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- [00:00]
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- [00:30]
Justin Wolfers
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- [00:59]
Charlie Sykes
first month of online therapy. ACAST powers the world's best podcasts.
- [01:07]
Justin Wolfers
Here's a show that we recommend.
- [01:11]
Amy Archer
A new season of 90 Day is upon us, and little miss recap has you covered. My name is Amy Archer. I'm a writer, I'm a Libra, I'm a mom, and most importantly, I'm a lady of a certain age. I grew up on a steady diet of soap operas, and I've now taken that lens and applied it to reality television. Together with a bunch of my friends, we talk about some of our favorite reality shows, including sister wives, 90 day, fiance, love is Blind, and more. And don't forget Reality Roundup on Fridays, where we talk about the latest happening on and off screen of our favorite trash reality shows. Come and join us at Little Miss Recap. That's Little Miss Recap. Listen anywhere you get. Podcasts
- [01:58]
Charlie Sykes
ACAST helps creators launch, grow, and monetize their podcasts everywhere.
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Justin Wolfers
Acast.com
- [02:08]
Charlie Sykes
I'm Charlie Sykes. Welcome back to the to the Contrary podcast and congratulations on making it to the long weekend. And after what we've just gone through, probably, and I don't know about the word probably, the most blatant, brazen act of political corruption in the most corrupt administration in history. I'm referring to, of course, the Goon Squad slush fund and Donald Trump essentially granting himself forever immunity from any IRS audit. This would be Donald Trump. Members of his family and his company can do anything, and the IRS promises never to look at their books again. Meanwhile, Trump's revenge campaign rolls on in the last week, he ended the political careers of Senator Bill Cassidy in Louisiana and Thomas Massie in Kentuck. But, but wait, wait, wait. As I wrote in my newsletter yesterday, the narrative seems to have kind of flipped over the last few days as people realize this revenge tour may actually be backfiring as more and more Republican senators are bucking the President. I mean, they are pissed about his endorsement of Ken Paxton. They are livid about this. They've killed the Billion Dollar Ballroom deal. They are not firing the Senate parliamentarian or getting rid of the filibuster. And this is kind of shocking. More Republicans in the House of Represent Representatives are reacting to Trump's attempt to bully them by saying, hell no. I mean, now, this may be a fall spring, okay, I concede that we've been through this before, but it's also an indication that there are limits to bullying. And right now, you have, I'm looking at the list here. You have a critical mass of Republican senators and members of the House who are, you know, ready to maybe say we don't need to do everything that Donald Trump says that we have to do. You know, particularly after, you know, he's thrown John Cornyn under the bus. I mean, imagine you're a Republican senator in the next seven months. You're there and you're sitting next to the political corpses of Thom Tillis, Cassidy, maybe John Cornyn. And then you have people like Lisa Murkowski sitting there and Susan Collins sitting there and Mitch McConnell, who loves revenge, served cold. That's enough votes for Donald Trump to run into some real serious problems when he really doesn't need it. But again, if only these folks had been warned. They're just getting a reminder that while Trump demands absolute loyalty, he has none in return. So I do think that this is one of those things where be careful what you wish for. Meanwhile, economic anxiety is rising. The Iran war quagmire drags on and on and on. And Donald Trump continues to be rather remarkably tone deaf, calling high gas prices peanuts, pushing ahead with his 250 foot tall golden arch without congressional approval. And so we have to ask that Evergreen story, what could possibly go wrong? And joining me on the podcast today to try to make sense of it all is the man who makes sense of it all, the professor of economics, who explains economics to the rest of us, Justin Wolfers. Justin, thanks for coming back on the podcast, man.
- [05:29]
Justin Wolfers
Excited to be here.
- [05:31]
Charlie Sykes
Before we get into this, just tell me about, you know, last time we were on, you said you had something to announce And I'm looking over your shoulder. Platypus economics, you have joined. You're out here, you know, on this little pirate skiff, right, of independent media. Just tell me what you're doing because I have been loving your YouTube videos and loving the new substack. It just feels like, you know, the neighborhood's gotten a little smarter. So welcome.
- [06:00]
Justin Wolfers
Thanks, Charlie, mate, you've been an inspiration. One of the things I've learned by coming on your show is that there's a real media outside the old media. The old media is frankly dying. I want to do two things. I want to skate to where the puck's going and I want to meet people where they are. And you and your audience have taught me, here's where they are. Look, mate, the underlying story is I want to teach the world economics. That's all I want to do. This is the second act of my career. And first act was modestly serious professor, still a professor. I'm just not at all modestly serious. And when I think about the world right now, we all have different diagnoses of what's going on. But economic literacy, I think, is a tremendous thing to have. I think it's doubly important at the current moment and I think an attachment to the truth. So, you know, as a research economist, my job was to try and come up with more rigorous economics. And when I look at the current moment, the problem is not a shortage of rigorous economics. The problem is a lack of trust and understanding of the rigor that's out there. So rather than spend the second half of my career trying to make something that's extremely rigorous, more rigorous, I want to try and make something that's been a difficult sale, an even tastier sale. Move a bit of that rigor, move a bit of that insight into the public debate. Make you whoever I'm looking at, not you, Charlie, your audience, a little smarter. And, you know, platypus economics, it's a smart ass name. I'm a smart ass bloke, but the mission's totally more smartass.
- [07:42]
Charlie Sykes
Well, we need more smart ass, but we also need more literacy. So you mentioned that economic literacy is valuable to have. I mean, we are also seeing the ongoing price we pay for economic illiteracy. So I want to get to the wonky stuff. Bond prices, oil prices, the stock market. I want to get to all of that in a moment. But since you are the people's economist, I mean, one of the jobs of economists is to explain things like billionaires and how their Minds work. So, Justin, could you explain to me the mind of Jeff Bezos right now? He gave an interview to CNBC the other day where. And I actually was telling this to somebody yesterday, they didn't believe me. Where he's actually describing Donald Trump 2.0 as more disciplined and more focused. He used the word discipline to describe Donald Trump. And everybody's looking around going, has he been paying anything attention to what's happening over the last week? Has he ever read any truth social posts? So help me understand why a billionaire, and I apologize for the language and we've done this before. A billionaire who has fuck you money just cannot say fuck you ever. You know, what, what's going on? What issues is he working through?
- [09:00]
Justin Wolfers
Yeah, I look, I don't know inside the man's mind. And he built an amazing business and actually many of us, I live in the Midwest and 20 years ago wouldn't have had anywhere near the assortment of goods that are available to me from all over the world. He's actually improved my life. I just want to acknowledge that mixed bag, you know, that's fine. I like to see the sunny side and everything. There's a couple of things going. So one, if you've ever spent time with rich people, and I have a funny feeling that you run in fancy enough circles that you. You've rubbed elbows a couple of times, used to. And the thing is, if you're that rich, you walk in a room, the room stops, everyone stares at you, and then they tell you how handsome you are, how smart you are, you can fart up any idea that you want and someone will call it brilliant. And as a result, you become quite detached from reality. I think there's actually sort of this is not economics. This is closer to sociology or even psychology, which is if there's no one calling you a fool, you're the fool. And I think it's actually uniquely disqualifying for higher office. I am so glad that I have two teenage kids who continually tell me what nimbesil aim. I think it's profoundly grounding. So first thing is you lose that grounding. The second thing is we each get to tell our own stories. The truth from an economic perspective is there's probably a lot of people who are trying to start.com businesses around about the same time. And Bezos got a little lucky and was a little smart. And the reality of his story, the reality of mine and the reality of yours is it's a little bit of little bit of luck, little bit of brains, a Little bit of tenacity in some measure. If you can keep the humility together, you'll understand. A lot of it is luck. A fair bit's tenacity and a little bit gift, but you get to tell your own story. And the thing is, there is an economic twin of Bezos out there. Someone who had the same idea at the same time and the luck went the other way. So you and I get to understand that reality and we tell the stories involving a lot of luck. Bezos only sees Bezos rise and so he's gonna tell his story as one of brilliance. And so once again, you have an elevated self esteem with no one telling you're an idiot.
- [11:20]
Charlie Sykes
But not elevated enough not to feel the need to suck up to the orange God King. See, this is the part that I get the huge ego. But at a certain point isn't part of that ego is don't want to appear to be sucking up and groveling. Right?
- [11:37]
Justin Wolfers
I mean, so why did he say what he said? I've been struck by how many people have thought he was being sincere. Okay, maybe he was. But there's one lesson in American business right now, which is if you can be quoted on the president, make sure the quote is positive. If you are a business school professor right now, you will be. You would not say it is in your corporate best interest to tell the truth. You would say it is in your corporate best interest to flatter. And so if you meet someone who's highly erratic, it's in your corporate best interest to call them disciplined. It's completely obvious, right? That has not always been true in American history. Right. It used to be that we had presidents who understood people didn't like them, that they would make rules of the game so that everyone can go out and compete fairly. What we have instead now is someone who sends contracts in particular ways, punishes perceived enemies, and so on. So that form of crony capitalism, one breaks markets. It breaks markets because the companies that succeed are the companies that flatter rather than build a better mousetrap. It also breaks politics because there was some reason we looked up to captains of industry in the past, which is they had a lot of information, they knew what was going on in the economy. And if they told the truth, that would be an opinion worth putting weight on. But political discourse is broken because the only idiots dumb enough to tell the truth are you and me.
- [13:09]
Charlie Sykes
Yeah, we don't move markets, apparently.
- [13:12]
Justin Wolfers
I mean, you do. You move my market.
- [13:15]
Charlie Sykes
So this leads to my next question, because I think a lot of people when they think of economics, they think of the numbers and they think of all of the things like cost benefit analysis. But there is also.
- [13:29]
Justin Wolfers
Stop a chat Rice. It's exciting.
- [13:33]
Charlie Sykes
Oh, gosh. So, yeah, but there's also an ethical and moral component to all of. To economics and particularly to free market economics. And so when you get to a point where the market is corrupted, when there is no longer a rule of law, when it is kind of, when we're describing right now here is a kind of crony capitalism, this has an effect, right? I mean, markets work when they are affecting and they're actually free. But corruption is a tax on that market. Or I don't know how you want to put it, a weight on the market. It's not irrelevant if Americans begin to believe that the market is completely rigged against them. And in fact the corrupt actors are running the show. So just talk to me about that because I think for decades and centuries there was that understanding that the economy didn't work without a certain ethical underlying. And then of course, there arose that philosophy that the only thing that mattered was making profit, which made sense for a while until we had the bad actors come along. So just talk to me about all of that because I do wonder about this world of corruption and the world of the economy. They're not separate from one another. How do they intersect?
- [14:55]
Justin Wolfers
Right. Look, all human endeavor, including economics, starts with morals and ethics. You can never rule that out. There's no machine that operates independently that has no ethical impact in the world. So I appreciate you starting now. And anyone who's ever been taught badly might have been taught that that's not the case. But we're in a smarter place here. I think there's two points I want to make here. When economists, and particularly free market economists, but honestly, even center left economists like me say markets are a really useful mechanism. We are talking about the fact that if customers are naturally going to go to the best product, that creates a very strong incentive to build the best product. That's the underlying genius of markets. I don't know who's going to invent the best cellular telephone, but I do know if they go there, I'm going to give them my money. Then that means there's inventors all across the country, all across the world trying to think about the best smartphone. And we get ongoing innovation and that is the genius of capitalism. And don't for a moment forget there's a genius to it. Remember the contrast between South Korea and North Korea. South Korea did not adopt Markets, South Korea, people are hungry, they're poor, they're literally shorter than people. Sorry, North Korea, they're hungry, they're poor, they're literally shorter than people in South Korea because of malnutrition. So this is without having to even use the libertarian language of freedom. This is just the failure to use markets leads to incredible costs. It leads to rates of child mortality and pain and misery. South Korea is rich, has much healthier people, less hungry people, happier people, more fulfilled people. And that's before, again, we talk about freer people. So there's a genius to markets. And any lefty who tells you otherwise is wrong. There's a problem with markets is markets provide incentives. If you corrupt the incentives, you corrupt the market. If we move to a world in which, remember the old political divide would have been 20 years ago, Charlie would have been on this show saying, justin, you lefties are all about government intervention. Us center right folks are all about allowing market forces to work. The reason, Charlie, that's true is on the never Trump side, is this is the most interventionist White House of our lifetimes. And it's not even close. Intervening in markets in ways in which left wing presidents would never dare and never dream of, but more importantly, intervening in a way that fundamentally distorts them. When intel walks into the White House and walk out an hour later and accidentally left 10% of the company down the back of the White House couch, that is distorting. When the president takes the greatest AI company in the world, which right now is anthropic, and it doesn't want to do business with him the way he wants it to do business and refuses to engage with it and puts a thumb on the scale of every other AI company instead. That's letting the greatest company fall behind rather than push ahead. It's distorting the signals and the incentives. When deals are done at Mar a Lago, rather than better products being discovered in the market, that distorts the signal. There's a general problem, and this is one that those of us in the center left worry a lot about. Competition is the market. Competition, lower prices and better products is the force that causes markets to succeed. The problem, of course, is businesses become profitable the more they can lessen competition. Businesses are actually always trying to undermine competition. One of the ways they do that is they strike a deal with the White House. I'll praise you and you'll send government contracts my way. And so all of that is markets don't work if you distort the signals. And that's what we're doing. That's point one. I want to get to point two. Markets need public support. So one of the funny things about being a public intellectual, I feel weird saying that is sometimes you get invited into rooms full of rich people. Rich people have figured out if you piss everyone off, capitalism and markets are not long for this world. And so if everyone feels the current system's not working, then the current system is not sustainable. And in a deep sense, you don't need to doubt me on this theory, which is that's sort of what happened with the rise of Trump. There was a feeling that our current system, whatever it is, wasn't delivering, particularly for working class people, and they wanted to stick their middle finger up at Washington, and Trump was the nearest middle finger. Now, Trump has failed to deliver the sense in polls in which people believe that he's looking out for them, that he has their interests at heart, that he's good for. The economy has never been lower. And that again, sets in motion political tides that will help some people, but are certainly the opposite of conservative.
- [20:18]
Charlie Sykes
You know, as a member, former member of the center right. Well, I still am a member of the center right. You know, what's really, truly shocking about this is it feels like five minutes ago that every conservative free market advocate would argue that what we don't want is government picking the winners and losers, that government putting its thumb on the scale would distort the markets, would in fact make it less likely that we would become prosperous, and that the best companies would rise to the top. It's one of the reasons why conservatives always had a suspicion of central planning, of industrial planning, up until the moment that Donald Trump comes into office and has this quasi socialist, syndicalist, whatever you call it, state capitalist system, where he sits back there and like, you win, you don't, I will pump you up. I will, you know, if you bribe me. All of those things which are all about the concentration of power in government rather than in the market. So talk about an abandonment of anything remotely like conservative economics. The other point that you made, which is absolutely crucial, and I did realize this even back in the before times, and I can still kind of remember many of the conversations when I realized that being pro pre market was not the same thing as being pro business, because businesses generally do not favor the free market. You spend time with businesses and you understand that, no, they like the idea of being able to rig the market. They like the idea of being able to go in and be a moocher. You Know, they love the return on investment of, you know, flying a Gulfstream jet to Washington, sucking up to the right people and getting something for it. So corporate welfare became a way of life. I actually wrote a book that many of our listeners would probably hate right now. It's called the Nation of Moochers. And people thought it was this right wing attack on the welfare state. Half the book is about corporate welfare and the way in which these markets were being distorted by these big fat cat companies that went in and got special deals for themselves, which contributed to the collapse back in 2008 and angered people when many of them were bailed out. And yet we are living in this world right now. So I don't know whether. But continuing this. Yeah, please go ahead.
- [22:36]
Justin Wolfers
Can I pose a point? Because I love it. I should teach this in my introductory economics class. And when I do it, some of the students go, wow. Because they. The language you used is exactly right. Pro market versus pro business. And so part of it's our political rhetoric. Like some people are like, oh, businesses suck, I want to tax them. I hate corporations. And then other people are like, corporations create jobs. Who the hell are you? And what's getting lost there is what delivers for us is market competition, which means you're pro market, or alternatively phrased pro competition. And that allows businesses the freedom to compete and the best to rise and the worst to fall. And by the way, we should be comfortable with the worst of them falling. That creates the space for the best of the creative destruction. So absolutely, yeah. I've never had this argument with someone who at the end of it said, oh, you know what, you're right, I'm pro business rather than pro market. They're like, oh, I thought I was pro business, but actually I'm pro market. I want to point out what this means, though. If you're pro market, you're pro competition. You care as much about big existing businesses as the unborn and as small businesses. Which means if you're genuinely pro market, what you want to do is set the rules and let them compete. Which means if a CEO calls you, you say, why are you calling? I want you to go and compete. You literally don't take their call. You don't know any CEO's name. That's what being pro market is about. Pro business means, oh, I call these guys. We share power between us. That might feel like it's good for the economy because everyone who's in the room is making the pie grow. But what you're forgetting about is the People who aren't in the room. And the people who aren't in the room are the small businesses who want to be the next generation of big businesses or the unborn businesses. Trump has been terror, has been great for big existing businesses. They can call him, which means he's been terrible for the unborn. I'm using that language lightly, provocatively, but I'm totally serious about it. It is very hard to start a company right now to compete against Apple
- [24:49]
Charlie Sykes
because, Tim, Apple can grow and build walls around themselves. This is why this is another people on the center right used to understand is that businesses are not anti. Businesses are not anti government regulation as long as they can capture those regulations, as long as they can create rules and situations that make it impossible for the little guy to compete against them. So what you have is you have Apple and Jeff Bezos who kind of like the idea of the walls and the moats that they can create from this cronyism. And this again, going back to the Bezos thing, is that, yes, there's a clear, obvious self interest of these guys sucking up, that they're figuring out that I can become even richer, I can become a billionaire or a trillionaire. This is good for me and maybe for my shareholders at the expense of these market principles that you're talking about. So Jeff Bezos could say, what is in the interest of the country? What is in the interest of the culture? What is in the interest of consumers? What is in the interest of the overall marketplace? And basically he said, fuck it at what's in my interest? He and Elon Musk and various others sit around Tim Cook and they're going to do great, right? So it is rational for their self interest. But there used to be kind of the recognition that rational self interest would also be that you don't want to inshitify the rest of the country in the marketplace. Right? Is that this was ultimately not. But that's kind of abstract, isn't it? That's not the way people in the real world make decisions.
- [26:27]
Justin Wolfers
I want to go one further with you. I'm not sure about the following idea and it's going to get me in a lot of trouble. So I have a feeling you want to hear it. Should we have billionaires? I mean, that is a question. So the standard view is if you have strong incentives to create great companies like Amazon, then we get the next Jeff Bezos, the next Amazon, more delivery, more stuff, we grow the pie, people's lives are better. The problem with that view, when it gets to Billionaires is Once you've got $100 million, you can have a house in New York, a house in the Hamptons, a house in London, you can walk into any restaurant, buy any bottle of wine and order any food off the menu. You can have a butler and assistant, and the butler can have an assistant. You can't run out of money. That's at roughly $100 million. I made that number up. It doesn't matter what it is.
- [27:21]
Charlie Sykes
I could live on that maybe.
- [27:23]
Justin Wolfers
Right? So more money than that doesn't buy you more stuff to have a better, richer, fuller life. What does it buy you? I can only think of one thing you can buy. Power. And so then the question is, are we comfortable with people buying power? Because if that's the only thing you can buy once your income gets above 100 million, if we're uncomfortable with the idea that some people should have more power than others, and I am, then maybe we don't have any need for any person ever to earn more than 100 million. I'm being a little provocative, but I mean it. Why allow billionaires? Why not just create 100% tax rate of the billionaire?
- [28:11]
Charlie Sykes
Well, I am shocked at your lack of empathy because can you imagine, can you imagine the soul crushing experience of being worth $1 billion if the guy next to you has $3 billion? And the dark night of the soul that that person is going through if the person down the road has $30 billion? Because can you ever have enough? And if you're worth $30 billion and you walk into the room with Elon Musk and you think, shit, what terrible thing has happened in my life that I am worth 1% of what he is worth? And I just made that number up. Because that's what it gets to at a certain point. It becomes this endless vortex of envy. And what about ism? But you've raised the question of, of power because the concentration it was, I mean, I mean, you know, a few decades ago we've had debates about, you know, inequality forever, right? The, you know, the income gap, you know, is getting worse and worse. But now we are in a position where America has a ruling class. And I was actually thinking about that this morning. This was one of the things that Americans, we used to say about ourselves. You know, unlike the Brits, unlike the Brits, we don't have a class structure really. We have class mobility and we do have a lot of class mobility, but we definitely have an oligarch, ruling class. And I've never before in my lifetime said that. And you cannot understand American politics or power without understanding that fact. Right? Traffic may be locked, but savings isn't. Unlock the savings at Boost Mobile with unlimited wireless for just $25 a month forever. No contact contracts, no hikes, and you keep your phone. Unlock the savings@boostmobile.com Unlock $25 forever requires customers to remain active on Boost unlimited wireless plan. For full offer details, visit boostmobile.com while
- [30:05]
Justin Wolfers
every other channel is fighting for your customers attention, podcasts are where they've already given it. No one accidentally listens to a podcast for 45 minutes. They choose to be here. They trust the voice in their ears. And when that voice talks about your brand, it doesn't sound like advertising. It sounds like a recommendation from a friend. Acast gives you that trust at scale, digital precision. Host read authenticity and performance data that proves it worked. Don't fight for attention. Buy it with Acast. Learn more by visiting acast.com advertise. Yeah, so let's think about what you can buy with that much money. So let's go to mass. Okay, Mass put, I think it was roughly 200, 250 million into the Trump campaign. Does that sound right?
- [30:53]
Charlie Sykes
Yes, it does.
- [30:54]
Justin Wolfers
Okay, so. And he won. And in fact then was given the keys to the US government, our government. And in the business of trying to save us a trillion dollars, probably cost us money, destroyed. USAID created the needless deaths of tens of thousands of people around the world, did damage in ways that we're still yet to count it all. What's stunning, actually, is how cheap that is. You know, the bloke's worth, I just looked it up, like 800 billion. He didn't even spend 1 800th of his wealth. And he bought the highest office in the world.
- [31:36]
Charlie Sykes
Okay, let's do that math. Let's do that math again. Okay, so he's worth, worth $800 billion. You and I have had this conversation that people don't make distinction between million billions and trillions. 800 billion. So 250 million, which is more money than most of us can imagine. He sends 250 million, which is a
- [31:56]
Justin Wolfers
quarter of a billion, and he has about 800 billion, right? So that means he used 1 3,000th of his wealth, which I hate doing maths like this, 0.03% of his wealth, right? He's got 99.97% left after he bought the presidency. It actually raises this really interesting question. One of the things I found very surprising over the whole last many years is Trump claimed, and I think he probably was a billionaire when he ran in 2016, and then he asked working class mums and dads to send in $20 donations to fund his campaign. This week alone, Trump got a $1.8 billion slush fund. He's got the right now to never pay taxes again, ever. He started crypto businesses worth literally billions of dollars. And in some sense, the question is, why didn't he buy the presidency? He actually begged, borrowed, and stole his way there. But he actually probably, if he was going to rape the US treasury the way he is, he probably just should have ponied up 500 million and run the most expensive campaign ever and made it not even close. I mean, the biggest business decision, biggest failure of Donald Trump's is to not have spent more to get here quicker, given how he's evacuating money.
- [33:23]
Charlie Sykes
Well, what is interesting is why he didn't do some of this stuff earlier is because I think that he has just discovered in Trump 2.0 what he can get away with. I think that he figured out that even he did not fully realize how vulnerable we were, how weak the system was. And there's a part of him that is like this little kid who's kind of amazed that, oh, my God, I can do this. What if I did this? Would I be able to get away? Oh, my God, I got away with that. And now, and this week felt like it was like, okay, you know, you only live once. Let's see if I can give myself $1.8 billion of taxpayer money to give out to my cronies, including the people who attacked the cops on January 6, who are now saying, yes, we want millions of dollars for attacking the Capitol. But then I'm not even sure that it feels like it pales to, what if I can, like, build on the immunity that John Roberts gave me by making the IRS never look at me, my family, or my businesses ever again. I can commit any tax fraud for the rest of my life, and I will never be held accountable for it. And he's gotta be like, part of him saying, you think I'm gonna get away with that? Because that would be sweet. I mean, really sweet. I'm gonna think about it when I'm filling out my taxes. Just so you know,
- [34:50]
Justin Wolfers
I had that thought, and it got me nowhere healthy. There's an interesting question. I want to turn it around. So many of us, like, it's unbelievable. It's crazy. He was able to just write the $1.8 billion slush fund, and lots of people like, how did it get to be so big? And the answer to that question is, what prevented it getting bigger? Which is a really interesting thing. So there must still be some constraints within our political system because he stopped at 1.8. He didn't actually go to 18 billion or 180 billion. And I think the question is why? I think it's a really important question because whatever it was, we want to keep it there. And it also helps inform us about what the next step is. Maybe this was just the first step, and now he's gone to 1.8. Next time he goes to 18.
- [35:41]
Charlie Sykes
Well, actually, you know, it's not 1.8. You know why he came up with that number 1,776,000,000 because somebody said we can make it 1776. And frankly, that may be the answer. Now, why he didn't make it $17 billion, I don't know.
- [36:02]
Justin Wolfers
But yeah, right, that's my question. I really want to know what that constraint is, because I think it's critically important to our future.
- [36:09]
Charlie Sykes
It's not his conscience.
- [36:11]
Justin Wolfers
Because at 1.8 billion, it was still enough to get front page, above the fold headlines at the New York Times. So if you multiplied by 10, the headlines can't get any bigger than they were. The outrage my friend Charlie Sykes feels over this is already so large. It's not gonna be 10 times larger if you make the number 10 times larger or a hundred times larger.
- [36:30]
Charlie Sykes
Yeah, yeah.
- [36:31]
Justin Wolfers
So what stopped him?
- [36:35]
Charlie Sykes
We don't know.
- [36:36]
Justin Wolfers
Republicans.
- [36:38]
Charlie Sykes
Well, see, now this is gonna be the part of the question that we can't answ is, you know, was this finally that mythical line that, you know, that we've been talking about for the last 10 years? You know, at what point will Republicans push back against him? And I was almost reluctant to do my intro today where I'm, you know, talking about the senators that were pushing back on him and the members of Congress because I feel like we've been Lucy with the football for so long. On the other hand, there is that that moment where you have an election and try to imagine being a senator or a congressman and going back and explaining to your constituen why when they're economically suffering and have economic anxiety, why you support the slush fund, why you support the fact that Donald Trump should be exempt from any scrutiny ever again in the future, why you would want to spend a billion dollars on the ballroom, why the President's priority is there. You know, these are moments where even in this Republican Party, there might be some who just can't stomach it, but I feel naive even saying this. Okay, so can we get the other mysteries of economics of the week?
- [37:48]
Justin Wolfers
Let's do
- [37:51]
Charlie Sykes
appears that the oil markets and oil prices, the people who set the oil prices have a different view of the world right now than the stock market. Stock market continues to be happy days are here again. The oil markets, the prices continue to, well, they look like they're rising. There are certainly and as you wrote earlier this week, week, it would certainly suggest that there is the belief that oil prices are going to will stay elevated for years. So can you explain this little dissonance between. Well, there's this dissonance between three things. The stock market, the oil market and consumer confidence. They're not tracking, are they?
- [38:34]
Justin Wolfers
Yeah. So much to say here. And it is something I've been writing about a lot lately. Let me, I'm going to bore your audience or make them smarter or both, but a serious question deserves a serious answer. The stock market is not high because of what's going on in Iran. That's the conclusion. Let me work backwards. The stock market reflects a lot of things. It reflects what's going on in Iran, what's going on with AI what's going on with a whole bunch of other stuff. And so if you just say the stock market today is higher than it was in the past, this is what the, this is standard right wing talking point now. And so you say, therefore the President must be doing everything right. Well, no, not if it's coming from say, a bunch of AI stuff that's unrelated to him. So then the question is how do we figure out what parts of the stock market movements are in response to, say, Iran? It turns out it's a very easy way of doing this, which is you look at a very, very narrow time period in which the only thing that happens in that narrow time period is the President escalates in Iran. And if it's a very narrow time period because it's such a short period, there couldn't have been much news about AI or the rest of the economy and so on. And when you do that, every time you look at a narrow time period where the President has escalated in Iran, stocks have fallen and every time he's de escalated, stocks have risen. So what you learn from that is the market's judgment is our adventure in Iran makes large American companies less profitable. So then we can back out from that and we can say, okay, the market as a whole is up, but it's not because of Iran. It must be because of the Other things. And that makes sense. There are other things going on in the world beyond Iran. In fact, we can do a calculation one step deeper, and this is something I did in a recent newsletter and video. We can look at days in which the oil price rises and see what happens to the stock market. Those are basically days in which there's been a lot of escalation of tension in the Middle East. And on those days, oil prices rise, stocks fall. On days which the opposite happens, the opposite happens. And what we learn from that is, roughly speaking, that a 10% rise in oil prices causes events in the Middle east escalation generally. That would cause oil prices to rise by 10%, cause US stocks to fall by about 0.9%. Now we know that as a whole, oil prices are about 60% higher than they were before the war. So now I'm going to multiply that 60% by my 0.9. I told you I was going to bore people. And I can infer from that that the stock market today is about 5% lower than it would otherwise have been if the Middle east had stayed calm. And I can go a step further than that. So now I've said not just the stock market doesn't believe in Iran. I've now said the stock market thinks it's worth 5% less. As a result of our adventures so far, the US stock market's worth about 60. The S&P 500 is worth about 60 trillion. Five percent of 60 trillion is $3 trillion. So now that says Trump's adventure in Iran has led the stock market to behave as if the future profitability of large American companies is $3 trillion lower than it would otherwise have been. The other thing I could do is I could just do the standard economist thing of saying, well, 3 trillion, is that a lot of money? There's roughly 100 million households in the United States. 3 trillion divided by 100 million. I know you already got the motors whirring over there, Charlie. It's $10,000 per family. So the President, according to the stock market, the President's adventure in Iran has been tremendously expensive to the average American. The stock market as a whole might be up because there are other reasons for optimism. Look at the AIA boom we're in the middle of. It's not that hard to understand that there are other things going on there. Now, let's bring this back to. You asked me to connect the stock market, the oil market, and consumer sentiment. The final part of that then, is how do we connect this to consumer Sentiment. We people understand war is bad for lots of things. It's bad for troops, it's bad for people abroad. It hurts the conscience, it hurts the world, and it hurts the economy. And so it's not just that Trump has cost the typical American family tens of thousands of dollars. We also understand this was not one of those macroeconomic events that just happens out there. This is a war of choice from a man who promised no wars of choice. Do you think people are pissed about that? I do. I think there's every reason to think that people respond even more negatively to self inflicted wounds. And this is profoundly self inflicted. How do I. Do you want to grade the exam, mate?
- [43:31]
Charlie Sykes
Well, no. And of course, they're experiencing it every single time they go to the grocery store. So it is no longer an abstract question for them. And this, of course, is why Trump feels absolutely stuck. You can sort of sense that Benjamin Netanyahu is like, hey, listen, I need this war to keep in office. Let's keep bombing. And Trump is listening to, who knows, the various autocrats in the Middle East. He wants desperately to get out of this. My guess is that he's gonna try to just change the subject to Cuba. I don't know that that's going to work because when people feel bad, I mean, a lot of, well, you know, a lot of just economic sense is like, how do you feel about your future? I mean, do you feel optimistic or not? You make that decision to spend money. Am I going to spend, you know, $5,000 on a vacation? Because, you know, I think things are going pretty well. Or are you thinking, you know what? I'm really getting kind of nervous. I'm getting nervous about the cost of living. I'm getting nervous about my job. I'm not going to spend that money. So these things, like sentiment are not irrelevant. Right? I mean, these things, you know, consumer spending is a lot of it is just driven by your mood, your sense of whether you're optimistic or pessimistic or nervous. Right.
- [44:52]
Justin Wolfers
Sorry. I just. Sometimes the feelings well up a little bit, mate. The other part of this is we were promised four to five weeks. We're at more than double that. And I have a vague memory, correct me if I'm wrong, I have a vague memory early on, coming on your show and saying, we always underestimate the cost of wars. We always underestimate how long we'll be there.
- [45:17]
Charlie Sykes
Always. You had a great piece in the New York Times on that. They're still lying about the cost. I mean, when they're saying it cost 25 to 29 billion dollars. Has anybody seen that?
- [45:26]
Justin Wolfers
No, it's trillions of dollars. And so I hate doing the victory lap of saying, hey, I was right. But I do have to tell you, Charlie, I was right. But the thing that I find distressing about the current moment is, as far as I can tell, there's no urgency to solve the problem. Like, what did he do last week? I mean, I know he declared war on various parts of the Republican Party, but I'm not sure what we did to solve the problem in Iran. And the thing that puzzles me is if you look at November 2026, oil futures, they're up. They're suggesting Republicans are going to the midterms with high energy prices that they caused. I don't understand why Republican congressmen and women and Republican senators aren't screaming at the White House. Could you at least take a meeting with these guys, figure out your plan? Or if you got a bomb and bomb, like, just do something. Look, if.
- [46:26]
Charlie Sykes
You know why? Because they're all just too scared. This is the downside of Trump's revenge, is he's basically saying to them, don't allow any daylight between you and me, because if you do, I will destroy you. But of course, all of these Republican politicians, this is what they need to survive, is a little bit of daylight or the ability to push back on this. And the vast majority of them are too terrified and have been too terrified
- [46:53]
Justin Wolfers
for sometimes each of us spends some time with older people, like Thanksgiving. And after a good meal, sometimes I'll walk past one of them and they've fallen asleep on the couch in front of the tv. And I'm not calling out any of my in laws in particular, but that happens at a certain age. I have no evidence, and I'm not being funny when I say this, I have no evidence the President hasn't fallen asleep in front of the Iran tv.
- [47:20]
Charlie Sykes
It does feel like that.
- [47:22]
Justin Wolfers
What would be different if he had fallen asleep?
- [47:29]
Charlie Sykes
I have that image now in my head. Okay, so in the few minutes that we have left, can we just change the subject completely?
- [47:35]
Justin Wolfers
Let's do it, brother.
- [47:36]
Charlie Sykes
Because. And there are so many things that I want to talk about or that I want to write about that every day. I'll sit down and then suddenly there's something that goes on in the world. I know I have to address this, but one of the things that I've been very interested in for a very long time, written a bunch of books about education, the impact of smartphones on Education, the impact on smartphones of children. How hard it must be to be a kid these days when you have that constant screen in the social media. I mean, it was hard enough growing up, you know, if somebody called you a spaz on the playground, but if you, you know, every day you open up some, you know, TikTok video and somebody is talking about you, it's gotta be a nightmare. Anyway, you had a very, very interesting piece about how some schools are experimenting with these new. Well, talk to me about it. What's the name of these little wallets they're called?
- [48:28]
Justin Wolfers
I mean, I'm just going to check my messages now, Charlie. Give me a moment and I got it. Okay.
- [48:33]
Charlie Sykes
Sorry, I just have to. Have to check the latest on Blue Sky. Right, but go ahead. What are they called?
- [48:39]
Justin Wolfers
Yes, so, right. They're called Yonder Pouches.
- [48:42]
Charlie Sykes
Yonder.
- [48:44]
Justin Wolfers
Yep. So look, schools understand the distraction. And by the way, I teach at a university. I understand the distraction. Students in my classroom are allowed to use computers and iPads, but they're not allowed to use funds. It's not clear I should even let them use computers, but I didn't want to fight that fight anymore. The best research says, put away your device. I think this is an issue we're all battling with, like, what role should device play in our lives? What role should social media play in our lives? It's not just about kids, but I'll give it a little plug here, Charlie. One of the things I like to do in platypus economics is I'm an economics professor. I talk to leading researchers across a wide range of economics issues all day, every day. Cause that is my nerd life. And I found this piece of research where what they did is they studied schools that were adopting these pouches. So this is very common, by the way. Schools now require you go to school and the first thing you have to do is lock your phone into a pouch that's magnetically locked and you can't get back to your phone. And so they were able to compare schools that adopted that policy with schools that didn't adopt that policy, similar schools. And then they. It's amazing data. They were able to figure out, are students actually using their devices despite the rules? And sometimes they are. But they asked the students about their feelings of happiness and anxiety and a whole bunch of feelings. They asked the teachers about what the classroom was like. We can track their grades, all sorts of things. It's a really interesting study. Not just because, wow, what a great thing to do, but actually social Science never quite follows our standard kitchen table or political simple lines. So for instance, the first year after they adopted this new system was a bit of a wreck. Students are a wreck, students are anxious, students are mad. And like, I get it, changing habits is really hard. And that's what was going on that
- [50:41]
Charlie Sykes
first year they didn't like.
- [50:42]
Justin Wolfers
But actually after that, student wellbeing, and I mean emotional wellbeing, rose by a reasonable amount and enough that this seems like it's a pretty good policy. And you might think to yourself, well, if my 13 year old, 16 year old would be happier like this, maybe I would be too.
- [51:00]
Charlie Sykes
This feels like a metaphor for a lot of parenting, that you might have some short term disappointment and pain, but much longer term happiness and satisfaction. I mean, this is the kind of, this is valuable social science because basically you're saying that, that if you take that deep breath and are willing to put up with a lot of bitching and moaning and unhappiness for a short period of time, after a while, when people get weaned from their heroin, from the crack cocaine, of having that phone in their hands for the whole time, they actually end up happier, smarter, with better lives. But it's good to know that that's over the horizon, right, because you have to go through some shit, mate.
- [51:41]
Justin Wolfers
So much of parenting feels like the good stuff's over the horizon. But look, that's something I love, which is social science can and does help us live better, richer, fuller lives. This is my generation of parents. There is no, there previously wasn't much research on this because there's not previous generations that have grown up exposed to this technology. And so we're using our bad intuitions and occasionally reading, you know, like Cosmo or Oprah, who we probably shouldn't believe at all. So we've got real social science doing a great job. And so I love to lift that up and help people see how my tribe, social scientists are helping cast light on some of the really big questions. And so you and I, right now, we're gonna spend all our time talking about macroeconomics and politics, but life is more than that. And you know, social scientists are working on all this and it's a great joy and it's exciting and I hope folks find it useful.
- [52:35]
Charlie Sykes
Well, and also I think, you know, issues like this will affect the culture going forward. It is not a distraction or a digression from what we're talking about. There may be these developments. I'll post a link to that piece. Now, where can people find your work again. I mean, if they want to go right now and look at that piece.
- [52:52]
Justin Wolfers
I love this. Look at that. Charlie set me up like that. I'm not as good at this as you are, but I have a substack newsletter called Platypus Economics. I have a YouTube page called Platypus Economics. I have a podcast called Platypus Economics. And basically what I'm doing is I try and think about things and I want to find people where they are. If you're driving somewhere, pop on the podcast. If you're sitting at home, give it a read. And also you'll find me in all the socials because apparently that's what the kids do.
- [53:22]
Charlie Sykes
That's what the kids do these days. Thank you so much, Justin. It's always. It's been fun. And thank you all for listening to this episode of to the Contrary podcast. And you know why we do we do this? Because we have to remind ourselves over and over and over again that we are not the crazy ones. Thank you.
- [53:51]
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Justin Wolfers
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Charlie Sykes
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Justin Wolfers
Here's a show that we recommend.
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Charlie Sykes
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