Shifts in Economic Debates: From Regulation to Housing Crisis

Noah Smith, an economic commentator and Substack writer, once dismissed libertarianism as a relic of the past. But in a political climate increasingly defined by populist protectionism and authoritarian rhetoric, he's reconsidering. "There are worse monsters than the market," Smith recently wrote.

With Reason's Zach Weissmueller and Liz Wolfe, Smith explores the evolution of his thinking—from criticizing "thin libertarianism" focused solely on state coercion, to advocating for a more expansive, "thick" conception of liberty that accounts for institutional and corporate constraints as well. He also discusses how libertarians might shape political discourse despite being exiled from both major parties.

Sources Referenced

• "I owe the libertarians an apology," by Noah Smith
• Just Asking Questions with Derek Thompson: Democrats Must Change
• Just Asking Questions with Michael Beckley: China is Dangerously Weak
• Michigan Gov. Gretchen Whitmer on tariffs

Chapters

• 00:00 Reflecting on libertarianism and Donald Trump's rise
• 06:00 Revisiting financial regulation and the housing crisis
• 11:00 Thin vs. thick libertarianism
• 17:00 Censorship, coercion, and the role of private platforms
• 29:00 Tariffs, trade, and the antineoliberal left
• 37:00 The shifting power dynamics in the Democratic and Republican parties
• 45:00 Political homelessness and the libertarian intellectual wilderness
• 54:00 Industrial policy, mRNA vaccines, and the role of government
• 1:01:00 China, manufacturing, and national security
• 1:10:00 Argentina, Javier Milei, and libertarian governance in practice

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Transcript:

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Noah Smith: I didn't understand what libertarianism had arisen in response to, and now that some of those things are coming back in the form of Trump, I see that libertarianism had more of a purpose than I realized.

Liz Wolfe: Were libertarians right all along? Just Asking Questions. Have you apologized to a libertarian lately? Today's guest has. "I owe the libertarians an apology," wrote pundit Noah Smith on his Substack. "It turns out there are worse monsters on the market."

"I've spent years making fun of Ayn Rand novels," Smith continues. "And yet, doesn't Trump's cronyism, disdain for private businesses, and relentless instinct for government control make him the perfect Ayn Rand villain?tag=reasonmagazinea-20″

We're here to interrogate this mea culpa. Noah Smith, welcome to the show.

Noah Smith: Thanks for having me on. 

Zach Weissmueller: So, Noah, you do have a deep archive of blog posts criticizing libertarianism. Now you're kind of sorry. Tell us why.

Noah Smith: When I was an economics grad student in the early 2010s, I really encountered a lot of people who were deeply libertarian. People would unironically just quote Robert Nozick and talk about how much they liked Ayn Rand. So it felt very near. Everyone fights the near enemy when they're intellectuals. If you live in a liberal city and you're inclined to argue with things, you'll argue with liberalism. I lived in a libertarian city/culture, so I argued with libertarianism.

At the same time, that was the Great Recession when it felt like our failure-you know, financial deregulation, and then our failure to intercede against a lot of the economic problems we were having, seemed to be causing a lot of issues in America and had really crashed the economy a lot. So it felt like a good time to beat up on libertarianism. I think those things combined were the reasons I criticized libertarianism so much.

But what I didn't know— I wasn't alive during the 1960s and '70s— I didn't see the ideas that libertarianism had been a reaction to. When you come up after the fact and you don't know the history of the thought there, I mean even the history of  libertarian thought, if you study it,  won't teach you this. It won't teach you the cultural milieu that people were responding to. Only studying history will teach you that—and even that only teach you part of it because history is very potted and sanitized.

You have to go to primary sources, see what people were talking about, what people were saying, and you have to read between the lines, and infer from what policies were being done. I mean, you look at Richard Nixon, you look at price controls and the Nixon shock and all these kinds of things. And you see libertarianism wasn't just responding to some lefty college kid challenging Milton Friedman clumsily at some town hall—which is from the famous video you can watch. It was also challenging a lot of the things Richard Nixon was doing.

I think that I didn't understand what libertarianism had arisen in response to. Now that some of those things are coming back in the form of Trump, I see that libertarianism had more of a purpose to be there than I realized, in terms of balancing out other ideas that were also bad, that had mostly been conquered and submerged by the time I started criticizing libertarians.

Liz Wolfe: What do you mean when you talk about the cultural milieu that libertarianism was reacting to? Which elements are you referring to?

Noah Smith: The New Deal arose in response to the Great Depression and response to the general underdevelopment of America. The New Deal started as an anti-depression measure but it took on all these long-term sort of projects like building the interstate highway system, making environmental regulations, and social insurance, and  all the edifice of big government that we've built. I think a lot of that edifice was great and should be kept, but if reformed and tweaked, and whatnot. But I think that what that meant is that we'd—we spent so many decades coming up with big government solutions to every problem that we had—that there was an impulse to come up with big government solutions to every problem we encountered.

And so, when you saw things like inflation, the oil shocks, there was this, you know, impulse to use fiscal stimulus, which had helped us in the Depression, helped us in some small recessions after World War II. So, like, let's do that again.

No—well, I guess we didn't really do much fiscal stimulus, but monetary stimulus—you know, that had been useful. And so then, that stopped being useful in the '70s. And I think that's the classic example everyone uses, but there's other examples too.

So, for example, the Bretton Woods system said that the dollar is the reserve currency—the dollar equivalent to gold. It was a fake gold standard, where it really was the dollar standard.

And yeah—so, when that started causing trade imbalances, you know, we responded with trying to control trade. And that was a bad idea. Instead, you know, free trade—relative to where we were—probably was a good thing for us.

And it maybe wasn't a good thing with regard to China in the 2000s. Maybe it hurt us on the margin. But then, in terms of, you know, helping us in, like, the '70s, '80s, '90s—like those—I think that free trade helped us a lot compared to where we'd–

Zach Weissmueller: When you're describing yourself as reacting to the city around you, in this case I assume it's kind of like the community of economics bloggers in the 2010s who's like the one sort of microculture that might skew libertarian?

Noah Smith: I wouldn't say bloggers. I'd say economists and econ grad students. Economists themselves. The discipline of economics has a lot of libertarians.

Zach Weissmueller: You're describing these bigger fundamental debates that have now resurfaced. What were some of the major debates of that time that now you feel have been sidelined to focus on "is trade good?" 

Noah Smith: Right. So, financial regulation. After the recession, we were like, "Oh my God, we deregulated finance, and then the economy crashed. Let's regulate finance. How do we do that?" And then we did Dodd-Frank, and then we stopped thinking about it—forever.

Then we had a tiny little mini banking crisis. In 2023, we had the failure of Silicon Valley Bank. And then the system worked. Everything held. That was taken care of quickly, and there were no real problems.

So, I think that debate over financial regulation has largely disappeared.

Debate over, like, fiscal stimulus—at this point, we're thinking, "How do we prevent all this debt? How do we prevent inflation?" We're not thinking about, "How do we get everybody a job?"

You know, people have a job now. And the question is, like, what do we do about this inflation?

Liz Wolfe: I am curious about what you're saying about financial regulation, and you mentioned that a few times as something that's very formative on how you came to look at the world.

But I'm curious—this is a very niche issue, a theory that's believed by some libertarians. I know some folks at Cato very much believe it, but I wanted to see what you think.

To what degree do you attribute the current sort of housing crisis to an overregulation in the wake of the Great Recession—specifically in the form of over-tightening lending standards, basically?

Noah Smith: I believe lending standards were over-tightened. How much the housing crisis is due to that is dubious because we haven't built enough housing to accommodate our growing population since the 1970s.

Liz Wolfe: Well, yeah, it's definitely a multi-causal type thing, but I am curious, because I feel like the "what's the right amount to regulate in the wake of a crisis" thing is something that people, in some circles, sort of skate past.

When it's like—I don't know—if that's part of why we're in such a bind with housing right now, that seems very relevant in terms of figuring out how to respond to future crises.

Noah Smith: So, I do agree that Cato is right in the sense that overregulation of lending standards—which was not really new laws passed—it was really just regulators being tougher. I think that was a big… that was the deal. That's a thing and needs to be pared back— and eventually was—pared back, actually. I think some of that was pared back.

Liz Wolfe: Go ahead.

Noah Smith: But I'm saying also, I think a lot of the tightening of lending standards was behavioral. It wasn't regulation entirely, because I think that simply people saying, "Oh my God, subprime," after the financial crisis and the housing crisis, I think that led a lot of institutions to be extremely conservative in who they lent to.

And that's just proximity bias. That's this recency bias. That's just like—if you cut your hand, you're wary around knives for a while. And that was what that was.

So, I think yes, regulation had something to do with it in terms of the attitudes of regulators, but really, ultimately, the changing attitudes of regulators and the changing attitude of bankers—and lenders—both came from the same reaction to the crisis. There's this very natural reaction of, "Don't stop doing the thing that just caused this pain."

And I think that there was an overreaction that needed to be overcorrected. And that it is now getting pared back. You know, sort of like… yeah, we're finding the appropriate level here.

Liz Wolfe: Why do you think intellectuals—especially on the left— feel the need to be so reflexively sneering toward libertarians? Why scapegoat the libertarians?

Noah Smith: Well, there's a number of reasons. One is that, you know, we have education polarization in this country, right?

You don't have a lot of conservatives among the intellectual set—among college-educated people, professors, whatever, right? So you don't have a lot of people saying, like, "Christ is King" among the university professors and educated people.

Who do you have on the right in intellectual circles? Well, you have some libertarians who say, "Let's leave things to the market."

So, if you have progressives—and, you know, people who think that our country is too conservative—maybe they were, like, bullied for being a minority religion or being gay or something when they were a kid. I don't know. Like, they have real sort of gripes with conservative culture in America.

But then they get into universities and the academic setting—or the professional setting—and they don't see a lot of traditional conservatives. And so, who do you fight? Who do you target as a conservative that you want to argue with?

You know, libertarians are the sort of Trumpist, you know, like, rightist intellectuals. And we have a few of those, right? We have the tech right.

But then—but I think that, you know, for a long time, libertarians were sort of the only conservatives that your average educated progressive ever met.

Liz Wolfe: Yeah, that sort of makes sense to me. But the thing that I'm curious about in your piece—I was trying to really understand: What type of libertarian are you critiquing?

One thing that kept jumping out to me is that it felt like you're objecting to a very specific type of libertarian—what we would call a thin libertarian. Someone who doesn't really conceive of how power and coercion can be used by institutions other than the state. They're primarily concerned with the relationship between the state and the individual.

But there are also a ton of libertarians—I would count myself one of these, I think Zach does as well—who are concerned by all the different entities and institutions who can create impositions on people's freedoms. Who can make it so that people don't feel free and they're not actually truly able to exercise free choice. 

And so, I don't tend to conceive of it as just a thing between the state and the individual. I'm also interested—I mean, that's the most fundamental level that I am most concerned with.

But then, there is another level too, that I think about frequently. You know, do you feel like you're sort of straw-manning the thick libertarians?

Noah Smith: Well, one of the pieces that I wrote—one of the first sort of critiques of libertarianism that I wrote—was something called The Liberty of Local Bullies. At which point I wrote that there are mezzanine institutions in society—I just made that term up—such as companies, universities, churches, all these other things that can cause people to not feel free, even if it doesn't meet the sort of…

They don't have power in terms of—they don't have a monopoly on the use of force like the government. But then, you know—so, I was critiquing what you call the thin libertarianism of Robert Nozick, and of people like that, and of many economists.

You know, you look at George Stigler and Milton Friedman and their sort of libertarianism—which is the kind I encountered in the econ world—and you see that it is the thin libertarianism. It really is.

Nobody's looking at the economics of how people feel constrained by companies and churches—you know, universities. Nobody's looking at that in econ. They're all looking at government policy.

So that is—thin libertarianism is absolutely dominant in the econ world, when econ people think about these things.

Liz Wolfe: Was Friedman really just a thin libertarian? I saw him as somebody who was very concerned with—or interested in—how is it that when we change the relationship between the state and the individual and free up markets, what other sort of, like, you know, cultural flourishing that allows people to live more freely follows from that?

Noah Smith: I don't think he thought a lot about corporate power.

Liz Wolfe: Well, I mean-yeah…

Noah Smith: The way corporations make people feel unfree. 

Liz Wolfe: You're talking about a variety of cultural institutions—you're not just talking about corporate power, right? You're talking about the way a church could be oppressive, or a HOA, or whatever.

Noah Smith: That's right. I mean, Milton Friedman also didn't think much about HOAs much.

Liz Wolfe: Well, I mean, yeah, they weren't as—

Noah Smith: What I'm saying is that thin libertarianism absolutely dominated in econ. And if you read that post, The Liberty of Local Bullies, I was advocating for more of a thick libertarian idea, although I didn't know that term at the time.

But I value freedom very strongly—it's a very strong value of mine. So in that sense, if you want to call anyone who thinks of freedom as a good in of itself as a libertarian, then I am one.

Thin libertarianism dominated so much among the libertarianism that I encountered for most of my life. And even now, honestly I appreciate the fact that there are thick libertarians out there.

And I like this—I'm going to spell it with two C's when I write that: thicc libertarianism. And I love that that's out there, and there are people who think of themselves that way. And that's a great way to be.

And I think that is where libertarianism needs to go. I think, you know, talking about directions where libertarianism needs to go—that's part of it.

I really only saw the thin kind until—well, even now—I see mostly the thin kind. Although, libertarianism is kind of breaking up and dying, in a way, as an intellectual movement. Which is a shame.

I want it back. And I would like it to come back along the lines that you're talking about, rather than along, like, you know, Robert Nozick.

Zach Weissmueller: I mean, I think where I've seen some of this play out in the real world is on the question of tech censorship—specifically throughout the COVID pandemic.

And I think a lot of libertarians were grappling with: how do you critique this? What is going on here in terms of the speech suppression? Should these private platforms be allowed to do it?

I think that the sort of proper libertarian analysis is usually to first look for any—if the state is, in fact, leaning on a private entity to create a coercive situation. And I think, in that specific case, it turned out that there was a lot of that going on behind the scenes.

We saw this jawboning happening between the CDC and the Biden and Trump administrations, and the social media platforms. So I think it's kind of like—the analysis has to start there.

But, I mean, you are right that there is through all of libertarian philosophy—Nozick, Hayek—the emphasis is on coercion. And the way Hayek looks at coercion is, it doesn't have to be perpetrated by the state. It can be perpetrated by private actors.

Coercion is basically subverting someone's will for your own—sort of exerting your will over somebody else's will by depriving them of some fundamental right.

And then the question is, what do you do about that? And the kind of classic libertarian would say, "That's why we have—we're OK with—courts, and police, and national defense, and stuff like that," because there are these other liberties.

We're going to bring this conversation back to, you know, the current political moment. But I am curious what your thoughts are on, like, just coercion—and being against coercion—being sort of at the base of libertarian politics.

Noah Smith: Yeah. So, I think what you're saying about—about internet, policing of speech—internet, you know, platform censorship, let's say—is exactly right.

And I think that that was a moment that made a lot of people who— a lot of libertarians—to the extent that a lot of libertarians even exist…

Liz Wolfe: There are dozens of us. Dozens!

Noah Smith: That moment made a lot of libertarians think about what freedom actually meant.

You had Randall Munroe writing that  very preachy comic saying that, "if it's not against the First Amendment, it's not a restriction on free speech. It's just people who don't like you showing you the door." You've seen that one, right?

Liz Wolfe: Oh, yeah.

Noah Smith: It's a famous comic, and I think people see that, and you're like, "Actually, that's not right." But if you—if you believe in a thin libertarian, you know, Robert Nozick–kind of world—then it is right. But that—so, that can't be right. Something's wrong about that.

Our intuition about what freedom means—what feels free—contradicts that. And I think that that led a lot of people to really see the reality of what I called mezzanine institutions, which, in this case, would be an internet platform that is able to control your speech and your thought, despite not having a monopoly on the use of force or, you know, of any sort of coercion—, any violent coercion, you know, they can't break your kneecaps. 

Facebook or Twitter will never break your kneecaps. But they still had some—there was some sort of power. And in this case, their power came from a network effect—a first-mover advantage combined with a strong network effect.

The fact is, it's really easy to duplicate Twitter, but the network that grew up around Twitter is incredibly hard to move. And so, I think that made people understand that that's a kind of power that has nothing to do with the monopoly on the use of force.

There are monopolies that are not based on the use of force that are also powerful—and that it's monopoly, not force, that really conveys power.

And I think that that is—that's a mezzanine—that's basically mezzanine institutions are institutions that have, you know, some sort of monopoly that's not force, 

Zach Weissmueller: This was sort of driving me crazy as this debate was playing out—it's that the word monopoly was thrown around fast and loose, and none of these companies have a monopoly on network communication.

And then, when we think about how it all panned out in the end—the proposals at the time were, "We need the federal government to get involved," and, "We need to, you know, threaten them, strip away their Section 230 protections, and force this sort of government-mandated neutrality on them"—it turned out really not to be necessary in the end.

I think it was good that their relationship with the government was exposed by the Twitter Files and other things like this. But, in the end, Elon Musk bought X, Bluesky popped up, and it's like a totally different landscape now. And there was no need for some sort of intervention.

So, it seemed like this particular example—while it's worth criticizing bad moderation policies—is kind of an example of the market correcting that issue, right?

Noah Smith: Maybe. But if you're talking about monopoly versus oligopoly, I think it's a bit of a weak point because if you have three platforms and they all—and those three platforms are the only game in town…

If you're talking about consumer prices, it's fine. If Walmart and Target compete with each other's prices to zero with a sort of Bertrand competition—if you know what that is—that just basically means two big players compete their prices to zero, and you don't need, like, 20,000 players.

So if you have that, it's fine.

But then, I think in terms of speech, if you have three big platforms, and they all have people who control speech quite tightly, you still have restrictions. Even though you have three, you have competition among those three, but it doesn't really help, because they all do censorship.

Maybe not even in the same way, right? But maybe they each do censorship. So, no matter what platform you're on, some of your ideas are being censored by the people at the top.

And so, I think this is—that's not a full solve, and not even a very important solve, what you're talking about. So, I don't think the existence of Bluesky has made social media platform censorship less of an issue for our society.

Liz Wolfe: You mentioned the monopoly side and talking about how the monopoly side  is possibly more important than the force side. I totally, vehemently disagree. One of the things that I think libertarians are very correct to focus on, is the fact that coercion from the state—the threat of, "if you don't do this, we will lock you up in a jail cell, and deprive you of your rights and make it very, very hard for you to exist in a society as a free man" That's just a totally different level of threat than being banned for a while from Twitter or from some other social media platform. 

Although I think it is very appropriate as a thick libertarian to be concerned by jawboning of companies- I think libertarians do a very good job of trying to prioritize and paying attention to, "What are the stakes here?" What type of liberty deprivation might you in fact encounter?

Being fired from your job can be awful, I think it's important that libertarians not discount some of that pain, and not overstate how easy it would be for somebody to legitimately hop between jobs, or localities, or neighborhoods, or whatever.

Like, if you feel legitimately closed out of the options, and it's a situation where transaction costs are very high, it's frustrating when the libertarians are sort of a little flippant about how easy it is to switch back and forth between jobs and neighborhoods.

But I do think that it is important—and libertarians do hone in on something really essential—which is: being fired from your job is profoundly… Maybe because a company engages in some sort of coercive behavior, and punishes you for your viewpoint, or something that you did that really is sort of outside of the bounds of reason—it's a totally different level of threat than the state threatening to lock you up in jail.

And I think that that is something that thin libertarians actually do a good job of communicating on.

Do you disagree?

Noah Smith: No, you're right. That's absolutely true. If you have a government that will come and put you in a death camp, break your kneecaps, or throw you in prison and beat your head in—that's more important than anything else.

I think the reason that thin libertarianism was so strong in the mid-century is because we were coming off a time period when many governments were really doing a lot of that. Look at the totalitarian states of the mid-20th century. They did a lot of it. And even we—America, whether we admit it or not, weakly imitates our enemies. We didn't do nearly as much as the Nazis or the Commies, or whatever. But then if you looked at what those people were doing, there was a lot of that. 

[George] Orwell even talks about this in 1984 when, basically, the main character is really—he's worried about this and that they could do to him, but then, when they beat him up with truncheons—which is, I think, a British word for stick—when they beat him up with truncheons, then he's like, "There's nothing in the world worse than physical force"—physical pain.

That's right, you know, in a sense.

The monopoly on these physical things is so important to us. We are meatspace beings. Physical stuff is so important that it—it dominates the first-order effect.

But then you have all these important second-order effects. Such as losing your job or whatever, or just being socially sanctioned. I mean, like, there are cases where people will often die for social acceptance, and people who are denied social acceptance will sometimes just kill themselves for no reason. They'll just kill themselves. And, you know, because they feel like—

Which is not to say that physical violence isn't the most important thing—because I think it is—but then you… "most" and "only" are two extremely different concepts.

And so I think that thick libertarianism is a whole bunch of second-order effects that matter a lot.

I'm not using "first-order" and "second-order" literally correct here, but colloquially, I'm saying that that other stuff matters too.

First, get the violence thing pretty right. Have a government that doesn't throw you in a camp, right?

But then after that your job ain't done. You've got lots more to do. And I think that's where thick libertarianism should really come in.

And I think that's where the debate over internet censorship platforms really opened a lot of eyes.

Liz Wolfe: This is something that has always really bothered me about people's callous dismissals of the impact of cancel culture or even some #MeToo-type stuff. There's a little bit of the sense of, "Oh, you lost your job? Oh, your reputation got a hit to it? You'll be fine."

I just find the "you'll be fine" response one of the most insulting things ever. You don't actually know if they'll be fine. I don't know whether you from the outside can judge what "fine" is.

Some of these people in some cases lost their entire livelihoods or committed suicide. To me that doesn't look like "fine". It's always been a very frustrating thing to listen to people dismiss this absolutely wild harm done by the collective. Sometimes done in a very un-judicious way and and act as if well because it's not done by an actual big institution like the state well it doesn't matter. It doesn't affect people's lives. I think it has affected a lot of people's lives. And I just wish people had the ability to slightly expand their minds to be able to understand that you can't just tell someone, "You'll be fine". You don't necessarily know if that's the case. 

Noah Smith: That's exactly right. I agree.

Zach Weissmueller: I think libertarians tend to feel cautious about stepping outside of the thin zone, because there's maybe a sense that that implies, well you need a regulation for it.

And that's not always the case. I think that if we're living in a free society, in a free libertarian society, there're gonna be problems. There's going to be maybe cultural movements that are censorious, or other voluntary arrangements that are constricting people's freedom.

At the very least, I think it's something that libertarians should think about voicing concern about, even if it's outside of the framework of, "is it the state doing it?"

But I do want to bring us back to the present day, Noah, and ask you about some examples you gave as to why you started rethinking your relationship to libertarians and libertarianism.

You highlighted some of the attitudes of prominent Democrats as a prime example of why libertarians are useful in the political discourse. One of them was Gretchen Whitmer, who gave a speech about tariffs—and we have a clip of that that I wanted to play.

Could you roll that, please, John?

Gretchen Whitmer Clip: "I'm not going to sugarcoat it. These last few days have been really tough for Michigan. Twenty percent of our economy is tied to the auto industry, which depends on a steady flow of goods from our largest and closest trading partners.

We're already seeing the impacts of tariffs. Auto companies are stockpiling parts and laying off workers. Suppliers are facing higher costs and delaying expansions.

I understand the motivation behind the tariffs. And I can tell you, here's where President Trump and I do agree: We do need to make more stuff in America. More cars and chips. More steel and ships. We do need fair trade.

No state has lived through the consequences of offshoring and outsourcing more than Michigan. So, as I've said before, I'm not against tariffs outright. But it is a blunt tool. You can't just pull out the tariff hammer to swing at every problem without a clear defined end goal."

Zach Weissmueller: We also had this statement from Bernie Sanders, who's been out on a major political tour:

"As someone who helped lead the effort against disastrous, unfettered free trade deals with China, Mexico, and other low-wage countries, I understand that we need trade policies that benefit American workers, not just the CEOs of large corporations. And that includes targeted tariffs, which can be a powerful tool in stopping corporations from outsourcing American jobs and factories abroad. Bottom line: We need a rational, well-thought-out, and fair trade policy. Trump's across-the-board tariffs are not the way to do it."

How does that make you feel about the state of the party and progressivism? These "I kind of like tariffs, but not the way Trump's doing it" takes?

Noah Smith: That's a very weak message and destined to fail. Trump's tariffs are either going to be rolled back—he's unilaterally rolled back some tariffs or paused some of them, I guess. Or they're going to hurt people. Either way, they're going to be bad.

So saying, "Oh, tariffs are sometimes good, but the implementation is wrong," is a weak-ass message. Bernie Sanders has been absolutely fiery and powerful when going after Elon Musk and going against DOGE, and saying [running] his "Stop the Oligarchy" tour.

But then as soon as its tariffs, the message falls apart and the attacks fall apart. That's because Trump has triangulated the anti-neoliberal left.

I have a lot of criticism for the anti-neoliberal left. I don't know if you want me to go into those. We could spend a lot of time talking about that or not.

Liz Wolfe: Well, describe briefly what you mean, just for those who aren't as steeped in this.

Noah Smith: In the years since the Great Recession, a progressive intellectual faction has coalesced around people like Elizabeth Warren and the Roosevelt Institute, the Washington Center for Equitable Growth, and the Hewlett Foundation.

These are intellectuals, right? I'm not talking about people marching in the street—activists. I'm talking about intellectuals.

This idea has coalesced that neoliberalism is the root of our problems, and we gotta stop neoliberalism. A lot of this is anti-corporatism. It's like, corporations are too powerful. And when they say "powerful," they don't always necessarily mean, like, power to set monopoly prices or whatever—or monopsony prices. They mean, like, politically powerful. The corporations' political power is oppressing us.

And this is why we don't have things, so that's what we need to go after. We need to be anti-corporate. That's the new thing. And this is how we'll be anti-neoliberal.

So instead of, you know, anti-market—just saying, "Markets suck"—we'll say corporations as entities suck, and their political power is bad. And so, it's not just a purely regulatory agenda, like "free markets suck, let's regulate them." It's the idea that corporations are bad actors—let's go after them.

And you see the neo-Brandeisian antitrust movement come out of this, right? It's the idea that we should go after companies not just because they raise prices on consumers or suppress wages for workers, but also because we think they have too much political influence and power. We want to knock down their ability to influence the political process. So we're gonna use antitrust to break them up.

That hasn't really worked in the courts very much because our antitrust law just doesn't support that. But that is the idea of Lina Khan and the neo-Brandeisians—the idea that political power is the key kind of power that needs to be fought.

And so, a lot of the anti-neoliberalism has coalesced around anti-corporatism. And it's not the only thing they've done. The anti-neoliberals are also in favor of industrial policy, which I like. I'm a big supporter of industrial policies, actually.

But then, they're also supporters of protectionism—which I'm not so much a supporter of. And then they're, you know, big supporters of unions—which I have nuanced views on. I think they could be good or bad, depending.

And so, I think that this anti-neoliberal faction has quickly made a lot of mistakes. Very quickly made a lot of mistakes that blew up in their face—really fast, you know, in just a decade.

Whereas, when you looked at Reaganomics—like, the Reagan conservative-libertarian-ish stuff—it took decades for that to really blow up in our face in the financial crisis, right? People complained about increasing inequality and stuff—but people didn't really get mad until the Great Recession. So, it took almost 30 years for this to blow up in our faces. And the New Deal? It took until the '70s for it to blow up in our face—like four decades. So even longer.

And so, I think, when you create a system of ideas designed to solve a set of problems—and it addresses those problems to the greatest extent it can—and then it overruns its original purpose and starts addressing things that it shouldn't be addressing and doing things it shouldn't be doing and then it blows up in your face.

This always happens. This happens with every single system of ideas we have, no matter how good it is. It's created to address the problems of the day, then it blows up in your face, and it needs to be retooled. Someone else needs to get their turn at bat. And that's how society progresses, I think.

But the thing is, the anti-neoliberal ideas were so anti—they were so reactive, so defined by what they weren't instead of what they were—that they fell victim to what we call the politician's syllogism, if you've ever heard of that.

The politician's syllogism is a statement that says:
Something must be done.
This is something.
Therefore, this must be done.

And it's wrong. That's wrong.

But essentially, the anti-neoliberals reached for any convenient or available tool with which to strike at the things they saw as neoliberalism. And a lot of those tools were not fit for purpose. Some were. Some were not.

And I think that tariffs and protectionism were something they started reaching for. And then Trump came in, stole their thunder, and did a hundred times more than they were gonna do. And it blew up in his face.

Trump is actually existing anti-neoliberalism.

Zach Weissmueller: Yeah, and so, when I think about the state of the two political parties right now—that sort of anti-neo, the Trump-flavored anti-neoliberalism—is clearly in the driver's seat of the Republican Party.

And as you're noting here, any sort of libertarianism or free market vestiges of the Republican Party have taken a major backseat, if they exist at all.

And then, when you analyze the Democratic Party, where do you see the balance of power right now? Like, are the anti-neoliberals in the driver's seat there too, or is it more of an even power struggle?

Noah Smith: I don't know. You know, you can see these things in retrospect. I'm not close enough on the ground that I don't live in D.C. I don't hang out that much with the D.C. people. I talk to the abundance people, I talk to the industrial policy people a lot. I don't talk to—like, sometimes I encounter—the anti-corporate progressive types, but they don't invite me to their stuff.

And it's hard to see who's really winning in terms of where the left goes next. But I do believe that whoever attacks Trump most effectively will be the one who wins, because American politics is defined by backlashes and by negative polarization.

And Trump is undeniably making a bunch of mistakes and being stupid. And so, I think that whoever most effectively presents a clear alternative to Trump—and attacks Trump in a way that resonates with voters, that resonates with random thinkers who just comment on this stuff and aren't in the middle of it—I think that that faction will be the one that wins.

And I think the disadvantage of the anti-corporate faction is that Trump is screwing corporations too. His tariffs screw American companies, and his price controls will hurt American companies. And companies are one of the biggest, most important allies that Democrats could have.

In addition, companies employ lots of Americans. And when your company gets hurt and you lose your job, it's hard to blame the company, you know, because the whole economy is suffering. Everyone knows that the whole company is suffering. If it's economy-wide, it's easy to blame your company—when they're the only ones laying people off.

But anyway, I think that the anti-neoliberal, anti-corporate types—and the anti-neoliberals who have mostly gone in for anti-corporatism—are going to have a lot of trouble being the effective responders to Trump.

Zach Weissmueller: When I try to think about where libertarians are going to land in all this—because we've been joking about how marginal—"There's dozens of us."

But I do think that in close elections, it's significant. The libertarian vote can be significant. I think it was significant in this election, where Trump just overtly courted libertarian voters.

He went to the Libertarian Party Convention and made his pitch to them. I'm not going to say that's what tipped the balance, but I think it certainly helped.

I want there to be a place that libertarians can go—where there's a party that is friendly to markets, even if there are disagreements around the perimeters.

What I worry about, when I think about the Democratic Party as that potential home, are—first—the attachment of all these different, very anti-libertarian interest groups, whether they are some of the unions…

There's kind of the lingering—though not as prominent—attachment to wokeness, and then just kind of the general, I think, distrust between progressives and libertarians that has been bubbling over the years.

Do you have any thoughts on that sort of coalition ever coming together? Is it a pipe dream, or do you think it's something that would be possible?

Noah Smith: I don't honestly know. I don't understand politics well enough to say.

I exist in the realm of ideas.

That's a goofy line, but I mean I do. I just sit here and write my blog and I read what other people write. Occasionally, go to some events. But I'm not building anything. I'm not a movement builder. I'm not good at it. And I don't try. I don't live in D.C., I don't have a lot of money, I don't have any of the things required to be a movement.

Liz Wolfe: An incredible sales pitch for Noah Smith.

Well, I kind of want to get at the same concept, but a little bit differently—something that perhaps speaks to stuff that you can comment on.

You criticize, in your writing, how progressives seem to consistently really misunderstand supply and demand issues.

Would we need a strong sort of libertarian faction of the Republican Party if Democrats could bother to learn basic economics?

I'm not trying to be an asshole, but that kind of is the gists, right–

Noah Smith:As someone who's spent his life trying to teach people basic economics—including the flaws with basic economics and the cases where it doesn't apply, or where we don't know whether it applies—you know, I laugh at that. Because it's… it's hard for people.

I wish people in both parties would understand it—but they…

Liz Wolfe: Sure. And the current sort of MAGA odd fixation on  trade deficits and fondness for tariffs—there are major Econ 101 issues within the MAGA movement right now.

But I'm saying, like, historically, libertarians have sort of glommed on to the conservative movement—the Republican Party—and there's been a little bit of a handshake meme of, you know, agreeing on certain fundamentals.

At least when I look at some of the, you know, pro–minimum wage arguments or confusion about how to fix housing supply issues on the left today—or even some of the things that they'll say about unions, teachers' unions specifically—I sort of find myself wondering: do you understand how the world works?

It seems like there's really this basic, fundamental—you don't understand the possible negative consequences that upping the minimum wage could have.

And, like, I don't know how libertarians could possibly find a home in the Democratic Party if that continues to be just, like, a very basic, low-level issue.

What do you make of this, as somebody who understands progressives far better than I do—and economics far better than I do?

Noah Smith: Maybe not. Libertarians don't have a home right now. They don't. Neither party is libertarian. Republicans will do some deregulation, but they'll also do stuff  like tariffs and price controls. The Republican Party is Trumpist. It's not libertarian.

The Democratic Party isn't libertarian either. Both parties have moved strongly away from libertarianism.

So, if the question is, "Which party should libertarians throw in with?" or "Which party could become libertarian?"—I don't know. I have no idea.

Here's my thought: I think that for intellectual movements, it's sometimes fine to be… if you find yourself politically homeless, that is liberating and empowering in an important way, because it means you don't have to make compromises anymore.

Good. OK. You can just write what you think.

And so, this happened to libertarianism once before.

So, the New Deal—I believe—was a much better program, especially for today, than the Trumpist anti-neoliberal, you know, whatever we've got now. Right? It was more effective. But at the same time, it disempowered libertarians, who had been empowered during the late 1800s and early 1900s, but then got disempowered by the New Deal.

And neither party— Eisenhower and Nixon—were very not libertarian at all. And then—but also—Johnson and Kennedy were not very libertarian.

And so, um, the libertarians were on the outs with everybody. You had the Mont Pelerin Society, and you had all these people who were very liberated to do blue-sky thinking and to exist in the realm of ideas instead of the realm of politics and power.

It was a time of great intellectual ferment, great generativity, great creativity, and projects for building organizations and things like that.

You had the Chicago School. You had Mont Pelerin Society. You had a bunch of stuff that was built. And that stuff became the foundation.

And ultimately, the Republican Party was the one who went libertarian first. But the Democrats went libertarian too. You saw deregulation started with Carter, right? And Carter did more legal deregulations than Reagan did—by far.

Liz Wolfe: We even look, sort of, later on at some of the—Clinton—you know, there have been a lot of comparisons between the current iteration of "DOGE" and government slashing and government efficiency.

And a lot of people have said, "Well, but this also kind of was a priority under the Clinton administration." It was just done in a way that was legitimately sort of laser-focused on efficiency—not necessarily cutting government for the sake of it, but sort of like, "How do we update these systems that really aren't serving us very well?"

And, you know, that's a libertarian impulse. Like, I'm not over here being like, "I would have voted for Bill Clinton," but, like, that is—

"DOGE," as it has been done, I don't think has made many libertarians very excited. There have been better ways of doing this, and we have a relatively recent example from the Clinton administration.

Noah Smith: Yep. Absolutely right. Clinton—he also deregulated finance. He shrank the welfare state. I mean, he didn't shrink the welfare state—he replaced it with EITC (Earned Income Tax Credit). He replaced AFDC with EITC, you know, and CTC (Child Tax Credit).

And so that was a much more libertarian-aligned sort of welfare—advocated by Milton Friedman. Or, not exactly the same as a negative income tax—but close enough. You had that little cliff to make people work. But anyway…

So, many of the libertarian victories came from Democrats, not Republicans. Some did come from Republicans, you know, but all of it came out of that intellectual moment in the '50s and '60s, when libertarians were completely on the outs in terms of power and spent their time thinking instead of fighting.

So that is my advice to libertarians now: think, don't fight.

Yes, it will take decades to return America to a sort of general libertarian organization. Trump will help that along—him being an idiot will help accelerate that, right? But you've got to think now. It's time to go back into the wilderness. It's time we go back into exile and build intellectual ideas.

You need whoever the next Robert Nozick, Milton Friedman, and Ayn Rand are—of whatever kind of libertarianism comes next and eventually comes back around. They've got to be working now. In exile. That's where they've got to be.

Things did not look good for libertarians in 1955 or 1965. Things looked really, really good in 1985 and 1995.

So these things take a couple of decades. Libertarians are in the wilderness now, and it's time to think and come back.

Liz Wolfe: A lot of people have been talking about a sort of populist shift that's long been happening on the left, and now we're seeing the great populist shifts on the right. You know, we're seeing—in their own very different ways—this convergence on populism as sort of the direction that both parties seem to want to go in.

But the other thing that I keep thinking about is, like, are we in a great era of, like, anti-economics? You know, we've seen a little bit of, like, death of expertise—but, like, are we also in sort of a death of econ or, like, counterintuitive econ?

Because you look at the sort of economically illiterate thinking on the progressive left that we've already mentioned here—but then you also look at, you know, the trade war that's being started by the Trump administration—and I don't know.

Are we in a great era of nobody giving a shit about economics?

And if we are, what is the way to reverse this? What is the way to change this?

Because this surely doesn't lead us to good places—whether done on the left or done on the right.

Noah Smith: A couple answers there. Number one: yes. Number two: economics itself has shifted—a lot. Economics has shifted against libertarianism toward government interventionism of various kinds.What economists teach, what they think, what they say in their research, and what they say in public statements, and online, what they believe, has shifted significantly.

Liz Wolfe: But I'm not even talking about Keynesians versus non. I'm talking about something even more out there which is like MMT (Modern Monetary Theory) on the left, and then, like, we're pissed off by trade deficits because of what they innately are—for kind of no reason—on the right.

Like, this isn't just, like, "Oh, will the Keynesian win this time?" This is, like—like—much more bananas. Right?

Noah Smith: Correct.

Liz Wolfe:  It seems like it's kind of like all of the econ lecture hall debates that the intellectual class could have—we just kind of, like, I don't know, started, like, you know, dropping acid instead of that.

We're so far outside of the Overton window of what had been historically sort of debated.

Like, am I crazy here? I don't know. Am I crazy?

How do we stuff the toothpaste back in the tube and get it back on track?

Noah Smith: You don't. You just make a new tube of toothpaste.

Like I said, Trump is going to screw things up. Democrats are not yet at the point where they will make things… they'll make things better by simply not doing a bunch of terror—like big tariffs—like Trump does. They'll be less active and more incremental.

They're not going to screw stuff up as badly as Trump is, but they're not yet—they're confused and divided.

I don't think that all the things we need are libertarian things.

I think we need industrial policy. I'm a big, big fan of that. And I think we need big government to build certain things. I think that in some cases, you don't want it. In some cases, you do want it.

And I think the abundance liberals are absolutely right that progressive disempowerment of big government has been more—even more—damaging than progressive regulation of private industry. Because progressives have had all their biggest victories in disempowering the government—instead of, relatively fewer victories in disempowering the industry.

And so, I think that… So, I'm not a libertarian myself, and I'm not going to be. But I'm happy to see libertarianism moving in some of the directions it's moving.

For example, thick libertarianism, which we talked about. And also state capacity libertarianism—something Tyler Cowen has written about, I think, very persuasively.

So, I'm excited about that. But it's gonna take decades before those ideas become dominant.

Zach Weissmueller: Let me ask about the industrial policy, build big-projects aspect of all of this. We had Derek Thompson on this show before to talk about abundance, and we'll link to that in the show notes.

That is certainly a big stumbling block for libertarians. If that's the future of the Democratic Party. Maybe we can bridge some gaps here—because when I think about  these big infrastructure projects and whether or not—and to what degree—it should be state-driven…

The question I have for you is: has your view of that changed, given the level of inroads that private companies have made in areas that were previously dominated by the state—whether it's space freight or other, um, transportation?

Now AI is, like, the bleeding edge of technological advancement—that's all been privately funded and pushed forward.

Is there space to think about: yes, we all want to have big, nice, shiny things in America, but it doesn't necessarily need to be these big federal government projects executing them?

Noah Smith: No. The answer is no.

I've gained confidence in industrial policy in recent years, which is why I push it more than I used to.

The most spectacular example of industrial policy was mRNA vaccines—which were one of the most miraculous and timely technological innovations that we have had in living memory. They're already fighting cancer. You're gonna have mRNA vaccines for brain cancer. 

So, when you wake up with a brain tumor and they tell you—you know—they're like, "OK, you have a glioblastoma, a couple of months to live." Well, then they're gonna give you some mRNA that will kill the glioblastoma, and you'll be fine.

That's a miracle. But how did that miracle happen?

So, when we look at how the miracle happened, we see that these drugs were developed—first, there was government-sponsored research at universities. Then there was private-sector research that was funded by venture capital, with the help of the government—but mostly by the private sector.

And then there were government pre-purchase agreements through Operation Warp Speed.

And those were the three stages of the development of mRNA vaccines.

So, you had a lot of government involvement at the beginning, relatively minor government involvement in the middle—with VC funding of, like, Moderna and BioNTech—and then you had a lot of government involvement in the rapid development of the vaccine and the rollout.

And this was incredibly successful. It taught us something about how industrial policy should work—that industrial policy isn't about government replacing the private sector. Industrial policy is about government fulfilling its role to empower the private sector.

Successful industrial policy is like that.

I think that success informed the CHIPS Act and the IRA, which I believe are both pretty successful policies—policies that Trump is rolling back.

He just rolled back most of the IRA—or proposed doing that—which they probably will.

Liz Wolfe: Use its Christian name—the Inflation Reduction Act.

Noah Smith: Yeah, it's more syllables.

Liz Wolfe: Exactly. I just think it's so funny—

Noah Smith: Everyone knows the IRA is Catholic anyway.

Liz Wolfe: No, the thing is, I still just have an ax to grind with the IRA and the fact that it's called the Inflation Reduction Act. It was just an excuse to push through all kinds of  things that are not actually related to reducing inflation and are in fact related to more government spending.

Noah Smith: Yes.

Liz Wolfe: That's the kicker–

Noah Smith: Yes, but that doesn't make it bad, it's still good. 

Liz Wolfe: It's the same as how New York City has named when you enter the tolled area below 60th Street, it's the Congestion Relief Zone. And it's just like, OK, you're naming it something that's the opposite of what it actually is.

Like, I don't feel relieved—I feel, you know, scammed. I feel nine dollars poorer.

But Inflation—I just think it's important that we always call it the Inflation Reduction Act, because it's a bullshit name and it's part of the federal government.

Noah Smith: The Inflation Reduction Act was a bullshit name. But "Congestion Reduction Zone" is not.

Liz Wolfe: "Congestion Relief Zone" The relief you're supposed to feel upon entering it?

Noah Smith: It relieves congestion for people once they get  inside the city.

Liz Wolfe: Yeah, once you pay the money, then it's—

Noah Smith: Once you pay the money, then you get the relief.

Liz Wolfe: I don't feel a sigh of relief when I enter. I just feel the sense that my EZ Pass has been charged an extra $9.

Noah Smith: It's like saying DoorDash is a "hunger relief zone."

Here is your transcript excerpt with punctuation and grammar corrected only, preserving every original word and phrasing:

Zach Weissmueller: I don't want to let this mRNA vaccine example go, because I think it's a good one to focus on—it maybe illuminates some of the areas of agreement and disagreement that are important here.

I think the agreement is that the government, in an emergency situation—or in other cases facing a national security threat, à la the Manhattan Project—can marshal resources to, you know, marshal resources from the public and private sectors to fulfill a very specific mission. So, putting up kind of a bounty for something like that—that is something that, especially in cases where there's a national emergency—even as a libertarian, I can get behind.

The process of getting there, I would maybe quibble with a little bit. Going back to Derek's book, I think he even pointed out that the NIH kind of overlooked mRNA technology early on. And I think that is indicative of a problem with the way that government funding of basic research works.

And maybe that is something that—you know—we've got all these cuts going on at the NIH right now, and people are freaking out. I'm a little bit more optimistic about it, just because I'm working on a piece about this right now.

There's a professor I spoke with—Terence Kealey—who makes the case that, basically, during the times when government was not funding science in the 19th and early 20th century—sorry, the 19th century in England, and then later in America—these kind of laissez-faire periods are when you saw the First and Second Industrial Revolutions. And that is maybe telling of something: that when it's the rich people and the industry kind of focusing the scientific research, you might get more useful products in the end, instead of replication crises.

But that's where I would disagree.

Where I will agree with you, though, is to say that these big projects that are very mission-driven and based on responding to legitimate emergencies certainly can be successful—and then have great knock-on effects.

Noah Smith: If that effort didn't cause libertarians to reevaluate their priors about how stuff works in society then there's an issue there.

Zach Weissmueller: On the other hand, do you think progressives have reevaluated their priors based on high-speed rail in California?

Noah Smith: They have not. And that's a big problem.

Here's the other thing about libertarianism that I think people are quickly understanding: China exists. It is big. It is ruled by people who don't like liberty.

There are lots of Chinese people who do like liberty. Chinese people—I could go on and on about the ways that Chinese culture is not an anti-liberty culture. In fact, I believe that Chinese culture is pretty similar to American culture in general.

We both just wear Crocs and drive to the mall. I don't know…

Liz Wolfe: Not I. I am neither Chinese nor American if wearing Crocs to the mall is the criterion.

Noah Smith: OK, fair. You're an intellectual-rich nerd. Just like me.

Liz Wolfe: Anyway—

Noah Smith: Go meet the working class.

Anyway, my point about China is: the people who run China are far more anti-liberty than anyone in America. Maybe Trump would be that repressive if he could—but he can't.

This is a big danger. It's a big if the world is ruled by that, okay? And if that comes and takes away your liberty, you're in trouble.

What can resist that? Only the collective action and the government action of countries that value liberty more than China currently does. That is the only thing that can resist them.

This is what I wrote in my old post, The Tamerlane Principle. The idea is: if you love freedom—if you love being free—you can't just optimize for freedom today. You have to sacrifice a little bit of freedom today to make sure you have freedom tomorrow.

What I mean concretely is that it takes, for example, taxes to fund national defense—which I think very few libertarians would disagree with. And I think everyone agrees you should pay taxes to fund national defense, because that's a public good—you get defense from people who want to take away your liberty.

Good. Great. We kind of agree on that. Even Robert Nozick talks about this and agrees on this. 

Zach Weissmueller: That's the public good we can all agree on.

Noah Smith: Yes—but I think what we're realizing, after looking at China, is that an effective defense takes more than tax. You can't just do it with fiscal. You can't do it by just throwing money at the problem.

We throw about as much money at national defense as China does, but—yet—they could beat us in a war. And I know people are like, "No, they couldn't."

Yes. They could.

Liz Wolfe: Yeah, we just discussed this with Michael Beckley, actually.

Noah Smith: Right. Yeah, no—they can beat us in a war. I just thought—it's not…

And the reason is because when after the first two weeks, when all our weapons run out, they can make more, and we can't.

Anyway, that is why. And so, these are blunt facts. And you can sit there and deny blunt facts because you grew up with a certain ideology that makes you want to deny blunt facts—and then you get rolled over by history and a collar on your neck.

Or you can deal with reality, which is that having an industrial base is necessary to resist domination by a country like China.

You need an industrial base. We need more of a civilian industrial base in order to be able to convert it to defense manufacturing when we need it. And that's what makes manufacturing important.

And that is why you have to grow manufacturing more than the free market will do—or else you won't have a free market tomorrow. 

You will be in chains tomorrow.

Zach Weissmueller: Liz, did you get the impression from that conversation with Michael Beckley that China is on firm economic ground right now? That things are going swimmingly?

Liz Wolfe: Yeah, I mean, Beckley was not exactly endorsing the hypothesis put forth by you, Noah.

But it is—like what you're saying—about ensuring that we do some amount of reshoring to ensure the sort of, like, industrial capacity and supply chain sturdiness in the event of actual hot conflict with China. This is not something that I'm particularly opposed to. I think it's something that more libertarians could take seriously.

The thing that I am sensing on a psychological level—just to play your therapist for a moment—is that Milton Friedman's 1997 visit to Hong Kong may be something that you're still bothered by.

Because Milton Friedman—I think, very publicly—there's an entire Free to Choose episode about this—he made a lot of predictions that didn't really end up being accurate about the trajectory that Hong Kong would take: the degree to which their political culture—and a culture that welcomes the development of civil liberties and the economic freedom that they're granted—would then lead to a culture full of civil liberties and a legitimately functioning political process.

He obviously visited right before the 1997 handover. But then we saw Hong Kong brought under China's rule prematurely.

In the last few years—I actually did a lot of reporting on the ground there as this was happening, as the national security law was imposed.

But for libertarians, at least, it's upsetting on two fronts.

Number one: because we want Hong Kong to be free, and to be a thriving metropolis and a bit of a foil to China—an example of how you can actually have a political culture that emphasizes and values freedom while still having some cultural components that remain fairly Chinese.

But two: it's also really frustrating because this didn't vindicate Milton Friedman. It kind of looked embarrassing. Like, he said it—and now his prediction in 1997 was totally wrong.

And that's uncomfortable. He's a little bit of, like, our—you know—Saint Milton. It's a bit embarrassing. It's a little bit unsettling for us that he got this so wrong.

You know, are you just really pissed off at Milton Friedman for being wrong about this thing?

Noah Smith: I'm not because I think it was almost right. It came close.

If you looked at what Chinese society was like in 2010, it was so much more free than it had been before. If you looked at Chinese statecraft —you know— Hu Jintao de-emphasized conflict with Taiwan. He said, "We can wait. Our official policy says we will retake Taiwan, but we can wait."

If you look at China's economic policy—until the 2010s—China didn't really do much industrial policy, except at the local level. At the national level, all it did was deregulate. All it did was privatize things. And that worked incredibly well. That was their era of greatest growth.

And so, when you look at that, I think Milton Friedman was not—ultimately, we say he was wrong because Xi Jinping came in, and because —you know— China started focusing so much on building its manufacturing base, and because they were helped by natural clustering effects.

But also because their system is optimized to mobilize resources, rather than to create efficiency. And they happen to be so big.

Ultimately, if China were a quarter of its current size, no one would be complaining about anything. China wouldn't beat us. If China were our size as a country, they wouldn't beat us.

Liz Wolfe: Well, the great news is that in two generations, they will be—right? Maybe not actually. But that was a substantial component of Beckley's argument, which is not, you know, that "demographics is destiny."

But there is a certain sense of, like, OK—like, American pro-natalists, you're worried about the birth rate of the West? Well, boy, do I have news for you: in China, it's even worse.

And we're not even aware of the half of it—and the degree to which they're really relying on a lot of military manpower potential.

But what happens when that disappears over the next few generations?

Noah Smith: Absolutely. I wrote a post about this called China's Demographics Will Be Fine Through Mid-Century.

So, the answer is that after about 2050, China's demographics will become a significant drag on them. And of course, if you want to project out to 2100—I don't even know—we'll all be, like, uploaded into the AI cloud or whatever the hell by then.

But, like, you know—I don't know—but I'm saying, like, nobody knows. Like, 80-year predictions? Nobody knows. Or 75-year predictions—nobody really knows.

But then, if you look at the 2050s—they're gonna have big trouble.

But until then, what's about to start happening in the next, like, three years or so—from now, actually right now, over the next three years—what's happening is that a large cohort of young people is entering the Chinese workforce.

That cohort does not exist because there was a bump in fertility in the recent past. It exists because—well, it does—but a bump in fertility several generations in the past was so large that it has echoed through the generations.

And you're getting a generational echo with this large Gen Alpha, let's call it—similar to our Gen Alpha.

And so, China is about to get a brief reprieve in terms of its young population that will last it a decade and a half, at least. And so, that means that China's demographics don't get really dire until the latter half of the century.

The latter half of the century is a ways away, all right? And a lot can happen in those 25 years.

Our demographics are bad too, and those of our allies. They're not "China bad," but they're bad.

And if we stop immigration, then where does our population growth come from? All of our fertility is below replacement. We're like 1.6 fertility now. We were at 2.1 a while ago.

Liz Wolfe: The TRT (total fertility rate) of this podcast is a lot better, though. Zach and I are birthrate influencers over here.

Zach Weissmueller: Only time will tell who's right about China. But I think there are reasons for skepticism that they are going to continue to be a super power. I do recommend people watch that conversation with Beckley. I think the way he puts it is there–

Noah Smith: You can sit there and hope it goes away, but the track record of sitting around and hoping conquerors go away…is poor.

Zach Weissmueller: My point is that, you know, the very industrial policy that you're kind of lauding—I think that's what has partly put China in the possibly precarious situation.

They get all this praise for their high-speed rail. Their high-speed rail—none of them make money. It's a sunk cost.

They famously build these ghost cities that are, like, completely empty. There's a lot of just, like, fake-feeling infrastructure in China.

And I worry that if we kind of import that—you know, earlier you were saying, like, we kind of imitate our enemies—if we, like, weakly imitate authoritarian China, we're gonna end up with these same boondoggles dragging us down at a time when we're already carrying a lot of debt.

So, that is the danger that I see in… that's really leading into an industrial policy.

Noah Smith: It depends on what we imitate.

So, by the way, the ghost cities are an exaggerated problem because people live there now.

The ghost cities—I think there were a couple of ghost cities, they eventually demolished them. But most of them? Like, people live there. They built—like, there's relatively few unoccupied apartments in China now.

There is more unoccupied commercial development—like malls that nobody goes to. That was a bigger problem. And bridges that people don't drive over.

But anyway, I guess what I'm saying is that I don't think imitating China is necessarily the thing we want to do. But I also don't see industrial policy itself as being defined by imitation of China either.

I don't think China's industrial policy is always a smart kind of industrial policy. I think sometimes they do stuff that works.

Like, for example, Made in China 2025 failed to catapult China's flagship industries to industrial leadership. But it succeeded in onshoring a whole lot of component manufacturing and hardening their supply chains for a potential war.

If we don't do that, you wake up on day one and you can't make shit—and then you lose the war. Then where do your liberties go?

Liz Wolfe: Then libertarians will really be in exile.

Noah Smith: You'll really be in exile. You'll be in exile. You'll go to Singapore or Argentina. Where would you go in a China-ruled world? You'll go nowhere.

Liz Wolfe:  We'll go to Argentina.

Noah Smith: China would call up the government of Argentina. They'd say, "Don't help those guys." And Argentina's not even very libertarian anyway.

Liz Wolfe: Now that Trump is such a Peronist, it's great—we'll have so much more in common with our new Argentine brothers and sisters.

Noah Smith: Yeah. Milei.

Liz Wolfe: Yeah.

Noah Smith: The champion of libertarianism in L.A.

Zach Weissmueller: That was actually the last thing I wanted to ask you about, because we're running long andI appreciate you giving us your time.

You mention [Javier] Milei in your piece — a proud libertarian who was portrayed as a madman going in. However he seems to have successfully tamed inflation and put Argentina on a somewhat of a course correction. I was just looking at the latest local elections, and his party is continuing to win seats—so that's an early indicator that, politically, he seems to be doing alright.

Observing an actual libertarian governance in action, how has that changed or affected your perception of libertarianism, since it's something you've been reflecting on lately?

Noah Smith: It's made me more enthusiastic about it. Milei's success is encouraging.

That should be looking at what Milei has done. And the cases where Milei had to backtrack a little bit—but then also the cases where he succeeded, which I think are substantial—this should inform libertarian intellectuals in exile in America.

Be inspired by that and say, "What of that could we get here?"

And so, I think that…holding him up as an example of "here's what you get when you go libertarian" is probably smart for libertarians to do.

Milei's success, relative to Trumpism's failure… the failure of Trumpist Peronism—is an object lesson that, if promoted correctly, could help libertarians a lot.

Liz Wolfe: I would love to see a Milei-type figure come to New York City and scrap rent control the way Milei has in Argentina. That would really change the game for me and my family.

Noah Smith, I want to ask you the question we ask all guests at the end of the show: What is one question you think more people ought to be asking?

Noah Smith:  One question that I think more people really ought to be asking is: what, in America—alright—what is really the problem with this country?

Instead of thinking about what someone told you, or what you read people yelling about in the media, think about what this country is like—what life in this country is like—and think: How could this be better? What could be better about this?

I have answers to that. I'm gonna write a post about that soon—with answers to that. But I think that the answers you'll come up with, if you just start from zero and you just think, What could we be better at?, will be different than the answers you assume is bad about the country if you watch all the food fights and all the yelling online and all of the political bullshit.

Our actual problems and the problems we yell at each other about are two different things. And I think more people need to think for themselves about what our problems really are.

Liz Wolfe: That's really insightful. Thank you so much for coming on our show.

Noah Smith: Thanks for having me on.

Speaker: Thanks for listening to Just Asking Questions. If you want to support the show and help it grow, please like and share this episode. Leave a comment letting us know what you think. And if you have questions you'd like us to answer or suggestions for future episodes, you can email us at JustAskingQuestions@reason.com.

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• Producer: John Osterhoudt

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