November 2011

Simon Johnson of MIT and the author (with James Kwak) of 13 Bankers talks with EconTalk host Russ Roberts about the origins of the financial crisis and how the next one might be prevented. Invoking the work of George Stigler, Johnson argues that the financial sector has captured the regulatory process and the result is that regulation and government intervention have been steered more by the interests of the financial sector than to the benefit of the general public. Johnson argues for capping the size of banks in order to reduce the danger of systemic risk and the too-big-to-fail excuse for bailing out banks. Johnson also discusses the role of the Fed in subsidizing risk-taking and leverage in the financial sector.

Gary Taubes, author of Good Calories, Bad Calories, talks to EconTalk host Russ Roberts about what we know about the relationship between diet and disease. Taubes argues that for decades, doctors, the medical establishment, and government agencies encouraged Americans to reduce fat in their diet and increase carbohydrates in order to reduce heart disease. Taubes argues that the evidence for the connection between fat in the diet and heart disease was weak yet the consensus in favor of low-fat diets remained strong. Casual evidence (such as low heart disease rates among populations with little fat in their diet) ignores the possibilities that other factors such as low sugar consumption may explain the relationship. Underlying the conversation is a theme that causation can be difficult to establish in complex systems such as the human body and the economy.

Roy Baumeister of Florida State University and the author of Is There Anything Good About Men talks with EconTalk host Russ Roberts about the differences between men and women in cultural and economic areas. Baumeister argues that men aren't superior to women nor are women superior to men. Rather there are some things men are better at while women excel at a different set of tasks and that these tradeoffs are a product of evolution and cultural pressure. He argues that evolutionary pressure has created different distributions of talent for men and women in a wide variety of areas. He argues that other differences in outcomes are not due to innate ability differences but rather come from different tastes or preferences.

Steven Kaplan of the University of Chicago talks with EconTalk host Russ Roberts about the richest Americans and income inequality. Drawing on work with Joshua Rauh, Kaplan talks about the composition of the richest 1% and 1/10 of 1%--what proportions come from the financial sector, CEOs from non-financial corporations, athletes, lawyers and so on. Then he discusses how the incomes of these different groups have changed over time. Kaplan argues that these groups have increased their incomes by similar proportions, suggesting that a failure of corporate governance is not the explanation of rising CEO pay. The discussion closes with a discussion of the financial crisis and the compensation in the financial sector.