as more moderate than they are. Let's think about the last presidential administration, you know, came on like Warren Harding, went out like, you know, Eugene Debs or something. So if he's elected, if your prediction is correct, what's your sense of how he'll govern and what success he'll have or not have? Well, I don't think you really can moderate unless it's really in your heart. I think who you are as a person is reflected in your leadership. You're saying like, you know, he has a long history of being very like anti-cop, wanting to defund. So what happens if the police accidentally shoot someone? Whose side is he going to take? I think we know because that's just, you know, who he is. Or, you know, I'm just instinctively have always been very pro-market. He clearly has an equally long and passionate history, although he's younger than I am, of just sort of not seeing, I just see the market allocating resources and sitting prices, And I think it's a miracle. I think he has a very different feeling about that. So even if he's like, all right, I'm going to work across the aisle because there's no Republicans in New York. But like I'm going to work with more moderate people in Albany. There's no moderate people in city council, but like in Albany and, you know, maybe, you know, not do all of these things and like not try to drive all the businesses away. That's still in his heart. And it comes out. It comes out in like subtle ways. It comes out in times of stress. As I said, whatever the economic equivalent is to a policeman accidentally shooting someone. It does come out, and the business community doesn't feel supported, and they know they'll get thrown under the bus at the first opportunity. Well, after your first visit to the Greenwich Village City of New York grocery store, you'll have to call me up and tell me about it. I wonder what kind of flour they'll give me, if I have a choice, or if they just give me rye flour. It'll be interesting to see if they have any at all. I want to finish on another area in which you're, I think, somewhat uniquely interesting. And that is risk and its role in a free economy and in the success that America's had. You have written it more than anything else. I think I'm reporting this accurately. risk and the proclivity to take it and the history of taking it has been the most important factor in what we think of as exceptional performance of this country. So I happen to think that you're very correct and persuasive on that. So if that's the case, where are we in terms of America's current attitude and willingness to take the kind of risks that have brought us to where we are? Well, I mean, it's certainly like faltering. I'm writing a new book on our change in risk. And I open with a story of I found this guy in Alaska, he got the last homestead patent. And you think about the homesteading program and how it would you know, I wasn't a uniquely American program, uniquely, you know, new world program, where the government said to you, hey, you don't have anything. But if you take these enormous risk, I mean, you might die. But your family might die. But if it works out, we're going to give you a chance. land, which was like the main way of wealth and upward mobility in that time. So the government was like supporting this amazing risk taking that people took. And it really became like foundation of wealth for a generation of people. And now it's like more than ever, the government's main role is removing risk from our lives rather than supporting risk taking. And I read about this and this guy in Alaska and how I even found him myself because I spent time in Alaska when I was in college. And even that now doesn't happen. Like I just saw, you know, did what people did when I was in college, which is you sort of just got on a ferry and you ended up in Alaska and you sort of had this summer adventure. And it was just a summer. We then like went on to have fairly conventional lives. But even that doesn't happen anymore because I'm working with this editor on it and she was like, well, you just went to Alaska. Did your parents sign you up for a program? And I was like, no. But I'm told that's actually now why young people go to Alaska. They don't work. They don't work in fishing. They go on a program where everything's arranged in advance. So you just see this generational shift in risk-taking from homesteaders to people who just took risk for a summer to people who just really don't take risks at all. And it's worrying. I mean, as we're scratching our heads at why Europe isn't growing, I mean, I lived in Europe for years. They're not risk-takers. Their government is very aggressive in removing risks from their lives, and that's why they've had low growth. It's like macroeconomics and finance are very similar. And I said this sort of central truth from financial markets is you don't get a higher return unless you risk loss. It's true. I mean this is the foundation of all finance. But it's also true for the macroeconomy in that if you don't have a certain amount of risk, you just don't have the same amount of growth. some of us found the nation's response to the pandemic alarming in this respect i thought it across the sectors public and private and non-profit for that matter like the one i was living in at the time the flight from from risk the hiding behind experts the fail-safe sort of people thought it was fail-safe attitude, first of all, imposed costs vastly beyond any savings or protection it provided, and said all the wrong things about this essential wellspring of our liberty and prosperity that you're talking about. Did you have the same concern? Yeah. I mean, I think the book was largely inspired by observing that. I'd watch TV. I'd watch Cuomo's press conferences. We kept being told we can go back to normal or not even normal, do some basic functions in society when we're safe. Michael, when are we safe? Since when has that been the standard? And the government's job is, as I said, to weigh tradeoffs and make choices that reflect what the populace wants. And it just completely varied on there were no tradeoffs. Well, they didn't think of tradeoffs. In addition, I don't know how you find time, but in addition to all the other things that you're doing, you teach, I think. You've been teaching at least at NYU. No, no, not in several years. I love teaching. It's just so much time. I found out when I tried it. Yeah, you're right. It's hard. It's great, though, when you do it. You forget how much you—in abstract, I'm like, why would I ever do this? It's so much time. But then you forget how much you like it when you do it. Well, it's not that long ago. So I'm just curious. What was your take on the young people in your classes and their views of freedom, of risk? of do they have any sense that they are less free than people were in previous days? They've accepted impositions on their privacy, for instance, that would have been unthinkable not that long ago. What's your take on their outlook? I think they do. I mean, granted, I mean, the young people I interact with, there might be some selection bias, but I think COVID particularly brought that to the fore. And actually, if one good thing comes from it, I think it's going to be a generation of people who really question things. And after all, all this dogma was thrown on them, sort of really reject it. Because, I mean, that generation was really robbed of so many important things. Proms, like graduations, their first year of college, like so many important milestones. And I think they're all wondering for what. I was teaching before that. But I mean, the students I interacted with, again, because I am on social media a lot. So I'm like, young people are trash. But then you actually meet them and they're like, wonderful, interested, curious, wondering why they've been told all this stuff that makes no sense to them. And really just hungry for interesting ideas that they can grapple with, even make them uncomfortable. So this is a good thing about teaching is you don't see these horrible people on social media. You see actual people, and they're wonderful, and they're thoughtful, and they're curious, and they're everything. You're supposed to be at that age. So maybe the next time some big shot in government tells them you must do this or not do that because we say it's better for you, maybe they'll be a little more skeptical than people were in 2020. Well, actually, I mean, another thing is we're seeing them much more politically divided. Millennials were all like super lefty. But we're seeing, I think, a really healthy political diversity in Gen Z, which makes me happy because, you know, I don't really vote. I'm technically a registered Democrat, but like I want both parties to be great. I think when one party goes off the rail, the other party sort of goes off the rail. They really set the tone for each other. So a really healthy society has people of various political views. And I think we're seeing much more political diversity in Gen Z. And I think that gives me a lot of hope. Well, then that gives me hope that in the question I like to end all these conversations with, maybe I'll get an affirmative answer from you. And the question is, in the year 2050, will America be more free or less free? I think more free. I think I'm optimistic about this young generation being more open, being more open to risk, being more feeling resentful of the constraints that are on them. And maybe they'll look back at this time as a sort of most Victorian era. Allison Trager, thank you for being with us. You know, Freedom's Prospects have a lot going for them in this country. The more people read you and pay attention to things you're saying, and we at Liberty Fund will remain among that group and very grateful that you took time to be with us today. Well, thanks so much for having me. And to the audience, thank you for being with us. Please join us on future installments of Future of Liberty, a presentation of the Liberty Fund. The Future of Liberty has been brought to you by Liberty Fund. a private educational foundation dedicated to encouraging discussions of the ideal of a society of free and responsible individuals.