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tv   Alan Greenspan Adrian Wooldridge Capitalism in America  CSPAN  November 20, 2018 8:00pm-9:11pm EST

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up next to discuss the book capitalism in america former whistleblower writes about the close relationship between the fed and big banks in her book noncompliant and later an interview with an economist about her book edge of chaos why democracy is failing to deliver economic growth you are watching a special weeknight addition of book tv on c-span two. >> at george washington
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university former federal reserve chair alan greenspan discusses the book capitalism in america the event was hosted by george washington university and politics and prose. it is just over one hour. >> on behalf of politics and prose and gw thank you for coming this evening. before we begin just a few housekeeping items, no flash with photography and if you would like to take photos without flash feel free to tag us on insta graham or twitter we would love to see those after the discussion with the q&a if you like to ask the author questions here in the center aisle please line up and make sure your question is a question try to keep it brief to get to as many people as possible as you know,
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there is not a book signing after the event but there are's book sales at the table and the authors have signed books - - bookplates for all books it is a joint effort tonight we also pleased to bring you a wonderful evening with alan greenspan and adrian wooldridge after studying clarinet at juilliard working as a professional musician alan greenspan were earned his bachelors and masters and phd from new york university served as the chair of counsel economic advisers under president ford and 1987 president reagan appointed him chairman of the federal reserve board. what is impressive and expansive career he made a science of understanding the us economy as though it is a living organize them to flow and change and surges and stalls. the author of "the new york times" bestseller with the age
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of turbulence adrian wooldridge is the political editor from the economist a doctorate in history from oxford the author of nine previous books including the fourth revolution, the witch doctors of the future perfect their new book capitalism in america gives the story of america's evolution from a small patchwork of colonies to the world's most powerful engine of wealth and innovation. in it they grapple with questions like where does innovation come from and how does it spread through a society? why do some areas see the first spread more democratically and others see the opposite? this book is a thrilling and profound master reckoning with the drivers of the us economy over the course of its history.
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there is no better moment than now to learn the lessons history has taught us that no better than to do it from greenspan and wooldridge the most pressing question is one that the authors ask and attempt to answer can united states reserve it sovereignty or will we see the leadership past two other less democratic powers? the authors will be in conversation born in kenya educated at berkeley school in england at trinity college in cambridge university he was head of the investment division of the head of the royal bank a director at aspen insurance holdings and at the brookings institution please help me to welcome alan and adrian and ahmed. [applause]
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. >> this is a real privilege to be at conversation with these two gentlemen. let me start by asking about the origins of the book alan is and economist renowned for his detailed knowledge of the us economy and the ability to cite those statistics and
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adrian is a business historian. how did the book develop? who had the idea? . >> and my publisher. >> yes to write a book with the economic history of the united states and to say i am not a historian he said quiet and we will decide we will ask adrian wooldridge to help. so here we are.
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>> how did you organize that division of labor? . >> it's hard enough to write that book alone. >> even more annoying to be around the corner from doctor greenspan and did not even know him at all. so we persuade the economist to give three months off and then we talked through the arguments and then exchange over the telephone is not as difficult of a process as we worried about. >> and with your career.
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so you made history and now you write about history. do you have an added perspective to have such a singular figure in the policymaking of this country? . >> i'm not sure what that means. i don't think people react that way. at least they shouldn't. and then to believe on free enterprise with an economist like myself to be so interested in what i was doing.
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>>'s let me make the question more concrete you criticize fdr for his decisions what went wrong in the seventies that were clearly policy mistakes to be a policymaker for so long. >> of course. and it is very easy to do that. this book is not anti- roosevelts. but what we did say to quote henry morgan found that was a close friend of the secretary of the treasury and he
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basically said that the new deal has been a failure. we have spent a lot of money and we have as much unemployment no now. but what made roosevelt a very important figure as a world war ii president. what was very important in the months before world war ii i'm not sure it is constitutional
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so we could help britain at the time in retrospect with the critical decision because the united states at that time has extraordinary isolationist to help anybody and that was considered dangerous. and roosevelt did a number of things that i'm not entirely certain hour legal but if not we would not be here today it could be a different regime. so on the one hand although not a fan of what he did in his first term or is in the second term and an overwhelming vote of very
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considerable adoration to do things that most other presidents would know and i think he save the world in many respects so that notion of anti- roosevelts is accurate through peacetime. but as a wartime president with winston churchill depended on the united states on those structures which we could produce and they couldn't through 1940 and 1941. >> i should tell the audience this book is not just a series of dry economic statistics it is actually very rich with political and social parts so
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congratulations to both of you so the substance the fundamental piece is the key to american economic success is at the highest rate of growth of productivity. why? what made the us have such a high rate for such a long period of time have a high rate of growth of productivity? . >> i'm not a great observer but. >> so the book starts off imagining a meeting of devereaux's of all the greats in the good of the world come together to discuss the dominant power and then you have people in china and they are all discussing who will rule in the next 400 years.
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and there is a good case to be made by china or turkey or spain or england which is just about to break from that backward continent but nobody mentions the united states is not even an afterthought in civilized discourse at that time just an isolated colony hanging on the edge of the world. over the next 400 years it becomes progress the most powerful country in the world the most extraordinary fact that a country can come from nowhere to be an engine of growth so we argue the reason america takes on the dominant role is because it is a country that is more willing to engage in collegiate distraction and engage in
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economic growth and change of disruption. >> why is america disposed one - - exposed to creative disruption? wine is america is so big much more than the european country to move around one is that it is a new country to be created in the age of business and the age of growth it doesn't have that inheritance so there is a quite compelling reason for that and that america has a constitution that provides the strengths of power and it means the government doesn't control everything and the final reason is america has an
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appetite for business and treats entrepreneurs as he rose and in britain or france they like bureaucrats and intellectuals in germany but america likes businessmen the entrepreneur is the ultimate things we are a business culture also corporations some americans were the first country to let companies free in the past you have to go to the government to say i want to set up a company for this purpose that this was the first company they could set them up for any general purpose they wanted to do and finally america allows companies to become big very very fast so for all of these reasons give america the
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incredible competitive advantage in the world of creative destruction so that is the optimistic story the more pessimistic story towards the end of the book but it is beginning to fade so there is a great question at the end if you have another devils meeting now would you predict america would retain its position or does it handed over to another country such as china? . >> do you want to add anything? . >> no. it is remarkable whenever he talks i agree. [laughter] . >> so let me ask you about the destruction portion of creative destruction because clearly it means in order for this to work you cannot
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protect the losers in this process. and that is the austere way to run economic policy. what is it about the political system that allows that to happen? . >> let me go back to economics because it's important to realize how does creative destruction increase the standard of living? the best way is to observe how it happens so for example, as part of the 19th century with those early stages with the precious metals but until all things in that steel
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process and then to very significantly reduce the cost and use resources to produce which was fine steel and in very large volumes. when you reduce the cost, that is what galvanizes. so with that unit cost so to speak is not produced so creative disruption is generated by the reduction in cost and you can see why business operation tries to maximize the profit and reduce the cost as one major aspect of its behavior. so what has been happening over the years is essentially that process is important to
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realize in the process a lot of people's well-being's there are so many wonderful examples of how it works. but for example, but to produce steel, all of the people involved in a lesser product are out of work and the technologies don't work and a lot of people suffer until they get another job. so the difficult political problem is how do you handle this?
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the way the american society handled it is that by the 19th century with creative destruction and displacement was beginning to get substantial the labor unions in the first part of the century and people didn't work for anybody else, they work for themselves and people didn't work for anybody else, they work for themselves call them craft unions but it is a different precision which changed very dramatically when we start to move forward to create large corporations. >> he has written a couple of books. [laughter] . >> that the issue here is
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there is no way to eliminate like when the telephone emerges or what happens to the pony express when the railroads are built. you can have it both ways with those costs along the line and then increasingly higher standards of living the unit cost to be the same thing as price and that basic issue of creative destruction is the tendency to push prices down for the existing product and that is the process and the answer of how we got here to
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be the most powerful economic power in the world. >> that we have to qualify that sense of creative destruction with those technologies are those jobs and to protect those industries but and then they collapse so countries that our more averse to creative destruction to have much higher levels of unemployment. >> and you make the point with the front tier that meant wages in this country were higher than everywhere else like the economic safety net.
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>> and to push the wages up to force demand to be there otherwise that does not exist. >> one of the most fascinating chapters is the chapter comparing the north and the south. i suddenly loved it and enormous amount with the basic idea that culture promotes innovation which was a northern culture and we had a natural experiment of the south which was a very different culture that did not promote innovation. both regions start out around 1800 so to talk about that whole chapter.
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>>. >> so understand why. so aside from those obvious characterizations but remember if you are a slave owner to make sure they don't want to read and write. so one of those crucial aspects is the intellectual capacity it is a very crucial input so it is basically stable. it is a very serious question
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and to have these competitive capabilities and in some odd way as i recall it was 1834 and then 18 oh seven there was a bill that passed and was signed by the president of the united states who at that time was an owner of slaves and the bill which eliminated the ability to import slaves it looked as though that track that britain had taken everybody else to abolish slavery would impact only the
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united states. and that great irony considering the thesis that a displaced northerner from the south showed up and what the cotton gin did was very significantly reduce the cost of producing cotton so taking the seeds out of the bowl of cotton was very laborious and very complex to see the cotton bowl and the result was a tremendous increase of productivity and the unit cost
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declined and it caused major expansion in the cotton production basically because the cost of the operation was so small but to have a combination of forces and to reduce the cost to produce that and we had caught in which extraordinary which exist to this day so we went
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to the issue of being able to produce the upland cotton in the united states which is offshore that became extraordinarily profitable and the result was the slaves if you limit the price of slaves it looks like exactly what you would expect with what happened with cotton production and as a result cotton which was not a major product in the sout south, tobacco is a bigger issue, swept through the south into texas and at one point in the middle of 19th century
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we were a major supporter and slavery became extremely broadly held because the number of slaves was far greater getting into the 18 thirties forties and fifties than previously so i often wonder that was totally obvious something would finally break apart the history of the united states in the 19th century was the issue of slavery versus many other things.
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. >> what i think was terribly interesting to go that far into united states history before a very major irreversible issue of slavery versus freedom and when it finally did it was a devastating war which took the confederacy with higher losses than the north but in general brutal war and what came out of it. >> you have a fascinating graph that shows the value of slaves and eastern chile it
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was the single most valuable asset more valuable than land and it's not surprising that it ends up with war. >> what happens in the united states in the 19th century you have two economies that are pulling apart those from the north based on industry full of tinkerers and then the economy of the south based on human labor. some more of the south resources are focused on slavery so basically by the 18 fifties the world's greatest producer of cotton and then to squeeze more labor out of the slaves so they are pulling in
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completely different directions so you think it would crush the south very rapidly but it holds on for quite a long time. . >> so the post- civil war. here there is a recurring tension between business and government you almost depict these cycles of these alternating periods of when government is in the ascendancy. can you talk about that as a theme of us history?
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. >> the theme of the book is creative destruction and the extraordinary thing that you have from 1860 through 1865 is that laborde tory of creative destruction such as standard oil and the rise of great entrepreneurs with huge organizations from nothing to dominant forces in the united states. for a long time that happens without any interference from the government washington is a small and sleepy town so it is a laboratory of entrepreneurs
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but then you have that backlash with the rise of labor unions like teddy roosevelt and that the corporations are too big so that is a fair is full of bad collections but then in the twenties with the idea of that attitude by the thirties so you see the pattern developing all the way through american history of government intervention which is the dysfunction or the extremism of the market. >> you make a provocative statement at one point you say
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the 19 twenties were arguably the last decade to be restrained so there is that trend for government to increase in size. do you think we could have stayed at 5 percent of gdp? . >> i suspect not. [laughter] it is really fascinating through the twenties with the gangsters but if you look at the data in that short period of economic growth and
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innovation the time of the century where motor vehicles are a critical issue essentially had one of those massive effects on society because up until then personal transportation was virtually nonexistent but even during the 19 twenties to get that budget deficit down they succeeded but it was very obvious the long-term trend it was very interesting in a political society such as ours to find those advocates and spending programs but very few
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people who want to pay for it. that is one of the critical issues that have emerged in today's environment. and with that double entry bookkeeping there is no way to do that and the consequences has been and will be extraordinary. >> without process of democratization of those innovations which before that was something only the elite could use but of homeownership and also that democratization up until then corporations tended to be owned by great titans of industry and in the 19 twenties is the beginning of a widely held public company large numbers of people holding shares so that
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was developing so i just want to say one thing can the size of government ever decline? it is interesting because in sweden the size of the government was so huge by the late 19 nineties and they have cut it down to about 79 percent to about 45. >> you talk about the late 19th century as this laboratory of laissez-faire but it was also the time when the us was highly protectionist and we think protectionism as the antithesis of the dynamic economy. so talk about the role of protectionism and what tech played to make the us.
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>> in the constitution so one of the tariffs is a tax and to bring it up to date for example, from the united states and china currently where both parties lose because where you withdraw that purchasing power from the economy you could improve the fiscal situation. that you create a very significant deflationary set of forces.
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there are winners and there are losers. i should not put it that way there are only losers but there are some who lose less than others and then claim they won the war. nobody wins a tariff war. is just a question of who loses the least. i think it is embedded basically with the unwillingness to see that reality and one of the problems is essentially that because we didn't have the income tax the constitution prohibited that the only way to fund the united states originally with the revolutionary war was basically tariffs so it had
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that historical aura to which going back to hamilton to say america is protecting its interested - - interests only then a free trading country but i am very skeptical because the real reason for the tariffs is revenue raising nonindustrial planning but second because i didn't think america's steel industry or oil industry was dependent on britain's, they grow very very quickly at scale so that economy pushes for those tariffs. so they don't grow behind these tariff walls.
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>> we probably need to move to audience questions after this very uplifting story of the dynamic high productivity growth it ends on a pessimistic note that addresses the question why is productivity then so slow over the last 30 years? what is the solution? . >> it turns out although it
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did not have to be that way starting in the united states with the social security act was passed to have a system if you look from 65 to date that amount of entitlement extended very substantially and the way that you know, that is and it is generally flat.
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but is it the economy that is enhancing the entitlements? gross domestic savings from what we borrowed but by definition to gross domestic investment to show with the building of machineries and the like. a major determinant.
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and productivity growth is essentially the standard of living because with the real gdp which is the standard of living with productivity growth is a right now we are an. of optimism politically because gdp in real terms with that three or 4 percent now we're down at 2 percent over the most recent years and that has created a very negative
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political response invariably that you engender demagogues so whatever the standard of living goes down to come in on the white horse. this is terrible. i will not handle it make me your leader. it is a very effective source of understanding of where populism comes from. capitalism is not a philosophy. it was just calling for help to do something, save me and
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currently it is a problem of which we have never seen before in the united states. . >> but and then to say andrew jackson and then to attract great words and then and then made a shambles of the place.
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and with that sense but even to think in the same terms. but we do not know how children will come out but essentially averaging two or 3 percent per year growth we are now down very low and have been there quite a while. so what we suggest in the back of the book is what to do with entitlements and the swedish
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example basically means we could get out of it but if you look at what they did it seems politically infeasible for the united states also for sweden as well. so my final line on this is as we argue for how we can do so it is politically extremely difficult political situation when innovation occurs. . >> wonderful i've probably gone a little bit over but we have time for ten minutes of questions so come up to the microphone.
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>> it is a pleasure to hear from you today and so to explain america's growth whether others besides creative destruction with developments of american productivity where you felt creative destruction was not the best? . >>. >> are there any other theories? . >> any periods of american history as the interpretive to all. so with that. of innovation.
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>> we possibly would not have considered any. i think it is a brilliant explanation it is much more difficult with an active role then to have that global need to build up this extraordinary capacity. so it works extremely well.
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you will see that collegiate side of creative destruction. and with that necessity of destruction america has become very complacent such as the automated industry to actually because they are investing in new technologies. so in some ways it's that they didn't have enough construction in the seventies. and then with very powerful industries sometimes you get that destruction not working in the way you would think. japanese can produce cars until suddenly.
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[laughter] . >> [laughter] . >> to help that analysis but there is this countervailing force to william jennings bryan. was a 36 -year-old and at the 1896 convention with the devastating remarks and why it
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was defeated. but it was the civil war that basically increase the level of the united states significantly so when the civil war was over everybody agreed to get the price level back to what it was so we are on a gold standard and by 18 seventies to get the price level down.
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but that role. that are very significantly different impact. so those periods of decline with all sorts of reactions and william jennings bryan with laissez-faire to what eventually developed from teddy roosevelt and woodrow wilson as well. and then to shift in the inflating in that form press
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with the politics of the economy and how people respond people respond very negatively to that. . >> so we live in the era where facebook and netflix and uber have hundreds of billions with a market cap even hitting the trillions. do you think americans support of creative destruction has led to these high valuations of these companies that is the pinnacle of creative destructio destruction? . >> when america seizes the initiative globally and technology such as steel and
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petroleum and two creates very rapidly these giant companies and going on now in silicon valley and serious companies like that. and then to seize on those technological changes so we see the continuity and american history to create entrepreneurs and then commercialized new ideas very rapidly so at the same time we see innovation spreading throughout the economy so now
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we see superstar companies now and all sorts of ways through patient protection that means it's great to have these companies so as long as they have this economy as much as i certainly would like. but let's make sure they don't last forever. >> lead is fascinating about the current. is that all major technological innovations with those circuits have all been developed within the united
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states. and what that clarifies is the innovation issue is not strictly the 19th century and there is a very famous book with the technology innovators and so what struck me about the book. [laughter] it is a fascinating book. . . . .
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and if so, what should it do? >> what's causing the continued wealth of any quality? does it matter what should the government do about it? >> a difficult problem that emerges because of the fact the growth in technology has no limits. the quality of the capital stock has no limit. but human intelligence does.
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going back to i would say go back and look at who are the most intelligent people com, the major innovators -- they all had an extraordinary level of intelligence, but as you get further on into the 20th century, there are fewer and fewer, smaller percentages of society that have the intellectual capability to deal with the extraordinary complexity of what the new world is developed. and what that means is that because of the level of human intelligence -- go back and look at all of the major intellectual
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advances in the 15th century they also fed continuously increases from one society or generation to the next. buthe quality of the technologil stock is always increasing. therefore, the incomes are falling inordinately toward a smaller and smaller part of the labor force and because that is the case, you get the extraordinary problem of inequality. you have to change human nature
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and how we go about that is a job in itself. you can do it up to a certain point, but then the question is eventually you are going to reach the ceiling. the level of chemical stock is changing and we are not quite there. there's a big problem in the future.
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the consequence of that is they ever higher proportion going to the society i have one last question i think. it helps regain momentum and rethinking and reshaping the educational system in the u.s. might be that your to get back on track and cleaned the economic progress.
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spin it how important is it to reshape the education system to get back on track but use the economic progress. >> it defines what the nature of the problem is a. thaa. they all have extraordinarily high levels of intelligence but it's not obvious that we are increasing at. you can for example if an
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extraordinary example of a level of intelligence of seeing both real-world and knowing but it's not obvious to that he and einstein generations later are basically on the same level but you can't get human intelligence improving with the limits of which are clearly there but you can always get the technology improvement where the incomes of low and the person who invents the iphone for example becomes a billionaire because that is the way the markets function. >> it doesn't concern me overwhelmingly that bill gates
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has got billions of dollars worth of steve jobs had billions of dollars because they were creating innovations that improve all of our lives and they did this by reducing products that got cheaper and better and more useful. people are making money doing that come after making this deal better. if that's the way they are making their money that's fine but if you have the crony capitalists doing it through the power of excluding other people from the markets have become rich in that way, then that does worry me. it's putting it -- >> i do think it's significant both dropped out of college.
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can you give these gentlemen a hand? [applause]
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heard about the relationship between the new york fed and large banks in the book noncompliant. she recently gave a talk in washington. thiss


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