is the cabinet post and who gets them? and an economy where the government is the major player you need to have a government job fair it is not enough of a private economy and it is done pretty much shot me sectarian basis the best candidate is not always win but to fka occurred becomes head of the foreign ministry you can bet that most of the people that have that jobs will all the kurds and where do we fit? how do we support our families so on a very basic level they want to know that second, who will fix all of

these houses? will anybody talk about that? will at the it discussed? will there be many that we get to if we come back? the government offered $800 but they ran out of money last year and there were ngos document saying how much people got and only 10% of the people that returned the money because they stopped coming back because you need a pot of money to get started again. they have specific issues they are watching for the specific policies before they make a decision because they understand once you go back you cannot get out again. >> host: what are we going

to see as the political jockeying unfold? we talk about the refugees and what they will look for what will the surrounding country is look for and what alliances can we expect? something we saw right before the election was being invited to saudi arabia and trying to strengthen his relationships so what will some of those neighbors what will they be looking for? >> the wall look for something different and they all play a ton of money into the campaign because they all have their candidates this is a region where everybody watches everybody else did you are weak you can expect your neighbors will dabble and i think the neighbors are going to be watching for a coalition that emerges that makes the country more safe and that will tell them where iraq is

headed if there is power-sharing in the region what it means to iraq's sunni neighborhood is that iraq will go alone and not be the iranian proxy and that will be important to saudi arabia, egypt arabia, egypt, jordan, and even the turkey in some ways i think with the iranians who watch for is that the bass this what they consider the sudanese are not too strong because they fought a long war and they want to be sure that never happens again and the balance will be what is interesting and that is what everybody is watching for. >> host: thank you very much deborah amos. . .

we intend to attract a discerning a crowd so probably many have already picked up on the fact that the gentleman on my right is not fannie mae and data as. issue is the person who has publicized as a commentary today. they don't call it the cold and flu season burst any reason and a last bandy is observing the

season with the nasty bugs which incidently shapira may picked up well covering the world economic forum coming yet another case of international economic contagion. thank you. [laughter] but we're delighted to have tim from the kauffman foundation, and share his thoughts about this book here and we're here today to talk about an excellent book with excellent timing about which i mean it's a superb treatment of timely topic and the topic is growth. the number one question in washington right now is what can be done to get our economy to start growing again. normally growth is taken for granted in washington as a normal game in washington, how to divide the pie, not how to make it bigger but with the economy having suffered a deep slump and unemployment and underemployment now at punishing double-digit levels, the urgent issue is how to get people back

to work again. now because this is a cyclical downturn there's talk about temporary counter cyclical policy is, we've had a huge spending splurge last year the so-called stimulus bill and now there's a flurry of activity to enact a so-called jobs bill with more spending and various targeted temporary tax incentives. much of this is wasteful foolishness while some of it at least i do a little good but there is widespread recognition in any event such counter cyclical measures don't really get to the root of the problem. because a given how we got to the current predicament there's concern about deeper structural problems with the american economy. after all our last two economic expansions turned out to to be speculative bubbles or at least degenerated into them. the tech led the boom of the 90 started off real enough before floating into fantasyland but the housing led boom of the past decade looks like it may have

been a good deal of flimflam know all along. so there's a good growing sense that we have to get past quick fixes and ensure the the policy conditions for real and durable growth are in place. and there's no better guide to what those conditions are then this new book from a -- "from poverty to prosperity: intangible assets, hidden liabiilities and the lasting triumph over scarcity", about the new economics 2.0 as the authors call it, a traditional economics was predominantly occupied with the efficient allocation of resources under conditions of scarcity. economics 2.0, on the other hand, is concerned with the conditions for overcoming scarcity by creating new resources and wealth. this is a wonderful survey of the new economics of growth and perhaps its biggest selling point to this reader is its suburban interviews with many of the giants of the new growth economics. the book is especially timely today because the message is so

completely counter to the prevailing way of thinking in washington right now. the good news is the politicians are paying attention to the problem of growth and the bad news is that too many are thinking about it all wrong. the dominant tendency is to conceive of the problem as identifying specific sources of future growth, the so-called industries of the future and then sharing them with subsidies. the flavor of the season when it comes to industries is green, green industries, green jobs are the rage right now and, indeed, here's what president obama said yesterday in a meeting with senate democrats: i continue to believe and i'm not alone of the country that figures out most rapidly new forms of energy and commercialize new ideas is going to lead the 21st century economy. i think this is our growth model. arnold and nick make clear in this book that this talk down a policy approach is a sucker's game. we don't have any idea with the industries of the future are. and certainly we don't have any

idea which specific companies are going to lead those of the future. the task rather is to create conditions in which completely unpredictable innovations can occur and get adopted. and for more about how to get that done i'm going to turn it over to the authors and commentary. i will introduce the authors one at a time, starting with nick schulz will be leading off. editor in chief of american.com which is online publication of the american enterprise institute focusing on business and economics and public affairs. nick formerly was editor of the excellent website d.c. as a daily and was politics editor at fox news.com and that i'm going to turn to the podium to nick schulz. [applause] >> thank you, frank. let me say at the outset i would

like to thank cato institute for hosting this event. i had a good fortune of several years ago a long time ago when i was a television producer of interviewing milton friedman a couple times at his home in san francisco and i remember him saying very clearly and explicitly during the course of one of our interviews that freedom is my highest value. if freedom is -- i don't know is my highest value but certainly up there in the top tier. at the cato institute, they've done more to defend freedom in this town where it needs defending than just about anybody else and we're grateful for your work. aid is needed now as much as ever. it's an honor to be here with break because i'm going to do it my publisher no favors by breaking the first rule of promoting a book which is

immediately talking about someone's book but frank has -- there are a lot of young people who not familiar, frank has written a book that is in my view one of the 25 or so best books of the last quarter-century, a book called against the dead hand and if you never read it, please, go get it. it's had a profound influence on me and how i look at the world until politics and economics so it's an honor to be with you. frank mentioned in the original discussions could be here but we have tim kaine, a terrific -- at the kaufman foundation and will tell you more about them but one of the things i've found doing the research for this book, a big seemed the book is entrepreneurship and on to burn you're lead grope -- growth and there have been until recently a very little solid economic research that had been done on an entrepreneurship and there are reasons on that but the research that had been done on

lot has been done things to support from the kauffman foundation and whether you realize it or not we are in debt to that two of entrepreneurship and the entrepreneur led growth. thank you to tim and your work at, and so it's great to have you here. i want to talk about three things today. the first is my interest in the subject which is a personal nature which i will talk about in a second. in the second is two my interested in this book and then the third is a big takeaway i am hoping to leave you with today. my interest in this topic of a long run dynamic economic growth actually starts with some of my family history. i come from -- the name schultz as it suggests -- i come from good german stock. german lutheran immigrants who came to the united states in the

19th century and there were cabinetmakers, basically carpenters. they were engaged in a profession that isn't the oldest profession, i don't think my ancestors were doing that, but one of the oldest professions in recorded history. the shuttle -- they settled in chicago and cabinetmakers, they entered in the 19th century than burgeoning piano making business, the m. schulz company piano making company of chicago. they were entrepreneurs. i will go into the details of the history of the piano industry but is actually pretty fascinating industrial history and has some success with that. they competed vigorously with companies like stein way of new york and they ultimately lost out to stein way and some others. what they did is they adapted to the fact that they didn't compete as well and entered a

niche market, adopting new technologies and they entered the player piano market so you probably see in the old pianos of the rules on the scrolls. they were very successful in doing that and harness new technologies, adapted to competitive pressure, they change, they tried an experiment with new things and had success in this market. there were successful with that up to a point and that point was competition from new forms of entertainment that came, that americans and others could access in the middle part of the 20th century so home forms of musical entertainment, that sort of pushed the player piano into an earlier era. so what were they to do with this? and they adopted it again under this competitive pressure seeing that this market was disappearing and they entered a

new business line of business or they created the auto typist product. this was based on existing technology of the player piano and basically what it was was combination of a typewriter and xerox machine. in that should give you if you are an office manager and say you ran a law firm or you had to produce a lot of paper you could type a letter and then have this imprinting in the same way a piano scroll have this and then you could publish over and over again that same letter to sent to clients so they answered -- entered in entirely new market and had enormous success with this for a while. until the second half of the 20th century, new forms of technology and innovation started to put pressure on the auto typist. obviously we have electric typewriters, actual xerox machines, the personal computer revolution and then the internet

today. the auto typist is now sitting in some industrial history museum summer. but even my father's generation, a couple of my own goals were to the company into the '70s, that's how long the stock around. so that brings me to my own career which has been as frank indicated, i spent time and web publishing. in these are jobs that literally didn't exist 15 years ago and yet i've been gainfully employed working with technology and sector is that simply didn't exist and yet these are the same forces that enabled me to have my carrier today were those that upset and destroyed my earlier ancestors businesses and lines of work. a black and livelihoods. and livelihood's. now, that's a little bit about my family history.

i tell you that because as i look at that when i look at standard economic descriptions, they were unable to capture this dynamic process of change over time and they overlooked the number of different things. you have a standard economic model which takes land, labor and capital as factors of production and then there's discussion about how to allocate scarce resources but to this overlooked so many of factors including things like on japan or ship, competition, entry of firms, innovation and technical change, the knowledge base that grows over time that macy's continuing technical change possible and also the institutional mix of the laws and norms and conventions that may dynamic economic change possible over time. all this has been largely absent from the sustained discussion of

economics up until very recently and so as i looked at this family history i said how can i understand this better but as it turns out there's been a lot of work over the last two generations in economics try to answer some of that and help explain the dynamic process over time. arnold will talk more about some of the woods in the book, but that explains my interest. i'd like to turn to who would be interested in this book. as frank said there are a number of interviews with prominent thinkers that will be known to many of the people in this room, folks like roll robert vogel or paul brummer and people like that. but there are also interviews with people that may not be as well known to you or whose work he may not be as familiar with so i encourage you to spend some time with it. but i also think this is a book that should appeal, it's not a

partisan book -- i used to joke probably could have had better book sales of renamed it from poverty to prosperity and how obama is taking us back to party again or something like that but it's explicitly non partisan. is an idea book and should appeal to honest people of any sort of a theological or political stripe and in some ways is designed to be a conversation with liberals. arnold was described himself in an essay a number of years ago the bleeding heart libertarian and i think of myself in a similar m'aam so what we're presenting in the book should i think be appealing to liberals. i know this is an issue of concern to frank to has been trying to engage in the dialogue between libertarians and liberals to see if there's common ground and maybe progressives can be attracted to some of the arguments that libertarian's make about markets and about why we should rely on

markets more than a state actions. in this book might be a little bit of a litmus test for that these this year if honest liberals want to give it a shot i think there's a lot they will find it to the should appeal to them. the number of people we interviewed our political liberals so we will see if the love of a sort of technocratic management can be overcome by the arguments presented in some of these books, we will see. and then just a couple of take away gods. one of the major themes of the book has to do with how we understand markets and how we understand what markets do. this will be a little bit of a gross generalization, but in the main when we have a political discussion about markets we think to bring down to camps.

one is markets work and deliver all these goods and their works of therefore should rely on markets. then there's another camp of what markets do in the context of the recent financial mess in the economic downturn that say markets don't work and that's why we need to have government come in and manage, tweak markets so they work for everybody. well, one of the messages of this book is markets failed but that's why we need markets. what we're advocating is that people take a look at what markets do over time it wishes it and able space for trial and error and experimentation and searching which is the only ways reliably over time to have a long run economic growth of a technological advance, and beneficial wealth creation and social change. but that has to be understood in the context of the fact that markets will fail. entrepreneurs will experiment with things that don't work.

sometimes there will be entrepreneurial enthusiasm to the point of a bubble as we saw with the technology bubble and the late nineties. my sense is there's very little that can be done by technocrats in advance to manage to that lawful chaos in a way that doesn't end up throwing out the baby with the bathwater. again, we're advocating a realistic assessment of markets but one that because it enologist markets, indeed, do fail should appeal to those for whom a as a political posture is they're starting point when they advocate government involvement in the economy. we say that conclusion does in this is very hollow and you have to read the book to understand that. but one final note, the role played by the entrepreneur and economic change overtime and is one and that has at least until

recently been sufficiently appreciated and is still under appreciated in and i mentioned that tim kauffman foundation has done good work on trying to help us understand what entrepreneurs do end how entrepreneurial activity rises and chips and economies over time. the big theme of the book is what entrepreneurs do is overcome resistance to change and that resistance can come in many forms, in the form of the incumbent firms threatened by new entrants were biotechnology who want to use the political process to stop that entrepreneurial change from happening. and that gets me to one of the worries that he highlighted which is that we may have one thing i worry is a distortion of the entrepreneurship that happens when the political class settles on a few select areas that they think our economic or technological winners.

he mentioned green technology and i think that's right arnold and i did a piece recently saying that we may be in the beginning stages of a green bubble that's pumped up by policymakers and the same way we have a housing bubble pump up in part by policymakers. not in total and there were market forces at work here but policy definitely had a role in the housing bubble and may well if we have green technology bubble. but what worries me is the moment that governments can't in this business of picking a winner technology is it makes a genuine entrepreneurs job of overcoming resistance that much harder because you're not only having to overcome in comments industries, a technological lockean, people not wanting to change their routines and what they're doing but you have a powerful interest that's made a bed in a certain direction and will be not inclined to lose that bet. if anything will be inclined to

double down over time and so one challenge is looking, taking very surrealistic look at entrepreneurship, how it works in the economy and what the challenges and threats are which, in the form of government run entrepreneurship or government fled to entrepreneurship. so with that, i will sit down and let are all talk and am looking forward to the q and a. [applause] >> our next speaker is co author arnold kling, independent scholar and a scholar at cato. in the was once upon a time and economist on the staff of the federal reserve system and also a senior economist at freddie mac or he got an eyeful of mischief that later was to explode in all of our faces. he's also an entrepreneur who

started one of the first commercial sites on the web and author of several books including ak kobuk, prices of abundance: rethinking of how we pay for health care. also a strange quirk of publishing, another book besides "from poverty to prosperity: intangible assets, hidden liabiilities and the lasting triumph over scarcity" that came out recently called unchecked and unbalanced about the were in conflict between two trends, the growing dispersion of knowledge and the growing concentration of power and how those two trends don't go together very well. but now he's here to talk about "from poverty to prosperity: intangible assets, hidden liabiilities and the lasting triumph over scarcity". everybody, please welcome arnold kling. >> thanks, i want to congratulate brink on scheduling this event for the february 4th, not february 5th. where another snowstorm is supposed to come in. my understanding is because the snowstorms have dominated the

news recently that president obama is planning a major address on the topic. [laughter] my sources tell me his advisers are telling him not to try to convince people that is due to global warming, but instead they will blame the bush administration's deregulation of the weather. [laughter] this mess that we inherited. in any way, when nick and i were writing this book we went to a number of working titles and one of the working titles was economics 2.0, the thinking the ideas in this book are very different from what's in the standard economics curriculum but there least as important. i emphasize these are not ideas that are original with nick and he. on the contrary they are ideas with some old and packaged, research taken place over the

past 50 years all you can see these ideas before that. i just want to make three differences between economics 2.0 and of mccaul economics 1.0 appear in the first difference is the question that we have. we asked how did countries like ours grow to be so rich and why are some countries still so pour? we spend basically 350 pages preoccupied with those questions and yet if you pick up a standard economics textbook you might not find three and a half pages dedicated to those questions so that's one difference. another difference is and this is in the subtitle, we focus on intangible factors. we focus on the assets assigned of the economy, we focus on ideas, entrepreneurship,

innovation, and on the liability side we focus on things that hold countries back which included predatory government and cultural resistance to change and cultural resistance to learning. so those are all intangible factors as opposed to the traditional tangible sources of wealth, land, labor and capital. the third difference which i will talk about in a few minutes which nick diluted to a little bit is the dinner way of looking at market effectiveness purses market failure. okay, so on the difference how countries became a rich and why countries remain poor, hence the actual title "from poverty to prosperity", comparing the poverty of some countries with the prosperity of others how we emerged out of of what we would now consider poverty 200 years ago to the prosperity that we have today. so the first question is that.

those questions in a way have been in the news a lot recently because of the aftermath of the earthquake in haiti and that really dramatizes how poor a country that is and what that means. people can ask, how does a country remain that pour? we don't have a specific discussion of haiti in the book but we do discuss poor countries in general and based on that i can safely make three remarks about the situation in haiti. first of all, poor countries tend to suffer from the government that is predatory and, of course, you have the regime in haiti and a cultural resistance to learning. those tend to be syndromes in poor countries. ..

>> and the third observation i would make is that we notice a number of countries in which side by side you have one country where the productivity level is very low and in the neighboring country it is very high and in those situations we have observed a faster increase in productivity for the low productivity workers if we move to the high productivity country than if they wait for the institutions of the high productivity country to take root in their country so that would suggest we ought to be relatively lenient in

terms of allowing refugees our immigration from haiti. let me switch gears to talk about the issue of how we think about market effectiveness and market failure this standard economics one point* zero approach is what we call static efficiency and we instead take the approach that douglass north calls adaptive efficiencies so static efficiency takes the state of knowledge given and says how well does the market to act allocating resources efficiently? if it allocates optimistically it is unlikely then it is not. from that perspective it is very unlikely that markets will be efficient because the conditions required are much too stringent when you

take a freshman course you hear about the problem of the externalities' can cause like pollution can mark up allocations but there are other things that are more prevalent there are deprivation gaps where consumers don't necessarily understand what they are buying and those cause problems if there are differentiated products which means you cannot have the perfect competition that is needed for static efficiency and then you have the up-front cost which make it possible to have enough competition to have perfect static efficiency? just last week apple announced a product called the ipad this illustrates all of the information gap how well it works most people who buy it will not knowing exactly how well it

will work or do anything useful for them is clearly a differentiated product not a commodity and a lot of the cost involved were up-front development cost for the research that is why people cannot come up with a similar product quickly so that is a classic example of a modern for the product service for a static efficiency if you are inclined to look it markets with a static efficiency there will be areas for the government to step in and allocate resources more effectively we don't look days you can adapt efficiency we don't say how was the market working today but over time how is the

market improving how the effectiveness in incorporating better cheaper products and services over time? and that is a question of dynamic efficiency. let me illustrate that with what has happened since the world wide web was introduced 15 years ago. in the stock brokerage industry there has been a great deal of destruction with a lot of new word and better services introduced and stock brokerage so that would be an indication of a dynamically effective market and adaptive the effective market real-estate brokerage has hardly changed at all if you ask me 15 years ago i might have been shocked if you told me today we would see real estate agents sitting in house is collecting standard commission that may suggest

the adaptive market failure talk about academic publishing bourse his music publishing. we have very different models now with itunes and my guess is we will see more disruption in the music publishing which suggest there is a lot of adapted the efficiency in the market but the overall market has produced adaptive efficiency. with academic publishing on the other hand, there has been little change which is ironic which the world wide web was founded not to create a platform for facebook but academic to indication buy yet academic journals still look the way they did 15 years ago which indicates the adaptive market fell year. the adaptive market the efficiency means that upstarts can come in and try

new products and services have the inferior efforts we weeded out that as a successful effort the better cheaper product work their way into the market and force incumbents either to adapt or go out of business that is what we mean by adapted the efficiency and that is the criteria for market the effectiveness first is market failure and the concern is that government will tend to side with the incumbents. they are politically sales and upstarts so where as the static efficiency criteria says everywhere you look you see opportunities for government to make things better when we look at the gap -- adopted the efficiency of their rare we look we see government as a threat to make things worse to hold back upstarts.

those again are the three differences to highlight today between one point* zero and 2.go how did we get to be so rich as a country at how do they remain so pour? we focus on the intangible factors common the idea is an innovation and entrepreneurship on the plus side predatory government and cultural resistance and looking at market effectiveness verses market failure and again those ideas are very important i believe they belong in the standard economics curriculum i think they ought to be incorporated in business and financial

journalism that i hope that someday they become part of the overall public consciousness. thank you. [applause] >> we have tim kane today from the kauffman foundation, a senior fellow also the:creator and author of the economics blog grube obligee i forgot to mention among arnold writing projects see is the coat editor and author of another blog akon talk which you should read regular the before being at kaufman he was the lead editor of the 2007 of economic freedom and tim is also a successful entrepreneur having founded a multiple software firm and in addition to an air force

officer he has been on the ups are and the levites on as well without comprehensive perspective please welcome jimmy cayne. [applause] >> when i was in the air force remember people use to talk about big blue as the example of the bureaucratic organization i said you're absolutely right. [laughter] this book is fantastic let me start with that i have known the two authors for a while but i was blown away i was involved in the policy debates my folks here at cato and don't like to say i am remiss in not having cater here to host the event they have carried the charge for liberty here in washington d.c. for a long time and it is an honor to be here. a fiber 2.41 thing for

somebody to think about or read it to push for the idea of human progress that is successful it would be chapter two of the book is a to our divorce and in fact, they have a series of charts and numbers from a to z because actually you ran out of the 27 points each as impressive from the acceleration of growth rates over time to food intake and calories and a fantastic series of charts i would highly recommend and if i was teaching economics i would have that chapter be reading forever course everyone can learn a lot from that. you can disagree with everything they write and opined and if it can -- fantastic economists interviewed and their

theories but you cannot disagree with the facts they lay out in charge today o.r. kb it is really astounding when you think about not that growth has an impact on our lives and arnold pointed out the new apple tablet as a paradigm of thinking how government may get involved so turned off i have the iphone and i have never had technological less like i have for this. i remember when i did not have one for a while but i knew i would get this and i remember 20 years ago when i was at the air force academy or the first class to have computers a flash in the past you can imagine going through basic training and you are the first class with computers and the class a but you did not get them so they think we are the

neanderthal macho guys and we will take it out on you because you are roche her headed geeks been no we imagined you would carry around something that had more power on our desktop in our pocket and the book challenges you to think not just the world 11 now and how wonderful it is in human progress is a reality but 20 years for word what will this technology look like a wart incorporate because if tim kane of 2010 were to say not only do have a computer in your pocket but they mapping program and be able to talk instantaneously on the phone / computer to someone in japan that is a profound change in the way that we live to think what it will be like in 20 years understand those forces you can drop a lot of that out of the book that is what i got out of it.

here is what i think is still missing and i want to challenge the offer at day shoppers to addressing q&a let me back up and say at the kauffman foundation started a blog and i was mentor by the two authors to have blogs of their own and i realized there are these amazing individual opinions nobody had tried to collect them all together like a wicked the seventh opinion so just this week we launched a survey of bloggers and one of the questions that the bloggers came up with one of the questions i wanted to ask was if you could come up with a growth model for busy policy makers what would it look like? nephew to come up with a growth model a congressman

could understand he said it was rough busy policy maker there is a model for the other side that model is even keynes would cringe which is the keynesian model is very easy win aggregate consumption goes down you can inflate g. even though you talk to bright democrats and republicans it all understand that does not describe the world that we live and we are still stuck with that that is the fall back mentality if the stimulus bill that was pushed by -- passed by bush is not big enough if that does not work then let's double the size and try again why do we have a competing growth model? here's the question here are the three payables you would include? i was disappointed with the results i got back the three things our highest was human capital which was

fantastic, innovation, a great to see that included and economic freedom and as the former editor i thought that was all right to but i plucked in the word scale and i think if i could get every congressmen to understand if we could increase the scale of our economy that is rarely get innovation and is that the right model or approach we should have a very simplified model? but it does fall in line with what they came up with one of the core ideas there is a hard view of the world output = a combination of physical capital and labor and the new model that they describe as software david brooks when he reviewed the book very favorably called

the protocol economy michael mandel likes to call it innovation economics a lot of people get this but we know it is a software thing but how can we put it to into a simple equation a busy policy maker can understand? here is a conversation i would like to have with you all. i want to point* out a number of authors in this book about the acceleration of growth and one of the authors not included is brad who cited in the book he pointed out some benchmarks of how and come per capita has risen over time and i have not published this anywhere but if you imagine the growth rate has not just been flat but accelerating since the 1800 that boils down to adding 0.1

percentage point* every decade so every seven years will be at 3% after that 3.one what are the implications? unfortunately to some that we're not going to have a world where the development gap is discussed between haiti and the united states is filled and but the poor countries will not converge that is something i have them looking at since my dissertation i thought i could find evidence there was in direct convergence over the long term instead you see the wealthy countries the economy diverging between welfare and wealthier and look at places like haiti and they are stagnant by almost agree with everything and everyone here but a way to disagree or stir up the pot let's talk about haiti. is the second plane to write that we really cannot do

much but be a beacon of light and show them how liberty works and then hopefully they will follow? it seems there is a trap and i would agree that sending in the marines in taking over the country whole hog the circuit 1800 will not work but isn't there some middle ground that we could find and doesn't paul roamers suggests this with some of his thinking? this is the conversation to have the second challenges will the u.s. really be the leading economy 100 years ago that is diverging? i would like to think so but a few writers talk about china and it seems to have a better sense of economics 2.so than in washington d.c. fantastic book by highly recommended as much as i love all the interviews i cannot them over emphasize how much i enjoyed chapter two. [applause]

>> first by just wondered if arnold or neck want to respond at all to the challenges that to raise? first of the poverty trap is that real and is there any way in your research or survey that looks like dave generally promising exit strategy? and then looking forward if the u.s. will maintain its position as a leading in abated the economy or falling off of the face? the first words out of my mouth the first issue of what model would you give to policy makers? the first is trial and error

that it is a theme of my thinking for a long times you have to be careful i may be biased i wrote about it in every book i have written including crisis of london saying we need trial and error solutions in health care. i think that would be my solution with the poverty trap there is trial and error starting from the situations where they are i am tempted to outsource my views on haiti 21 of the people we interviewed in the book and has a block -- blog and i guess my views are so similar to his his views are so more well for by will take his views of trial and error and he uses the term searchers rather than planners that local people searching and trying out things rather than coming up

with a grand plan. >> for a the future if hasn't formed a bit of accelerating change there is skepticism but the potential for ever accelerating growth is there. between mangling the name but to dismiss any concern that china will displace us

that we will adopt it much more quickly we talk about the venture's some consumers and producing growth steve jobs is the promoter of growth but that there are so many people appear willing to try anything that steve jobs puts out to make something useful out of it to make us a faster growing country any innovation is not a threat but an opportunity. >> just to reinforce a couple of those points if there is a model of trial and error i will extend out that you have to couple that with a realistic assessment

of how politics actually works in the recent political interference is so problematic because of assiduity error side of trial and error. of the political tolerance for error is so low from government failure that what you have government failure in the policy arena have either a temptation among policy members to point* their finger at something else are say you with the case of stimulus we did not do enough so we have to do more of the same as we will double down the bets. you need to contrast that without trial and error markets work new firms can come in and advanced technologies and those that don't can if they don't get support and that is how

progress continues over time. whether not you can get a policy maker to adopt the child and her model is the open question in because it is not in the dna of politicians who want to try to start monkeying with things. on the point* of what we can do to close the development gaap, paul romer who we interviewed has the idea for charter cities where basically looking at the success china has had success in the coastal regions where they are basically areas where they change the institutional mix of laws and permitting market activity and having enormous growth if you can adopt the model in haiti and turn port-au-prince into a charter city to change the

institutional make up there may be hope for real rapid change he also says you need to be invited in to do this and what he is trying to do is set up an architecture where people can be brought in to try to help you set up an institutional max that will work with your cultural norms and there might be some hope there so i am not totally pessimistic about the future of the rise more immigration is not pleasant for a lot of people but certainly in the case with haiti we should bring as many as three kn action if there are some people in the book who are very bullish about china and i am a little agnostic on it. i would say it would be

pulled up that china's place of the technological frontier will be limited and they are happy permitting free enterprise in areas that don't really challenge state-controlled but frontier technologies or communications that threaten the regime they don't like it and innovators will not go and work there for a long period of time so go to other countries where they can come a united states, india and other places of asia it is an open question how quickly tae that opens or embraces the technological frontier then the last quite that the demand side for innovation and technological changes a totally overlooked aspect of the discourse. we have a heroic by entrepreneur to create something that is the end of the story. know it is not you have a

consumer that is habituated to try things out and that is very much the case in the united states. people will run out and buy the ipad and it will be a bust he has had a lot of failures but he operates in a market that is open to taking risk even on the consumer side that the united states is position the next 50 or 100 years. >> let me add my fault $0.2 i am behind your spirit their trial and error mantra but it needs something more than that because washington has trial and error down pat especially the airport. [laughter] the feedback loops and the market we have good ideas leading to profits meeting to losses leading to dropping good ideas in the

opposite dynamic and washington where bad ideas attract more money was open up two questions please give your name and make it a question a quick question. >> i cannot help to take the opportunity when you say to study how politics works but my question is haori different than what the austrians are saying? certainly they have zero is been emphasizing a entrepreneurship and the fact countless intangible factors to consider the analysis how would you say what you are saying differs from what the austrian

economist say? >> i would be willing to plead guilty to there being a big austria and antecedent to what we write to. it is just informed by more recent research that tends to support that point* of view but you can. >> >> just to speculate growth that means after 24 years i need somebody who can double to 20 trillion with the

biggest the combined economies of the day it seems in a very short time we will go from scarcity to use up all of the resources of the world and a very short time and who can do fundamental changes to an economy to stabilize and needs to be preventing. >> linney give you a polymer type answer. he said in physics with the law of conservation of matter we may not have matter that gets depleted. with the economic consists of to the extent it is physical activity at all with communications to take some molecules transferring

to other molecules two if you could read the interview with paul romer in our book he would get a perspective that says we really don't face an issue of depletion of resources that is not the way the economy works and some of the facts that we mentioned in the book includes the fact that for instance the weight per dollar of gdp is falling so the physical components are falling relative to the mental components. >> there is a long history of bring about that exact question that limits to growth and none of the predictions seem to bear out in dynamic economy is and free economies so i think as

long as the economy remains relatively open and free that is not something i would be worried about. i have two quick questions do you think that with frank 98 behavioral innovations and therefore we will never have a mathematical understanding of the structure? or do think it is plausible we will get there? second, if you take trial and error that part of that if of failure is letting failure fail that the losers in the process of eight process to understand

innovation to is that three inherent tension in democratic capitalism and if you do how to deal with it? >> the first question is doesn't make it impossible? i think that is right again i will advertise that talking about the innovation that economic growth is precisely because of that no one knows which innovations will work or where they will come from so there is an element of unpredictability to economic growth that is inherent in that and i am in that camp. so the next question innovation and creates losers as well as of winners

and what type of political dynamic does that create in our society? we have seen what type of dynamic where the government takes over general motors because it cannot think it cannot conceive of general motors going out of business. then you ask what to do about that? and i think and to take over general motors and not think the man tried to the way it works of workers retire early sometimes when their industry is in decline and the young workers come in with new skills i guess i

don't have a great answer for that there is a case to try to develop a sound and compassionate safety net that is more oriented to being a safety net and the political mishmash of the accidental welfare state the accidental state we have developed a that is difficult politically. the solutions come in the other book where we have wilder ideas of competitive government the brief point* i don't think there are scale economies and government that justify 300 million per cent policy. if you needed to have some of the things decided for

300 million people out of washington d.c. then switzerland could not possibly work. singapore could not work. denmark could not work. the fact that those much smaller policies would be some welfare states and the scent government's suggest to me that we can have a much more competitive governmental system were a lot more of the welfare state functions took place at much lower levels of government. that is in the other book. >> i agree with arnold on the uncertainty. the second question is one that for me personally in working on this book have wrestled with the most and don't have any sort of satisfactory answer that question we ask a lot of the interviewees of the book it is clear that they don't have satisfactory answers

with a close psat here is what we can do to solve the problem of the creation in a dynamic economy interestingly enough phelps one of the economists that we interviewed has been thinking a lot about this question in the context of political philosophy and doing a lot of extremely interesting philosophical work on this in part because he takes very seriously the wanting to maintain the gains and advantages from a dynamic economy but also the critique about what happens. he turns it around and says you have to understand to have the view of human potential and the limits on it to procurers and innovators need to be taken into the calculus and that is a useful original way to

try to enlarge the discussion about it. but two years the power politics and ball does not solve that but it begins to settle the change the discussion and a helpful way. that will not be that satisfying to you but there is some interesting ferment going on. >> he will answer that in his own book. [laughter] >> a straight comment on the issue of government trial on there point* you have more trial and error going on if you have a more decentralized governmental structure and contrasted between with switzerland is more stark than it might first appear because of a decentralized system at the canton level they have a universal health care system but it is done canton by canton differently contrasting with obamacare where we try to write to the

rules for 1/7 of the economy in one fell swoop. >> i am a columnist and one of the questions that the responses why did i write this as opposed to others but i would submit the same thing and asked the following thing. as i understand the premise of your buck when -- your book wire some four and wire some rich? mad is not the view that essentially those that don't have the rule of law is a constitutional issue when it be better to the inquiry

with the government why are some are poor and some are rich? >> i will go first what i would say is the book is about certainly the disparity among countries that more than that to it draws together several different strands of research in different areas brought together before to show similarities and economic history technology and development new firm information there is a lot

of research on new form information that is relevant i will leave it to arnold after that.

this is the area where more needs to be done and the leader of the school of economics taking a much more expansive view of what needs to be steady to understand the question of how cultures change and house societies change and a lot of the work is history and needs to be

done for different small communities up the regional level. >> i just want to make a comment thank you for inviting me if you think about why countries are stock and how they changeover time there are a lot of revolutions that happen including the united states got into the path to tie this in with trial and error it is on satisfying because i don't think it will be politically persuasive we have been creeping away from that so if we ask a lot of thinkers around this town to get the concept and the book is the solution would be the federal government needs to be involved in giving tax credits for r&d to have innovation a very centralized response for the people that get everything that is being said and not the underpinning of how does real change happen? that is the worry i have. i have an optimist u.s. vs.

china but i am not fully bought into the optimism because they see the u.s. creeping toward less federalism more central control and in the political structure you have two parties that don't want to open up to entrepreneurial ideas will they tolerate the entrepreneurial economy? i think there's a lot of momentum in our favor but can we get to a trial and error politics? >> thinking of voice some poor countries adopt the policies that make them grow rich and others don't. i am afraid negative eight radical element some countries are all lucky if you look at poor countries that get rich over the last century countries like taiwan and south korea and singapore and she lay they

were autocracies general they are terrible. but also have communist left-wing insurgencies to deal with so there was a strange correlation of forces on the one hand not being democratically accountable that other wise might have showed to the growth in a crib for the rise ahead to worry about the popular discontent and do something to buy it off by providing broader-based -- broader-bas ed growth and in a sweet spot seems to have pro-growth policies how do we create that somewhere else? who knows? >> >> have a comment and a question. would anybody like to

comment on the future not only innovation but creating the organization's as we have been talking about making that more difficult in the united states i don't see any other competing economy where that seems to be done any better it would you like to talk about not where we are about where things might develop? and to make another comment people don't often and think of this but another very successful country that succeeded under imperialism was pr the highest gdp per capital-- her capita of all westamerica countries and not an example but to say there are where cultures are the same the puerto ricans

are the same but they have an organization put above them that seems to have worked out well but they are not happy about it buy the way. [laughter] >> they're not sell happy to go for full independence either. >> i think the ku church-- the question of future entrepreneurship is too difficult for me to throw off in a two-minute answer. my one comment on pr is there is almost an example where you see a lot of migration between them you have to control for that factor in seeing how that exception played out. >> i am with you to not see other countries right now as

being ready to take the mantle of technology frontier way from the united states. i don't like certainly most of the political trends at work as it relates to that in this country. i know that this this is something jim is working on right now. it is an open question and there are obviously benefits that go to other countries because the united states is on the technology front year that is part of the conversation coming from our political discourse because it just reinforces what our erroneous assumptions are about new technology and how that can be sustained over the long haul. but where that is in the future is still an open question. >> we will take one more question.

>> echlin there has not been in academia and the economics the push to make money equal political power or the goal power there has not ben that discussion or desire with that in mind throughout the history of the united states the development of corporations how do or have you looked at the issue of legal liability when you talk about expansion comedies signed inflation? and the effects of genocide volatility and not narcotics terrorism and the high-end enterprise that you talk about with the olive part

way? >> to you address the issue of legal liability for genocide for the conditions within the third world countries are poverty because creating poverty with inflation, designed inflation? >> that is not really in the scope of the book. the book it does not touch on act. >> i think with that stumper. [laughter] we will call it a day. the conversation and can continue books are available for sale and please feel free to purchase more than one per of your friends will love them and the authors will be happy to sign them. >> they make great gaffes. [applause] >> thank you for coming

>> rat the annual organization of american historians we are here with oxford university press executive editor. want to start with something hour viewers know very well with the empire of liberty talk about this for a second? >> yes. this is the eighth book in that series which is a legendary series started and the 1950's by richard hofstadter and gordon would was one of the authors and as everybody knows he is somebody who has spent his life and growth in this point* it covers everything from the founding of the new

nation up to the war of 1812 and a book that will have a lot of interest for those who like political history or history of the constitution as well as the making of art and culture during this period and a book that is compulsively readable and they will get a lot out of no matter their experience on the founding fathers. >> you edited this book this is a link the book and it was probably linked year before you i did it. can you talk about the process? >> i have edited the last couple bucks it is always interesting getting a 2,000 page manuscript for anybody to produce these books is an extraordinary feat and that is as an editor is the respect for the fact this is somebody's long-term project and the making of a lifetime of work in this field. i'm not the only one editing

the book. david kennedy the official author of the series also works on them so he had two people giving the back in addition to readers' reports. these are a process. some authors love it and other authors don't but it is a wonderful experience to come to the operation of the project and i can say it is definitely shorter than it was but not the shortest in the serious. >> one last question. he is a pulitzer prize-winning author and you worked with him a long time it is probably easier for you to make tenants for him but do you feel it is a little reticent to make suggestions to authors? >> no. [laughter] i was editing a pulitzer prize winner and i also add a first time rioters some people come with trepidation and so grateful that anybody is reading giving feedback i

have been here 13 years to figure out what level of editing people need and want and will accept comes with experience. but i do not have a great deal of trepidation with this one. >> a couple other bucks? this is the manhattan project tell me about him. >> an assistant professor of both urban and american studies and the interdisciplinary book that takes on the topic near and dear to the heart of many new yorkers which is a point* immediately after the war when york started to become a place of urban renewal and the place of urban history projects like the making of lincoln center, the united nations and how york became the global city out of world war ii said there were large neighborhoods of rundown tenements and other parts of the city not considered by urban planners to be in the kinds of places that would show off new york and the

best light. this is the making of four projects that include housing and include the business community that supports the project there is a lot on architecture and bought the buildings look like and how much clean lines are utterly different but the kinds of people that come to work and what it means four city blocks to be changed to have a green space and places that are recognizably different. >> are you a native new yorker? >> i am from long island i was born in new york. >> do you live this book? >> no. i don't live and then had 10 per our work in a building that was not destroyed. oxford is in a historic building. and it is buildings like that they did not want in the 1960's. they wanted them to be clean and look very different and the oxford office.

>> know your enemy the rise and fall of the american soviet experts. >> this is a fascinating project because starting this proposal talking about american going to war against an enemy against a language and culture they did not know. you could talk about contemporary politics pataki about how little the united states knew about the u.s.s.r. at the beginning of the cold war and world war ii. people were brought into government service to learn about russia through the u.s. government and how into the '50s and '60s as the cold war became more a part of american life our america learned about the soviet union and historians, people who knew the language, study the economy, literature and bring us through the point* to understand rise and fall of the field of sovietology that was a large part of the population. >> the final book? living in the '80s you can

see ronald reagan and the stock exchange and madonna. >> it is strange to add it a book on a point* one has lived through. this i thought was important to do more history about especially for students because the college-age students think of this as history just like world war ii. this is original essays that were put together and has a large range of writers and one piece by a conservative politician and also a piece by a record producer so we have a fun book and something in terms of being an editor it is great to think of this is starkly and not just what i remembered but to work with historians to did archival research to learn things about affirmative action of public-private