Cowen on China

Great Power War, China Studies, Industrial Policy, and Tyler's Dream Bureaucracy Jobs

I’ve been reading Tyler Cowen’s blog, Marginal Revolution, daily for over 15 years now. Full disclosure: Tyler, through Emergent Ventures, has supported ChinaTalk in the past, but this interview is not payola. Tyler is my dream guest.

In the first half of the interview (transcript here), we got into AI, exploring its impacts on education, therapy, creativity, development, and pet ownership. In the second half below, we discuss why China studies matters, great power competition, industrial policy, and Tyler’s dream bureaucracy jobs.

If you’d prefer you can also listen to the entire show on the ChinaTalk podcast.

China and the Risk of Great Power War

Jordan Schneider: You’ve had a number of blog posts alluding to the fact that you're surprised people underrate the risks of great power war. Why do you think so?

Tyler Cowen: If something has not happened for a long time, most people simply forget about it. The last time a nuclear weapon was detonated against human beings was in 1945. So we simply start assuming it can't happen, it won't happen… It's not even within the set of our consciousness.

Terrorism, at different periods of time, becomes thought of as not possible; not recently, [since] of course it became salient again with 9/11. A major pandemic that affected everyone­ — HIV/AIDS, although it did affect everyone, was not perceived that way — is salient again. We just underinvest in catastrophes if they haven't happened in a long time.

I see this pattern in history again and again and again. I think a major war between great powers falls into that category. And now with Russia, Ukraine, China, and Taiwan, it's no longer the case. People talk about it a lot. I'm not sure how much the talk helps, but at least there's some basic awareness that these things can happen.

Jordan Schneider: If China does invade Taiwan in the next five to ten years, what do you think the odds are that the US would join the fight?

Tyler Cowen: If it happened very soon, I think the odds are extremely high. I've asked people who ought to know and they confirm that answer. Maybe some of that response from them is a bit strategic, But I don't think it's only that. I think the United States really would be obliged to respond. or you're faced with a world where South Korea and Japan get nuclear weapons. There's a quickly a war between Israel and Iran, and countries in the Middle East — Turkey, Saudi, UAE — want to get nuclear weapons. Our other commitments become much less credible, and we don't want that. So we would do something quite significant in a military way.

Nine, ten years from now, say there's an evolution of the Ukraine-Russia situation. Could that change our views on Taiwan? Absolutely. But at least [with] anything close to the status quo, I'm pretty sure we would respond in a significant way.

Jordan Schneider: So you’re giving pretty low weight to Trumpist isolationism [rising] again as the thing that changes the dynamic?

Tyler Cowen: I don't see the evidence for that. I don't think it's the view of the American electorate.

I think American elites, for the most part, accept and embrace the idea of some degree of American hegemony, and no one wants to be the President presiding over a world where American global credibility has gone capoot.

[Losing] Taiwan looks bad in an election: wars break out in other places, there's chaos in Asia, there's a problem with semiconductor chips depending on exactly how the war goes, possibly a recession or depression as a result… Politicians don't want that. They will fight back.

Jordan Schneider: The other scenario I worry about is: a [Chinese] victory happens fast enough that there's a choice that a US president will have to make between a war, which would slice 10% off global GDP, or shrugging your shoulders and allowing trade in East Asia and the Taiwanese semiconductor ecosystem to continue.

Tyler Cowen: If the war is over that quickly, it becomes a real dilemma, but I don't think it will be. As you know, Taiwan is not easy to invade no matter how superior your numbers [are]. Chinese military does not really have proper training, especially proper training with supply lines. Supply lines are remarkably difficult to pull off; it's one of the amazing achievements of the current and recent US military. So there are going to be bumps along the way, even if you don't think the Taiwanese will put up a Ukrainian-style resistance. And the US can deploy its military assets very quickly. We have excellent intelligence and satellite information, so I think the idea that we wake up one morning and Taiwan is fallen is very unlikely how it’s done.

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Why study China?

Jordan Schneider: How much impact do you think the recent protest will have on Xi’s governance into the medium term?

Tyler Cowen: We’re speaking on December 13th. For a very short period of time, what we’re seeing is reports saying Zero Covid is over. If anything, people are being pushed out into the workforce and the world. They’re being fed “non-truths”, shall we call them generously, that Chinese traditional medicine will save you from Long Covid. The flip is very much in the opposite direction.

This being China, I’m reluctant to predict that this will last, but it certainly seems like a possibility that it will last. You go from one extreme to the other. Above all, what’s important is social solidarity, and thus we get an overreaction towards openness rather than Zero Covid. So it’s likely those protests will have mattered a tremendous amount.

Jordan Schneider: I guess my question is more [in terms of] beyond the specific Covid politics, [regarding] concerns about social stability, changes to tightness or looseness, and foreign relations.

Tyler Cowen: I would put countries or regions into two categories: those that are easy to predict and those that are hard to predict. If you look at the history of India, it seems to me relatively linear: you have some big changes — it's colonialized, then it gets its independence — but those happen at around the same time as a lot of other places are colonialized and get their independence. Growth rates are pretty steady. If you are predicting, with India, more of the same for centuries, you'll do okay. You can't do that with either China or Japan for whatever reasons. If you predict more of the same, you miss the Taiping Rebellion, the Boxer Rebellion, the Communist revolution, Deng and the liberalization starting in ‘79 (or some would say earlier), what's happened recently with the move toward greater autocracy…

China is one of the hardest countries to predict. You periodically get these very major sudden flips that most observers are not predicting. I'll just predict that China will stay hard to predict.

If you have riots or demonstrations in India, I’ll just say we’re going to get more of the same: we’ll still going to have riots and demonstrations, but India will be India. I’m not going to say that for China.

Jordan Schneider: As a sort of corollary to that, what’s the point of regional studies?

Tyler Cowen: You need smart, credible individuals in the State Department who have credentials, the ability to command facts intelligently, [and] the ability to be persuasive. If you’re done regional studies on China, are you in a better position to fill those jobs? I would say absolutely. It’s not just signalling — [though] some of it is signalling — but you’re actually better able to produce the kind of image and persuasiveness that the [State Department] job or working as a diplomat requires.

People who do regional studies do not only work for the State Department, but that’s just a very simple example that helps you see that it still can be quite useful.

Jordan Schneider: In the first few decades of the Cold War, the Ford and Carnegie Foundations basically created American area studies. I'm curious, Tyler, as you've been following this new wave of billionaires investing in progress studies stuff, what new intellectual outgrowths will come out of new philanthropic money in the coming years?

Tyler Cowen: I think donations will become less regular. The old model of donations is: you have a long-term relationship with a donor; they renew every year; it's quite predictable. I think younger donors think more in terms of venture capital hit-and-run: give something a boost to get it started and then hope it can find a way of supporting itself.

Be more non-traditional, take more chances, invest more in individuals, be more skeptical of universities and nonprofits… Those are all trends I see with tech money and crypto money. Now, how much more tech and crypto money will be generated? On tech, I'm pretty optimistic. Crypto money, I guess I'm less optimistic. That will depend, but I think those are some of the trends we’re already seeing in philanthropy.

As it relates to China, a lot of donors would like to do something, but they don't know what to do.

Say, somehow, you want to improve American relations with China. Well, what exactly do you do? It seems like there are a lot of ways you can spend a lot of money and just get marginal impact, like [making] a big donation to a regional studies program at a major university. It seems not very leveraged. People are looking for something to do and they're also afraid of becoming a target of China. We’ll see, but I’m not sure that area will change much.

Jordan Schneider: How would you spend money to prevent World War 3?

Tyler Cowen: I don't know that spending money is the way to do it. If I were the US government, what I would do is go to some of the countries that we're not so friendly with and boost the quality of their early warning systems, so they don't fire nuclear missiles thinking by mistake that they've been attacked — which indeed happened several times during the Cold War and we almost had exchanges of missiles. You want to give those evil state parties better information than they probably have now. This is all high levels of national security. It could even be [that] we're doing more of this than we let on. But it seems to me that's some low-hanging fruit that we could be doing more of. The thing I do is just talk more about the issue and try to raise consciousness.

Jordan Schneider: Recently, Blizzard Activision didn't renew its deal with NetEase, its Chinese domestic distributor. Shortly, millions of Chinese nationals who've been playing World of Warcraft their entire lives will no longer be able to. I'm curious: how important are shared cultural touchstones like video games, the NBA, and Marvel movies to keeping the peace?

Tyler Cowen: We had plenty such touchstones with Germany before WWI and WWII. It didn't matter, but it's certainly worth trying.

I had my own project to improve relations with China, which failed. I wrote a manuscript for a book, and my plan was to publish it only in China. It was a book designed to explain America to the Chinese and make it more explicable and understandable. I wrote the book [and] submitted it to Xinhua [Publishing House], which gave me a contract [and] even paid me in advance. But then a number of events came along, most specifically the Trump trade wars, and the book never came out. They’re still sitting on it, I don’t think it’ll ever come out. But that was my “misguided” project to do a very small amount to help the two countries get along better.

Jordan Schneider: Wow. What were your themes?

Tyler Cowen: If you think about Tocqueville, he wrote democracy in America so that Europeans would understand America better. So I thought, “If we're trying to explain America to Chinese people, it's a very different set of questions, especially in the 21st century.”

I covered a lot of basic differences across the economies and polities. Why are the economies different? Why is there so little state ownership in America? Why are so many parts of America so bad at infrastructure? Why do Americans save less? How is religion different in America (that was, I think, an especially sensitive topic)? Just trying to make sense of America for Chinese readers, but not defending it. [It’s] just some kind of olive branch of understanding: here’s how we are. I don’ think they’ll ever put the book out; of course, by now it’s out of date.

Jordan Schneider: But there are plenty of other countries on the planet who could use a little Civics 101.

Tyler Cowen: They could, [but] this is a book written for Chinese people with contrasts and data comparisons to China. To send the same book to Senegal would not really make sense.

Jordan Schneider: But if you publish it in the US, it will osmose out. I don’t think it needs to be published by Xinhua for Chinese people to read it.

Tyler Cowen: The book is out of date with facts. That's not a big problem: facts, you can update. But it's very out of date with respect to tone. Right now, everyone feels you need to be tough with China. You can't say nice things to China about China, or you're pandering. You look like LeBron James, or you're afraid to speak up. The book would've made a lot of sense in 2015, but its current tone doesn't make sense in the current environment. I still like the current tone, but it would be misread as something it's not.

Jordan Schneider: Well, I think it’s a more important book in 2023 than it was in 2015.

Tyler Cowen: It probably is. It will have some future; I’m still thinking about it and trying to get that right.

US Industrial Policy

Jordan Schneider: Industrial policy. Should the US be doing it, and if so, what are the institutional bodies or know-how that it would need to not waste everyone's money?

Tyler Cowen: People mean so many different things by those words. It’s better, I think, to be specific. I would say our industrial policy of the past has been: a) the military and b) strong governmental support for universities, rather than a lot of explicit, or even indicative, planning. I think that's worked pretty well overall. If someone says, “Well, there's a crisis in semiconductors,” or, “Doing things to help universities is far too indirect,” I strongly suspect that's true. I don't know exactly how to fix that problem. You have Intel laying staff off [and] not always stepping up to the plate in terms of delivery, efficiency and quality. So simply throwing money at it? I don't know.

I'm pretty convinced we shouldn't be doing nothing. I would just say it's more useful to talk about specifics. Industrial policy per se doesn't really mean anything to me.

Jordan Schneider: When I read about Boeing and the Northrop Grummans of the world and their dependence on US government contracts, it feels a lot like Chinese SOEs. How worried are you that more government money towards firms themselves and further away from labs and universities will lead to more firms losing their edge? Is that something that we should be concerned about, or are there certain industries where scale is so large that you’ve got to hold your nose and bite the bullet?

Tyler Cowen: I think we're stuck, at the moment.  Often, the number of firms that can get through our military procurement process is no more than two. The process itself is so cumbersome and the companies you mentioned are pretty good at that, even if they're not always good at other things.

But it does seem to me our procurement cycle is broken. A lot of procurement can take 12 years or more, at a time when technology is changing so rapidly. In essence, [the government depends] on companies to do things outside the procurement cycle — as is happening with AI, I might add — and then [jump] on board very late and [commandeer] it in some fashion. Maybe that, too, is just what we're stuck with. It's just hard for me to believe that what we have now is the best of all feasible worlds. There must be a way to improve it. I'm not the person who has the knowledge to tell you how to do that, but my belief is that it has to be broken and wrong.

Tyler’s Dream Bureaucracy Jobs

Jordan Schneider: Tyler, what bureaucracies or organizations throughout history would you have most liked to work at or be a fly on the wall for?

Tyler Cowen: Something like the Aztec bureaucracy before Cortés arrived; I think I would learn a great deal. It wasn't a very pleasant bureaucracy, but it must have done a lot of things very well. [It’s] probably underrated from an efficiency point of view, like managing all those canals: were they all private? I'm not sure we know, but I doubt it. It's a lot of infrastructure in Tenochtitlan at the time; [there was] almost certainly a strong public role in that. Or the Roman Empire, or Ancient Greece.

Jordan Schneider: The Fifth Sun, which I think you recommended, was one of the most fascinating things I've ever read. It was [by] this anthropologist: the source material for the Aztecs is first-generation folks or people who are talking to the Spanish.

Tyler Cowen: They had codices. The libraries of the Aztec Triple Alliance were burned, so we're not sure what they had. But it was a truly remarkable civilization. When the Spanish arrived in what we now call Mexico City, they were impressed and astonished, especially by the network of canals. And if you look at what we now call biotechnology, they bred corn — a remarkable achievement. From what was a weed called teosinte that was very far from modern-day corn, they turned it into a food that drove numerous civilizations, including a lot of European civilizations. Untutored (in the formal sense) farmers in central Mexico playing around with plant breeding led to achievements that no other civilization has come close to, including ours as far as I can tell. An extraordinarily impressive set of people and culture; the language, Nahuatl, is beautiful; the poetry — what we know about them; the quality of the food… It all just seems incredible.

Jordan Schneider: You mentioned the Roman Empire.

Tyler Cowen: How good was it, really? How far did its reach extend? Someone writing another history book is not really going to teach me that, but if I could go back and work for the empire in AD150, I feel I'd come away with a pretty good sense of things. How long did it actually take to get a message to the other side of the empire? How were grain deliveries managed? How binding were the price controls? And so on. I'd learn all those things. How can you not want to do that?

Jordan Schneider: Let’s do the past millennium. Pick a few.

Tyler Cowen: Just current Singapore. I've gone to Singapore many times; I love my conversations with people who work in the Government of Singapore. I’m not a citizen, but to work there would be a great honor for me.

Jordan Schneider: How about a US bureaucracy?

Tyler Cowen: Well, something DARPA-like would be my pick. Maybe DARPA itself. As you probably know, the NIH is introducing its own version of a DARPA-like institution for healthcare. I know some people who are working with them, trying to make it better. I think those would be some areas where maybe I could have some positive input.

But if you put me somewhere like the Fed, even if you like my views, I don't really think I could contribute to what the Fed is doing. They have an excellent, numerous staff. I don't, per se, know anything those people don't. I think my marginal product at the Fed would be zero.

Jordan Schneider: What about [something that’s] less your marginal product and more “this would be really interesting, I get to learn a lot”?

Tyler Cowen: The two are related, right? What's interesting is to be able to improve or change something. So there are bureaucracies that are hopeless, that I wouldn't want to do. There are bureaucracies that are pretty good, like the Fed where my marginal product would be zero. Basically, a new institution or new branch of an institution is where I would want to be.

I gave a talk recently to ARIA in London. Of course, that's British, but that's their new science funding agency and they have [the] latitude to take a lot of chances. The people at Aria are all reading my book with Daniel Gross, Talent, and trying to think, “How can we use this book to shape who it is that we hire next?” I would be excited to be somewhere like that.

Jordan Schneider: Do you have some book recommendations about technology and bureaucracy?

Tyler Cowen: With books, it really depends [on] where you are starting from. I don't know any magic-quality book on technology and bureaucracy that is simply good for everyone.

I like the idea of reading in clusters. You could pick a bunch of books surrounding the mobilization of technology at the start of WII; that's a great cluster to read in. Or you could pick history of the National Science Foundation, or history of the Internet, or the Pentagon and information technology, and just read through the cluster. I think that's better than looking for the book.

Jordan Schneider: I've been searching for two years now for something as good as Men, Machines, and Modern Times.

Tyler Cowen: That's very good, but I think it comes down to reading in clusters. Books on technology maybe don't attract the very best writers; they attract people who love technology, which is fine. But there are really many wonderful biographies of literary figures that are captivating: Virginia Woolf, Samuel Johnson, Keynes (who, in a way, is a literary figure) … But when you get to technology, I don't see anything comparable.

Which fields have the best books?

Jordan Schneider: This is one of my questions: the lopsided ratios of book quality relative to topical importance. I don't want to say that a marginal Shakespeare analysis book isn't important, but where do you think there's overrepresentation or underrepresentation of great books?

Tyler Cowen: If you take Samuel Johnson, I believe there are three biographies of him that are just phenomenally good — a book you could just push on someone. Not someone totally uninterested, but you can just say, “This is a phenomenal book.” And there's three for one guy. That's great, but it's also a little screwy.

[With] most major tech figures, there's not one such book. And the people who could write great books on tech, like Patrick Collison, have a high opportunity cost. It probably won't ever happen. In literature people usually have very low opportunity costs, and they're rewarded for writing about literary figures.

So I think that's the pretty obvious division of where books turn out very well and where quality is under-provided: high opportunity costs, and technical subject matter that a bit repels what Mark Andreessen calls the “wordcels” — and that's most of tech.

Also, history of science is not the best area to read in. It's extremely important. There are plenty of books full of facts, but if you're looking for, say, a truly charming book on the history of botany or geology, I'm not saying there are none, but you have to actually look pretty hard. There are a few areas, like theoretical physics and Einstein's string theory, that [have] enough popular interest, [and] you have a lot of very good books by super smart people like Roger Penrose that are very appealing just to read. Evolutionary biology and Darwin: a lot of great books on that one thing which have sold very well.

There are these few areas that everyone goes crazy over, and then the rest of science, you know… I did some reading in the development of the science of taxonomy. [It’s] very important, actually: Linnaeus and so on, how we classify animals and plants… I'm not saying those are bad books, but there's not one I would push on you. There's no Richard Dawkins of taxonomy that I know of.

Jordan Schneider: What are the worst books for people to read at different points in their life? Have you seen latching onto a certain book ruin or spoil someone?

Tyler Cowen: I don't know. I'm very reluctant to make those judgements. I certainly know people who have read books and then become involved with cults, either formal cults or informally cult-like institutions. But maybe that was the best they could have done, and maybe they end up doing something useful. Look at Alan Greenspan: he was in the Rand Cult and he ended up running the Fed. Opinions differ on how good a job he did at the Fed, but you wouldn't say he just blew his mind on LSD and was a cult stoner. He was super successful. So it's very hard to know when the book is truly harming someone.

Maybe people should read more bad books and fewer good books; the contrarian in me is inclined to wonder if that isn't the case. I definitely wish people in tech would read more humanities.

Jordan Schneider: But didn’t someone say SBF is the great example of what happens when you get a tech founder who reads a lot of books?

Tyler Cowen: He posted that he hated books and didn't read them right. He said if you write a book, you're a fool. It should be a six-paragraph blog post.

You asked what areas have good books. I find very good books on China hard to come by. Almost impossible that it's one country where traveling in the country is of very high value compared to reading books about it.

Jordan Schneider: I think political science is a crime on humanity in terms of the quality of books that get written by people who could have been writing better books — or at least political science in so far as it's been done in the past 30 years. That's where I see the most missed potential: early-career folks who have done a lot of research but have to write painful things in order to get tenure.

Tyler Cowen: I agree there's far too much writing for tenure, but it's in most areas. It's not only political science. It's maybe more obvious in political science because you have a clearer, more vivid image of what the book should look like.

Charity

Jordan Schneider: How should normal people with four or five digits to spend think about giving away money?

Tyler Cowen: Give to GiveWell is one simple answer. They put a lot of serious effort and energy into figuring out which projects should get money. But it's not just about the rational side: you want to give to things where you will feel involved in a way that motivates your own altruism. It should have personal meaning for you. I don't think it should be a waste.

It's often a waste to just give to your alma mater, but the notion that you can sit down in a perfectly rationalistic manner [and] figure out the best donation, to me, seems a bit off.

You need to take your own imperfections into account and give to things that will remain vivid to you. I think giving to political parties usually is a waste. It's overrated. People do too much of it.

Audio Quality

Jordan Schneider: Tyler, what do you think about audio quality when listening to music?

Tyler Cowen: I have invested a great deal in audio quality, so I have a very expensive stereo sitting right next to me now. And I very much enjoy listening to the stereo really every day, [for] quite a bit of time. People who just listen on a computer or who listen with earbuds, to me, [are] aesthetically criminal.

Now, if you have a high-density file and the right kind of earbuds, the sound quality might be good. But it seems wrong to me that most music was not composed to be heard by ear, and you're injecting it into your brain in a way that is contrary to the intentions of the music makers. It's a very different kind of perceptual and emotional act.

I think you should listen to music in manners closer to how it was intended, and also go to live concerts. It seems to me with music listening, American society has become much worse over the last few decades.

Jordan Schneider: Have you tried IEMs?

Tyler Cowen: No.

Jordan Schneider: So these are wired headphones that, for a hundred bucks, can actually blow your mind in terms of quality.

Tyler Cowen: I have very good headphones. I don’t think they were IEMs, and the sound quality is good, but ultimately it’s not how I want to listen to music. It’s somehow taking music out of its proper context.

Jordan Schneider: Is there a skill you wish you had?

Tyler Cowen: Reading and speaking Chinese. That would be high on my list if China truly reopens. I prefer not speaking Russian, actually. Some of my family speaks Russian and I find it better not to understand all of it.

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