The False Economic Theory Behind The Greatest Grift in History

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1:00This is the Tom Harbin Program. Hey, welcome to the program. Nick Hanna is a successful business leader, entrepreneur, venture capitalist. He's founded, co-founded, or invested in dozens of companies. He was the first non-family investor in Amazon for example. And a company founded a quantitative later sold in Microsoft for $6 billion. He has this remarkable new paradigm for a new era called market humanism. Nick, welcome back to the program. It's been a while since we spoke. Nick Hanna or by the way.com is the website. Tell us about market humanism. The market humanism is basically what my co-author, Oxford, OXB University economist Eric Binocker and I call basically the new economics. It's market humanism is what you get when you build an economic framework from the empirical evidence up versus ideology down.

2:09And I don't need to tell you that the neoliberal sort of neoclassical economic framework that the world has accepted. And we've made policy on the basis of for 50 years or so has done nothing but make rich people richer and everybody else tour. The problem is that that economic paradigm has been accepted by policymakers both on the right and the left. And if you take it seriously and enact policy on the basis of it, that's just what happens. And so my co-author Eric Binocker and I started with an intuition which hardened into a conviction that the problem was that the economic framework itself was just objectively inaccurate in the way that it represents reality and the way in which it characterizes economic cause and effect. And let me give you an example of that working in the world. So you may recall Tom that I was part of a small gang of people that cooked up the $15 minimum wage in 2011, 2012, 2013.

3:16The thing about that policy intervention is that if you take the neoliberal orthodox economic framework seriously, then it is true by definition that if you raise wages, there will be fewer jobs. It's embedded in the mathematics of how that system works because in that framework, and I don't want to get technical, but it considers the economy to be an equilibrium system, which is a system within which if one thing goes up, another thing has to come down. And this is why there are 18,000 professional economists in the United States, plus or minus, and not one rodent support of the $15 minimum wage. So it's been spectacularly successful. Right. Tom, I was on the phone a couple of weeks ago with a very prominent left-wing economist who admitted to me that when we cooked this darn thing up and it started to get publicity, he and a bunch of the lefty economists had a conference call where they all agreed that we had lost our minds.

4:22Apparently, one of them was like, no, no, no, no, it may not be that bad. But here's the thing is that if even the leftiest economists believe that if you raise wages for workers, it would be bad for workers, it is impossible to help people. This is why we're in the box that we're in. And I just want to be clear, this is what they're teaching in Econ 101 classes today all over the country. It's not like this has gone away or is in the past. This is the orthodoxy that exists today. Yeah, and it started in the 60s with Milton Friedman at the Chicago Strait. That's right. I wrote a book about this, the hidden history of neoliberalism, how Reaganism gutted America about three years ago and just laid it all out. It's a shocking story, particularly when you get into Hayek and Friedman and the racism that was underlined it as well as... Absolutely. I mean, it's just absolutely crazy. I'll tell you in Nick Hanna or the venture capitalist, the host of Pitchfork Economics Podcast. He's got a new book coming out, Market Humanism, a new paradigm for a new era.

5:24Folks, can download this for free at marketsbuiltforhumans.org if they're interested. But I think that the thing I really want to underscore for your audience is that if we let this existing economic paradigm continue to dominate policy making, none of the stuff that we need to get done to get this country back on track is possible. And this is... So it's quite urgent that we start to push back on this orthodoxy, which... I don't want to say it's a conspiracy, but it kind of is a conspiracy to keep rich people rich and everybody else poor. And only if we can knock that old paradigm out and replace it with a 21st century thing is likely that policymakers will start to address the problems that you articulate every day on your show. Yeah, thank you. I agree.

6:25Whatever happened to Keynesianism... So Keynesianism was a remarkably robust way to understand the economy for its time. That goes back almost a hundred years now. Keynes was right about many, many things, but he didn't understand... And so one of the things that he's best known for, of course, is this idea that in a recession, you should increase demand. Right, government should spend money so that you get the flywheel of the economy going. And inject that at the bottom of the economy, not the top. Exactly. And he was right about that. There's no doubt. But modern scholarship improves our perspective on that and deepens our understanding of why that is true in ways that Keynes could probably have never anticipated. So for example, we now know that the economy is not an equilibrium system. It's what's called a complex adaptive system. It's more like an ecology. It actually is a kind of an ecology.

7:26And if you understand the economy as an ecology, not as an equilibrium system, then it becomes obvious that the dynamics of the feedback loops are what you're very interested in maximizing. And so for example, in the equilibrium view, if one thing goes up another thing goes down, but when you understand it as an ecology, saying that when wages grow, jobs would shrink, would be just like claiming that when plants grow, animals shrink. This is obviously not the way the system works. You know, wages are, you can think of wages as the food that businesses eat. And the more wages people are paid, the more food there is for businesses and the more they eat, the more they grow, and the more they grow, the more they hire. And that creates more wages and that creates a positive feedback loop, which is what drives market economies. That's a great amount.

8:27So that's what that's. That understanding was laid out in the 1770s by Adam Smith in theory of moral sentiments. And then absolutely. And then somewhat followed up on in wealth of nations, but as particularly theory of moral sentiments, just lays this stuff out. Of course it does. Of course it does. And people, these are old lessons. I'm reading Greek history right now, Tom, and they're arguing about the same things. It's just, it's unbelievable. And just to be clear, there are two really terrible things that came together over the last 50 years in American economic policy making. The first was the series of category errors that academic economists made. For example, believing the economy was an equilibrium system, not a complex adaptive system. And what happened was that that in turn was weaponized by a small group of very rich people who saw that this way of

9:31understanding economic cause and effect was very friendly to their interests. So for example, Tom, if you accept that the economy is an equilibrium system, which is now what they call Pareto optimal, which means that all of the resources in the economy are organized in the most socially and economically optimal way. Then it is true by definition that anything you do to affect that way of distribution will harm the efficiency and welfare for everyone. So this is one of the greatest griefs in the history of humanity. If you can get people to believe that the existing arrangements are the optimal arrangements, well that is pretty great news for the rich, for the people at the top of that distribution, right? Especially. And if you can persuade everybody else that anything you do to affect that arrangement will be bad for everybody, well, I mean, you've just locked in, you've locked in, well, they don't call it the status quo for nothing.

10:35Right? Yeah, for sure. We're talking with Nick Hanna or Nick, I'm going to hit a hard break here in a minute and a half and I can't stop it. So once again, the book is Market Humanism, a new paradigm for a new era and people can find it where and how? And markets built for humans.org, you can download it for free. Markets built for humans.org, that sounds great. Do you have, are there any politicians that you're finding who are taking seriously the work you're doing? I mean, we're a dialogue with all of the people who are likely running for president right now. Good. And people have been unbelievably enthusiastic about this. I mean, the people who take the time to undertake this seriously and understand a little bit, realize that in the locks, a huge amount of space for progressive politicians who actually want to get something done. The problem we live in now, Tom, is that the existing economic theory codes anything that's good for

11:37rich people is an unalloyed good and anything that's good for working people as a threat to the economy. This is why every single minimum wage increase requires 10 university studies to affirmatively prove that it will do no harm and $50 billion in annual all street bonuses. That gets a free pass. Yeah. No, I'm not saying forever. That's the only way. You know, if the minimum wage had ever caused inflation or loss of jobs all the way back to 1935 when it was put into place, every Republican will remember the year. They've gone, oh, don't forget 1972. That's right. But they never have. It never has. You're absolutely right. Never have. Absolutely. Exactly. Yeah, the great Nick Hanover. The book is Market Humanism, a new paradigm for a new era. Check it out. Nick, thanks so much for dropping by. It's always a pleasure and enlightening to talk with you. Thank you. Thank you for your time, Tom. I appreciate it. My pleasure. Steven, your Belinda, California. Hey, Steve, what's on your mind today? Hello, Tom. Hello, everybody. You know, this is going to sound a little odd, maybe,

12:39but I was just thinking about some of the things that have been said lately. People talking about socialism, etc., etc., but I wonder in mind, folks, that national socialist was what they had in Germany. Well, yeah, Hitler picked up that word socialist because at that time, it was a very popular word. Well, yeah, yeah, because some places it was actually working okay, but unfortunately, they ended up, you know, ending up being not key as in not socialism. So that's probably what it was about. Well, it was probably about Germany. Germany had Germany was the first country in the world to have a national healthcare system. A single pair of healthcare systems was put into place by Kaiser Wilhelm, both what in the 1880s, as I recall, I, you know, it's in my book, The Hidden History of American Healthcare. So, you know, Germany was a relatively socialist country. They had free university too during Hitler, but it wasn't communist socialism. It was more, you know, social socialism.

13:42Kind of more like Northern, Northeastern European country. Yeah, which is what Germany is. Yeah, that's another. Yeah, yeah, people wait north. I mean, you know, I've been talking about, yeah, it wasn't, it wasn't, it wasn't, it's Scandinavian socialism, but it was, you know, it was a hell of a lot more socialist than Britain or the United States. But excellent point, Steve, excellent point. Thanks for calling and making it. Just nice to hear from you. Dave in Olympia, Washington, hey, Dave, what's on your mind today? That was great attention, Nick Hano, or a big fan of a pitch-fork economics podcast actually inspired a major project and I built back there in COVID, but that's another story. The reason I called is that I've pondered the thought and I want to get your opinion thought on it. Is that socialism is not a yes or no question. It is a what and how much? Oh, I like that. Yeah, because it exists on a, it exists on a spectrum. Exactly. We have socialist, socialistic aspects to our country right now. And it fluctuates through his throughout time. And right now we're looking at adding a few things to it.

14:45And on top of that pile is healthcare. And education. In education, yeah, my daughter's deeply into it. Yeah, mine too. Yeah, so it's not a yes or no, it's a what and how much. And that should make it less scary for people. Yeah, well said, Dave. Well said. The question is, the Republicans are trying to essentially reinvent this field, this word, you know. And the question is whether they're going to be successful. I suspect in in red areas where there's not a lot of pushback and the, you know, the advertising savvy and the billionaires come in with all their money, they're going to have some success. Yeah. Uh, it's going to be real interesting. Yeah, you know, some some magic drift, you know, socialism and communism are once considered the same thing and then they were separated. And you know, words change, awful, used to mean awesome. Yeah, yeah. No, it's, we got to fight that. Yeah, we do and we've got a big job here ahead of us. And the biggest job is the fact that, you know,

15:45Musk and, well, there's these, you know, roughly 200 billionaires families who supported Trump in the last election literally spent one out of every six dollars that we spent on the election last time in 2024. They're going to do it again. They're going to do it even more this year. Yeah. And, you know, we're going to be ready for that. Dave, thank you for the call. In fact, those ads are probably hitting right now. Musk has got a new thing. It's called votesafe.org where he gathers all your personal information. It's getting spooky out there. And the paper to say that she was good.

16:49We fought our way from silence. We kicked down every door. Now the men who missed that power. I'm coming back for more. The men who want to sign for you. I'm coming for your rights. Your money and your body. You ballot in your life. They'll call a God and family. While freedom disappears. The men who want to sign for you. I'm already here. Pearson, Lamar, Texas. Say Pearson, what's up? You and me are not the only two people in America above the age of 50 who actually embrace socialism. And for the poor unfettered, un-dirregulated, mercenaged, self-capitalism.

17:50Please vote, Mr. Representative, our age group has felt very insulted. Well, the reality is, Pearson, when you look at the polling, you find that a minority of people over 50 support socialism and a majority of people under 30 support socialism. There actually is about a 20-point spread in that difference of age. I think a lot of it has to do with our having grown up with the great enemy, the great Satan being the union of Soviet socialist republics. Well, I got to tell you something. I always questioned the media when I was a kid growing up. Maybe a no-small port because of the Vietnam War. Having studied history, I think, in tension and class. And I realized that our country has always been that war. And I didn't appreciate being like, I felt like I was a bean treat like cannon fodder. So I looked at everything with John the Sky. And maybe that's why I am the way I am. Consider myself a news junkie, fanatic, and his Tom Hartman fan. I don't know what Bernie fan and socialist Democrat, my dummy fan.

18:52I get it, Pearson. So I guess you and I are born in the wrong decade. I don't know. No, I think we're supposed to be. It's an ideal society. We would be the wise elders, right? And I think we have something to contribute. That's why I show up every day. So Pearson, thank you for your observations and your kind words. Always nice hearing from you. I don't know. Yeah, there you go. And I hope Donald Trump is not considered a wise elder, by enough people come this general election. Yeah, no, he's clearly the village idiot, which is all the more of the problem. Yeah, Pearson, thank you for the call. Mark in Oakland, California. Mark, what's on your mind today? Do you know why Joseph Kennedy sided with FDR during the Great Depression? Well, what was his motivation for signing with FDR during the Great Depression? I don't explicitly know. Okay, well, I read that's fine. I read a book called The Rock of Bellers of American Dynasty Back Around. Sometime in the 70s, when I was basically just getting out of high school.

19:56And I read in that, that was written by a couple of right winners too, I later. I didn't know at the time, but I later discovered ways. He sided with FDR because he did not want his wealth confiscated. He understood 15 years prior to the Great Depression, the Bolshevik Revolution happened in Russia. He saw the same thing happening right here in America. And he knew the only way to preserve it was basically selfish interest, of course. The only way to preserve his wealth was to socialize the debt, if you work to socialize the Great Depression. And basically have the federal government boosted this out of this thing with federal spending. That's why he reported FDR. It would have pure, selfish, and pure. That makes perfect sense. You know, I, Luis and I started a community for abuse kids and we were vegetarians, so the community was vegetarian. And a number of notable vegetarians jumped on and became members of our board, Dennis Weaver, Gloria Swanson. And I used to, I don't know, every three or four

20:58months, I'd go down to New York and do a little fundraising tour. And I'd always visit with Gloria Swanson. We'd have dinner together in our apartment. And she told me these wild stories about Joe Kennedy. He was her lover for a while. He stole a bunch of money from her. He was her manager. And she ended up just hating him. But she was very clear that when FDR appointed him the first commissioner of the Securities and Exchange Commission that FDR had said to Kennedy himself, it takes a cook to catch a cook. Very quickly, it was a fault. I even bought that up for this reason. American capitalism only exists due to the largest of federal socialism. And it's been that way for basically my entire life. That is a fact. If anybody wants to debate, you know, I'll put up money. If anybody wants to out the base then want to take the capitalism, socialism, yeah, pure, pure unregulated capitalism

21:58always implodes. You know, it always, it always ends up as oligarchy. And then oligarchy is a transitional form of government that typically ends up as tyranny. So you're absolutely right. Park, thank you for the call. Paul and Woodenville, Washington, hey, Paul, what's on your mind today? Oh, Tom, you were opening, you were making an analogy between capitalism and football, which prompted me to want to share a, a, our direct comparison that I've been using for a long time between football and socialism. Right. The NFL draft. We don't use an accurate definition of socialism when we talk about the, the common safety nets because of the proper definition, the textbook definition requires the socialism turn of profit. A lot of people don't know. So the textbook definition is that socialism is collective ownership of productive gain, which is profit, and a reinvestment of some portion of that profit productive gain back into the

23:03collective interest. So that some portion of the profit goes back into the interest. So it's self-sustaining. So my analogy with football is the city of Green Bay owns the Green Bay Packers, which is the most successful professional football team in history. And to the degree that the Green Bay Packers, which makes a lot of profit, give some of that profit back to the city of Green Bay, which I'm pretty sure they do, not as a socialist football team. Okay. Yeah, it was originally started by the union, you know, the Packers union, the meat package union. And they, they do a lot of things for the city of Green Bay for kids and so to, to whatever degree, don't have to be all the profits. But socialism does require that the collective owns the profit. And some of those, some portion of those profits go back into the collective interest. Good point. I mean, the

24:06Tennessee Valley Authority is socialism because people pay for those services and some of those profits go back into expanding the services. I mean, there's actually more socialism in red state. And the Hoover Dam. The state of Alaska, yeah, the state of Alaska and their oil, permanent fund. Yep. That they get that every citizen gets back, the state of Texas has funds there. There are universities with similar things with oil. And yet here we are. This all to be asked about how bad socialism is. It's just, it's just, it's just, it's just, you know, a propaganda move so that capitalism can go unchecked as you were talking about. Yeah, I agree. Well said, Paul. Thank you very much for that. And thanks for that. You know, highlighting that fine distinction is an important one. Harold and Santa Barbara, hey, Harold, they guy about green Bay. Yes, I agree. The city of Englewood should own the Lakers and everything because of their pain for it. But anyway, that's not my question. My question

25:09is in college, you and I were able to work our way through college or university. And my other friends, a lot of them benefited because of their fathers were killed. But it wasn't a war. So what's going to happen with that widow? If she has children, what are her children going to be able to go to school? Yeah, this is a real problem. People, for people who don't know what Harold is talking about, we have 18 service members who have died now as a result of Trump's attack on Iran. And because Trump is saying this is not a war, their survivors, their widows and their children are not eligible for the war benefits that Congress has put into our law. And they're getting screwed. And some of them are starting to speak out, which is something that you generally don't do, but they are. And I think it's a good thing. Terrell, thanks for pointing that out. Bob and Melbourne, Florida, hey, Bob, what's up? I was in China from 1993 to 97.

26:17I spent five years over there working for a couple of joint ventures, me and half of the world. I think that always when China was really opening up to capitalism and everything. And just so happened, so I married Chinese person while I was there. Her father, my father-in-law, was the director of transportation for Hubei province. So we had a firm rose. Yeah, and her mother was an infrastructure engineer for Air China. So what they did then, and what they're doing now, even, is they take the state-run companies that were owned and operated directly by the government. And what they do is they split off parts of that and run it under private capitalism type things. And then they compare the two. In other words, they'll take

27:18one shipbuilding company and another shipbuilding company. One of them is Communist, one of them is capitalist, and then they compare the two. And so, and they do that with like every industry, because obviously there's certain things in capitalism that you want for like food distribution. Different than the manufacturing toasters. You see what I mean? Yeah, yeah, with toasters, you just want to maximize profit with food distribution. You want to share everybody gets fed. That's right. And so what they, and then they look at it for like 10 years. Fascinating. And then they compare the best. And then they choose from that. And that's why they've got 9 or 10 percent. Makes sense, Bob. Thanks a lot for that. I'm great insight. Thank you. You're listening to Tom Hartman. Robin in Berkeley, California. Robin, what's on your mind today? I saw a letter to the editor a couple of weeks ago in the paper that backed up something I've been feeling. And I don't know if I can read it. It's only a couple of

28:22sentences. But basically the question is, is it a good idea for Democrats, even if they feel that they're socialist and they're, you know, espousing ideals of socialism and whatnot, if that's what they're doing, to use that term, given its sort of inflammatory history in this country. And the thing ends up, I'll just read this last sentence here. It says, that it too late to invent a new term that will not automatically lose several million Americans who will refuse to vote for candidates who declare themselves a socialist, whether they agree with all the policy decisions or not. What about that? I mean, there are a lot of people and you know, I know, I think the Fox that everyone else is going to jump all over the security house. Oh, yeah, of course. You know, this is this is more free to come in this. Yeah, there's a there's a real demographic divide here. If you're over 50,

29:24the word socialist freaks people out. If you're under 40, the word socialist actually causes people to smile. We're kind of stuck with it. I mean, Bernie has been calling himself a socialist for 50 years. You've got a bunch of candidates who call themselves Democratic Socialists and they're not walking away from it. So I think the job is to have people understand that America has always been a socialist country from George Washington, signing legislation to provide for a poor house in Washington, DC, to social security, socialism, Medicare, socialism, our fire departments, our socialism, our entire military. Yes, when I was in the Navy, I got across my mind any number of times how kind of communist this was. Free medical care, free everything. Yeah, sure. Yeah, in the government. This was this was during the height of the Cold War. Yeah, but there are people and I'm obviously I'm over 40, but I think it's it's what's very worried. I'm not a hot potato. It's

30:25it's you know, I mean, it's a hot button word. I do and and the Republicans are going to do everything they can to try and use it as a club against us. And that's why I think it's important to stand up and say, no, we like this word. We like this concept. We like the idea of doing things for the society, which is what socialism is all about. The Democrats need to be just laser focused on this and counter anything that Fox and those people are going to throw. I agree, but they won't because the Democrats, you know, as well, Roger said, I don't belong to an organized political party. I'm a Democrat, you know, sadly, that's that's okay. But Robin, your points are all right. Thank you very much. Donnie and Petaluma, California. Donnie, what's on your mind today? Hi, Tom. I love your show. I listen all the time, but I do have to complain about Pearson, who called in saying, oh, here's my little rant. First of all, I don't know if Pearson demonstrates. He probably doesn't because the majority of people demonstrating are boomers. I'm 67, 67.

31:31And we demonstrate all the time we protest here. We were the generation where there was born in that fight against the Vietnam War and unfavorable civil rights. Yeah. I mean, I was younger for the Vietnam War thing, but I saw it on TV in San Francisco. I remember there them chanting, we don't want one, two, three, four, we don't want this leaping law. Yeah. And I remember seeing that on TV. And I'm just saying that a lot of women are protesting older women and young people are starting to come out too. And we have a weekly protest in the corner of East Washington and the Bolivar, Petaluma Bolivar every Saturday. And he's just wrong. I mean, they just older people. Yeah, individual just announced that there's going to be another no Kings national nation-wide, no Kings protest on October 17th. So just definitely. Yeah. Donnie, thanks for the call. Yeah, get out there, everybody. There you go. Keep it up. Keep up the great work. Thank you.

32:35And thank you for being with us today. We'll be back tomorrow, same time, same place in the meantime. Don't forget democracy is not a spectator's sport. It requires all of us. That includes you. So get out there, get active tag. You're good to yourself and the folks around just stay safe. Each of edges get your exercise and double check your voter registration vote dot org, especially if you live in a red state. I'll catch up with you tomorrow. You've been listening to Tom Hartman for audio and video archives visit Tom Hartman dot com.