205 | John Quiggin on Interest Rates and the Information Economy

Sean Carroll's Mindscape: Science, Society, Philosophy, Culture, Arts, and Ideas

Sean Carroll | Wondery

Society & Culture, Physics, Philosophy, Science, Ideas, Society

4.8 • 4.4K Ratings

🗓️ 25 July 2022

⏱️ 79 minutes

🔗️ Recording | iTunes | RSS

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Summary

The idea of an “interest rate” might seem mundane and practical, in comparison to our usual topics around here, but there is a profound philosophical idea lurking in the background: if you lend me money now against the promise of me paying you back more in the future, I am relating the different values that a certain sum has to me at different moments in time. Traditionally, the interest rates set by the government have been a major tool for influencing the economy, but in recent decades they have increasingly fallen near zero. John Quiggin relates this change to the shift from manufacturing to an information economy, and we talk about what that means for the public interest in having information be reliable and widely available. And yes, there is a bit about crypto.

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John Quiggin received his Ph.D. in economics from the University of New England. He is currently a VC Senior Fellow in Economics at the University of Queensland. He is a Fellow of the Econometric Society and the Academy of the Social Sciences in Australia. Among his books are Zombie Economics: How Dead Ideas Still Walk Among Us and Economics in Two Lessons: Why Markets Work So Well, and Why They Can Fail So Badly.

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Transcript

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0:00.0	Hello everyone and welcome to the Mindscape Podcast. I'm your host Sean Carroll.
0:03.8	And as this episode is being released in late July 2022, there's a lot of news stories going on
0:10.6	around interest rates going up and the desire to curb inflation. There's a whole bunch of reasons
0:17.6	why dealing with global supply chains, wars, a whole bunch of things going on. This podcast will
0:23.4	be about none of those things. I'm sure these things are very, very important, but they are of the
0:28.4	moment and they might go away. We here at Mindscape are about of eternity. We want to know the truths
0:34.7	underlying what is going on. So this podcast is however about interest rates. And in fact, it's kind
0:41.7	of something I was reluctant to get into. Today's guest, John Quigain, is a very respected economist
0:48.3	at the University of Queensland in Australia. The accent will be dead giveaway right away.
0:53.7	And he's written a very interesting books about markets and how they both succeed and how they fail.
1:00.0	So I invited him on the podcast and he says, love to talk about markets, but what I really want to
1:04.7	talk about are interest rates. I was skeptical since I know nothing about interest rates and they do
1:09.9	seem a little bit down in the in the mess of policy and so forth. But it's interesting because
1:16.8	number one, there's a phenomenon going on where interest rates globally are way low. There are
1:23.0	many countries that accounting for inflation are going with zero interest rates in the government's
1:28.8	lending to certain preferred lenders and so forth. Why is that? This is something very different
1:33.8	than has been going on before. But also it actually does kind of resonate with the intellectual
1:39.7	themes that we talk about here on Mindscape because what do you mean by an interest rate?
1:44.5	I have a dollar. I'm going to give you a dollar if you promise to give me back a dollar in five
1:50.8	cents a year from now, five percent interest rate. Okay. So basically you're trading money for time
1:58.2	in some sense. To me, I would rather have the dollar five a year from now and you would rather
2:04.0	have the dollar right now. That is the basis of the idea of interest rates. So it's involving a
	...

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