Ep 109 - Mordecai Kurz: Technology And Democracy

Vasant Dhar (0:10)

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Hello and welcome to Brave New World. My guest today is Mordecai Kurz, Professor Emeritus of Economics at Stanford University. Mordecai is the author of a new book, Private Power and Democracy's Decline, How to Make Capitalism Support Democracy. The subjects of AI and democracy are both front and center these days, which makes this conversation particularly timely in a very polarized America, where many feel that democracy is not working like it used to. Is technology working against democracy? Mordecai, welcome to Brave New World. Delighted to have you on the show.

Mordecai Kurz (1:23)

I'm delighted to be here.

Vasant Dhar (1:25)

You know, so you've written a most interesting book, Private Power and Democracy's Decline, and the ascent of private power is very evident. I'd like you to say more about democracy's decline, but before you say that, tell the audience a little bit about yourself. You've been at Stanford for a long time.

What motivated you to write the book?

Mordecai Kurz (1:46)

Well, I'm actually an economic theorist. I spent all my life, most of my life, I should say, doing advanced economic theory, mathematical economics. But there was a big change in the way the profession saw itself beginning around the beginning of this new century, around 2003 And between 2003 and 2014, a bunch of papers and books came up to show that inequality and income distribution is a fundamentally important question that economic theories have ignored.

And I thought this is such an important question that it deserves attention. I started reading on it, and I became very engrossed by that. I was taken by that. And I first focused on the technology side, and I wrote one book that was published in 2023

But then I understood that inequality, since I was developing a theory of inequality, it had important political implications. And this is how you come to democracy.

Vasant Dhar (3:08)

So this isn't the first time we've had this kind of inequality. I saw you present your book at Stanford, and you noted yourself that in 1928, 10 percent of the people own 90 percent of the wealth of this country.

Mordecai Kurz (3:22)

85 percent, yes.

Vasant Dhar (3:24)

Okay, so close. So this goes way back, goes back a century. So I'm surprised that economists have not paid adequate attention to what happened subsequently and developed a theory that would incorporate inequality as well. I mean, how do you think about that?

Mordecai Kurz (3:41)

Well, this is the point that I was trying to avoid getting into it. But it's exactly the point that between 1930 and 1980, economists seem to come to the conclusion that capitalism found its own equilibrium, so to speak, and found a way of becoming more humane.

And the reason for it is because the proportion of income that was received by workers was then viewed as constant, as invariable, natural number. This was a weird principle. Nobody understood why. Keynes calls that a miracle of economic statistics. And that remained true until 1970 And in the 1970s, there was a sudden beginning decline of labor share or the proportion of income that goes to workers. And this is what prompted all this literature. So the change began somewhere around 1970s, 80s.

And that change is the realization that assumptions that were made about capitalism at that time were not correct. That something else was going on.

Vasant Dhar (5:12)

You're talking the beginning of the Reagan era. Yes. Is that right?

Mordecai Kurz (5:17)

Yes.

Well, this is my theory now. Now we are talking about my theory. But it is true that it is also, it is two things happening in 70s and 80s. It's the Reagan policy change and new technology coming in. So there's technology and policy working together.

Vasant Dhar (5:36)

I was going to say that the period you referred to saw the emergence of several new kinds of general purpose technologies, like the computer and then later the internet, which were both game changing and disrupted the old order by diminishing the role of routine work and created more of a sort of a winner-take-all outcome with very powerful incumbents.

On the policy side, I also recall that the Clinton administration continued to dismantle labor protections, which you would argue started a little earlier. Am I remembering the evolution of tech and policy correctly?

Mordecai Kurz (6:11)

No, no, you have excellent memory. Your memory is perfect. In fact, my theory of what has happened there, if you ask what is the reason for the decline of democracy, I would summarize it simplistically perhaps with three facts. Number one, policy, technology, and culture is the three elements. And we can discuss each one separately if you want to. But let me just briefly say the policy, free market policy that was instituted by Reagan, but was followed by all other presidents, and even more so by some of the Democratic presidents unleashed enormous forces within the country that resulted in the creation of tremendous degree of inequality, rising of private power, and declining in the power of the individual.