Mike Green: The Fourth Turning and Reimagining the American Dream

“I think there are a lot of people who feel a genuine frustration at how the system has behaved, and more importantly about how there has been this dynamic of privatized gains and socialised losses. The way I would resolve it is, you know that’s wrong. And yet it seems that the models or the tools that are being used give us no option to that. And at the core, what that’s telling you is that the models are a mistake…” Mike Green In this podcast, Mike Green and I discussed political philosophy. Well, I fumbled around trying to articulate my frustrations, objections and questions and Mike managed to read between the lines and carry the show. By way of background, I’ve been frustrated with a few things since the late 1990s. Most of my frustrations relate to how regulators, governments and central banks have repeatedly undermined the capitalist process of creative destruction by bailing out imprudent risk-takers. We got a taste of this in 1998 when the Fed bailed on LTCM, and a belly-full of it in 2008 when they changed the rules on mark-to-market accounting and bailed out the banking sector. Since then central banks have supported asset prices at every turn, with increasingly direct intervention, culminating in direct purchases of corporate credit in March of 2020. For the most part, Mike and I are frustrated about the same things: regulatory capture and a fundamental misalignment of political power and incentives, the compound effect of which is responsible for most of the forces that are tearing America apart from within. However, where my experience has festered and soured, Mike has been diagnosing the problems and seeking solutions. Viewed through the prism of Mike’s philosophical framework, our current situation is a function of decades of policy choices rooted in a misguided faith in Calvanist meritocracy, amplified by a fundamental misapprehension that goes to the very heart of economics. These themes converge as we explore: How treating the economy as an ergodic system inevitably leads to accelerating boom-bust dynamics How central bank policy is largely motivated by a policy choice that has placed the social safety net in the hands of the corporate sector Why a policy of offering guaranteed, non-dischargeable loans to children to pay for higher education is criminally irresponsible, and creates a cascade of corrupt signaling mechanisms and mal-incentives, with obscene repercussions MMT, the Kalecki equation and how policy can be structured to narrow the wealth gap Ergodicity economics, the Farmer’s Fable, and the myth of meritocracy The importance of the Fourth Turning as a time to dismantle corrupt institutions and rebuild in a new image Disentangling skill from luck, and designing a redistribution policy that socializes windfall gains to support distributed entrepreneurship and economic dynamism Creating a system of accounting that recognizes non-monetary contributions and externalities How citizens will think about taxes in a modern monetary world, and whether taxes have only ever been paid at the business end of a gun Whether we can move past the Fourth Turning without a major catalyst, what that catalyst might look like, and how to look across the chasm with optimism about the future This is a two-hour podcast, and I apologize in advance for meandering questions and the occasional non-sequitur. Still, this was a deeply important conversation, and I think it’s worth your time. I think many of us who think about the state of the world know that something is very wrong. Many of us have worked to bury these frustrations and work within the game and the rules as they are. But at root we are mostly checked out. Mike makes the case that the system is broken, but it can be fixed. And he expresses an incredibly coherent framework for a system of...