Intro (00:02):

Welcome to The Future of Liberty, a project of Liberty Fund hosted by Mitch Daniels.

Mitch Daniels (00:16):

Welcome, everyone, to The Future of Liberty Podcast, a presentation of the Liberty Fund, an organization committed for the last 60 years to the promotion and protection of those freedoms that have made America the great country it is and the beacon of the world that it is. Today we’re enormously grateful and fortunate to have with us Allison Schrager, one of the most knowledgeable, widely read and insightful commentators and advocates of these points of view that Liberty Fund so actively tries to promote.

(00:56):

Allison, thank you so much for coming to visit us.

Allison Schrager (00:58):

Thanks for having me.

Mitch Daniels (01:00):

Let me start with this question. You have written about the virtues and the resurrection, in one recent column of neoliberalism, which prompts this question. What is neoliberalism?

Allison Schrager (01:14):

Well, I mean, it’s somehow become a dirty word, but really, I think of it as the Washington Consensus, which emerged in the ’80s and ’90s, that the secret to economic growth is freer markets. I think center leftists would’ve favored a little more government intervention. Center rightist a little bit left, but it was mostly that free markets would grow the economy and that we should have more free trade. It largely about economic freedom.

Mitch Daniels (01:45):

Well, you’re widely read on several subjects, but you’re an economist first and foremost. You are a PhD from Columbia.

Allison Schrager (01:55):

Yes.

Mitch Daniels (01:56):

If I remember correctly, let’s start there with the economy. We’re talking mid-2025. By most measures, the American economy is performing well, despite predictions that it would suffer from uncertainties over erratic policies, government threats of tariffs, and so forth. So, is the American economy rewriting the rules as we understood them, or are we living on borrowed time?

Allison Schrager (02:29):

You never know. The way I like to think about it is the American economy is just extraordinary despite sometimes I think what is our best efforts to otherwise. We are so innovative. Americans really are such great workers and innovative and traditionally risk-takers, but our policy choices really do matter. And the tariffs worry me, but I think the economy is showing to be sort of more resilient. I think you can never predict a recession. They say booms don’t die of old age and I think that’s largely true. When you look at policies that maybe aren’t ideal, they don’t necessarily always cause a recession unless they’re horrible, like 150% tariffs could cause a recession, 10% probably won’t. However, they do make the economies less resilient to what does come along. So, we don’t know what’s going to happen in the next several months and the next year.

(03:33):

We could have a big shock. China could invade Taiwan. A lot of bad things could happen. The question for policymakers is, have we made the economy resilient to that so if we do have a recession or we can avoid a recession, it will be less bad?

Mitch Daniels (03:47):

Is it fair to say that maybe we overestimate, constantly, how much influence the government has on the economy? Maybe a free economy of hundreds of millions of people making individual decisions is a little bit bigger than the government. Maybe this is part of the government’s instinctive hubris.

Allison Schrager (04:05):

It is. It depends, obviously. I think one lesson I’ve noticed people have failed to take away in the last several decades of policymaking is if you do something a little, that doesn’t mean you can do it a lot. A lot of Democrats were like, “Okay, we raised minimum wages 50 cents. Let’s double or triple them because clearly minimum wages don’t matter.” And I think you could say that about a lot of government policies is if you tinker, yeah. The natural state of the market is stronger than that sort of tinkering, but policies can be very damaging I said if they go way too far. So, I think we’re suffering a lot from going a lot further, but again, we keep being very resilient. For instance, everyone keeps expecting, and I’ve been a debt hawk forever, even before everyone became one.

(04:56):

Again, it makes us less resilient. Everything’s fine. Markets aren’t freaking out about the One Big Beautiful Bill, but the problem is, do we have an emergency where all a sudden we must issue a lot more debt? Are markets going to be less forgiving because we already have so much debt? So, I think the resiliency is really the role of government policy and largely where we’re failing.

Mitch Daniels (05:18):

I always recoil when someone will say or write, “The president, whoever it is, is running the country or managing the economy.” You don’t. In those jobs.

Allison Schrager (05:31):

Yeah, they don’t get credit.

Mitch Daniels (05:31):

The most you can hope is not to do too much harm.

Allison Schrager (05:33):

Yeah.

Mitch Daniels (05:33):

And possibly to nudge things in a different direction. But again, the inevitable tendency of government, too many of the people I think who observe it is to accept that.

Allison Schrager (05:46):

Agreed. The problem is you also don’t have the counterfactual. Where we’re probably going to land with tariffs probably is not going to cause a recession. Maybe it will increase inflation on the margin, but not enough that people will notice in a big way, but we would have been better without the tariffs, but you never know that counterfactual. That’s the way politicians really should be judged but can’t be judged.

Mitch Daniels (06:11):

I want to come back to tariffs briefly in a minute, but on the way there, you’ve written, very persuasively about the centrality of growth, which when one thinks about it, it’s not only important to people’s material progress, but then to the confidence of people, to peace and serenity in our political process and so forth. So, you mention the bill that as we’re visiting has very recently passed and one of the big arguments people were having is, how much growth can we expect from this giant combination of so many different policies? The administration says, “Oh, well, 3% and that’s why it will not aggravate our debt problems.” Other models aren’t that optimistic.

Allison Schrager (07:02):

Yeah. We’re not going to get 3% growth from it. Maybe we’ll get 3% growth, but I wouldn’t put it on the bill. At the same time though, I feel like a lot of the criticisms of the bill are equally unfair. I have this very controversial opinion about the One Big Beautiful Bill, which is it’s not terrible, but it’s not great either. Everyone else seems to think one of the two things. And it does, like any big bill, do some good things, which I think will be good for growth, like all these tax credits and write-offs for research and development happening in private corporations that when we instituted full expensing in 2017, that did have a very positive impact on growth. So, I’m glad they’ve made that permanent. Everyone freaks out about any change to Medicaid, but that is a big program that’s growing and sort of grows unchecked.

(07:50):

There is a lot of fraud. So, I think some of the changes to Medicaid are important and a step in the right direction. Extending tax cuts or making them permanent from 2017, I have mixed feelings about it. On the one hand, I don’t think this is a good time for a massive tax increase, particularly on the middle class, especially with the tariffs coming. At the same time, we really can’t afford it. So I would have preferred, and not that Trump ran on this platform or there’s any appetite, but what we really needed was a bill that really did serious tax reform like we did in the ’80s and really took a hard look at our tax system and made it better, more efficient, and also would increase more revenue, but that wasn’t in the cards so this is pretty much as good as we were going to get.

Mitch Daniels (08:35):

Maybe it was a missed opportunity. First of all, as you say, for genuine tax reform, and some of us think the problem with the Medicaid provisions is they didn’t go nearly far enough.

Allison Schrager (08:44):

Yeah.

Mitch Daniels (08:45):

This program has exploded in cost in recent years. It’s not cruel to put it back where it was or on the track it was recently. Not to mention that the president himself took off the table majority of the dollars the federal government spends the other entitlement programs, and just one more chance to bend down the debt curve. You talked about the importance of permanence in things like expensing so businesses can plan. We all know how important that is, and it’s been proven. Now, nothing has injected more uncertainty, than the tariffs. They’re on, they’re off, they’re on, they’re postponed, they’re on, but we’ve reduced the rates.

(09:36):

What’s your view of this? Is it really clever bargaining? And if so, how long can you do that before you impose costs that are worse than the gains?

Allison Schrager (09:46):

For me, the ideal tariff level is zero. So, I would never say, “Oh yeah, this is really clever bargaining.” On the other hand, again, there’s always something to what Trump’s doing that’s important. I actually do kind of admire, although the uncertainty around tariffs, the high tariff levels aren’t quite how I would deal with it, is these non-tariff barriers he talks a lot about. For instance, even in Europe, even within the EU, they have these huge distortions and regulations that have really hampered their economic growth. I read one study from the IMF that’s the equivalent of a 40% tariff within the EU, which is supposed to be a free trade zone. So, when he’s coming after Europe for these free trade barriers, non-tariff barriers that act like tariffs, he’s not wrong. I think the irony of it all is these non-tariff barriers actually hurt the country that has them more than they hurt us.

(10:36):

If they actually negotiate and remove them, it would probably be the best thing Europe has ever had, even more than for us. There’s something to thinking about trade and about regulations that make trade harder, although I think we’ll end up with higher tariffs, which isn’t in the spirit of free trade, but at least the issue is coming to the fore. It’s amazing to me. Like most economists, I never thought tariffs would destroy the economy or cause runaway inflation or a recession, but I did expect the economy to be weaker, at least from the uncertainty. It’s not, and it’s remarkable. And I don’t think anyone can really explain it.

Mitch Daniels (11:19):

Maybe by the time this airs, we’ll know more and hopefully have good news. Let me ask a non-economic question related to tariffs. It could be asked in other contexts, because there’s a lot of debate among commentators about our constitutional framework and who should govern what. Whether tariffs are a good or bad idea, should Congress reclaim the authority to set them? The president has asserted, and no one has stopped him, that he can do this with the stroke of a pen. Is that good or bad government?

Allison Schrager (11:54):

It seems bad to me. There’s a reason why Congress is supposed to have the authority to tax and tariffs are a tax. By having one person do it, you have these sort of willy-nilly rates that move around, which I guess in theory might be good for negotiation. I’m not sure either way. Congress really should take this power back. I don’t know if they will, might end up being the judiciary that takes it away, but it’s hard to predict.

Mitch Daniels (12:24):

Another one of your special areas of expertise is public fiscal policy and particular pensions. You frequently sign off some of your posts and missives, “Fellow pension geeks,” which is an appealingly self-effacing way but I’m glad there are people like you paying attention because this is an under attended crisis of its own building. I’m curious to know, I won’t hold you to this prediction, but which would you expect first, a run on the dollar, a crisis at a treasury auction or at the national level, or the collapse of a major state pension fund, many of which are deeply, deeply underwater?

Allison Schrager (13:11):

I would put it on the pension funds. These higher interest rates have been good for pension funds, giving them some breathing room, but we need to keep paying attention. This is another slow-moving disaster which, in the end, I think will require a federal bailout. The feds keep insisting they won’t do it.

Mitch Daniels (13:34):

Yeah. Well, not so fast. I think I’ve been worried about exactly that for 10 or 15 years. In fact, I’ve speculated, we’ll give thanks to the founders in the Connecticut Compromise, which gave every state two senators. I’m hoping at least that when that day comes, when Illinois or California or somebody presents themselves, “You’ve got to save us from our own vote buying and the unconscionable giveaways that have been a part of creating this problem,” that you’ll find 25 states or more that say, “No, live in the bed you made.”

Allison Schrager (14:16):

Well, it sounds heartless to say, “I hope so.” It just seems that no one ever lets pensioners go. You look at any sovereign debt crisis or municipal debt crisis, it’s like pensioners always get paid first before bond holders.

Mitch Daniels (14:31):

Don’t you think there’s a difference between an auto worker in Michigan and a $200,000 lifeguard in California, a public employ?

Allison Schrager (14:42):

Honestly, I wish there were more accountability for the people who run the pension funds. That only happens when the funds fail and the pain is felt, which sounds cruel. Another issue is that many public-sector workers don’t have Social Security, so if they lose their pension, they’re really out of luck. But why aren’t states held accountable for running their pension funds properly? I think there’s a lot more pain to come, especially with the issues in private credit and private equity, which pension funds have moved heavily into over the last few years. They’re now having trouble getting their money back and aren’t getting the returns they were promised.

(15:25):

It’s going to be really interesting. It probably depends on who’s in office whether there’s a federal bailout and what it looks like. But at the end of the day, these are very sympathetic people—even the $200,000 lifeguard in California. I’m sympathetic to them because they were promised something and made financial decisions throughout their lives based on that promise.

Mitch Daniels (15:48):

Well, no one said they get zero, but they might have to take a substantial haircut down to the level that some private sector pensioners would find a step up.

Allison Schrager (16:00):

Yeah. To some degree, there isn’t sympathy because most people have a defined contribution plan. They watch a lot of public safety workers retire when they’re like 40 with a lifetime pension.

Mitch Daniels (16:13):

You say they didn’t get Social Security, but a lot of them had that second career, double dipped, whether it was another public pension or a private retirement fund.

Allison Schrager (16:23):

It’s becoming popular to put these people on Social Security, which is fine. My theory is if we put these public sector workers on Social Security, then that should come with a guarantee the feds never bail out their pension.

Mitch Daniels (16:39):

Yeah.

Allison Schrager (16:40):

They already have a guarantee, so in theory they don’t need it. If we said, ‘We’re going to put public sector workers on Social Security,’ they would then have a guaranteed form of retirement income, something that comes from a rock-solid promise. I’m not sure we can do that, and I’m not a politician. I’m not sure it’s possible to make such a commitment. Then we would never bail out a public sector pension.

Mitch Daniels (16:57):

Well, if you’re right about it being more likely to happen then I hope it is, but that guarantee might not hold either, if in fact they’re able to roll the rest of the country. Well, that’s one I won’t say if we find out. We will find out at some point, just don’t know when. You just mentioned Social Security, what about foregoing taxes on Social Security, which this recent bill did too? Here we got a system that’s going broke or going bust in 2032 already and now this. Is that a good idea?

Allison Schrager (17:30):

No. Obviously not. I would have rather this bill actually do entitlement reform. The more we wait, the more expensive it is. I think people also underestimate how much uncertainty this causes. The retirement situation is really interesting in America. In a lot of ways, it’s never been better. It’s not like there was some golden age of defined benefit plans where everyone had one. They were expensive and they actually pose a lot of risk to employers. More people than ever have retirement coverage. People are retiring with more wealth than ever before, but people also are convinced they don’t have enough to retire. They’re convinced that an earlier generation had more security and more money than they do, and that actually isn’t even true. And I think that is in part because no one knows what to expect from Social Security. My mother’s in her 70s and she still will make comments like, “Well, who knows if I’ll get Social Security.”

(18:18):

I’m like, “Yeah. No one’s going to take away your checks.” But the fact that people are supposed to have this stable, certain source of income to be the foundation of their retirement planning and people don’t know. On the one hand, it’s like a hands off don’t touch it. On the other hand, it’s well, we don’t know if it’s even going to be there for me. We just need more clarity around retirement income and people need to know what they’re going to get, what they’re not going to get, how to better manage their 401ks, and really people would then realize they’re actually much better prepared for retirement than they think they are.

Mitch Daniels (18:51):

Again, one thing I think we know with some real confidence is that these crunches are coming and so the golden age of the pension geek is ahead of us.

Allison Schrager (19:00):

I don’t know. The good thing about being a retirement economist is the problems are relatively easy. How to fix retirement isn’t very complicated. You just have to save more and probably consume less.

Mitch Daniels (19:15):

Ronald Reagan, you say frequently, people say there are no simple solutions. No, there are, just not easy ones. This is a classic case.

Allison Schrager (19:23):

Yeah. Exactly, which is why pension geeks will always be employed and frustrated. We know what to do, but no one will ever listen to us.

Mitch Daniels (19:29):

Well, your day is coming. That’s my point so hold on.

Allison Schrager (19:32):

I don’t know. I’m not optimistic.

Mitch Daniels (19:34):

You coined a term I really like in your writings about the recent arguments over ESG and DEI, but let’s talk about the first one. You said that the only bubble you had ever correctly anticipated was the virtue economy. So, I love the term, and I love the notion you were presenting there but talk about that.

Allison Schrager (20:07):

So, I can’t call bubbles, but if there’s one sign that something’s amiss in a market it’s when someone says they’re going to get something for nothing. That’s why I love financial markets because they’re just so pure in so many ways. There’s always this fundamental truth that you don’t get higher returns without risk. If you constrain your portfolio, you’re going to get a lower return. This is when you know the virtue economy is just not working. This is true of DEI or ESG because they both effectively act as a constraint on who you can hire or what companies you can buy stock in. Yet, it was all being sold as it’s somehow going to make things better. Like, oh, if you constrain your stock choices to these virtuous companies, you’re going to get a higher return too. That doesn’t make sense.

(20:54):

It’s one or the other. If you feel very strongly you don’t want to invest in oil companies, fine, bless you. But you must understand, you’re going to get a lower return in exchange for putting that constraint on your portfolio, or certainly as well with companies saying, “All right, we’re only going to hire certain people based on their race.” Well, then that constrains the pool of people you can hire, and it puts a constraint on the talent you can find. This was always being sold as these studies from big prestigious consulting firms that are saying, “DEI also is going to make your workforce more productive.” I knew it was a bubble.

(21:35):

One, I sensed people were getting sick of it because it was always silly, but you also just know in finance, and this is true of any financial crisis or any stock bubble, is when people are convinced, they’re getting something for nothing. It’s when they think, oh, I’m piling into this clearly risky asset, but it will never fall in price.

Mitch Daniels (21:59):

In both contexts, a question many of us are curious about is whether this conclusion, which seems absolutely dispositive to some of us but not too many others, is lasting or temporary. It may be a different answer for the two related phenomena. So, let’s take ESG first. Some people say, perhaps you have, that this has settled the shareholder stakeholder argument in Milton Friedman’s favor. I’d like to hope that’s right, but how confident are you that this won’t come back in some different way or form?

Allison Schrager (22:47):

I’m less worried about it in financial markets because you see it institutionally. You see Larry Fink trying to distance himself from the fact this ever happened at BlackRock, like a couple years ago, it was all he was talking about. I think one of the reasons they got away with it as they did with ESG is they just went in a lot of tech stocks and tech stocks had a good run. So, they could credibly claim, “Oh look, we’re getting more money too.” The test of any market strategy isn’t how it behaves in one market. It’s how it behaves in all markets. So, I think it’s now hard to act as a fiduciary and be an ESG. It’s politically divisive and it’s not performing as well. This has now largely been settled.

(23:25):

On shareholder stakeholder value, I’ve always been a big fan of shareholder value. Milton Friedman’s right about everything, at least when it comes to that. Although I am rethinking certain aspects of it; I just read the Alex Karp book that really makes the case that companies need to be moral. I’m not willing to completely go there, but that does seem to undermine some cases of shareholder value for certain companies, depending on what their activities are.

Mitch Daniels (23:52):

In the case of ESG, and on the very day we’re having this conversation, there’s yet another story summing up the quantitative assessments, which are very definitive that no, it doesn’t work. It does hurt your returns and certainly doesn’t help your returns.

Allison Schrager (24:12):

Yes.

Mitch Daniels (24:12):

There’s no evidence of that. Markets can calculate and quantify that. Now switch to DEI, which is to some extent harder to prove one way or the other and an equally emotional appeal for some people. Are they temporarily in hiding? Are they playing possum or will they be back as soon as they get the chance?

Allison Schrager (24:38):

I think DEI in places like universities will be very hard to dislodge. Many people in power are true believers who think this is morally right. It is hard to engage with them because they have a point about making workforces more equitable and more welcoming. Who argues with that? But the implementation and what DEI became ended up being everything it was supposed to be against. Unfortunately, many people in these positions of power do not see that and still think the means they used, like loyalty oaths or race restrictions on hiring at some universities, are justified and they are still trying to use them where they can. So that will be harder to change. I am not sure about the private sector or whether they can still get away with it, because I think we will see many more lawsuits. And as I said, it becomes a constraint on performance because it becomes a constraint on who you can hire, and that is bad for profits.

Mitch Daniels (25:45):

Yes. And in the private sector, that’s what ultimately matters, your performance. Higher ed, which we’re just about to talk about, has benefited, frankly, from not being accountable, not being measured in terms of performance in the way that markets relentlessly do. Our friend and former guest here, Niall Ferguson, suggested some time ago that we had the acronym in the wrong order, he said it should be diversity, inclusion, and equity. And now the real question is, did DEI die or not? We’ll see.

Allison Schrager (26:18):

I think unfortunately, it’s still around, certainly in a lot of institutions.

Mitch Daniels (26:22):

Let’s talk about those, including the one from which you have a very prestigious degree. You’ve suggested that, using Columbia as an example, of so many similar institutions, that it needs to be broken up. That’s an interesting idea. Tell us why you think that.

Allison Schrager (26:43):

Well, the university research model has been very important to economic growth, and I think exceptionalism. It really does produce a lot of the research that has made our country very economically successful. It’s also been critical on attracting talent from all over the world. It’s one of the reasons why the most talented entrepreneurs who’ve really increased growth in numerable ways came here as students to do research. You know what? Universities are rewarded for doing this very important function. They get a ton of federal money, and they really can become the most powerful and influential institutions in the world, largely on that federal money. Therefore, the research is so important. Trump’s war on universities, and honestly, who’ve behaved quite poorly and done some rather shocking things, said, “Well, I’m taking away money,” it was largely research money because that’s the money he had control over.

(27:44):

People were outraged. They’re like, “Well, this was cancer research.” So now we’re in this position where we can’t really hold universities accountable for their behavior because they’re doing this very important function. The question is, why are they doing this important function? The universities didn’t have to do this. The deal was going back. I can’t remember his first name.

Mitch Daniels (28:06):

Vannevar Bush.

Allison Schrager (28:06):

Yes. Was government supported research was important. He saw that and he thought it should go on.

Mitch Daniels (28:12):

It had been to the victory in World War II.

Allison Schrager (28:15):

Yeah. He saw where this was going. And he’s like, “This should happen at universities because it’ll be less political than if it goes on in government.” But now they’ve made it so political. They didn’t have to do this. They chose it. I’m all for freedom of speech and I’m all for academic freedom and I accept that universities are going to have some professors who say things I find very offensive, and I think they should keep their jobs. I’m even open to them teaching students. Fine. Columbia certainly has a lot of professors I disagree with, and I totally support them keeping their jobs. The question is that universities took their most insane professors’ ideas and made it university policy and imposed that on the sciences. We have all these stories of the years of sciences having to do these loyalty oaths, having to hire the best scientists and said to fulfill some DEI quota.

(29:05):

And suddenly it was hurting science. I think universities need to be held accountable for that. I have even argued, and this was cut from the column, that universities like Columbia should separate their sciences into a different university. If they want to pursue activism, fine. If they want university professors who I think are extreme setting university policy, fine, just keep the sciences separate. Do not harm them. If you want federal money, you have to keep things neutral, and they are not able to do that. One thing that was in the original column but cut because it was getting unwieldy is that I argued the breakup should mainly happen for the elite universities. I also argued that funding should still go to public universities and land grant universities, which serve more of the public so more people can benefit. But why are we giving so much money to schools like Columbia and Harvard when they have really fallen on their mission?

Mitch Daniels (30:06):

I would hope you keep writing about this because as you just pointed out, this to me is a broader subject than just the future of the academy. Science itself has been polluted.

Allison Schrager (30:17):

Yes.

Mitch Daniels (30:18):

If you look at what some scientific organizations have imposed or recommended to their members, and at some of the grants that have been given, there is no question that much of it was not in the public interest. It was politicized. People on the left often talk about threats to science, but in some ways, they have posed the larger threat. We have issues of non-replicability and a lot of low-quality work being done. A reform like the one you suggested might be the best way to return to science we can all trust, and science that, if the public is going to fund it, truly advances the public interest.

Allison Schrager (31:05):

Exactly. They need accountability and public trust, but they abused all of that.

Mitch Daniels (31:09):

You live in Greenwich Village. You told me before we started, that’s a fun place to live. I’ll take your word for it. I have to ask you, I’ve been a longtime fan of the Manhattan Institute, like the Liberty Fund and I think it’s one of the most important voices for freedom and principles of liberty out there. It was founded, at least as I recall, in hopes of bringing New York City back to some social and civic health. It has had some great days, as New York has had ups and downs but also real highs. Now we suddenly have a self-proclaimed, maybe even beyond socialist, Marxist by some measures, as the odds-on choice to be the next mayor of New York. So, are these glum days at the Manhattan Institute, and how worried should fans of New York City be?

Allison Schrager (32:17):

Well, fans of New York City should be very worried. I wouldn’t say they’re glum days at Manhattan Institute. I was telling you; everyone keeps saying to me who’s not there, “Oh, this should be great for you guys and great for your fundraising because you are everything he’s not.” It’s going to be a disaster. I should say, otherwise our legal team will kill me, we’re a 5013C and we don’t endorse any candidate. I wouldn’t say they’re glum days. I think people are very worried because in some ways it would revitalize our mission, although it feels like it’s been a very strong mission as long as I’ve been there since 2020. I think one thing I’ve noticed is everyone who works there is very passionate about New York.

(33:01):

We love New York and we want the best for it. We want the best candidate who supports and agrees with us on policy, particularly because we take public safety very seriously and see who is harmed most when public safety falters. On the one hand, we feel very invigorated in our mission. We always do. I joined in 2020, and we were certainly invigorated then. But at the same time, all we want is for our research to be irrelevant because the city is doing so well.

Mitch Daniels (33:40):

There were days when it looked like you’d succeeded, but now here we are.

Allison Schrager (33:43):

Yeah. I think that everyone wants the city to be successful first and foremost. It’s the best job I’ve ever had. I’ve never worked for a think tank before, but it’s wonderful working with people who, and I guess you feel the same here, who just really share your vision of what you want the world to be.

Mitch Daniels (34:06):

Do you want to make a prediction? Will this fellow prevail?

Allison Schrager (34:12):

I think he will. I remember when de Blasio won. I remember just being like, “What are you doing, people?” We had it pretty good with Bloomberg. What are we doing? You sense this enthusiasm. People were really passionate. I don’t know why. They all disavowed it five years later and said, “I never voted for that guy.” And I’m like, “I remember you doing that.” You have people who are so excited for this guy.

Mitch Daniels (34:39):

Well, some people. Let’s insert the parenthesis that I think your calculation is maybe 8 or 9% of New Yorkers actually voted in the democratic primary for this candidate.

Allison Schrager (34:50):

Yeah.

Mitch Daniels (34:50):

That leaves 91% who didn’t. That’s a phenomenon we see around the country, people getting elected in one party settings with tiny percentages. 

Allison Schrager (35:01):

Yeah.

Mitch Daniels (35:01):

With that proviso, you think he’s probably got the best chance to win.

Allison Schrager (35:07):

He’ll turn out. Some people aren’t that engaged. People also have a lot of motivated reasoning going on now. They’re like, “Oh, well, he won’t do the worst things he’s saying he’s going to do.” Or “Oh, I’ll never vote for a non-Democrat,” or whatever. They’re having problems getting excited about Eric Adams. I’m not sure why. I thought Eric Adams was actually a pretty decent mayor.

Mitch Daniels (35:26):

Well, let’s take that first point you just made. I think it’s interesting beyond New York. When not just Marxists, let’s say, committed leftists, get elected, they sometimes pose as more moderate than they are. Let’s think about the last presidential administration, came on like Warren Harding, went out like Eugene Debs. So, if he’s elected and your prediction is correct, what’s your sense of how he’ll govern and what success he’ll have or not have?

Allison Schrager (36:04):

As I said, I do not think you can really moderate unless it is genuinely in your heart. Who you are as a person is reflected in your leadership. He has a long history of being very anti-cop and wanting to defund. So, what happens if the police accidentally shoot someone? Whose side will he take? I think we know, because that is who he is. I have always been instinctively very pro-market. He has an equally long and passionate history, though he is younger than I am, of not trusting markets. I see the market allocating resources and setting prices and I think it is a miracle. He feels very differently. So even if he says, ‘I am going to work across the aisle, I am going to work with more moderate people in Albany, and maybe not do all these things or try to drive all the businesses away, it is still in his heart and it comes out.

(37:03):

It comes out in subtle ways. It comes out in times of stress. As I said, whatever the economic equivalent is to a policeman accidentally shooting someone, it does come out and the business community doesn’t feel supported, and they know they’ll get thrown under the bus at the first opportunity.

Mitch Daniels (37:19):

Well, after your first visit to the Greenwich Village City of New York grocery store, you’ll have to call me up and tell me about it.

Allison Schrager (37:26):

I wonder what kind of flour they’ll give me if I have a choice or if they just give me rye flour.

Mitch Daniels (37:30):

Well, it’ll be interesting to see if they have any at all.

Allison Schrager (37:32):

You’re right.

Mitch Daniels (37:34):

I want to finish on another area in which you’re, somewhat uniquely interesting and that is risk and its role in a free economy and in the success that America’s had. You have written that more than anything else, I think I’m reporting this accurately, risk and the proclivity to take it and the history of taking it has been the most important factor in what we think of as exceptional performance of this country. So I happen to think that you’re very correct and persuasive on that. Where are we in terms of America’s current attitude and willingness to take the kind of risks that have brought us to where we are?

Allison Schrager (38:25):

It is certainly faltering. I am writing a new book on our changing relationship to risk, and I open with a story of a man in Alaska who received the last homestead patent. If you think about the homesteading program, it was not uniquely American but a New World idea in which the government essentially said, “You have nothing, but if you take enormous risks, you might die, your family might die, but if it works out, we will give you land,” which was the main path to wealth and upward mobility at the time. The government was supporting extraordinary risk taking, and it became the foundation of wealth for generations. Now more than ever, the government’s main role is removing risk from our lives rather than supporting risk taking.

(39:13):

I write about this man in Alaska and how I even found him because I spent time in Alaska when I was in college, and even that does not happen now. I just did what people did then, which was get on a ferry, end up in Alaska, and have a summer adventure. It was just a summer. We went on to have fairly conventional lives, but even that does not happen anymore. I was talking with my editor, and she asked, “You just went to Alaska? Did your parents sign you up for a program?” And I said no. But I am told that is now how young people go to Alaska. They do not work in fishing or other jobs. They go on a program where everything is arranged in advance.

(39:56):

So, you just see this generational shift in risk taking from homesteaders, to people who just took risks for a summer, to people who just really don’t take risks at all. I find this worrying. We’re scratching our heads at why Europe isn’t growing; I lived in Europe for years. They’re not risk-takers. Their government is very aggressive in removing risk from their lives and that’s why they’ve had low growth. It’s like how macroeconomics and finance are very similar. I said this sort of central truth from financial markets is you don’t get a higher return unless you risk loss. True. This is the foundation of all finance, but it’s also true for the macroeconomy and that if you don’t have a certain amount of risk, you just don’t have the same amount of growth.

Mitch Daniels (40:37):

Some of us found the nation’s response to the pandemic alarming in this respect. I thought it across the sectors, public, private and nonprofit for that matter, like the one I was living in at the time, the flight from risk, the hiding behind experts, the fail-safe; people thought it was fail-safe, attitude. First of all, imposed costs vastly beyond any savings or protection it provided and said all the wrong things about this essential wellspring of our liberty and prosperity that you’re talking about. Did you have the same concern?

Allison Schrager (41:30):

Yes. I think the book was largely inspired by observing that. I’d watch Cuomo’s press conferences. We kept being told we can go back to normal or not even normal, do some basic functions in society when we’re safe. Well, when are we safe? Since when has that been the standard? The government’s job is, as I said, to weigh trade-offs and make choices that reflect what the populace wants. It just completely veered on that there were no trade-offs. Well, they didn’t think of trade-offs.

Mitch Daniels (42:00):

I don’t know how you find time, but in addition to all the other things that you’re doing, you teach? You’ve been teaching at least at NYU? 

Allison Schrager (42:07):

Not recently. No, no. Not in several years. I love teaching though.

Mitch Daniels (42:11):

Not for a while.

Allison Schrager (42:12):

It’s just so much time.

Mitch Daniels (42:14):

I found out when I tried it. Yeah, you’re right. It’s hard.

Allison Schrager (42:17):

It’s great though when you do it. In abstract, I’m like, why would I ever do this? It’s so much time. Then you remember how much you like it when you do it.

Mitch Daniels (42:25):

Well, it wasn’t that long ago. I’m just curious, what was your take on the young people in your classes and their views of freedom and of risk? Do they have any sense that they are less free than people were in previous days? They’ve accepted impositions on their privacy, for instance, that would have been unthinkable not that long ago. What’s your take on their outlook?

Allison Schrager (42:52):

I think they do. Granted, the young people I interact with may reflect some selection bias, but I think COVID brought this to the fore. If one good thing comes from it, it may be a generation of people who really question things and, after having so much dogma thrown at them, begin to reject it. That generation was robbed of so many important things: proms, graduations, their first year of college, so many major milestones. And I think they are all wondering, for what?

(43:26):

I was teaching before that, but the students I interacted with, again, because I’m on social media a lot, so I’m like, “Young people are trash.” Then you meet them and they’re wonderful, interested, curious, wondering why they’ve been told all this stuff that makes no sense to them and really just hungry for interesting ideas that they can grapple with, even make them uncomfortable. So, the good thing about teaching is you don’t see the horrible people on social media. You see actual people and they’re wonderful and they’re thoughtful and they’re curious and they’re everything you’re supposed to be at that age.

Mitch Daniels (44:02):

So maybe the next time some big shot in government tells them, “You must do this or not do that because we say it’s better for you,” maybe they’ll be a little more skeptical than people were in 2020.

Allison Schrager (44:14):

Well, another thing is we’re seeing them much more politically divided. Millennials, we’re all super left, but we’re seeing, a really healthy political diversity in Gen Z, which makes me happy. I’m technically a registered Democrat, but I want both parties to be great. I think when one party goes off the rail, the other party sort of goes off the rail. They really set the tone for each other. So, a healthy society has people of various political views. I think we’re seeing much more political diversity in Gen Z, and that gives me a lot of hope.

Mitch Daniels (44:47):

That gives me hope that in the question I like to end all these conversations with, I might get an affirmative answer from you. The question is: in the year 2050, will America be more free or less free?

Allison Schrager (45:00):

I think America will be more free. I’m optimistic about this young generation being more open to risk and feeling resentful of the constraints that are on them. Maybe they’ll look back at this time as a sort of Victorian era.

Mitch Daniels (45:18):

Allison Schrager, thank you for being with us. Freedom’s prospects have a lot going for them in this country the more people read you and pay attention to things you’re saying. And we at Liberty Fund will remain among that group and very grateful that you took time to be with us today.

Allison Schrager (45:36):

Well, thanks so much for having me.

Mitch Daniels (45:36):

And to the audience, thank you for being with us. Please join us on future installments of Future of Liberty, a presentation of the Liberty Fund.

Outro (45:45):

The Future of Liberty has been brought to you by Liberty Fund, a private educational foundation dedicated to encouraging discussions of the ideal of a society of free and responsible individuals.