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Artificial intelligence is fundamentally transforming the global economy at breakneck speed, but Diogo Costa argues that the real threat to prosperity isn’t technological disruption; it’s the return of bad economic ideas.
As the president of FEE (the Foundation for Economic Education), America’s oldest free-market think tank, Costa is concerned that the affordability crisis is providing the perfect opportunity to tempt the next generation with the ideas of socialism, and argues that economic education is the antidote.
Recently, he sat down with Fox News Digital at Freedom Fest in Las Vegas for a discussion about the intellectual defense of free markets, the intersection of freedom and technology, and how his upbringing in Brazil brings a unique perspective to today’s economic policy debates.
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“The biggest challenge today is the different ways that ‘anti-economics’ keeps reappearing. And this time, it’s reappearing through a new kind of socialism. So through the 20th century, we had different flavors of socialism, labor union socialism, environmental socialism, anti-globalization socialism. Now we see this cost-of-living socialism, affordability crisis socialism.”
While young people are aware that they are better off in a market economy, Costa argues, they still want heavy-handed intervention if they perceive it benefits them.
“Young people, they want to live in a market economy. They don’t want to move to Venezuela or Cuba, but they want price controls in everything. They want to freeze the rent, they want free rides in buses, they want to make sure that groceries are either run by the government or price controlled somehow. And this is not just a phenomenon in New York City or California. This is something that’s happening globally.
“And this is the new kind of ‘anti-economics.’ So, Leonard Read [founder of FEE] understood that economics is always one generation away from turning prosperity into poverty. The good ideas need to keep being recycled, they need to be reframed, and this is a challenge that we have right now, the rise of this Gen Z affordability socialism.”
He further argues that while the technology produced by vibrant market economies has incredible potential, the ideological foundation of capitalism is under attack like never before:
“We’re in a golden age for technology, not necessarily for the ideas behind it…the ideas behind the market economy are not as well understood. And when you talk about AI, people are thinking all the jobs are going to be gone. Humanity is on the verge of extinction.
“So there is a lot of pessimism at the same time that you have these wonderful technologies. So the ideas that help us explain and help us work with technology are what’s missing.”
Costa’s studies of the Austrian school of economics lead to separating the economic power of the free-market from its cultural power:
“Joseph Schumpeter, the Austrian economist, said that capitalism would be economically powerful and at the same time culturally weak because you have companies that will be doing amazing things, but capitalism makes things more abstract…and at some point people stop seeing exactly how they are part of this amazing complexity.
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“That’s why with FEE we sometimes go back to a pencil. We just ask people ‘do you understand how a pencil is made?’ Because if you see the complexity, the network, the amazing, marvelous market system around… Just building a single pencil, you start to understand how you are part of the complexity and you benefit from it.”
Costa’s own experience growing up in Brazil during the economically chaotic 1990s was pivotal in shaping his outlook on policy and the need for economic education.
“I grew up in a country that had hyperinflation. When I was 10 years old, 11 years old, yearly inflation was above 1000%, 1200%, 1300%. That meant the prices were changing literally every day. And it’s hard to understand how if you live in a society that is that economically chaotic all your life is designed around those problems.
“So as a child, when I was going to the grocery store because my mom gave me a $1,000 bill to buy a bag of chips, I had to think, ‘Oh, I need to get there before the price tagger starts changing the prices’.”
“My parents had to turn a bedroom in our house into a pantry because when they got their paychecks the first thing they did was go to the grocery store and buy everything you can…So your life starts to be designed around these big issues. And this is something that some people take for granted.”
But it was not only hyperinflation that opened Costa’s eyes about economic education; he also first hand the effects of a fundamentally protectionist economic system:
“It’s the same thing with protectionism…as a young boy in the early 90s, I wanted video games. Brazil had strict protectionism. So I could buy these dupe video games, but I couldn’t get the real deal. And this was something that people now take for granted, but this was how the Brazilian economy was being shaped.
“And Milton Friedman has this saying that he thinks that we never actually learn economics as humanity, we learn as individuals, we learn maybe as generations, but now that we don’t live under hyperinflation people forget what that’s like, now that we don’t live under hyperprotectionism people forget what it’s like. So it’s very easy to drift towards inflation, to drift towards protectionism, to drift towards anti-economics and economics needs to be re-taught every generation.”
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