Is Market Capitalism simply an accident of certain factors that came together in the 19th and 20th centuries? Does the innovation of economics require a new economics of innovation? Is the study of economics deeply affected by the incentive structures faced by economists themselves, necessitating a study of the “economics of economics”? In this broad ranging interview INET Senior Economist Pia Malaney sits down with Eric Weinstein – mathematician, economist, Managing Director of Thiel Capital (as well as her co-author and husband) to discuss these and other issues.
Underlying the seismic shifts in the economy in the last ten years, Dr. Weinstein sees not just a temporary recession brought on by a housing crisis, but rather deep and fundamental shifts in the very factors that made market capitalism the driving force of economic growth for the past two centuries. The most profound of these shifts as Dr. Weinstein sees it, is an end to 20th century style capitalism brought about not by a competing ideology, as many had once feared, but instead by changing technology. As production is driven increasingly by bits rather than atoms, he sees the importance of private goods give way to public goods, undermining a basic requirement of market models. In a different line of thinking, as software becomes increasingly sophisticated it takes on the ability to replace humans not only in low level repetitive tasks but also, with the use of deep learning algorithms, in arbitrarily complex repetitive tasks such as medical diagnosis. He sees other technological changes such as the development of crypto-currencies changing the very basics of a macro economic system currently controlled by central banks. Such developments have to potential to de facto shift economic decision making away from centralized government control in a manner that is as yet unpredictable.
Dr. Weinstein also explores the political economy of economics itself, discussing the notion of “economics squared” and the role of rent seeking within the field. Are academic macro-economists truly in a position to advise government agencies given their own track records? Is it time to turn the same lens on economists that they have so effectively used to analyze other labor markets? With the sharp eye of outsider and the familiarity of an researcher within the field, Dr. Weinstein provides the kind of unflinching critique economists are more used to serving up than receiving.