Q&A with Russ Roberts and John Papola

BRIAN LAMB, HOST, Q&A: Russ Roberts, when did you decide to teach economics through rap?

RUSS ROBERTS: Really when I was about 12 years old. I thought doesn’t every young boy dream of that? No, I got contacted by John Papola out of the blue. He listened to my podcast. EconTalk, he said let’s do a video together. I thought great idea, I don’t have time for that.

If you do a lot of the work and get it started, I’ll pay attention to you. John turned out to be an extremely persistent person. We started off with the idea of doing a video on just teaching some aspect of economics. It strangely morphed into a rap video of Keynes and Hayek, such is the greater process.

LAMB: We’ll dissect Keynes and Hayek in a moment. I noticed on YouTube this morning, John Papola, there were 2,281,000 views of the first video you did. Which was the first one?

JOHN PAPOLA: ”Fear the Boom and Bust,” yes that’s right.

LAMB: Is that a lot of hits, 2 million some?

PAPOLA: Well, it’s not as much as comic videos about cats, but that’s a high bar so I think as far as videos about economics, it’s pretty good. I think perhaps most interestingly, that video came out over a year ago. It got consistently, long after sort of the first pop, 3,000 views a day every day, like day in and day out, which was sort of amazing to me that it would sort of sustain at that level.

LAMB: We’re going to look mostly today at the second video. What’s that called?

PAPOLA: ”The Fight of the Century.”

LAMB: What’s the basis?

ROBERTS: We wanted to look at whether the stimulus package had worked. We wanted to go back in history and look at how Keynes and Hayek debated that a long time ago, look at the role of the Great Depression and this debate about whether government spending can create prosperity and get us out of recession so we wanted to focus on that.

LAMB: How did you approach this one maybe differently than you did the first one?

PAPOLA: Well I think we wanted to make it sort of bigger and better in every way from a visual and audio way. So the song, I think, is a much bigger, bolder song. We’ve got a song refrain by Rich Murphy, Eddie Murphy’s brother, and I think the other thing too is in a lot of ways, this one is sort of complementary to ”Fear the Boom and Bust” where ”Fear the Boom and Bust” was this sort of theoretical textbook macro jargon and this video is much more sort of the political economy and sort of the applied theory. So they’re really talking about how do these things impact the real world so you’ve got to talk about the Depression, you’ve got to talk about the incentives of politicians in deficit spending.

LAMB: Let’s watch the first minute or so of this and then you can dissect it all.

(VIDEO CLIP BEGINS)

SECURITY GUARD: Lord, Lord Keynes! Wow, it’s, it’s, it’s such an honor!

JOHN MAYNARD KEYNES: Indeed, sir.

GUARD: Please, just go. Just go right on through. Woah, woah. Identification please. Hayek?

FREDRICK HAYEK: Hayek. Like, um, ”high explosives.”

GUARD: High, high explosives. We have a 10-66, HQ. I repeat, we have a 10-66.

VOICE: Copy that, Mike. Proceed.

HAYEK: What’s a 10-66? That was just an example of how to pronounce my name.

(VIDEO CLIP ENDS)

LAMB: John Papola, what were we watching? What was that scene?

PAPOLA: One of the things we tried to do with this one, which mirrors the first, is to sort of set up the context for these two personalities. Obviously, we’re making a little dig at the TSA there too, which is always fun. It’s good for viral views, which is that Keynes is a big figure in the world of politics, in the world of economics as it’s been taught in mainstream and people know his name. People know stimulus.

People know, it’s part of the vernacular whereas Hayek, you can come across incredibly accomplished economists who don’t really know much about Hayek. So he’s very much an underdog in terms of the rhetoric. He won a Nobel prize for his business cycle theory, so it’s not like he’s a completely heterodox figure, but we wanted to sort of set the table that this is sort of the landscape, rhetorically and culturally.

LAMB: Where were they checking into?

PAPOLA: They’re on the, scene wise, this is the beginning of a senate hearing or I guess just a congressional hearing more in general, we don’t sort of distinguish, and so they’re on their way in to testify on behalf of the role of government spending and the economy and that’s the security checkpoint at the entrance.

LAMB: Russ Roberts, who was John Maynard Keynes?

ROBERTS: John Maynard Keynes is probably the most influential economist of the 20th century although Hayek, I think, is in the running. He’s just not as loud and brash, but his theories in the 30s were used as a justification for a lot of government spending and dominated macroeconomic business cycle theories, theories of recession, depression for roughly 40 years until the 70’s when things somehow went awry, so called Phillips curve, the relation between inflation and employment wasn’t holding the way Keynesian models thought and Keynes fell out of favor in the 80’s and 90’s in the academy, among academic economists.

But come a big recession, he’s back in favor again because he gives people an excuse to spend money in the name of saving things. So he is a huge figure, he had an outsize personality. We use his charm as part of the theme in the videos because he was a very charismatic man and very attractive to all kinds of folks who wanted to be around him. So we make him the more popular guy in the videos and Hayek is always struggling for respect.

LAMB: Let’s watch some more.

(VIDEO CLIP BEGINS)

COMMITTEE CHAIRMAN: Ladies and gentlemen, members of the committee, we are here today to consider the impact of government spending on our economy. We are fortunate to have two world-renowned economists to offer their testimony on the matter.

KEYNES: I see you took a detour down the road to serfdom.

HAYEK: Talk about the end of laissez-faire.

KEYNES: Well, shake it off Freddy. I’m not pulling any punches in there.

HAYEK: I’m ready. Are you?

KEYNES: Prepare for the return of the master.

VOICE: John Maynard Keynes. F.A. Hayek. Round two. Round 2.0. Same economists. Same beliefs. New microphones. New mustaches.

(VIDEO CLIP ENDS)

LAMB: John Papola, what are we seeing in that, right there on the screen, who are those two characters supposed to be in real life?

PAPOLA: Well, in real life, the gentleman with the beard and the Friar Tuck is a certain Fed chairman. He’s a stylized Fed chairman though. I’ll leave it to the audience, but, and it’s also my dad.

LAMB: That is your dad?

PAPOLA: Yes.

LAMB: How about the other fellow?

PAPOLA: So, then sort of he’s surrounded by people who represent essentially, I guess you could say like the broker dealers, the actual big money center banks that the Fed interacts with that sort of have this odd relationship with this government agency where they both sit on its board, but then also buy and sell securities with it and sometimes turn to it when they get in a pinch.

LAMB: Who’s the fellow sitting on the right of Ben Bernanke, there was a point where somebody thought it was Mr. Geithner, the Treasury Secretary.

PAPOLA: Oh no, it’s not. There’s sort of, they’re no one in particular. So yes, there’s no name associated with that particular gentleman in the real world.

LAMB: Russ Roberts, what are you trying to accomplish with this?

ROBERTS: With the video?

LAMB: Yes.

ROBERTS: We’re trying to get people understanding of one, the economic argument between these two people, the argument for what we call the top-down approach to recovery, which is the Keynesian approach versus the bottom-up approach of Hayek. Most people just presume that if you spend money, you create jobs and we argue that didn’t happen in the past.

When we stopped spending money at the end of World War II, jobs didn’t disappear. In fact, the economy did very well. We argue there’s not a lot of evidence for the Keynesian model and we argue really that the whole idea of macroeconomics isn’t as scientific as economists like to pretend that it is. Hayek in 1974, when he got the Nobel Prize, wrote a very powerful piece called ”The Pretense of Knowledge.” He uses those lyrics in his song, in our song, where he says the economy is not a class you can master in college and to think otherwise is the pretense to knowledge.

We argue that economists often act as if economics is a precise science. We’re going to create 37,582 jobs or this is going to cost 16,455 jobs. That’s fake science. That’s what Hayek called ”scientism,” the use of scientific technology and jargon to give an aura of certainty that doesn’t really exist.

So that was our goal. Our goal was to get people to think about both sides of this question where the stimulus and government spending actually is the road to prosperity and secondly, to get a little skeptical about the scientific nature of economics, which Hayek was a major skeptic about.

LAMB: Who wrote the song?

PAPOLA: It was us together. It really was. One of the things that’s most exciting about this project is that like Russ said, I reached out to him as a listener of EconTalk and so I was trying to educate myself about economics having never studied it formally, but Russ has also written fictional books and is a very just creative person so sort of, it’s a very unlikely balance of sort of really down the middle, 50/50 writing the lyrics together, bringing ideas to the table and then bringing ideas to the table visually. It’s a great collaboration and a friendship and that’s what it’s all about for us.

LAMB: You live in New York.

PAPOLA: In New Jersey, for now.

LAMB: Close, you live in…

ROBERTS: Maryland. Work in Virginia.

LAMB: Maryland, how did you two get to know each other and from what perch were you on when you got to know each other?

ROBERTS: We spent a lot of time on the phone and a lot of time emailing before we ever met face to face. We wrote, I think, two songs before we actually met face to face. We wrote a preliminary song that didn’t make it, we decided to reject before we wrote ”Fear the Boom and Bust.” We didn’t write the music, by the way. The music was written by Richard Jacobs who is a great composer, but the lyrics were John and I.

LAMB: What were you doing and why did you get to know Russ Roberts?

PAPOLA: Well, up until recently, I was full-time as a creative director at a broadcast cable network.

LAMB: Which one?

PAPOLA: Spike TV, which does not endorse nor associate directly with our work, where I have a lot of great support from my colleagues there. It’s a great organization. It’s a great group of people. As essentially the combination of the election cycle in 2007-2008, and then the financial crisis really with Bear Stearns, that just sparked my interest in these ideas in economics.

I was very inspired by the Ron Paul campaign and the way that he was talking about, how many people talk about monetary policy in a political setting other than him? Nobody. Now it is and the fact that that happened, the fact that you had this lone voice talking about the role of money and monetary policy in the economy followed by this crash and this sudden, we had Ben Bernanke appear for the first time in 90 years to give a press conference and that just struck me as there’s a story here that isn’t being told and as a media person, as a creative person, I think I had the tools to tell it in a different way. So that’s why I reached out to Russ.

LAMB: You said EconTalk was the way you got to know that he existed. What is EconTalk?

ROBERTS: That’s my weekly podcast where I interview economists, authors, the woman who cuts my wife’s hair, the guy who sold me my car or Nobel Prize winners. It’s an hour-long conversation on economic issues of the day.

LAMB: Where do you do it?

ROBERTS: I do it out of my office at George Mason, but it’s a Liberty Fund project. You can find it on the web at econtalk.org. It comes out every week, 6:30 a.m. Monday morning. There’s about 250 of them on the web.

LAMB: You’re at George Mason University here in Virginia.

ROBERTS: Yes.

LAMB: EconTalk is a podcast.

ROBERTS: Yes.

LAMB: How do you find it?

ROBERTS: You can find it on iTunes. You can Google it. If you go to iTunes and just search for EconTalk, you’ll find it.

LAMB: And what was your past before you got into Spike TV?

PAPOLA: Well, I went to film school at Penn State University and then I’ve been essentially a member of the Viacom family for my whole career. I got out of school and started off at the bottom rung as a production assistant at MTV in the animation group. Then I worked for Nickelodeon, which is where I met my wife and also where I met my boss then and then boss and friend Neils (ph) at Spike.

So when Neils (ph) left Nickelodeon to go to Spike, I said take me with you, that sounds exciting. He said all right, come aboard and then the first seven years up until this April where we left to start a new venture, I was at Spike.

LAMB: The first video was actually released when?

ROBERTS: It came out the end of January 2010.

LAMB: That’s the one that has 2 million hits and the other one that we’ve been watching has about 700 and something thousand today.

ROBERTS: Yes, correct.

LAMB: Let’s watch a little bit of the rap that you’ve put together here.

(VIDEO CLIP BEGINS)

KEYNES: Here we are… peace out! Great recession, thanks to me, as you see, we’re not in a depression. Recovery, destiny if you follow my lesson. Lord Keynes, here I come, line up for the procession. HAYEK: We brought out the shovels and we’re still in a ditch…And still digging. Don’t you think that it’s time for a switch…From that hair of the dog. Friend, the party is over. The long run is here. It’s time to get sober! KEYNES: Are you kidding? My cure works perfectly fine… have a look, the great recession ended back in ’09. I deserve credit. Things would have been worse. All the estimates prove it—I’ll quote chapter and verse. HAYEK: Econometricians, they’re ever so pious. Are they doing real science or confirming their bias? Their ”Keynesian” models are tidy and neat. But that top down approach is a fatal conceit. CHORUS: Which way should we choose? More bottom up or more top down…the fight continues…Keynes and Hayek’s second round. (VIDEO CLIP ENDS)

LAMB: John Papola, I have to ask you, who is the chairman there, the African-American gentleman, who is he supposed to be in Congress, anybody in particular?

PAPOLA: No, really that’s Rich Murphy, who is awesome. He’s a great singer and Richard Jacobs, the composer, had worked with him before. So when Russ and I decided we really wanted to bring a different element to this song to break up the rapping with something melodic, Richard recommended Rich and that’s how that came about.

LAMB: Who are the two actors that are out front?

PAPOLA: That’s Billy and Adam, so they are improv comedians. They also have a really hilarious group called the Harvard Sailing Team. My wife Lisa actually found them. She, I met her when I was at Nickelodeon, so she’s also a TV professional. We had tried a couple of, I guess up and coming rappers in the early stage of developing Fear the Boom and Bust and it just, it wasn’t quite fitting you know.

There was, it’s an odd project and you sort of need to commit to it and just take the time to get the intonations right and the sense of what it is. I turned to my wife who can find anything, she’s like a mega producer, and I said we need basically two guys that look somewhat like Keynes and Hayek that can comedically rap and she found them in like a week.

LAMB: How old are they?

PAPOLA: They’re in their late 20’s, I think, pretty sure. They’re just amazing people. They’re incredible, hardworking professionals and just great human beings. They’re awesome.

LAMB: Russ Roberts, tell us more about the two characters that they’re playing, Friedrich von Hayek was from what country? When did he live? What were the basics that he stood for?

ROBERTS: Hayek was born in 1899 so he’s a 19th century guy in a sort of kind of sense, born in Austria, ends up spending important (ph) time in the early part of his career in England where he meets Keynes. They become friends, which is part of what we try to bring out in these songs, that they were respectful of each other. They were friends. They argued.

I’ve actually seen the postcards they wrote to each other. I’ve touched them out at the Hoover Institution at Stanford where I also have an appointment. They have a lot of Hayek’s stuff and they have their postcards back and forth. They call each other Keynes and Hayek by the way, by last names. We have Keynes calling him Freddy for fun because he’s British.

So Hayek, he also spends time in the United States. He ends up in the University of Chicago for a while, not in the economics department. So he had an incredible career spanning a huge part of the 20th century. He died in 1992. He was important for a whole bunch of reasons, ”The Road to Serfdom” is the book most people think of. It’s not the book I recommend.

I would prefer ”The Fatal Conceit,” I think that’s more about the economics and politics is what he wrote about. He wrote about politics, economics, neuroscience, incredible breadth of knowledge and interest and had an impact on economics very much so in the 30’s and 40’s, was kind of a forgotten figure, gets the Nobel Prize in the 70’s and really has a rebirth that we’re trying to encourage. We think his ideas are very important still today.

LAMB: Didn’t you graduate from the University of Chicago?

ROBERTS: I did. I’m a University of Chicago PhD.

LAMB: Did you ever meet him?

ROBERTS: I did not. Again, he was a quiet figure. He was not an important figure in the department. I was required to read one of his most famous articles, ”The Use of Knowledge in Society,” which he wrote in 1945. It used to be on graduate student reading lists, probably is not much anymore, but I think still a very important influential, incredibly important paper about how prices signal and steer information in a modern economy.

LAMB: Where was John Maynard Keynes educated?

ROBERTS: He’s a British economist. I want to say he went to…

PAPOLA: King’s College, Cambridge, I think.

ROBERTS: Cambridge, yes, and he of course, his young career, he was most famous for ”The Economic Consequences of the Peace” where he said that the Versailles Treaty at the end of World War I was going to lead to disaster. He was right, very prescient that made his reputation. He also wrote influential books on probability, monetary theory, but his giant work came out in 1936, ”The General Theory of Income,” John knows this better than I do, ”Income, Money and Employment?”

PAPOLA: ”Interest, Employment and Money.”

ROBERTS: ”Interest, Employment and Money,” thank you John. See I haven’t read it since 1977.

LAMB: When did he live?

ROBERTS: Keynes died in, John you’re going to help me here, late 40’s?

PAPOLA: I think ’46.

ROBERTS: ’46?

PAPOLA: I think so.

ROBERTS: There’s a poignant correspondence between Keynes and Hayek at the end of Keynes’ life where Hayek was worried about inflation and Keynes says no, don’t worry, I’ll just nip it in the bud, I’ll tell my supporters that it’s time to stop, but he dies. We get this sort of post-war era, 50’s, 60’s, starting this inflationary growth happens that ends up with the stagflation of the 70’s. I’m a little worried we’re about to get another dose of that here in the 2010’s, we’ll see.

LAMB: Your education?

PAPOLA: Yes, like I said, I actually, I just have an undergrad with film and TV from Penn State.

LAMB: But no, the reason I ask that was no economics?

PAPOLA: None.

LAMB: Is that an advantage?

PAPOLA: I sort of do think it’s an advantage although it’s a dangerous thing because there’s so much, there’s a lot of allure in economics and it can give you this false sense of you sort of understand the world and it’s very easy, from either perspective, from a free market or a more interventionist perspective, to say oh I’ve got it all in my head. It’s a system and this is how it works and so it’s a challenge to sort of stay humble about your understanding.

The more you get into it, the more you read and that’s part of why, that was really part of what attracted me to Russ’ podcasts so much is that he, not only does he treat his guests with him, I think both of us would often disagree intellectually with a lot of respect and dignity, but he also approaches his own biases or his own point of view with a lot of even skepticism that there’s only so, and that is a very Hayekian point that we were trying to make in the video, that there’s limits to what we can know and be wary of your certainty with regard to the economy.

LAMB: Which one of these economists, Hayek or Keynes, is dominating the thought in the United States today?

PAPOLA: Well, I guess it depends on how you look at it. I would have to say it’s still very much Keynes though I think people who are adamant fans of his would say Hayek. I mean, the fact that we’re approaching, we’ve hit this debt ceiling, which is a kind of strange arbitrary law, and it’s like the world is going to come crashing down. How could we not spend more money? How could we possible imagine balancing the budget?

So there is a Keynesian bias that’s sort of natural to government. Just even more generally, every time Christmas rolls around and people talk about how important the Christmas spending is going to be for the economy, that our economy is built on consumption. That’s a bizarre, from my point of view, it’s a bizarre idea to think about that consuming wealth is how we create it. It’s a weird…

LAMB: What’s the biggest difference between being a Keynesian and a Hayekian?

ROBERTS: Well, what we’ve been talking about right now, we decided to spend 800 and it turned out to be about $820 billion that we borrowed. We’ve ratcheted up government spending dramatically in the hopes of creating jobs. The Keynesians will tell you we didn’t spend enough. That’s why it didn’t work better.

LAMB: What would have been enough?

ROBERTS: Well, Paul Krugman said $2 trillion would have been a good number. There’s no worry in his mind about the implications of that for people’s confidence in the future facing higher taxes. The Keynesians tend to be looking more at the short run, the Hayekians tend to be looking more at the long run. Part of Hayek we haven’t talked about that’s so important is the political incentives.

Hayek spent a lot of time worrying about who responds to the incentives, who’s drawn to power, what happens to them once they get in power. The plans of politicians really don’t always end up off the economics department drawing board. They tend to respond to political incentives so I think that’s a hugely important difference. Hayek emphasized that and politically powerful get the goods. People who don’t have political power don’t get the goods.

LAMB: Let’s watch some more but before we do that, how long is this video in its entirety?

ROBERTS: If you include the credits, it’s just over 10 minutes.

LAMB: Some more music.

(VIDEO CLIP BEGINS)

CHORUS: It’s time to weigh in…more from the top or from the ground…let’s listen to the greats. Keynes and Hayek throwing down KEYNES: We could have done better, had we only spent more. Too bad that only happens when there’s a World War. You can carp all you want about stats and regression. Do you deny World War II cut short the Depression? HAYEK: Wow. One data point and you’re jumping for joy. The last time I checked, wars only destroy. There was no multiplier, consumption just shrank as we used scarce resources for every new tank. Pretty perverse to call that prosperity. Rationed meat, Rationed butter… a life of austerity. When that war spending ended your friends cried disaster yet the economy thrived and grew faster. (VIDEO CLIP ENDS)

LAMB: Where did you do all this?

PAPOLA: We filmed the entirety of this video at Drew University in Madison, New Jersey. They had, this is just part of the, filmmaking is a lot like a giant construction job. You’ve got to hire the right crew. You’ve got to scout your location and find the right plot, which in this case Drew offered a nice big auditorium where we could stage that boxing scene and then this beautiful, I don’t think it was quite a chapel, but it had a kind of chapel-like feel to it. That wasn’t really the point. It was this sort of nice mahogany classic environment where we could have our sort of timeless congressional hearing.

LAMB: When did you do it?

PAPOLA: We did it on, two long days, April 16th and 17th so over the weekend and then my partner Josh and I, Josh had an unbelievable edit already done two days after. We really got very excited about it. We couldn’t go to sleep. Once we had it in the can, we had to get to work. So it actually debuted only 10 days after we were done shooting.

LAMB: How much did it cost you?

PAPOLA: Well, it should have cost about a quarter of a million dollars. It did not cost that. It wasn’t dramatically below that, but we pulled a lot of favors and didn’t make very much money on it or anything like that. But from a production value, how do you do that? How do you reproduce that? Two-hundred to $250,000 is about right.

LAMB: Where did you get the money?

ROBERTS: We raised the money from people who are excited about the project. We have a website, econstories.tv where we have the videos, the lyrics, you can download, it’s all free by the way, there’s no, you can get the songs and we have other material up there if you want to learn more about Keynes and Hayek. We have essays, podcasts, other video, videos we’ve done with other scholars, Larry White of George Mason and Robert Skidelsky, Keynes’ biographer, so you can watch videos there.

Basically went out and reached out to people who we thought would be passionate about this kind of economics project and it has a great appeal to the high school and college audience, by the way. A lot of people have watched it in high schools and a lot of people are excited about people learning about good economics at the high school and college level. So at my blog, Café Hayek, I advertised that you could donate there and we went out and raised money. So it all came from private donors who are passionate about economic education.

LAMB: I trust that you’re a big Hayek follower.

ROBERTS: I am. We like Hayek by the way. We tried to give Keynes his due. We tried to be faithful and honest to his viewpoint. He looks better. He has all kinds of pluses going for him, but we actually do like Hayek.

LAMB: When did you start that?

ROBERTS: Interest in Hayek?

LAMB: Yes.

ROBERTS: It goes back a long way. I had some interest in him in graduate school, back in the 70’s, but coming to George Mason, which has a strong interest in Austrian economics, the chairman of the department when I got there was Don Boudreaux who is an enormous Hayek fan. He turned me on to a lot of Hayek’s essays and books. My last book, ”The Price of Everything,” is really an attempt to bring Hayek’s ideas about microeconomics into a fictional context. So I’m deep into Hayek.

LAMB: Let’s do some more video.

(VIDEO CLIP BEGINS)

KEYNES: You only see what you want to see. The spending on war clearly goosed GDP. Unemployment was over, almost down to zero. That’s why I’m the master, that’s why I’m the hero. HAYEK: Creating employment’s a straightforward craft. When the nation’s at war, and there’s a draft, if every worker was staffed in the army and fleet, we’d have full employment and nothing to eat. CHROUS: Which way should we choose? More bottom up or more top down…the fight continues…Keynes and Hayek’s second round. It’s time to weigh in…more from the top or from the ground…let’s listen to the greats. Keynes and Hayek throwing down. HAYEK: Jobs are a means, not the ends in themselves. People work to live better, to put food on the shelves. Real growth means production of what people demand. That’s entrepreneurship, not your central plan. KEYNES: My solution is simple and easy to handle…it’s spending that matters, why’s that such a scandal? The money sloshes through the pipes and the sluices, revitalizing the economy’s juices. It’s just like an engine that’s stalled and gone dark. To bring it to life, we need a quick spark. Spending’s the life blood that gets the flow going. Where it goes doesn’t matter, just get spending flowing. HAYEK: You see slack in some sectors as a ”general glut.” But some sectors are healthy, only some in a rut. So spending’s not free – that’s the heart of the matter. Too much is wasted as cronies get fatter. (VIDEO CLIP ENDS)

LAMB: So what’s the subtlety ”say” on the back, or s-a-y on the back of the…

PAPOLA: So this is my proudest contribution to the econ of the video. Jean-Baptiste Say and Thomas Malthus essentially had a version of the Keynes / Hayek debate a hundred years before Keynes and Hayek, which is also part of why we called it ”The Fight of the Century.” It’s fight of the centuries back and forward. It’s not going to stop and it didn’t start with them.

We’re basically, the debate went that Malthus believed that you could have a general glut of goods, that there could be overproduction and that insufficient, essentially spending, insufficient demand for goods in general could cause, that was the cause of recession and that’s what a recession was. Say, on the other side, said that’s not, spending’s not the nature of prosperity and the source of our purchasing power. You first have to produce something that someone else wants and only through that process do you have the means to purchase other things.

So I have to go to my job and make money so that I can go and buy a house or buy a car. That gets reinterpreted in a very strange way as supply creates its own demand, which sounds like you can go in your backyard and make a mud pie and magically someone will appear to buy it. That’s not what Say was talking about. He was saying that production, which is fairly (INAUDIBLE) when you think about it, is the source of your purchasing power.

You have to be productive to be able to buy things and that if spending in one area collapses because people made some mistakes, that capital and that interest will flow into other areas and so you would have shifting sectors. So that was something I really cared a lot about this and I wanted to make sure it got in the video and Russ and I debated is it too much, is it too geeky, how important is it.

LAMB: Did anybody figure it out in a blog somewhere what exactly you were doing and they analyzed this?

ROBERTS: Sure, oh yes, and we’ve got Mises, who was Hayek’s great teacher in Hayek’s corner and we have Hicks, you don’t see much of him, but we’ve got Hicks in Keynes’ corner also who was a great populizer of Keynes’ views so those are the corner men. We were hoping we were going to film them in between rounds feeding them articles and books to read. We weren’t quite able to get that in, but we wanted to make a little tip of the hat to their intellectual influences.

LAMB: Who do you, when you’re writing this kind of stuff, who do you think of as the viewer?

ROBERTS: We’re trying to reach people who are interested in how the world works. That’s everybody from a high school student who is curious about economics to a person who is just trying to make a living and get along and is worried about what’s going on in Washington or in the country. We tried to make these lyrics accessible, a little bit amusing.

I have to admit, I actually enjoy listening to it still. It’s a little bit weird. I’m not a rap fan, but I’m getting into it now. I get e-mails from grownups who say I watched this with my kid. I’m into rap now. My kid’s into economics. That was part of our goal, to reach people. I had a woman write me that her fourth grader watched it and liked it.

I had a guy tell me his fifth grader has mastered all of the lyrics and had a friend over and was showing it to his friend. He said ”dude, you know anything about Austrian economics?” That’s the sweet spot for us, to get kids, 10 is a little young maybe, but to get kids in high school and college and curious people everywhere to find out more about these ideas, is really why we did this and that’s very gratifying.

LAMB: How did you test it to see if people understood it?

PAPOLA: We didn’t. Yes, I’m sort of in the Steve Jobs school of you don’t focus group. The creative process is just so, is challenging and its very, very subjective and its collaborative and there’s already so many collaborators involved, Russ and myself and Josh who edited and shot parts of it and the cinematographer and there’s so many compromises of the logistics of it. It rains and you can’t get the shot you wanted to get so you have to rethink the way it has to happen.

ROBERTS: Or it snows and you’re hoping you’re going to get a Rolls Royce limo in that first movie, but the guy who owns it won’t let it out of the garage on a snow day.

LAMB: The first one you did was in New York in snow.

PAPOLA: Yes, 20 inches the day before we shot it, so it almost never happened.

LAMB: Now is there any money being made on showing this on YouTube?

ROBERTS: No, not now.

PAPOLA: There’s some ads that run on it, but it’s a pittance. It’s nothing.

LAMB: We have almost a two-minute clip of the discussion of Wall Street and bailout, government oversight and it shows Hayek gives Keynes a big punch and Keynes goes down. Why the boxing thing? What’s that, how did you set that up?

ROBERTS: Well, where ”Fear the Boom and Bust” had this pretty strong metaphor, the drinking.

LAMB: Your first video?

ROBERTS: The first video had this sort of drinking and the party and the hangover the day after. This piece, what we were really trying to just establish is that this fight and this debate and this intellectual battle is timeless. So that’s why we have Say and Mises and Malthus and that’s why it has, stylistically the look is sort of this golden nostalgic feel, even in the Senate hearing which is theoretically modern day, but I hope that that’s modern day 30 years from now that people watch it and say, when he says the recession ended back in ’09, it’s the equivalent of someone today saying oh, the Depression ended back in ’33 like some believe. So that was it. It was really a motif. It was just a kind of broad playground for us to have these ideas happen.

PAPOLA: And the chance to have the chair of the hearing be the referee of the boxing match, we were deeply attracted to that. That gave us a chance to make a little joke at the end about what role politicians play in deciding who’s got the best arguments and that was fun.

ROBERTS: And John really wanted to shoot a boxing scene. PAPOLA: That was a lot of fun.

LAMB: Again, if somebody’s watching and they want to watch both of these videos in their entirety, where do they go?

PAPOLA: They can go to econstories.tv or they can go to YouTube. If you Google Keynes rap, Hayek rap, Keynes and Hayek, in fact, I don’t know if I should be apologetic about this, if you Google Keynes, our first video comes up on the first page. That’s his little bit of his legacy now, for better or for worse.

LAMB: Two videos, YouTube or econstories.tv. All right, here’s two more minutes.

(VIDEO CLIP BEGINS)

HAYEK: The economy’s not a car, there’s no engine to stall. No expert can fix it, there’s no ”it” at all. The economy’s us, we don’t need a mechanic. Put away the wrenches, the economy’s organic. CHORUS: Which way should we choose? More bottom up or more top down…the fight continues…Keynes and Hayek’s second round. It’s time to weigh in…more from the top or from the ground…let’s listen to the greats. Keynes and Hayek throwing down. KEYNES: So what would you do to help those unemployed? This is the question you seem to avoid. When we’re in a mess, would have us just wait? Doing nothing until markets equilibrate? HAYEK: I don’t want to do nothing, there’s plenty to do. The question I ponder is who plans for whom? Do I plan for myself or leave it to you? I want plans by the many, not by the few. Let’s not repeat what created our troubles. I want real growth, not a series of bubbles Stop bailing out losers, let prices work. If we don’t try to steer them they won’t go berserk. KEYNES: Come on, are you kidding? Don’t Wall Street’s gyrations challenge your world view of self-regulation? Even you must admit that the lesson we’ve learned is more oversight’s needed or else we’ll get burned. HAYEK: Oversight? The government’s long been in bed with those Wall Street execs and the firms that they’ve bled. Capitalism’s about profit and loss; you bail out the losers there’s no end to the cost. The lesson I’ve learned? It’s how little we know. The world is complex, not some circular flow. The economy’s not a class you can master in college. To think otherwise is the pretense of knowledge. CHORUS: Which way should we choose? More bottom up or more top down…the fight continues…Keynes and Hayek’s second round. (VIDEO CLIP ENDS)

LAMB: Where did you get the actors and the, not the two actors, the main ones, but all the extras?

PAPOLA: The same place. I turned to Lisa Versaci who knows how to get things done. So what we did is actually, at this point, we’d already had a decent following from our first video and so we reached out to essentially our fans on Facebook and on the internet and my wife coordinated essentially people that are into what we’re doing and wanted to be a part of it to come and participate so there’s a lot of, it’s not just a group of background extras hired.

LAMB: The two names, and I wrote them down, Billy is it Scafuri?

PAPOLA: That’s right.

LAMB: And the other one is Adam Lustick and you say that they’re not 30 yet?

PAPOLA: No.

LAMB: Where did they learn how to dance though?

PAPOLA: They’ve lived rich lives so far. Yes, you know what, they actually do comic rap on their own so they’ve got a number of albums already out with hilarious parody rap songs. So they’ve been doing not quite this, but this kind of thing live for some time.

LAMB: When did you get interested, Russ Roberts, in the new technologies, the podcasting and things like that? And how did you know that it was going to have any impact at all?

ROBERTS: I remember when I, someone said to me you know, you ought to have a blog and I thought I don’t know about that. So I didn’t do that for a while and then all of a sudden, I realized, yes, I should have a blog, that’d be fun. I was late to blogging and I thought, when I heard about podcasting, somebody invited me to be a guest on a podcast and I thought, I’m not going to be late to this.

So I jumped into podcasting in 2006 with EconTalk and I have been doing it for five years. When I started, people said well no one is going to want to listen to people talk about economics for an hour. Five minutes is a long time on radio, but there is a big taste in demand out there for serious conversation and serious learning. It’s not textbook, it’s not classroom so it’s not a lecture, but it’s more of a conversation.

I think that’s the way we’re hardwired actually to learn is by talking and listening. So what I try to create for our listeners, I try to ask the questions they’d ask and so technology, that was an obvious thing. I noticed that people weren’t reading as much as they used to, so radio, podcasting seemed like a good idea. Obviously, the big prize was always video and so I’m thrilled that I’ve had the chance to collaborate with John, who has such in incredible visual imagination and the knowledge of economics to go with it because video is very time consuming as we both know.

We spent a lot of time on these projects. It’s a blessing to do with somebody who understands what I understand and has the same goals as I do. I think in the modern era, I think about what it would have been like in 1995, the dark ages, think about that, this is 15, 16 years ago if we’d come up with this idea. We would have created a DVD which would have been a modern thing. How would we have reached people with that? Well, we would have them, put out a mailing list.

We’d have gone out there and tried to get people to ask for it or buy it. Here we can give it away for free. We have now about 3 million views of the videos that we’ve created combined. They’ve been subtitled in 11 languages. What an incredible world we live in where you can, anywhere in the world, get access to this entertainment, these ideas, in the format you want whether it’s print, audio or visual.

LAMB: I saw on YouTube that these two actors, in front of an economist seminar of some kind, you take this thing on the road now?

ROBERTS: We did.

PAPOLA: Which is really, it is bizarre. It was the Economist Magazine. They have this annual conference, the Buttonwood gathering. So they saw it as an opportunity to be, to lighten things up. It’s a tough crowd.

LAMB: You mean they didn’t laugh as much as you expected?

PAPOLA: No though I think Mervyn King might have been our biggest fan in the crowd, I have to say.

ROBERTS: Joe Stiglitz was there.

PAPOLA: Yes and so it was an illustrious crowd which made it even weirder for me, who has no reason to be listened to, to get up on stage with Russ and to opine about the problem with macroeconomic methodology.

LAMB: Will you do this more if people are interested?

ROBERTS: Sure, it’s fun, but at that session, we had Billy and Adam sing. We wrote new lyrics for the old song which became the jumpstart for the next song.

PAPOLA: That’s right.

ROBERTS: That’s when we realized hey, we’ve got another song almost already written. It ended up of course not being true. We ended up adding about, killing some verses and adding a bunch more, but that was the, we called that the sneakquel. It was kind of like the sneak preview of the next one.

LAMB: Here’s the last section of this music, particular music video. This is about two minutes.

(VIDEO CLIP BEGINS)

CHORUS: It’s time to weigh in…more from the top or from the ground…lets listen to the greats. Keynes and Hayek throwing down. KEYNES: You get on your high horse and you’re off to the races. I look at the world on a case by case basis. When people are suffering I roll up my sleeves and do what I can to cure our disease. The future’s uncertain, our outlooks are frail. That’s why free markets are so prone to fail. In a volatile world we need more discretion, so state intervention can counter depression. HAYEK: People aren’t chessmen you move on a board at your whim–their dreams and desires ignored. With political incentives, discretion’s a joke. Those dials you’re twisting… just mirrors and smoke. We need stable rules and real market prices so prosperity emerges and cuts short the crisis. Give us a chance so we can discover the most valuable ways to serve one another. CHORUS: Which way should we choose? More bottom up or more top down…the fight continues…Keynes and Hayek’s second round. It’s time to weigh in…more from the top or from the ground…let’s listen to the greats. Keynes and Hayek throwing down. Which way should we choose? More bottom up or more top down…the fight continues…Keynes and Hayek’s second round. It’s time to weigh in…more from the top or from the ground…let’s listen to the greats. Keynes and Hayek throwing down. (VIDEO CLIP ENDS) LAMB: John Papola, you said as we were watching it, that was your sister there holding the microphone?

PAPOLA: That’s right. I got my sister in earlier just in the crowd, my mom as well, so it was a family affair.

LAMB: Where is your mom in this video?

PAPOLA: She’s nodding her head along in the crowd in some of the early shots.

LAMB: The, is it lip-synched?

PAPOLA: That’s right, so you play back the song on set and then they sing along, but to make sure that its synchronized with the picture, but in order for the performance to work, they do have to sing it there because if you just sort of mouth it, our eyes are so attuned to the subtle changes in your face that come from singing versus not and so they have to belt it out and really perform it live multiple times, again and again over the course of the day.

LAMB: So if you’re there in the room as its being, do you film this or tape it?

PAPOLA: We filmed it on these brand new Sony cameras that are, you can shoot a Hollywood movie on these cameras, they’re beautiful cameras.

LAMB: And did they, so if you’re in the room, you hear them singing along with the actual song on a speaker somewhere?

PAPOLA: That’s right.

LAMB: You know you mentioned earlier, interesting about this session with you both is that there are two stories here. One is the making of the video and the other is the economics of it. Go back to something that you said very early in our discussion here about the Liberty Fund based in Indianapolis.

ROBERTS: Yes, they’re a foundation.

LAMB: And I looked on their board and I only recognize, not that I should recognize anybody, I only recognize one name and there’s Mary Anastasia, make sure we pronounce this, O’Grady of the Wall Street Journal editorial board. Who are those folks and what is that fund?

ROBERTS: Liberty Fund is a foundation in Indianapolis. It was created by an Indianapolis businessman, Mr. Goodrich. He was interested in the great books. He was interested in dialogue. He was interested in education.

So Liberty Fund does a few things. They publish great works of economics. A lot of the, Adam Smith, the best works of Adam Smith that are out there today are Liberty Fund editions that they’ve done in collaboration with academic press and other great books like that. They run conferences for scholars who sit around and talk about ideas and then they have a webpage, econlib, the Library of Economics and Liberty and the Online Library of Liberty where they archive great works of economics. So my podcast is there.

There’s a blog, econlib, which is a top 10 economics blog. We have all kinds of, I’m on the advisory board, we have all kinds of great works of economics. We have Karl Marx. We have some john Maynard Keynes and we have some Adam Smith. We have the entire works of Dave Ricardo, which are not easy reading and I don’t recommend that lightly, but it’s an enormous resource that’s all no charge for anyone around the world who has access to the internet.

LAMB: Where does Liberty Fund get its money?

ROBERTS: They got it from Pierre Goodrich.

LAMB: All the money’s from him?

ROBERTS: As far as I know. It’s his endowment. It’s an endowment that’s grown over time. They don’t raise money. We don’t charge for anything. People have written me saying ”I love your podcast, can I give you money?” Liberty Fund sort of says ooh, they’d probably take it, but they don’t really raise money.

LAMB: How did you educate yourself about economics?

PAPOLA: Well, Russ’ podcasts played a big role and then also just reading books although really audio books because I get sick on the bus. I have a long commute.

LAMB: How long is your commute?

PAPOLA: It was almost four hours round trip.

LAMB: Every day.

ROBERTS: He’s really smart.

PAPOLA: The beauty of public transit in the New York City area.

LAMB: And you would go from where to where every day?

PAPOLA: I would go from Vernon, New Jersey into Manhattan and so I listened to a lot of Murray Rothbard and I read some textbooks, which is weird. I watched an intro macro class on my, that was for free from SMS, I don’t even know what school that is, but it was pretty interesting. I wanted to see sort of how it’s normally taught and I’m glad I didn’t have to sit through that for real.

LAMB: We have a clip of the first video you did, which is already almost near 8 million views and let’s see what its, released when, last April, in 2010?

PAPOLA: Yes, January 25, 2010. It’s like 2.3 million views, the new one.

LAMB: Oh the new, I’m sorry, yes the old one. Seven million, that’d be nice. Maybe after this program you’ll get…

PAPOLA: I hope so.

LAMB: Here’s about a, first of all, before you show it, what, set up what this was about.

PAPOLA: This one really is almost an intro macro buzzword festival for Keynesian economics and Austrian business cycle theory. So you have Keynes first step through sort of the basic framework for his theory and why government spending can restore employment in theory and then Hayek goes through his approach which is very different about the role of monetary policy because money is one side of every transaction so it kind of makes sense that money would have system wide effects. The way that the credit cycle that the Fed creates induces the business cycle and causes what he calls now investments.

LAMB: OK let’s watch it. It’s about a minute eighteen of the first video you did.

(VIDEO CLIP BEGINS) KEYNES: My general theory’s made quite an impression. A revolution. I transformed the econ profession. You know me, modesty, still I’m taking a bow. Say it loud, say it proud, we’re all Keynesians now. KEYNES AND HAYEK: We’ve been going back and forth for a century. KEYNES: I want to steer markets. HAYEK: I want them set free. KEYNES AND HAYEK: There’s a boom and bust cycle and good reason to fear it. KEYNES: I made my case, Freddie H. Listen up, can you hear it? HAYEK: I’ll begin in broad strokes, just like my friend Keynes. His theory conceals the mechanics of change. That simple equation, too much aggregation ignores human action and motivation. And yet it continues as a justification for bailouts and payoffs by pols with machinations. You provide them with cover to sell us a free lunch. Then all that we’re left with is debt, and a bunch. If you’re living high on that cheap credit hog don’t look for cure from the hair of the dog. Real savings come first if you want to invest. The market coordinates time with interest. Your focus on spending is pushing on thread. In the long run, my friend, it’s your theory that’s dead. So sorry there, buddy, if that sounds like invective. Prepared to get schooled in my Austrian perspective. KEYNES AND HAYEK: We’ve been going back and forth for a century. KEYNES: I want to steer markets. HAYEK: I want them set free. KEYNES AND HAYEK: There’s a boom and bust cycle and good reason to fear it. HAYEK: Blame low interest rates. KEYNES: No… it’s the animal spirits. (VIDEO CLIP ENDS) LAMB: You said what, phrases become well known?

PAPOLA: Well, among certain circles, prepare to get schooled in my Austrian perspective appears on more than one e-mail signature.

LAMB: Why?

PAPOLA: Austrian economics, which again is not about the country of Austria, but just this lineage of these thinkers, Mises and Hayek and Rothbart and others, and Carl Menger that just, for the most part, came from Austria. That was the mainstream before Keynes.

They were the guys and they had a big impact on economics but since the Keynesian revolution, they’ve been very much relegated to the sidelines and so like any group that sort of feels they’re on the outskirts, you develop a very loyal following. I’m an Apple guy and Apple’s mainstream now, it wasn’t always so, and a good slogan goes a long way for people that feel like they’re maybe not getting heard.

LAMB: I have to confess that when I got into preparing for this show, I started to drown in all the different websites and blogs and all that and we talked earlier about Café Hayek and I want to ask you again what’s that?

ROBERTS: That’s my blog that I do with Don Boudreaux about the issues of the day, economic issues.

LAMB: And you’re based at George Mason University teaching what level?

ROBERTS: Correct. Undergrads and grads.

LAMB: Teaching what course?

ROBERTS: This semester, I’m teaching a seminar on Adam Smith to both graduates and undergraduates.

LAMB: Did they have to watch your videos?

ROBERTS: No, but they’re all fans. They’ve told me about how it’s doing more than I’d find out on my own. They like it.

LAMB: And EconTalk again is what?

ROBERTS: That’s my weekly podcast that comes, it’s sponsored by Liberty Fund. It comes out every Monday morning at 6:30 a.m., interviews with economists, authors, everyday people, business leaders.

LAMB: How many of them are there?

ROBERTS: There’s over 250 in the archives. We keep every one of them up online. Liberty Fund is very interested in education so they’re up there without any charge.

LAMB: Is there one of them or two of them that have really taken off and where their numbers are bigger than the rest over the years?

ROBERTS: I interviewed Milton Friedman twice. Those are still popular. I interviewed Nassim Taleb three times, I hope to interview him again, those are very popular. But maybe my most popular guest is Mike Munger of Duke University. He’s actually the security guard in that opening scene of ”Fight of the Century.” So he and I have a great rapport. We have a lot of, he’s been on I think 19 times, on the program.

LAMB: Tell us again who he is.

ROBERTS: Mike Munger is a professor of economics and political science at Duke University. He’s a frequent guest on my podcast EconTalk and we cast him as the security guard. He’s the chauffeur in the first one. He’s just a big fan of the videos. We’re buddies. He wanted to be part of it so Mike is, he’s got cameos in both of them.

LAMB: What has been the most enjoyable part of this for you?

PAPOLA: It’s hard just to have one thing. I think maybe the most enjoyable part is to see that we are actually having an impact on the world in what I think is a positive way. People are talking about these ideas and they feel empowered and as Russ said, we’ve gotten so much mail, or not real mail, but e-mail and Facebook messages from people that are discovering economics in the way I did, but through our videos.

So, to sort of have discovered these ideas in this bizarre way for myself, the serendipitous sort of set of circumstances and then to be able to contribute back to that sort of community and that pool of knowledge is just, it’s really amazing. I get sort of emotional thinking about the fact that I’m privileged enough to get to do this.

LAMB: What’s next?

ROBERTS: I don’t know. When we did the end of that, we were very, we spent a lot of time thinking about that last 30 seconds and it might be the last time that we see Keynes and Hayek on the screen. It’s funny, we know Billy and Adam personally, but to me and probably to John, they’re Keynes and Hayek and we’re saying goodbye to them really at the end of that probably. There’s always a temptation to write a third one, you never know, but maybe, maybe not. So I think for the future, I hope John and I will collaborate on something different and we’re still talking about it.

LAMB: Why do you think it’s the end of Hayek and Keynes on this video project that you’ve got?

PAPOLA: I think that we’ve managed to cover a lot of ground with these two and I think that the best thing we could do for them, for Keynes and Hayek, for these videos and for the ideas is to give them a chance to be covered and to explore the ideas that surround them. It’s a lot of, there’s a lot of stuff in these two videos.

There’s a century’s worth of study and there’s other issues to cover. So I won’t count out the possibility of a return, but you know what, sometimes it’s good you go away from them and then when they come back, it’s like Indiana Jones part three, you just, you’re that much more excited to see them return.

LAMB: John, we were talking about this earlier, Papola.

PAPOLA: That’s right.

LAMB: But it could be Papola, you’re Italian and Russ Roberts, John Papola is from New Jersey, Russ Roberts is from here at George Mason University. He teaches economics and again, you can find these videos on YouTube.com. Thank you both very much for joining us.

PAPOLA: Thank you Brian.

ROBERTS: Thank you.