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Dwarkesh Podcast

Tyler Cowen - The Great Reset

Tyler Cowen is Holbert L. Harris Professor of Economics at George Mason University and also Director of the Mercatus Center.

Dwarkesh PatelhostTyler Cowenguest

Jul 10, 202046mWatch on YouTube ↗

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CHAPTERS

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Chapter summaries

The Great Reset arrives: institutional brittleness exposed
Cowen reflects on his 2017 prediction of a coming “great reset,” arguing that COVID revealed a lack of flexibility and competence in key U.S. institutions. He contrasts relatively strong performance by the Fed and Supreme Court with failure across much of the regulatory state, Congress, and executive capacity.
- •Reset came sooner than Cowen expected (not 5–10 years out)
- •Low borrowing costs didn’t translate into effective public-health execution
- •Masking and test/trace failures as symptoms of institutional rigidity
- •Fed and Supreme Court as exceptions to broader institutional decay
Post-crisis dynamism: biomedicine as the breakout sector
Asked whether the reset will bring renewed dynamism, Cowen gives a conditional yes—especially for biomedical innovation. He expects the pandemic to catalyze major advances in virology, immunology, vaccines, and preparedness, while being less certain about other sectors.
- •Predictions should be conditional, not absolute
- •Biomedical R&D surge will be historically significant
- •Tech remains innovative, as it has been for some time
- •Potential for broader dynamism exists but could still be squandered
Second shockwave: racial issues as an early warning signal
Cowen notes another prediction from The Complacent Class: racial tensions and segregation would flare during crisis because Black Americans are often most vulnerable. He frames this not as a forecast of solving segregation but as a diagnostic signal of systemic stress.
- •Racial vulnerability makes unrest more likely during shocks
- •Segregation as a persistent structural problem
- •Crises reveal fault lines rather than resolve them
- •Reset includes social as well as economic pressures
Cycles vs long-run growth: reconciling Complacent Class with Stubborn Attachments
The conversation turns to an apparent contradiction: a cyclical view of history versus a long-run commitment to growth. Cowen argues that growth can be uneven in the medium run yet still trend upward over centuries given persistent liberal institutions.
- •Short-run cycles can coexist with long-run growth trends
- •Institutions and culture can provide persistence across centuries
- •The post-1973 slowdown as an example of a long cycle
- •Stubborn Attachments remains viable on sufficiently long horizons
Time horizons, safety, and sustainability: when growth arguments break down
Prompted by Greta Thunberg’s critique of “eternal growth,” Cowen discusses how different time horizons shift priorities between growth and safety. He suggests very long horizons can push societies toward extreme risk aversion unless there’s an outlet like space expansion.
- •Very long horizons can prioritize safety over growth
- •Very short horizons can undervalue compounding benefits
- •Cowen jokes/estimates humanity has ~700–800 years left
- •His memory aside, the framework is about horizon selection
Space optimism vs Earthbound constraints: rejecting a ‘Pascal’s wager’ for NASA
Cowen explains that belief in large-scale space colonization changes the calculus by expanding potential future value, reducing safety-obsession. But he’s skeptical due to binding physical constraints (speed of light) and worries that space-based arguments become a moral ‘Pascal’s wager’ that devalues Earthbound human concerns.
- •Space optimism enables very long horizons without paralysis
- •Cowen is not a space optimist; physics and travel constraints dominate
- •Earth likely remains the main arena; ‘moon vacations’ at most
- •Pascal’s-wager-like reasoning can distort moral priorities
Limits to growth on Earth: constraints are social conflict, not space or energy
Pressed on whether growth eventually requires leaving Earth, Cowen argues Earth has ample room and potential energy options; the tighter limits are human conflict and, near-term, carbon emissions. He notes many underexplored living arrangements (ocean platforms, underground) and treats Mars as unnecessary until we “fill up Nevada.”
- •Earthbound growth may be finite but can be very long
- •Living space and energy aren’t the binding constraints (in his view)
- •Carbon is a short-run constraint likely to be solved
- •Human conflict is the deepest long-run limiter
WMDs and the end of civilization: why long peace doesn’t imply permanent peace
Cowen’s main reason for pessimism over centuries is weapons of mass destruction and the inevitability of major war given enough time. He challenges Pinker’s declining-violence thesis, proposing a ‘ratchet’ view where wars are rarer but potentially more catastrophic, especially as destructive tech cheapens.
- •Over long horizons, probability of major war approaches certainty
- •Civilization can fail without literally killing every human
- •Declining war frequency can still mask rising war severity (ratchet)
- •Cheap nukes (e.g., $50k) radically worsen long-run risk
China as the primary flashpoint—and the durability of autocracy
Discussing war warning signs, Cowen points to China/Taiwan/South China Sea and North Korea as main geopolitical risks, though not necessarily worsening in 2020. He also rejects the ‘wealth → democracy’ thesis for China, arguing autocracy may remain stable and even strengthen with prosperity and surveillance.
- •Near-term war evidence is limited, but key flashpoints remain
- •China/Taiwan/South China Sea as central strategic risk
- •Autocracy is a stronger competitor than many assumed
- •Rising wealth hasn’t democratized China; median voter may not want it
Common-sense morality: evolutionary selection for workable social norms
Cowen explains why his views often align with ‘common-sense morality’: norms evolve under competitive pressures at the level of societies, families, and groups. While not optimized, radically nonfunctional moral systems are selected against, so common sense tends to cluster around survivable equilibria.
- •Morality evolves under social competition and selection pressures
- •Common sense is ‘workable,’ not necessarily optimal
- •Extremes that contradict lived stability tend not to persist
- •A warning against ethical systems too far from common intuitions
Big Business, startups, and the Great Stagnation: innovation vs stagnant services
Cowen reconciles his praise of big business with concerns about complacency by emphasizing where startup decline is concentrated (retail) and how large firms face contestability and drive innovation. He maintains the Great Stagnation thesis primarily targets education, healthcare services delivery, and government capability—not tech giants per se.
- •Startup decline is concentrated in retail, less alarming than it seems
- •Big firms (Google, Amazon) can be highly innovative and contestable
- •Productivity problems lie more in services and government capacity
- •Pandemic response as evidence of governmental stagnation
Online education as a supplement: MRU and what universities still provide
Cowen describes Marginal Revolution University as a high-quality supplement rather than a replacement: swap out the ‘worst 20%’ of education for online options. He argues in-person education remains central for socialization, mentoring, navigating hierarchies, and the irreplaceable top slice of face-to-face learning.
- •MRU offers full principles sequences with exercises, not just lectures
- •Best model is hybrid: replace a chunk (e.g., 20–30%) with online
- •Universities provide social learning, networks, and mentorship
- •Humans’ need for in-person interaction keeps campuses relevant
Aesthetic decline in Parkersburg: wealth without cultural confidence
Cowen recounts visiting Parkersburg, WV: a striking mix of early 20th-century grandeur and modern ugliness/run-down development. He’s unsure of the full causal story but suspects a loss of cultural self-confidence and perceived centrality—since absolute wealth is higher now than when the beautiful buildings were constructed.
- •Parkersburg shows architectural splendor alongside severe decline
- •Economic decline alone doesn’t explain worse aesthetics
- •Absolute wealth higher today than during past building booms
- •Hypothesis: cultural ethos/self-confidence and ‘centrality’ eroded
Mentors, talent, and adult development: what changes (and what doesn’t)
Cowen’s core advice is to find one to three excellent mentors and maintain a small group of intellectually energizing friends. He previews themes from his talent book (spotting/signaling over ‘developing’), argues most skills can be developed best after 18, but suggests temperament is relatively stable—especially for men—with some gendered differences in life experiences and constraints.
- •Mentors provide a ‘glimpse of what you can be’ through example
- •Small-group friendships matter for sustained growth
- •Talent work emphasizes spotting/signaling; development follows indirectly
- •Skills can develop strongly after 18; temperament changes less from ~18–70
Historical contingency, nuclear risk, and the post-COVID future: pessimism vs upside
Cowen resists naming a single ‘biggest mistake’ in history due to unpredictable contingencies, and he forecasts a high probability a non-test nuclear weapon will be used in the listener’s lifetime (though full-scale nuclear war remains less likely near-term). He closes by outlining pessimistic scenarios (prolonged pandemic, institutional and global cooperation decay, war+pandemic) and an optimistic one: falling death rates, decent vaccines/therapeutics, recovery, and a lasting biomedical innovation dividend.
- •History is hard to rerun; contingencies can flip outcomes
- •High probability of limited nuclear use; lower probability of apocalypse soon
- •Risks: prolonged COVID, psychological scarring, migration/cooperation collapse
- •Upside: improved treatments, workable vaccines, V-shaped recovery, biomed leap

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