David Friedman - Dating Markets, Legal Systems, Bitcoin, and Automation

David Friedman is a famous anarcho-capitalist economist and legal scholar. Watch on YouTube https://youtu.be/3svashDgB50. Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/16-david-friedman-dating-markets-legal-systems-bitcoin/id1516093381?i=1000531485801, Spotify https://open.spotify.com/episode/5ufMd2kBqXSY7kIuBEJlAg?si=aaYB8R-fQLKTEahtJQTyTQ, or any other podcast platform. Episode website + transcript here https://www.dwarkeshpatel.com/p/ david-friedman. David Friedman's website: http://www.daviddfriedman.com/ Follow me on Twitter https://twitter.com/dwarkesh_sp for updates on future episodes. Timestamps: (0:00:00 https://www.youtube.com/watch?v=3svashDgB50&t=0s) - Dating market (0:12:15 https://www.youtube.com/watch?v=3svashDgB50&t=735s) - The future of reputation (0:27:30 https://www.youtube.com/watch?v=3svashDgB50&t=1650s) - How Friedman predicted bitcoin (0:35:35 https://www.youtube.com/watch?v=3svashDgB50&t=2135s) - Prediction markets (0:40:00 https://www.youtube.com/watch?v=3svashDgB50&t=2400s) - Can regulation stop progress globally? (0:45:50 https://www.youtube.com/watch?v=3svashDgB50&t=2750s) - Lack of diversity in modern legal systems (0:54:20 https://www.youtube.com/watch?v=3svashDgB50&t=3260s) - Friedman's theory of property rights (1:01:50 https://www.youtube.com/watch?v=3svashDgB50&t=3710s) - Charles Murray's scheme to fight regulations (1:06:25 https://www.youtube.com/watch?v=3svashDgB50&t=3985s) -Property rights of the poor (1:09:07 https://www.youtube.com/watch?v=3svashDgB50&t=4147s) - Automation (1:16:00 https://www.youtube.com/watch?v=3svashDgB50&t=4560s) - Economics of medieval reenactment (1:19:00 https://www.youtube.com/watch?v=3svashDgB50&t=4740s) - Advice for futurist young people This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.dwarkesh.com https://www.dwarkesh.com?utm_medium=podcast&utm_campaign=CTA_1

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Dwarkesh Patel?

  Today I have the pleasure of interviewing Dr. David Friedman, who is a famous and macrocapitalist economist, and most recently, the author of "Legal Systems Very Different From Ours." So my first question is this: is the dating market efficient? In the sense that it doesn't maximize net value? It's not a competitive market, because I'm not substitutable for another bearded 20-year-old Indian man. So I'm curious if you think, how efficient you think the dating market is?

• 0:27Speaker 01

  Oh, boy.

• 0:29Speaker 01

  I've been puzzled for quite a while on why online dating doesn't work better than it does. That, in principle, a lot of dating is a sorting problem. That not only are you not identical to another bearded Indian man of the same, Indian or ethnic man of the same age, your potential dates have different tastes. So that it's really, I actually discussed some of this. I've got a chapter in my "Price Theory" text, which is really on what I think of as the marriage market, although it applies to dating more generally. And I have one model, which is a really simple economic model,

• 1:14Speaker 01

  in which, in effect, everybody is identical. And you have a market in which there's an implicit price in terms of the terms of marriage, how much the husband agrees to do, to what extent the wife gets to make decisions, things like that. And you then allocate people, you then have an equilibrium price. And the real point of that section is that I'm arguing that the effect of polygyny or polyandry is the opposite of what people expect. That if you legalize polygyny, you allow it, make it legal for a man to have multiple wives, the result is to benefit women, and maybe to harm men.

• 1:56Speaker 01

  Because if men can have multiple wives, that's going to bid up the price of a wife. It means that some men can, in effect, go on the market and try to bid for two wives instead of one. And that then means that the ordinary monogamous man still ends up getting a wife, but on worse terms. He's got to do more of the dishes. And women either get all of a husband on better terms, or half of a husband on terms good enough so that they prefer half of that husband to

• 2:31Speaker 01

  to all of another. And that's sort of a fun argument. And of course, if you legalize polyandry, you allowed a woman to marry multiple husbands, you have the same effect in reverse. So that's the easy, the easy model. And then the harder model is the sorting model. And even then, I only have a simple sorting model. My sorting model is one in which everybody's value as a spouse varies, but it's the same to all potential partners. And the real one is one in which not only do people have different, not only is your value as a spouse different from somebody else's, your value as a spouse is different to some people than to someone else's. The way I like to put it is that the woman who I eventually concluded was about a one in 10,000 catch

• 3:16Speaker 01

  was not, in fact, being pursued by anybody else at the time. Because other people had weird tastes and did not recognize what a desirable partner this was from my standpoint. I should say, we're still married. That was 38 years ago or so that we got married. So that's a really hard problem. And I'm not quite sure. The problem is that a lot of economics ignores search costs. Because we don't have a very good way of handling them. And yet, search costs are really central to the dating problem. And I would have thought that things would get a whole lot better with computer dating. Because you can take all of the characteristics that are sort of objective and measurable,

• 4:00Speaker 01

  tell them to the computer, have each person search a million profiles, find the subset of that who meet the easy characteristics, and then interact with each other to find how well they do. But as far as I can tell, it hasn't happened. I don't think that. Marriage has worked better since computers came in. The people I know who've been trying to use computer dating haven't found it very successful and so forth. And in fact, the story I'm told is that OkCupid, which is one of the most successful of these things, has gotten worse over time.

• 4:38Speaker 01

  It was originally designed by enthusiasts who did clever things and then taken over by businessmen who did less clever things. Now, it may be the people I've talked to are just sufficiently different from the mass of the of the market. So that what looks what works for other people doesn't work for them. But my that's my impression. So so is it efficient compared? There's efficiency, you've got to compare it to some alternative. It's certainly inefficient compared to the ideal of a world where a perfectly wise benevolent person paired us all up. But we don't have any of those people around. And it's, I guess, the interesting question is, does it work work better than the system where parents choose your spouse for you?

• 5:24Speaker 01

  A quite a long time ago, one of the most interesting conversations I've had. I was in Bombay waiting for a plane to Sydney. And I got into a conversation with a woman from southern India. And we ended up sitting next to each other and talking a good deal all the way to Sydney. And she was flying out to join her husband, who was a physician. She was from southern India. Her husband had been chosen for her by her parents. She would have had a veto. It required her consent, but the actual search was done by by by her parents, not by her. She was still happily married. My first marriage had broken up. So the evidence from our little tiny sample was in favor of her system.

• 6:07Speaker 01

  What was really fun about it was that here was a intelligent, modern person, a contemporary, an educated contemporary from an entirely different society in terms of that set of institutions. And it's a lot harder to say, well, obviously, the way we do it is right. When you've actually got someone real there defending the alternative. So I really don't know whether the modern American system, modern Western system of courtship works better or worse than the traditional system where the parents find a potential partner. Then the partners get to decide whether they approve of each other or not. Uh, cause you know, there is the argument that there's hardly anything farther from the economist's model of rational choice than a man in love.

• 6:55Dwarkesh Patel?

  Interesting. I, I wonder if um, to the extent that, you know, arranged marriages sometimes work better than non-arranged marriages. I wonder if that's because of just a social structure where that maybe makes you happier while you're in marriage versus whether your parents are better choosing a mate for you.

• 7:15Speaker 01

  Huh. What do you mean? You mean it makes you happy because you don't feel as though it's your fault that you've, if you've messed up, that you should have done better?

• 7:21Dwarkesh Patel?

  Or maybe those cultures are just better at um, in making wives and husbands uh, more, you know, stay together and feel happy about their.

• 7:28Speaker 01

  In a sense, what you'd really want to look at, and what exists, though I don't want to share their data on it, would be people from India. In particular, I monitor through all of India, but at least southern India, who, who live in the US. So that my impression is it's not all that uncommon for somebody, you know, a young adult, maybe in the tech industry, to uh, migrate to the US, then go back to India to marry the wife that his parents have chosen for him. Or maybe in some cases that arrangements are made here, and then live in America. So that's as close in a sense as you can come to a controlled experiment of separating out quality of choice

• 8:13Speaker 01

  versus uh, the degree to which the culture supports your marriage, so to speak, and uh, which would be interesting. Now, the other way you could do it, but it would be much harder, is that what you would like the, the computer dating people to do, but I don't think they've really done, is really serious research on what observable characteristics match with what. That you'd like, and in principle, you could do it, what you'd like to say, all right, here are all the things somebody tells us about himself. Cause that's really all you, all you've got in practice. Let's take all pairs who ended up married, or maybe all pairs who dated, who made the first try of having a date.

• 8:55Speaker 01

  And which, how do you figure out from the characteristics of the two parties whether they'll have a second date? And you would think they'd want to do that. And then ideally, you follow that through and you say which ones got married, which marriages lasted. So ideally, you could actually get sort of statistical data, saying, here's how to pair people up. And if you had that, you could then look at couples who were produced by American courtship institutions, and couples who were paired up by their parents, and see which one came closer to matching what the computer told you you ought to get together. That would be a really neat project, but it would be very hard to do.

• 9:36Dwarkesh Patel?

  Yeah, that would be interesting. Yeah, in hidden order, when you talk about efficient markets, you you you explain it in terms of could a bureaucrat god improve on the market by like changing the allocation of production or quantity produced? And in this case, it's funny, in a sense, the parents are that bureaucratic god.

• 9:52Speaker 01

  Except the the parents in those societies, the parents have almost enough authority. That is to say, they they could be rejected, but usually aren't. But they aren't perfectly wise. But yes, no, no, the bureaucrat god basically is my attempt to make sense of what economists mean by economically efficient. Because there are two issues with regard to economically efficient. One of them is what's an improvement? And there, as you know, I go with Alfred Marshall's view of it rather than the more conventional Pareto Hicks-Caldor for anybody who knows these terms in economics approach, which I regard as a way of pretending not to make interpersonal comparisons when you really are doing it.

• 10:36Speaker 01

  But but once you've got your way of comparing, then when you say this is efficient, efficient compared to what? And as far as I can tell, the closest I can come is to say, what's the best you could, best outcome you could imagine by this criterion? And that's my bureaucrat god. That's if you imagine a omniscient, omnipotent, benevolent actor who is controlling everything. And then I say, well, of course, nothing will come up, you will look up to that. But some things will come close, and in particular, the standard sort of price theory, efficiency theorems, tell you that a competitive market.

• 11:15Speaker 01

  That doesn't have certain specific problems such as public good problems and externalities will act would actually produce the efficient outcome. And you never quite have that, but that's a whole lot closer than if you try to imagine other institutions such as a centrally planned system where the central planner has neither the right incentives nor the information nor the power that the competitive market has all the power you want because each person controls themselves. So that's control where everybody just in a decentralized form and a central planner never has that, of course. So I think it's a useful concept, but you have to recognize that once you get to a

• 11:57Speaker 01

  fully realistic picture of any system, you're not going to achieve it. All you can do is say, well, in the in this approximation, you would achieve it. And then you have some feel to how much breaking the approximation messes it up.

• 12:11Dwarkesh Patel?

  That's right.

• 12:12Speaker 01

  It's a useful thing about economics in my view.

• 12:15Dwarkesh Patel?

  I want to ask you about futurism now. You talk in your book, Future Imperfect, about how contracts will be enforced in the future and you see because of the rise of

• 12:26Speaker 01

  They will be enforced in the future. One of the things I try to be careful about in that book is to say, I'm not making predictions. I am saying if this technology develops in this way, this is what will happen. But I don't know which technologies are going to develop in which way. So in the case of contracts, what I think you're thinking about is my discussion of how a world online works where you have complete privacy, what I refer to as a world of strong privacy, that encryption potentially could give you a world where I can do business with you and no third party can observe what we're doing. And that includes making money.

• 13:09Speaker 01

  And then the question is, in that world, how do you enforce contracts? And I say, if that happens, if you end up with that future. Here is a plausible way in which contracts could get enforced using ultimately reputational mechanisms. And but I don't know that world is going to happen. That, you know, the National Security Agency has been doing its best for decades to keep that world from happening. And you can see from there, as I try to make clear in the book, there are downsides of that as well, that world as well. As well as as well as upsides. And we're in fact seeing one of the downsides already, because one of the things I think I discuss, I think I discussed in Future Imperfect

• 13:52Speaker 01

  is the possibility for crypto for for cyber ransomming. For getting onto somebody's computer.

• 14:03Speaker 01

  Encryption the whole contents of the computer and then say, I'll sell you the key back to decrypt it. And that's a bad thing. And you can think of other bad things that if you kidnap people at the moment in the real world, the hardest part of being a successful kidnapper is how you collect the money. Because that's where you're likely to get caught. We can solve that problem. All right, with with with with with good cryptocurrency and and a world where where you've got enough encryption. So that people can't follow who's paid, who's who's sending message to whom. Now, so so that world has downsides as well as upsides. Now, I happen to think that on net governments do more harm than good. Be a sort of simple way of putting it.

• 14:47Speaker 01

  And that therefore, a world in which governments find it harder to control people. Although we'll have the disadvantage that some of the things governments do are good and won't be done. We'll have the have at greater advantages. But but in any case, all I'm saying is I'm not predicting that that world will happen. I'm saying that world could happen. We there's the technological possibility for that. We that we've known for, I guess, decades at this point. Well, Bitcoin is newer than that, but but cryptocurrencies are the only new part of that world. I wrote up, I wrote this up long before cryptocurrencies existed. And so we could have that world, and it's a really interesting world, which is part of why I talk about things like how you enforce contracts in it. But I'm not predicting it's going to happen.

• 15:31Speaker 01

  And similarly for my the various other things that I discussed that, you know, the one I most want is to solve the aging problem. Because at the moment. It is very, it is, under current circumstances, the probability that I will be alive thirty years from now is very close to zero.

• 15:48Speaker 01

  I would like to be alive thirty years from now. I like living. Living is a lot of fun. So, the particular future that I would have most in favor of is the one where they solve the aging problem. Where I get, at worst, to stay at something like my present age, which is a little bit creepier than I used to be, but tolerable. And ideally get to run it back a couple of decades. That world will have its own features. Mo- mostly good, but not all good. Because after all, if that had happened, you know, a few decades earlier. It would have been Stalin who presided with nuclear weapons over the breakup of the Soviet Union. And he might have had a different view of it than the people who were in power.

• 16:31Speaker 01

  Spain would still be being ruled by the dictator who ruled it from the end, from what? I guess sometime in the, whenever the Spanish Civil War was over, nineteen forty or so, until a few decades ago, Franco. So, there would be bad things about a world where people didn't get old. But I think on net, there would be good things. So, so all of these futures have positive and negative features. And I'm not predicting which ones will happen. I was only trying to explore for each of those futures. And there's a reason I called the book Future Imperfect. That was partly a grammatical pun. And partly the fact that none of these futures is perfect.

• 17:13Speaker 01

  One of the early cypherpunks, who were people who were exploring the encryption stuff before anybody else was. His line was, "In encryption is not your friend." Right? Technologies are not your friend. Technologies are what they are.

• 17:27Dwarkesh Patel?

  Yeah. So, okay, fair enough. Assuming, let's say if, if, if we move to a system where more contracts are enforced by reputation rather than the traditional legal system. I want to ask you, what are the social consequences of that? For example, will we see a return to honor culture? And is for is the rise of political correctness maybe a consequence of us turning to a culture that depends more on reputation? Because now whether you are woke or not, either way, says something about your reputation, and that signal matters more than it did in the past to your employer or to potential clients.

• 18:05Speaker 01

  That's interesting. That is, the obvious problem is that for some people, woke is a positive signal and some a negative signal. Certainly for me, it's a negative signal for. And the thing is that the reputation you want is an online reputation, which does not have to be linked to your real space identity. And in the kind of world I was discussing, wouldn't be linked to your real space identity. That partly it's the fact that it's not linked that means you have to depend on reputational. But of course, it's also true that reputational enforcement has been important for a very long time.

• 18:45Speaker 01

  That most, I would have guessed that most of what makes stores behave themselves, act well, is not the legal threat at all. It's the threat of bad reputation. That, you know, I've had the experience of, I was having problems with the people who were putting in the battery for my solar system. And I put up a very negative review online, and I immediately got a response from them. Basically, you know, like, what can I do to to help things? And and they ended up giving me a $500 discount to apologize for the month during which they had turned off the solar system that already existed when they installed the battery.

• 19:27Speaker 01

  So I think there are a lot of other examples you see nowadays, which which doesn't don't even depend on on the transactions being online transactions, because companies care about their reputation, and they have an online reputation even for real space transactions. That, uh, so, but, but the question is, is there any particular reason why you would trust somebody who agreed with your politics more? And it seems to me that, you know, my impression is that woke people quite often fight with each other and, you know, attack each other for, can't try to cancel each other because they're the wrong version of, of woke, so to speak.

• 20:05Speaker 01

  So, so I, I, it seems to me, you might have, what you might get, you might get the pattern, which, which you do already have, where you've got groups of people who have something in common. And they, so one of the sort of odd patterns you get is some particular market niche, uh, say, donut shops, being dominated by some particular ethnic group. I don't, I think there's a real, I think donut shops are a real example, but I don't remember which it is. Uh, and I know from my own experience that running motels is dominated by Indians in the U.S. I don't know why, but that's an observed pattern.

• 20:47Speaker 01

  Uh, so, and part of what may be happening there is that you have an ethnic group, uh, you don't want to offend somebody who you, your son might want to, want to court his daughter. Uh, that there are a bunch of, of, of social links within the ethnic group. And even aside from that, you don't want to offend somebody who knows people who know you. Uh, I remember observing a long, long time ago, online, back in the days of Usenet, if you're familiar with that, which was really before the web. And one of my hobbies is a group that does historical recreation called the Society for Creative Anachronism. And it had a Usenet group.

• 21:30Speaker 01

  And it was a whole lot more polite than most Usenet groups that I observed. And I think the reason was that if you made, i- if, if you behaved, uh, really badly on there, if you went around insulting people for no good reason and being unreasonable. Even if the person you were being nasty to would never meet you, he probably knew somebody who would meet you. And you didn't want to have your reputation, your real space reputation messed up. Uh, so in that respect, I think there is, but I think that's an effect which will go, which will become smaller in the future world, because in the future world, we've got an online version of that. So then in the future world, at least as I've described it, I don't have to know you

• 22:14Speaker 01

  in real space. And most people I'm interacting with, I won't, many of them won't even be on the same continent I'm on. Uh, I've in fact interacted with a number of dealers in India, who I have never met, uh, but who I'm willing to trust to deliver what they say they'll deliver because they've done so in the past. And so it seems to me that, that, that if anything, the internet means that reputation is less tied to real space interactions and more to online interactions. And we have better mechanisms for keeping track of reputation than we used to, that, that eBay, for example, as you may know, when you have any eBay transaction, you get the opportunity to report to eBay on how it went.

• 23:00Speaker 01

  And when you're considering dealing with something, one of the things you see is what's their eBay reputation? How many people have said that they fulfilled what they said they would fulfill?

• 23:11Speaker 01

  Uh, and you get the same thing. If you buy something from Amazon that is not actually being sold by Amazon, because Amazon also functions as the middleman, books are the context where I'm most familiar with this. And one of the things you see is, well, this seller has it at this price and here is what his rating is. Here is what people have dealt with and say. So it seems to me that I, I, I don't think I would, I would expect in a sense, I think of what you're calling honor culture as more the real space version of doing this.

• 23:41Dwarkesh Patel?

  Interesting. Yeah, I wonder what the consequences of tearing down the walls between communities that perhaps make reputation in some ways more salient. For example, with the example of the Indian motels, I've lived in small towns, many different small towns across the US. And you know, you might have like, at most like 10 people who are of Indian origin, which isn't a big deal for me, but for my parents, you know, that's a very big part of their social community. So, losing status or in that community is a big deal, and the reputation matters a lot more. And similarly for your Usenet group for the SCA. When you have, but when you have communities that aren't isolated in that way, for example, when you have like a Twitter user, that then is the, is the value of reputation or the

• 24:26Dwarkesh Patel?

  capacity of reputation to tamp down a bad behavior, is that reduced?

• 24:30Speaker 01

  But it depends a whole lot on whether you are interacting with people where your reputation costs you anything. So that if, if, if somebody, if I become part of a Twitter mob online, first, the, insofar as I have an online identity, that online identity is not doing business with anybody. It's not probably involved in any interactions where people trusting it matters. So it's free to behave as badly as it wants. On the other hand, if I am interacting, as I do, on a blog or a forum, where there is

• 25:13Speaker 01

  a, maybe 100 people who are regular posters to it, and we're, in that case, reputation does matter. If I behave in a way that shows me to be an unreasonable person, people won't take what I say very seriously. It's not as serious as he will not be willing to sell to me or buy from me, but it's still a real cost.

• 25:32Speaker 01

  And so, anyway, the, you know, what, how this is going to pan out is various. And in general, the internet is going to have, is having and is going to have non-obvious effects. I'm reminded, I just saw somebody online who quoted a bit that Heinlein, science fiction writer, wrote, where he was talking about the influence of automobiles. And he was saying that there were people who, as when the early automobiles came out, suggested that this would end up entirely replacing the horse. But he doesn't know anybody who had realized how it would affect courtship behavior.

• 26:13Speaker 01

  That the existence of closed automobiles meant that there was now a place where couples could make out, where their parents wouldn't be seeing them. And where they could be 15 miles away from anybody who knew them, so as to reduce the chance of reputational costs and so forth. And somebody else online quoted somebody 30 years before Heinlein, when this was just happening, who was commenting on this effect and quoted as judge who in some, I don't know, some rural area probably, who said that of the last 30 women who had come before him charged with sexual offenses, which I presume just means having sex, though we

• 26:54Speaker 01

  didn't clear it, 19 of them had committed them in an automobile. And so that was an interesting case, where you have a technological change and it has some obvious effects, but some less obvious effects. And similarly here. So I don't know what the, what the final results are going to be. I don't know how much the whole woke Twitter mob cancellation, that set of phenomena, how much that's only happening because of the internet. Or how much it's just due to other, you know, ideological changes over time, which is very hard to know.

• 27:30Dwarkesh Patel?

  Yeah. Speaking of unexpected developments, you have a chapter in Future Imperfect on eCash. And the book is published in 2008, which is the same year that Satoshi Nakamoto writes his white paper on Bitcoin. In many ways, it was prophetic, the chapter he wrote. But in some interesting ways, and this is in the context of you being very right, in some interesting ways. What Bitcoin actually was, was just a completely different paradigm than what you imagined eCash being.

• 27:59Speaker 01

  Correct.

• 28:00Dwarkesh Patel?

  Specifically in the sense that you imagined that it would be some centralized institution, like a private bank or company. Instituting money based, that is, that is underwritten by either dollar denominations or commodity bundles. When in fact, you have a completely decentralized currency.

• 28:15Speaker 01

  Correct.

• 28:15Dwarkesh Patel?

  I'm curious, in retrospect, what do you think you missed? How do you think you got it so right?

• 28:20Speaker 01

  Well, I couldn't, I couldn't have predicted Bitcoin. I'm, you know, Nakamoto was a very smart guy. And, you know, I've done computer programming. I've kept an eye on encryption issues because they interested me. But I was never at that level of expertise to, to realize what he could do. It was a very, very clever idea.

• 28:38Speaker 01

  And no, the version I was thinking of was Chao Mian digital cash. The math of which had been worked out by Chao Mian, maybe a couple of decades before I was writing something like that. And in a sense, that is the, the biggest difference. Is that because Chao Mian digital cash requires an issuer, it hasn't happened. Because you need an issuer, which is a reliable institution. Which means it almost has to be in some developed country, or at least some country with, with sort of reasonably well-functioning legal institutions. But also, but, but one effect of digital, of anonymous digital cash is that money laundering laws become unenforceable.

• 29:21Speaker 01

  Governments are very much just like that, in part for good reasons, in part for bad reasons. Consequently, no country of the sort you would need existed that was willing to put up with it. That's at least my interpretation of why it never happened. And the beautiful thing about Bitcoin is there's no issuer. And it does not require, you know, it's just happening invisibly online, as it were, which is very clever. The problem with Bitcoin, but not with cryptocurrency in general, not necessarily, is that the value of a Bitcoin is very unstable over time. And that's not too much of a problem if you want it as a speculative investment. I, in fact, have some Bitcoin.

• 30:05Speaker 01

  But it makes it rather inconvenient if you're using it for day-to-day transactions, because if a price is set in Bitcoin, the seller doesn't know what value he's going to get for his good. The buyer, looking at the price in Bitcoin, can't easily compare it to what somebody else was selling the same good for a month earlier, because the price of Bitcoin could have changed 30% over that period of time. So Bitcoin is really not very good for a money for transactions. And that means that you want somebody to produce a stable coin that's easy to use. And there are various projects of that sort. I've got one of my blog posts in which I sketch out one mechanism by which you could get a stable coin,

• 30:47Speaker 01

  which would be stable in, say, dollars or in something else. So, and I'm sure there are other ways. That is, you could, in a sense, one of the things that ought to be doable, but I'm not, again, enough of an expert to know quite how you do it, is to have a Bitcoin where every time the value of Bitcoin goes up, you get a new subdivision with the same value. So in effect, if the value of Bitcoin goes up, instead of having 100 units, you're now having 112 units. If it goes down, instead of 100 units, you're now 90 units. And then the units themselves could be fixed to the dollar. And I haven't, in a sense, I tend to write more than I read in a sense.

• 31:32Speaker 01

  So I haven't really made a serious effort to keep track of the various projects for stable coins, other than the one that I invented, and I'm not doing anything wish that I discussed on my blog. But I think if you had a cryptocurrency that both had a reasonably stable value in terms of dollars or euros or Swiss francs, in terms of something whose exchange rate to other things didn't change very rapidly, which is what you want. Ideally, of course, you do it in terms of commodity bundle, but I'm not sure how easy that's going to be to to set up. That if you had such a thing, and if there was any, if it was easy to make transactions

• 32:13Speaker 01

  in it, which again, I think is not yet true of Bitcoin, though I, since I've just held it rather than try to use it, I could be that by now they've made it easier, that then it would become a serious alternative to conventional currencies. And if you could do it in a way which proved it against inflation, which means you don't lock it to the dollar, maybe you lock it to the average of the dollar, the Swiss franc and the euro or something. Then the problem is, as you probably know, I don't know how much you know about cryptocurrency. The basic problem is you need an oracle. You need a way in which the software can find out what the exchange rate is.

• 32:56Speaker 01

  And I I know of some clever ways that the, some of the people, not not not Bitcoin, but with with with the the second most popular currency, have some interesting ideas about that, actually, I discussed it with them a few years ago. Their ideas, not mine. But I don't really know at the moment to what extent people have oracles that they can trust, because you need some way in which the software can determine the facts of the real world. And of course, the more you, the more the software can determine facts of the real world, the more neat things you can do with it. Because, you know, as you may know, there's this old idea of smart contracts, where you have a, I make a bet with you, and the bet is in effect built into the.

• 33:41Speaker 01

  In effect, programmed into the money in such a way that if I win the bet, you suddenly have some less money and I have some more money and vice versa if you win it. And there are ways of doing that, but it requires that the this is Ethereum is the one I'm familiar with, which does this sort of stuff. It requires that Ether can find out who won the bet. And that's sort of an interesting, an interesting project which requires ingenuity to solve. But no, I think, so anyway, I think, I think the, and I should say, my ideas on cryptocurrency are partly because I was interacting with some of the Cypher punks very early.

• 34:23Speaker 01

  And it was really a case where one of them had stolen a bunch of ideas from me, reprocessed them, and I then stole back his version from him because I had the discussion in machinery of how a stateless market society would work. And he had then said, well, what happens with those ideas if you have strong encryption? And had worked out some neat stuff. And then, then I read his stuff and, and, and borrowed it back. So, so I, I can probably claim a little bit of credit, but, but it's not like I thought up the, these ideas of, of, of the digital clash all by myself. I was partly a part of people who were interacting over that.

• 35:06Speaker 01

  I was, I wasn't really a part of the Cypher punks. That is, I was on the mailing list for a while and I met some of them once. But I, I, I knew what they were talking about and it was neat stuff.

• 35:17Dwarkesh Patel?

  Yeah, I, I've done a little bit of programming with smart contracts. And one of the very interesting ideas that i- i- is that you can have contracts that own assets. So like the contract owns the Ethereum, which in retrospect, it just seems like an obvious idea. But it just, what I learned about it just seemed like a very cool idea. Speaking of smart contracts, I, I'm curious what you think about prediction markets. I don't know if you've, I don't know your opinion on that, but.

• 35:42Speaker 01

  I've known about prediction markets for longer than almost anybody else. Because I was corresponding with Robin Hanson back before he switched fields and became an economist. That's sort of my standard example of one of the really nice things about this world. Is that it used to be that you had to be a university professor because the people you wanted to interact with had to be in the same building you were, so to speak, to interact very much. Now it's no longer true. So I came across Robin very early. Discovered that he had these really neat ideas and so I corresponded with him. So no, the prediction markets are a very interesting idea. And I gather that they are developing. I think

• 36:24Speaker 01

  the ones I know about seem to have limits in the size of the bets you can make. And in the amount of house cut, if you want to take your money out. So I assume that it will develop further. But in principle, and Robin's idea, of course, is that you want the prediction market as a way of generating information. And that was, I mean, the a lot of the great ideas are very simple. And his idea was a stock market has as its nominal function allocating capital. And just as a side effect, it generates information because you observe that a certain stocks are going up or down and that tells you something about what people who are

• 37:06Speaker 01

  willing to bet on it, believe about those companies or those industries or whatever. So he said, look, how about you do it deliberately? There are things we'd like to know. What if you set up a market for that purpose? And that was where prediction markets originated. This was Robin Hanson's idea. So, so no, they're, they're, they're a neat idea. And some, of course, have always existed. If you think about futures markets for agricultural products are a futures are a prediction market, although they now refer to that way. That if you observe that the future price of wheat is sizably larger than the present price as of a year out, you say, oops. Looks as though the, the smart money expects that there is going to be a bad harvest.

• 37:51Speaker 01

  Or something else is going to happen that's, that's going to do it. And that, that's, that's, that's very neat. And in principle, you have to.

• 38:01Speaker 01

  I guess it requires that there is a reason why people want to bet on this, but people like to bet on lots of things. And so, no, I think that is, that's something nice that's developing. And again, I haven't really paid enough attention. I haven't actually ever made a predicted bet, although my younger son has been betting, I think, on predicted and says he's ahead so far. He's doing it mostly for fun, not because, but, but you don't, you don't want to limit people doing it for fun because the, the thing is, if you could only make small bets, then the prices are going to be dominated by ideologues. Whereas if you can make bets of any size, then the smart money who doesn't care what's true, they only care

• 38:46Speaker 01

  what, what bets make money is likely to take over.

• 38:50Speaker 01

  There was an interesting case back, I don't remember which election it was, but one of the US presidential elections a few presidents ago, where the relevant market very briefly surged in favor of one of the candidates and then very quickly went back. And my conjecture was that somebody who wanted that candidate to win thought that pushing the prediction market in his favor would make people expect him to win, which would then make you more likely to win because you're more likely to donate money to, to people who you think are going to win. But that he, his effect got wiped out by the, by the smart money coming in on the other side when they saw that there was, were, was insect free money lying around.

• 39:36Speaker 01

  But that does require a market where you can make reasonably large bets. Cause otherwise it's the number of betters and not the, not how strongly they feel about it, not how confident they are that, that matters.

• 39:49Speaker 01

  So, you know, prediction markets are a neat idea.

• 39:51Dwarkesh Patel?

  Yeah. I, I want to ask, is, for example, the chapter on eCash, you talk about, at the time you thought that the burdens to eCash were regulatory, not technological. When we talk about these other fields, I, I wonder to what extent you think that what's what proportion of progress you think is stopped by, we just don't have the right technology versus how much you think it's just because the, the regulations of the space are just not conducive to innovation.

• 40:15Speaker 01

  And that is my, my, my view then, and I think I may have been too optimistic, was that it's very hard for regulation to stop progress because there are many independent countries. And the evidence against that is that as far as I know, nobody had challenged trials for COVID vaccines.

• 40:35Dwarkesh Patel?

  Or nuclear fusion.

• 40:38Speaker 01

  Well, nuclear fusion.

• 40:39Dwarkesh Patel?

  Or normal.

• 40:41Speaker 01

  But nuclear fusion may just be hard, but we know that vaccines aren't hard because they produce a successful vaccine in something less than a week. Right? People talk about the fact, isn't it wonderful that we got vaccines in a little under a year? But the truth is that we got vaccines in less than a week. And all the rest of the time was the testing procedure. And you couldn't do it to zero. First, it would take time to get to produce substantial quantities. But you could, as far as I can tell, have done a good enough testing so that it should have been available to anybody who wanted to take the risks in maybe two months. That what do you do? You do two tests simultaneously.

• 41:23Speaker 01

  One of them is you give the vaccine to a large, random set of people, so old, young, et cetera, and you don't expose them to the disease. All you're trying to do is see if the vaccine has serious side effects. You then take a hundred or two hundred or three hundred healthy young adults. You give them the vaccine and you deliberately expose them to COVID. That'll tell you a month after, if you believe that you may need two shots a month apart, that you wouldn't even have to do that in order to find out that it works, just to find out the best way of doing it. So expose them and give your people the vaccine, expose them all to COVID.

• 42:04Speaker 01

  You have some rough idea of people who are exposed to COVID from external evidence, how likely they are to get it. If almost none of them get it, you know the vaccine works.

• 42:14Dwarkesh Patel?

  Yeah.

• 42:15Speaker 01

  Now, now you can keep getting better information as you go on, but that's enough. So that means that we could have had some of the vaccine in maybe two months instead of whatever it was, 10 months or 11 months. How fast they could expand production and how many would be willing to risk it and such, I don't know. But the impressive thing is not just that the US didn't do it. We know the FDA is crazy that way, but that nobody did. Now, I don't really know for certain what happened in China and Russia. But at least of the Western countries, none of them was willing to do to do challenge trials. Right.

• 42:56Speaker 01

  That's, I think, a case of enough common cultural elements. One of which is better to have a hundred thousand people die from not doing something than to have ten people die from doing something. Right. And nobody will put it that way, but but the the. And so that's sort of disappointing to me that you didn't. You had one country, which in other ways defied the rules, namely Sweden. And that was a good thing that gives you some more information, although not as good information as you'd like. They didn't do very well, but we're not sure how many other differences there are among the countries that could explain it. They did much worse than the other Scandinavian countries, but not much worse than Italy or Spain, say.

• 43:41Speaker 01

  I think better than Italy and Spain, I'm not sure. And then, you know, people have different explanations of the reasons for for these different outcomes. But but but but I, in a sense, I wish the world were less uniform in that sense. And if I think about aging, for example, I can easily imagine the FDA. He at least requiring all sorts of lengthy testing for. Medical treatments to to stop aging and maybe even trying to block them. Because after all, one of the effects of ending aging is that the social security system goes bankrupt.

• 44:26Speaker 01

  All right, very quickly, unless you are willing to stop paying social security to very old people or something. And there are going to be other respects in which there's going to be prejudice. So I could certainly imagine that some countries would see ending aging as a bad thing. Find hard to believe that all of them would. And there are obviously a lot of politically powerful people and a lot of wealthy people who are old. And they're allowed to like not to die of old age. So my guess is that can't be stopped. But as I say, I would have guessed that that somebody would have done a better job on on COVID than they did.

• 45:02Dwarkesh Patel?

  Right. Robin has an interesting theory about this. I don't know if you've seen this, but he thinks that nuclear power could have been much much more technically proficient by this point, but enough regulations. And the way he explains how it's been globally curtailed is he has a blog post titled World Forager Elite or something like that. And I had him on my podcast if you want to listen to that part of the conversation. But his idea is that the elites across the world who control regulatory agencies and policymaking, they talk to each other and just like any any profession, they're deeply imitative and coveting of each other's approval. Just as journalists want the approval of other journalists, intellectuals want the approval of other intellectuals,

• 45:42Dwarkesh Patel?

  policymakers from different countries want the approval of, you know, the EU regulators want the FDA regulator and so on. Anyways, this actually brings up a question I wanted to ask you about legal systems very different from ours, which is your most recent book. You talk about the vast diversity of legal systems throughout history. And yet, when I look out at the world today, you know, you have some exceptions, maybe Sharia in the Middle East and so on.

• 46:10Speaker 01

  There is there is nowhere in there is nowhere in the Middle East with the possible exception of the Islamic State, which doesn't rule anything, which actually follows Sharia.

• 46:19Dwarkesh Patel?

  Okay, so then those questions.

• 46:20Speaker 01

  The Saudis are the closest, as far as I know. But mostly countries that talk about following Sharia have a government statutory legal system, some of whose rules are borrowed from by Sharia. But Sharia, the real thing, it's not clear actually that Sharia is the right term for it, but the real traditional Islamic legal system was not was not legislated by the state. That was a system sort of like common law in the Anglo-American system, in which the legal rules were worked out by scholars based on religious sources. And the judges were appointed by the state.

• 47:04Speaker 01

  But the judges didn't even have to be legal experts. It was a good thing if they were, but they could rely on the Muftis, who were initially at least reputationally supported legal scholars to tell them what the law was.

• 47:17Dwarkesh Patel?

  Yeah.

• 47:19Speaker 01

  In principle, that system had separation of state and law. Now, they always, states always sort of poached on that in various ways. But that was the basis, and no one does that now.

• 47:32Dwarkesh Patel?

  Right, so just to finish my question then.

• 47:34Speaker 01

  Yes.

• 47:35Dwarkesh Patel?

  What is the explanation for why, you know, you don't have any country that has marketable tort claims? Or where, as far as I'm aware, or where, you know, the plaintiff has to bear some risk for filing a suit? If it doesn't work out, why is it that there's so little diversity in legal systems around the world today?

• 47:52Speaker 01

  Yeah, no, but it seems to me that Robin's answer sounds like a plausible answer. You know, when I wrote the book, I, normally when people talk about comparative law, they're talking about Japanese versus European versus US, et cetera. And I was deliberately not doing that, that the closest I came to our system was 18th century English criminal law. And that was so that I'd written an article on it. There was a bunch of really interesting stuff there. But that's really too close to our system for what I was trying to do in that, in that book. So no, you're right, that the modern legal systems all look like variants on the same thing. And I guess there's some pressure for consistency in the sense that if you're going to be doing business with people in another country,

• 48:36Speaker 01

  you'd like their legal system and your legal system to be similar enough so you can make sense of them. But I think a lot of it has got to be ideology and a lot of that is because all of these are are state-made legal systems. So one of the interesting questions is if you look at non-state legal systems, which there are lots in the modern world. That if you think of, you know, a a university's rules for its students, a large firm's rules and so forth. I wonder if you actually looked at those. Or to take an example, I should say there are two chapters in that book that I didn't write.

• 49:13Speaker 01

  That friends of mine, and their their names are on the book, but basically I knew people who had written interesting books on other legal systems. So I asked each of them to do a chapter on it. And that's the book, but the it's chapter by David Skarbeck is on is on prison gangs. And the chapter by Peter Leeson, which is on 18th century pirates. And if you look at those systems, they aren't all that similar to the state ones, if I think about those two at least.

• 49:45Speaker 01

  So I think if my my guess is that if you were looking at non-state legal systems, you'd find a lot more diversity, but I could be wrong. And I suppose that is certainly Jewish law, rabbinic law still exists, not as a state system. Israel doesn't really have rabbinic law, but it exists for certain areas as a enforced by people believing in their religion kind of system. And I suspect again that if you looked at those, you would find a good deal less uniformity.

• 50:17Dwarkesh Patel?

  Interesting, although even when I consider universities, for example, if I got out the rulebook for my university, University of Texas, versus the University of Tennessee, or just name any random university, if I redacted the actual name of the university there, I doubt I would be able to tell which one is which.

• 50:34Speaker 01

  The question is, is either of those very close to either criminal or tort law

• 50:41Dwarkesh Patel?

  Sure.

• 50:41Speaker 01

  in the US, and I don't know about those cases, but I wouldn't assume that it was.

• 50:47Speaker 01

  Because.

• 50:49Speaker 01

  But but but but I think it is probably true that the sort of ruling groups in in all of the developed world know each other and talk to each other and and not wholly unreasonably say, well, you know, that country's got this rule seems to work for them. Maybe we should do it, too.

• 51:08Speaker 01

  I mean, there's certainly another, there are a number of cases where there's where there's been a sort of a deliberate campaign to do that. The one that struck me partly because of some online discussions is age of consent to sexual intercourse. That if you look at the situation, even fifty years ago, I think, what the age of consent was varied a lot from country to country. And at this point, there are countries where it's different, but almost everybody is something between sixteen and eighteen. And similarly for US states, the US states, I think Hawaii was the last one that conformed. I think it was fourteen in Hawaii until maybe twenty years ago or something.

• 51:52Speaker 01

  So there, I think, I think in those cases, there's actually an effort by people who think that it's bad for young people to have sex, more or less. Or it happens under bad circumstances. And and then push the idea and nobody else is all that interested in it. But I think the more general similarity, things you were talking about, I think, are are more a matter of a single global culture, as it were, among the people who among law professors and that I'm pretty sure that when I get messages telling me that people have been looking at something I wrote, a lot of them are people elsewhere in the way if people are not in the US or not in in England.

• 52:37Speaker 01

  And sometimes they're looking at something I wrote about law, sometimes it's something unrelated to that, of course.

• 52:42Dwarkesh Patel?

  Interesting. I wonder to what extent this was referred to me, but maybe it is just that we have had spectacularly successful empires in the recent past. When you think of Napoleon, you know, conquering Europe and creating a rational legal system, or, you know, the countries dominated by England, maybe they were able to just enforce a legal system, then that that that became prevalent.

• 53:05Speaker 01

  That's interesting. That is. There are really two different kinds of countries dominated by England. There are the ones that ended up with a more or less English speaking and to a significant degree, English ethnic population. That's the US, Canada, Australia, New Zealand. I don't think I missed any. And then there are countries like India or a good deal of Africa, which were part of the British Empire. And in fact, India was affected quite a lot. I mean, as you of course know, one of the two official languages in India is English. But nonetheless, it had its own culture. And although it was, you know, to some extent maintained the British influence, it would

• 53:50Speaker 01

  not be astonishing if its legal system was quite different. And I think there at least, I don't know a lot about Indian law, but I think there are significant ways in which it does not fit the Anglo-American pattern.

• 54:02Dwarkesh Patel?

  Gotcha. Yeah, so I want to ask you now, because we're rapidly moving to your dead stop. So I want to ask you about your, you know, your theory of how property rights and the norms to respect them arose. Feel free to explain that theory as you answer this question, which is, why do we not apply the same commitment strategy against the government violating our rights that we do to other individuals violating our rights?

• 54:34Speaker 01

  Because any individual who did that would be worse off as a result, is the simple answer. But basically, what you're discussing is an article of mine called A Positive Account of Property Rights. And it was really about rights in general. I just happened to write it for a conference on property rights. And the same material appears in the third edition of Machinery of Freedom in somewhat slightly different form. And the basic argument is that

• 55:05Speaker 01

  Starts out with with with other species. It starts out with territorial behavior in animals, which is a well-established pattern of a fair number of different species. And the territorial behavior consists of an individual species somehow marking the territory he's claiming. And then somehow turning a switch in his brain so that he will fight more and more desperately against a trespasser of his own species insects, who the farther into the territory he comes. And the critical fact is that unless the trespasser is much stronger, a fight to the death is a loss for both sides. And therefore, if one side can somehow commit himself to,

• 55:49Speaker 01

  "I will do whatever it takes to fight you," then the other side backs off. And I should say, this is something I ultimately got from interacting with Earl Thompson, who is no longer alive, but he was a UCLA economist, who was again, a little bit like Robin, in the sense of a very bright, very original kind of person, and a lot of fun. And I discuss him on my blog a little bit, and a little bit more in something I've been writing. But the idea of commitment strategies is really important. And you then say, "Well, what's the human equivalent?" The human equivalent is mostly not geographical boundaries. It's boundaries in right space.

• 56:31Speaker 01

  It's what are the patterns of behavior that, what are the lines such that if somebody else crosses them, I am willing to bear unreasonably large costs to fight him? That's the way of thinking about it. And that then gets into the idea of shelling points, the idea that you can't just set your boundary anywhere. You have to set your boundary at something which both sides will see as a natural division. So I talk about things like bank robbers, who have to split the loot, and each one thinks he deserves more than half of it, but they don't want to keep arguing about it till the police show up so they agree on 50/50. That 50/50 seems like a natural division, like what's called a shelling point.

• 57:15Speaker 01

  And I discuss that at some length, as I say, in both the article, which you can get from my webpage, or the chapter in my third edition of Machinery. And that then...

• 57:30Speaker 01

  What makes civil order, the reason we aren't in a Hobbesian anarchy where everybody's fighting everybody else, is that we have reasonably consistent pictures of each other's commitment strategies. So that I know that if I am your neighbor and I come and say, "I've decided to dump my trash over the fence onto your property," and look, doing anything about it legally would be more trouble than just dumping the trash, just disposing of the trash, you aren't going to accept that, that, nor are you going to accept it if I say, "Look, instead of dumping my trash, pay me $10 a month," you're not going to do that either. And in terms of a simple cost-benefit calculation, it looks like you ought to surrender, but we all have a feeling for why it would be a mistake to surrender.

• 58:11Speaker 01

  So, in that sense, you get a pattern in which people are mostly not fighting each other because each person knows, "Here are the lines other people have drawn." And you can't just draw the line anywhere you want. I can't draw the line and say, "All right, the deal is, I will fight as hard as I can if you don't pay me $50 a month in tribute," because you won't believe me. And you, but I will believe you if you tell me, "Try to make me pay you tribute," and I will do whatever I, whatever I have to to stop you. So, that's sort of the basic idea. People should read the article if they want the details. And then, my definition of government is that organization against which we drop our commitment

• 58:56Speaker 01

  strategies. And if I drop my commitments, it depends on other people seeing the difference, seeing that a government is a different kind of thing. If I drop my commitment strategy against you, other people will observe that and say, "Look, he's a wimp, we can push him around too." This is my discussion of why the UK was willing to send their only aircraft carrier almost to Antarctica to fight the Argentina over some barren islands that nobody cared about. Because if they didn't, it might be Gibraltar next. If it was clear that they were not committed to defend their territory, even when it didn't seem worth doing. And...

• 59:42Speaker 01

  On the other hand, if you have a organization that is sufficiently powerful, and if other people don't see giving into it as the same thing as giving into an ordinary person, then you know that if you tried to maintain that commitment strategy, you would die because the government's got a whole lot more power than you do.

• 1:00:06Speaker 01

  And therefore, you don't. And so I think that's the the the base, the basic interest. But I really got into that part of it because the question I was trying to answer is what makes something a government? Because I call myself an anarchist. The the society I describe in machinery as an anarcho-capitalist society has mechanisms for enforcing law. It's not just that you can do anything you like. Why aren't those mechanisms a government? And that was the question I was starting with because some people said they are, you're not really an anarchist. And my answer is because those institutions are seen by people as having the same status as as private individuals.

• 1:00:49Speaker 01

  That the in the the the rights enforcement agencies are not a government because if they try to extort you, you will in fact resist not an infinite cost, but a much larger cost than the issue seems to be worth. As would other people, whereas governments, you don't. So that was that was my answer.

• 1:01:08Dwarkesh Patel?

  Right. And in fact, I had Michael, Professor Michael Huber on my podcast, who has written a book called The Problem Political Authority. Instead of making the positive account, he makes a normative account for. Yeah, yeah, sorry. He makes a normative account, sorry, for why we shouldn't distinguish between

• 1:01:25Speaker 01

  Yes.

• 1:01:25Dwarkesh Patel?

  political authority and normal individuals.

• 1:01:27Speaker 01

  That's right. That that that book, he basically runs through all of the standard philosophical arguments for why governments have a right to do things the rest of us don't have a right to do.

• 1:01:37Dwarkesh Patel?

  Sure, sure.

• 1:01:38Speaker 01

  Basic conclusion is that the only defensible one is the belief that if they don't have the right catastrophic things will happen. And he then spends the second half of the book arguing as I would that it isn't true.

• 1:01:49Dwarkesh Patel?

  Sure. And by the way, have you have you heard of Charles Murray's strategy for setting up a commitment strategy to combat government interference in his book For the People? If if not, you'll find this very interesting. Okay, so the idea is this, you you have a few people uh who have a lot of money, set up a fund, and he calls this the Madison Fund. And the entire purpose is whenever OSHA or the EPA comes to somebody that, you know, normal people can sympathize with, and they say, here are the regulations you must abide by. Maybe they they'll destroy your business and so on, uh but and maybe they're obviously unreasonable. And in these cases, this Madison Fund would go through every possible legal avenue, even though they know the end result is going to be that they're going to lose the case,

• 1:02:34Dwarkesh Patel?

  to increase the burdens on the EPA agents and on the bureaucracies within the EPA, increase the cost that they had to bear for enforcing this rule. And so then the government knows, listen, we we can't go about enforcing this rule because it's just not effective. Uh it it's not.

• 1:02:49Speaker 01

  Problem is that if if they weren't committed to do it for any any victim, it could work. That is to say, I presume that regulatory agencies do actually look at how hard their target is going to fight. But given that they're committed to doing it for everybody, the regulatory agency is going to say to itself, if we give in here, we're not going to be able to do our assigned job assigned by Congress. And therefore, we should, and after all, the the the federal government has an awful lot of money available to much more more money than your your your group of wealthy people do.

• 1:03:23Dwarkesh Patel?

  Interesting, but if you've started off one one regulation at a time, and in each case.

• 1:03:28Speaker 01

  That's right, if you could if you could find, if you could find some way so that it only applied to one percent of of of what the agency wanted to do, you might you might be able to pull it off. That would be an interesting, an interesting project. So what what what's the book?

• 1:03:44Dwarkesh Patel?

  For the people, or by the people, rather. Right, and another uh another variant he has on this is uh instead of like having somebody fund this charitably, you can have, for example, an association of dentists. They all pitch in two hundred dollars a month. And then the goal of this institution is, if the government tries to enforce this law, which we know is not effective at preventing, you know, uh harm or anything, then we will chip into the legal cost of fighting government tooth and nail to enforcing this rule.

• 1:04:11Speaker 01

  In a certain sense, this is how a private law system like the Somali system did work. That is to say, in the Somali system, the traditional Somali system, you have coalitions which are formed partly by kinship and partly by explicit contract of a group of people. And part of the deal is if somebody wrongs one of us, everybody in the coalition will help him use feud, basically, use or threaten violence against the person who harmed him to get compensated. And when the compensation comes in, it gets divided among the members of the group.

• 1:04:56Speaker 01

  Typically, the victim gets a larger share. And it's more complicated than I'm describing, but the basic idea is that it is a group of people who are committed to defend each of them against wrongs by people who are members of other such groups.

• 1:05:14Speaker 01

  But it's more, even more complicated than I'm describing because it's a set of nested coalitions, where if the group you're fighting, you're dealing with is too strong, you expand by taking in the set of people, the set of other such groups that are sort of part of your, of your tree, as it were.

• 1:05:32Dwarkesh Patel?

  Right.

• 1:05:33Speaker 01

  It's quite a neat system. I have a chapter on that in the Legal Systems book, and it was a lot of fun.

• 1:05:37Dwarkesh Patel?

  As a computer science student, I really enjoyed that chapter because it just appeals to my, it appeals to my, you know, the aesthetic of recursion when you're looking at the most common ancestor or the most recent common ancestor. Anyways, okay, so I want to ask you.

• 1:05:54Speaker 01

  What I like about it, of course, is not the kinship part, although that's very important in that society, but the fact that it's also by contract, by explicit contracts. So that you can have what they call a pile of shields, which is a coalition which is entirely by contract rather than by kinship. And apparently, that was the term they used for NATO.

• 1:06:19Speaker 01

  That because it wasn't like we were kin, but we had all agreed to

• 1:06:23Dwarkesh Patel?

  Right.

• 1:06:23Speaker 01

  each other.

• 1:06:24Dwarkesh Patel?

  Yeah, yeah.

• 1:06:24Speaker 01

  Island shield.

• 1:06:26Dwarkesh Patel?

  Yeah. Uh, and okay. So I want to ask you, does this theory imply that the poor are the least likely to have their property rights safeguarded? Because the point of a commitment strategy is the other person knows that

• 1:06:40Dwarkesh Patel?

  in some sense, you're protecting this property, which is not worth the cost of retribution.

• 1:06:44Speaker 01

  Side of that is that the poor also has less have less valuable stuff to steal.

• 1:06:48Dwarkesh Patel?

  Sure, but if

• 1:06:49Speaker 01

  One hand, the poor, uh, and poor is poor is too narrow a statement. Whoever has less of the resources relevant for conflict. So that it might well be that a poor lawyer uh, would be in a pretty good position because conflict in our society might well be lawsuits and his time is available for him. Whereas a somewhat better off person with no expertise in law might not be. Uh, and after all, I, I, I discussed this in the context of the Icelandic system a thousand years ago. And then while money was you, while wealth was useful, the main thing was how many of your kin

• 1:07:28Speaker 01

  were competent warriors, uh, how many of your friends were. So it was really the relevant, the relevant power in that was not mainly money. It was mainly alliances.

• 1:07:39Dwarkesh Patel?

  Sure.

• 1:07:40Speaker 01

  But it's true that anybody that, that, that in such a system, how well you are protected partly depends on how much of whatever resources are used for, for, for, for conflict that you can command. But at the same time, how much protection you need depends on how much stuff, on how strong other people, other people's reason to want to violate your rights are.

• 1:08:04Dwarkesh Patel?

  Right. But, uh, yes, I'm, uh, uh, where I was going to go with that was, um, not necessarily that you have less resources for retribution, although that's part of it. But another is you just have less stuff that the aggressor could keep aggressing upon. Maybe you just have one location where your property is housed so that once it's taken, there's no reason for the aggressor to expect you to do retribution because you have no, there's nothing that your commitment strategy is further helping you protect.

• 1:08:29Speaker 01

  Well, except you've got a future. It's it's protecting other things you accumulate. And if people are too worried about that, you will then get coalitions. You will get what you had with kinship in Iceland. You will get groups of people who agree, as in Somalia, that we will, if your rights are violated, we will help you fight, as it were. And we will then get a share of the compensation.

• 1:08:59Dwarkesh Patel?

  Interesting.

• 1:09:02Dwarkesh Patel?

  Okay, so I I want to talk now about just some general questions that are relevant to this discussion. One of the one of the ideas that's been going around in the kind of people I talked to is this essay by this venture capitalist named Sam Altman, and it's titled Moore's Law of Everything. And the idea he has, which is relatively common, is that we're going to have stupendous levels of wealth created by automation and AI. And this wealth is going to somewhat arbitrarily flow to very few Asians, to the detriment of everybody else, because they're going to lose their jobs. And then what's necessary then is some sort of wealth tax or some sort of land tax in order to redistribute this income.

• 1:09:41Speaker 01

  Beginning with, is it detriment to other people? Or only that other people don't get the large gain? Because my first my first approximation response to all of these stories is why can't you have a subset of the population who are doing the same things they were doing before with the same technology, trading with each other, and are about as wealthy as they were before? Now, maybe you can't, because maybe all the capital gets bid away from them. But they'll have whatever their own capital is. So it's it's hard to see how they are worse off than Hong Kong in 1950, than any society which doesn't have a lot of wealth, but has people who productive people.

• 1:10:25Speaker 01

  So I think it's I think it's entirely plausible and may already have happened that technological change will result in some people being a lot better off and some people being a little better off. So if you think about there's evidence, I've never haven't really looked very carefully at the whole issue of whether wealth in the US is becoming more unequal. People claim it is, it might be true, but it's sort of complicated because you've got to look at at household versus individual. And if households are getting smaller, then household income would go down, even if individual income didn't and so forth. But but putting that as supposing it's happening,

• 1:11:02Speaker 01

  one explanation is that technological progress means that the value of intelligence is increasing more than the value of strength. That's the sort of simplest way of putting it. And therefore, even if the value, even if strength is still useful, it would then be the case that the P that that that sort of smart techies will get a lot richer than than other people. And that could easily be happening and maybe what has been happening. I'm not that not just techies, doctors, lawyers, people, other people of that sort. So so that may be what has been happening over the last 20 or 30 or 40 years. I'm not sure. And that could certainly keep happening.

• 1:11:42Dwarkesh Patel?

  But so so listener, I mean, if it was just that the wealthier get more, you know, can produce more, that would in fact be good for the poor people because now if more can be produced because of AI, then it's cheaper for them to buy the things that they would want to buy. I'm talking about a scenario where automation makes their jobs useless. And we're talking about large segments of the population.

• 1:12:03Speaker 01

  I don't understand. Their jobs are useless only in the sense that there is another way of doing the same thing.

• 1:12:13Dwarkesh Patel?

  Yeah.

• 1:12:14Speaker 01

  But that other way is.

• 1:12:22Speaker 01

  Costs are relative, right? Why, they can still do the same things as before in an hour of time. So why can't they still produce the amount of stuff? So you can imagine stories where they can't. Stories where somehow the people who are, can produce enormously more are no longer available to them to work with them in producing their things. But there's, it's not obvious that you would expect that to happen. And at the same time, the usual sort of comparative, principle comparative advantage rule is that the more different the people you're trading with are, the greater the gains to both sides of trading.

• 1:13:02Speaker 01

  So if the result is that the, that certain things, individuals who can do them are a hundred times as productive and certain things only twice as productive, then someone who can't do those things can do the, the, the twice as productive ones and trade for the other stuff and get much more than they could before. So, so it's, it, it doesn't seem to me that it's the pattern you would expect, except if what matters to you is relative income. If you, matters to you is relative income, then it's the pattern you would expect. But if it's absolute income, it isn't impossible.

• 1:13:40Speaker 01

  But I don't, again, I don't see why, why can't the non-techies keep running a non-techy economy, as it were, for themselves? And then have that non-techy economy trade with the techy economy on much more profitable terms than it could have traded with anybody before, because the techy economy, even it's better at some things, it's much more better at some things than others. That seems to me the right first guess on that. I should write this blog post.

• 1:14:08Dwarkesh Patel?

  Oh, that's an interesting idea. But then, I mean, would that analysis apply? Could you say a horse, well, a horse will retain some comparative advantage over a car, but that doesn't, like if we're talking like a hundred years ago, right? Just consider a horse versus a car. It's not as if when the car came in, like by definition, the horse has some comparative advantage in terms of, you know, you know, some benefit you can get out of it.

• 1:14:30Speaker 01

  Of course, it has a much more restricted set of things it can do than a human being does, and a horse doesn't own himself.

• 1:14:38Dwarkesh Patel?

  Right. So to the extent that AI can do a lot more of the things that humans can do, then could it get worrying in that sense?

• 1:14:51Speaker 01

  I don't know, I should think more about this question. But, you know, I'm certainly familiar with the scenario, kind of scenario you will talk about. I don't know what the particular author you're talking about. But it does seem to me that it seems to be much more plausible that the poor people will be better off, just not nearly as much better off. Because there have got to be things that the computer is not better at. You know, people might like personal servants and personal servants are, it's very hard to make a computer a real full substitute for personal servants. They might like people to nannies for their kids.

• 1:15:36Speaker 01

  They might like live entertainment is something people value. It seems to me there are going to be an awful lot of things, even if like 80% or 90% of things, computers can do much better. If there's 10 or 20% of things they can't do, even though they can do a little bit better. Better is a relative term and you can then keep doing those things and trade them for the others.

• 1:15:58Dwarkesh Patel?

  Interesting. Okay. So I want to respect for your time, just two more questions. First of all, what have you learned about economics from the Society for Creative Anachronism?

• 1:16:10Speaker 01

  Huh, I've gotten a little bit more sympathetic attitude to gift cultures. Because now I also pick up from reading Icelandic stuff, that is medieval Icelandic stuff. But it is, I have, in a sense, I should have, I should have realized it earlier, even without that, because there are certain parts of our ordinary life, which are gift cultures. And the standard example I give is that you have some friends over for dinner. And they feel as though they ought to have you over for dinner. And if they can't have you over for dinner, they should take you out to a restaurant. And it would never occur to them to say, well, you took them out for dinner. Why don't we pay you 20 bucks and we're even?

• 1:16:53Speaker 01

  So that's a gift, a gift culture embedded in our ordinary system. But certainly in the SCA, partly because I'm playing the role of a medieval person. And at least in some medieval cultures, you have the idea that nobles don't work for money. That it's sort of.

• 1:17:17Speaker 01

  Anyway, but also sort of the feel of it is that I feel as though it makes sense to do favors and not to do things for money. Now, it isn't entirely true. I, I have, my wife and I have a medieval cookbook and we sell that. And, but generally, when I went, when I, long before that, I put together a collection of source material on medieval cooking, which I reduction Xerox four pages to a page to make it really cheap. And I was selling that for cost. And it somehow didn't seem appropriate in terms of my interaction with other people hobby, hobby to be doing it for money. And similarly, one of my hobbies is lapidary work, cutting, cutting semi precious gemstones.

• 1:18:00Speaker 01

  And I do it for fun. I cut more stones. I also do some jewelry making, but not very much. I cut more stones than I have a use for. So quite a while ago, I put up an offer on Facebook to other SCA people that if somebody was making jewelry, actually based on medieval jewelry, I would donate gemstones for them. And again, it just felt more nearly right to me to do that as a donation than to say, I will sell them to you. And I'm not quite sure why, but except in terms of my emotional feelings that, that, that having participated in gift cultures, it's making it easier to have some feel for why people. But I still don't really understand economically. I mean, the very interesting question,

• 1:18:42Speaker 01

  maybe someone else has looked at more carefully, why you sometimes have gift cultures and why you don't. Why?

• 1:18:50Speaker 01

  Yeah, anyway.

• 1:18:51Dwarkesh Patel?

  Uh, yeah, I would love to hear, read an explanation of that, just as you made an explanation for property rights. Similar thing would be very interesting. Uh, cause you forego the convenience of, uh, you know, money as an exchange for keeping track of favors. It's very interesting why that's done. Uh, final question.

• 1:19:09Speaker 01

  Yes.

• 1:19:09Dwarkesh Patel?

  Given, you know, the sort of futurism that you've done and the different technologies you've looked at. If you were 20 today, what field would you decide to go into and in hope to, uh, either, you know, increase innovation in that place, space, or maybe to make a profit and start a successful company?

• 1:19:28Speaker 01

  Yeah, I'm not sure I'd be very good at starting up a successful company.

• 1:19:33Speaker 01

  I mean, the obvious interesting area at the moment is sort of encryption and stuff and crypto courage and so forth. But the problem is, this is the usual problem, because it's an interesting area, a whole lot of smart people go into it.

• 1:19:47Dwarkesh Patel?

  Yeah.

• 1:19:48Speaker 01

  So I started out getting a doctorate in theoretical physics. And part of what happened was that I was less enthusiastically interested in the subject than some of the other people, but I was smarter than the people I was interacting with as a graduate, even as a graduate student at Chicago. And that was enough of an advantage. Then I was a postdoc at Columbia Physics Department, and I wasn't smarter than the people I was interacting with. They were the professors, and they were much more interested. And it occurred to me that what had happened in theoretical physics was that because at the time I went into it, it was sort of the elite field that was being subsidized and everybody knew was the high status important thing, although it hasn't really produced

• 1:20:29Speaker 01

  as much since then as it was expected to, that therefore it was overpopulated with high IQ people. And that was one part of the reason that I eventually left that field and became an economist instead. Because there are certainly some very smart people in economics, but there weren't as many of that kind of people, as it were. It wasn't as dense, so it was more likely that I was smart enough to say original and interesting things in that field. So again, the temptation, partly because computer programming is a lot of fun, I've done it, though I'm not professionally, it would be tempting to go into computer programming. And in effect, I guess what the thing I would enjoy, the thing I like thinking about, and

• 1:21:13Speaker 01

  I don't know if I can pull it off or not, would be independent computer programming, to do the equivalent of inventing Tetris.

• 1:21:22Speaker 01

  Uh, of and maybe to do something where you can carry it far enough. So somebody will pay you a whole lot of money to take over your project and then doing it really right. Making machines that work is something that human beings really enjoy. And it's a whole lot easier with programming than it is with engineering. Uh, and I have ideas. I have ideas for computer programs to help teach economics, three of which went with my price theory textbook I actually wrote. But I've got lots of ideas for more. And I think what would be fun, assuming I could support myself doing it, or maybe do it along with some other things,

• 1:22:04Speaker 01

  would be to be taking clever ideas, like what I was saying before about how you ought to be running, how you ought to do computer dating, uh, things like that. And some mixture of writing the programs myself for simple things and getting other people involved in such projects where the project requires more than one person for company. And that, that, that's probably the activity that most strikes me as being fun. Now, I've also written a few novels and it's possible that if I had started writing novels very early, I would have been good enough to sort of be able to support myself and do good stuff. But my guess is not that my impression is that the people who are really good at that have talents I don't have.

• 1:22:50Speaker 01

  And so I think I would only do that as I do it for my own fun. I write novels that some people enjoy, uh, so it's worth doing. But even if I compare it to my younger son, who is a would be novelist, and he just thinks about it a whole lot more carefully than I do and has,

• 1:23:08Speaker 01

  I sort of do it by intuition. And he does it by some mixture of intuition and theories of how to write novels and he's much better than I am.

• 1:23:18Dwarkesh Patel?

  Uh, yeah. Which is nice, I mean. Well, anyways, uh, Dr. Friedman, this is a great pleasure. Thank you so much for your time. It was fun. Thank you. I enjoyed it too. Bye bye.