Episode 287 - The Rise and Fall of ESG with Peter Earle
Today's guest is Peter C. Earle, economist at AIER. The topic is ESG: Environment, Social, and Governance regulations, and the theory behind it that says corporations should be run for the benefit of interests outside the shareholders. They explore the rise of ESG criteria in a low interest rate environment, and ask whether ESG on its way out.
Peter Earle
American Institute for Economic Research
American Institute for Economic Research - ESG as an Artifact of ZIRP
American Institute for Economic Research - Woke Capital Is Destined to Become a Relic
American Institute for Economic Research - World of Warcraft’s Corrupted Blood Outbreak is Not a Model for COVID-19
Related Episodes
Episode 108 - What is Probability, Bloomberg vs Bernie on Boards, and Password Guessing
Episode 110 - Pandemic Update! Media Overload, Symptom Distribution, Estimating Fatality Rate
Episode 282 - Meganets with David Auerbach
Transcript
Intro: You're listening to the local Maximum Episode 287. Time to expand your perspective. Welcome to The Local Maximum. Now here's your host, Max Sklar.
Max: Welcome, everyone. Welcome. You have reached another local maximum. Nice day today. Getting hot out there. Listen, there was the gold rush. There was the race to monetize the Internet. There was mobile, there was crypto. What are you going into these days to make some money? Well, have you heard of the equity business? No, I don't mean no, no, of course not stocks.
I mean DEI–diversity, equity and inclusion. How many of you have friends and neighbors and, dare I say, coworkers who are really revved up to go into this new field? There's just so much money to be made in DEI, at least for now. And all you have to do is spread the gospel and browbeat your industry into delicious compliance. Now, if you've been living in the US for the last few years, you've run into this, I'm sure.
But there's another kind of analog on the corporate level that you might not have heard it. I'd call it an analogy. We'll have to hash this out. It's another three letter term ESG–environmental, social, and governance. If you haven't heard the term, you might continue not to hear it because BlackRock CEO Larry Fink said he no longer uses the term ESG, which is due to the growing political backlash against this particular concept in investing.
So what is ESG? Well, our next guest has done a lot of research in this area. Peter C. Earle is an economist who joined AIER in 2018. Prior to that, he has spent over 20 years as a trader and analyst at a number of securities firms and hedge funds in the New York metropolitan area. His research focuses on financial markets, monetary policy, and problems in economic measurement. Let's bring up another fascinating conversation.
Peter C. Earle you've reached the local maximum welcome to the show.
Peter: Thanks for having me.
Max: Okay, well, I am very excited to talk to you in person. Well, not in person, but live, because I really wanted to hear your ESG talk at Pork Fest. And I heard it last year. And so I just want to introduce my audience to this a little bit because some people might not know we've been talking about Chat GPT a lot for the last few months. So I just want to start by asking, what is ESG and is it a bad thing? Was it meant to be a good thing? What are some of the perceptions around it?
Peter: That's the best place to start. So ESG describes a framework whereby businesses should take into account not just shareholders and profit, but also stakeholders. Specifically, in this case, stakeholders with respect to environmental, social, and governance objectives. The idea is that companies owe an obligation to any entity, any interest group, which could argue they're affected by it.
Now, I'm not going to get into this just yet. But many viewers who hear that will say, well, boy, that's a pretty slippery slope. I mean, can you imagine any individual or group on earth today arguing that they're not affected by, say, Amazon.com or something? But anyway, ESG that portion of it refers to companies having to meet certain environmental, social or governance frameworks, having to meet certain criteria with respect to that.
And the social and governance portion is overwhelmingly informed by DEI, which is another sort of an abbreviation we hear a lot today, which is diversity, equity and inclusion. Now, the question is, “Is it a bad thing?” And the answer is that for at least a century, the explicit purpose of corporations was explicitly to serve shareholders, equity owners of the firm. And in 1919, there's a landmark court case called Dodge versus Ford Motor Company, which sort of enshrined the ruling that Henry Ford had an obligation to run his firm in the best interest of shareholders and shareholders alone.
And the ways in which the primacy of shareholders upheld is straightforward. Managers and executives basically have to use the resources of the firm to maximize profits and guard the interests of shareholders. Yet, since the 60s came around, and in particular about 1963, there's been a new wave of thought, and that's of stakeholder governance. And basically, as I said, the idea of a stakeholder is that any individual, any group, or entity can argue that the company owes it some obligations merely by virtue of having an effect on it.
Now, this could be anything from pretty logical stakeholders like suppliers or vendors to some kind of strange ones. I mean, local communities are not that strange. The environment is kind of strange, trees, things like that. Basically, any party which can either argue or have argued on its behalf that it has a relationship or is impacted by a firm is a stakeholder. And that leads us to some kind of unusual places which we're seeing more recently.
Max: So who determines who is a stakeholder and in what ratio of power should they have? Like, if I say, “Oh, I'm a supplier, I'm a customer here, I really need these guys to do a good job, so I should be a stakeholder than someone else.” “These people are operating in my town and it's affecting my lifestyle, I'm a stakeholder.” Who adjudicates how much power person A has via person B.
Peter: Yeah, exactly. How does the pecking order go? Right? What is actually happening behind the scenes? In many cases that the governments, or in some cases, shareholders who have a disproportionate influence on the company itself will exert on behalf of them. For example, some large shareholders, institutional shareholders, like mutual funds or something like that, may determine that it's really important to be custodians of the local environment.
So they may find themselves under pressure or themselves voluntarily put pressure on a firm to change their policies with respect to pollution or something like that. That's not very pernicious. But there are some forms of stakeholdership that are actually very pernicious, and they're being informed right now by governments, by activist groups, all of whom are finding ways to sort of exert their will on companies which subvert the rights and the obligations of the firm to its shareholders.
Max: So you use the word pernicious. Can you give some examples that are particularly illustrative of what's going on?
Peter: Sure. I mean, in some cases, you have for example, in terms of diversity and inclusion, in some cases you have dictates coming down that says that firms should choose people to be on their boards of directors or choose people in the C suite CEOs, chief operating officers, that sort of thing, who represent diverse interests, either, say racially or whatever, but they may not be qualified. And I mean, that's both bad for shareholders. That's really bad for those people too.
I mean, some of those people are being set up to fail in those cases. I don't think it's fair to anyone. But that subverts the purpose of the company, of the corporation, to guard its shareholders' interest and make a profit. Because you want the most qualified people, regardless of what those people say, ethnic or gender or whatever background might be. That's one thing.
And I mean, certainly you can imagine ways in which environmental dictates and governance and other social requirements can also subvert what's best for shareholders in terms of what the management is or should be doing.
Max: So this kind of reminds me if I were to go back into this podcast history, I just want to go back to Episode 108. And this whole idea of ESG and stakeholder holder capitalism, as you said, goes back many, many decades. But back in 108, this was one of the last episodes before COVID because I remember COVID was episode 110, and that was a pretty memorable episode.
So this must have been like February of 2020, and we were talking about these proposals by Elizabeth Warren and Bernie Sanders who wanted to actually pack corporate boards. They wanted to put members on corporate boards that protect interests other than shareholders. So I don't know what you could do to comment on that proposal other than why is this coming about now? Why was this coming about in, let's say, 2019, 2020, and what accounts for this timing?
Peter: Yeah, there's a lot to be said about that. So first I would start by saying that on one hand, I think the emergence of ESG, this is a personal view. In one sense, it represents a great development and achievement for those of us who espouse free market and pro-business philosophies. I would argue that by pushing ESG, the left, and in particular the collectivist left, the far left is simultaneously acknowledging the high productivity and welfare-enhancing component of business while simultaneously they're essentially conceding that governments can't do anything right.
They're inherently incompetent, they're costly, all that sort of thing. So in that way I think we can take a maybe not, maybe not applaud, but we can give ourselves a golf clap. Right. But a different way of looking at it is abject hypocrisy. Probably most of the individuals and groups who are trying to pile new responsibilities onto private capital are in the same breath promoting the idea that there are these huge swaths of public life that should be relegated to state control and the provision of goods via state and Primator.
So there's a few ways you asked how we got here. I mean, there's a few ways we got here. I think one is that we permitted governments to encroach on private property over decades and not really pushed back on it. I always come back to this because I'm an economist. We live in a nation where a kid is more likely to take square dancing lessons than have basic economics by the time they reach twelveth grade.
Max: Yeah, we did square dancing.
Peter: Yeah, we did the parachute thing. I would rather have done that than economics. But looking back now, it might have been better for me if I had taken economics much earlier.
Max: Yeah, I think we had one class.
Peter: By the way. Yeah, and by the way, when kids do take economics, usually in college, if there, they usually take a pretty lousy form of economics that puts them off. There are better ways to teach economics, but that's a whole other conversation we can have. There's another phenomenon which really the west got so rich so quickly and markets are such a great generator of prosperity, it's very easy to forget where you came from, even one or two generations ago.
Let me just add two more real quick, if you don't mind.
Max: Yeah, go ahead.
Peter: Another is this is another personal view. I think that the incredible levels of real demonstrable, violence and destruction which Americans saw in the summer of 2020 led to a lot of fear that wasn't there previously. I think even though it had to do with the killing of George Floyd, I think seeing cities actually burning and hearing actual gunfire in the streets of major cities in the US was really existential to people, and in particular to people in positions of responsibility, CEOs and corporate board members and the willingness of the media to whitewash a lot of what was happening.
You remember, the whole mostly peaceful nonsense played a role in companies. I think that played a role in companies not going under to collectivist impression to firms. And then, as you know, because I wrote an article about, the second of those has to do with the role of monetary policy in making these distractions for corporations financially plausible. If you had said if a lot of this pressure had come onto boards and corporate executives, whether it's directly from the government or through firms like BlackRock in the 1980s when interest rates were six to 8% or whatever, they would have been laughed out of the room because it's just too expensive.
You would say, “Okay, we can do this or this, but not this and this.” And I think in the zero interest rate policy we've had for many years and I wrote an article about this, I think a lot of these things became plausible. But the rise in interest rates, I think, is going to force a reckoning and make a lot of CEOs sort of hearken back to the days of being focused on the business of business alone.
So that's a lot of talk, but I think those all account for the sort of meteoric rise of ESG in the last three or four years, and also, to some extent, what will reverse it.
Max: Yeah, I think one of the things that really caught me off guard in the middle of 2020 was and I kind of look back at my writings and stuff at the time, and it was like, “Well, I was living in New York. I didn't feel any particular fear at the time.” But then it was like when my employer started having these mandatory zoom meetings telling us that this is a good thing and we have to support it, and you can't mention any of the downsides to what is going on in our community.
I asked some questions that were conveniently ignored and thrown out by management, and it was clear this was happening throughout the tech industry, every company you could possibly work for, and it was a little bit of crime in my city. Not good, but I understand that. But when all these companies were like, you have to celebrate this, I was like, that was a real shock.
Peter: Yeah, I lived in New York City for a while too, and it was nothing like that back then. In fact, the period of time when I lived in Manhattan were some of the best years that New York has had in 50 or 60 years. So I lived there at a very different time that's probably unrecognizable now.
Max: When did you live there?
Peter: Late 90s.
Max: Okay, so I came kind of late to the party because I was there from 2006 to 2021.
Peter: Wow.
Max: Yeah, I feel like those first five to ten years were pretty good. New York City, 2010 2013 I could live with. Crime was low when it happened. It wasn't celebrated. I felt like services kept on getting better and better. New neighborhoods were opening up continually, and then sometime in the middle of the De Blasio administration, all that stopped happening.
Peter: Yes, absolutely.
Max: There was a little bit of momentum going into, like, 2015, 2016. But after that, not so much. But anyway, getting back to ESG, I feel like you just answered this question that I have here, but I think it's an important question to ask. So maybe we can go back because I'll just write what I have here. I think a lot of people, including myself have been caught off guard with some of the corporate actions recently, whether it was from my company or other companies.
It's like they're very committed to what they're doing, and it seems like they don't care about customers or who's willing to pay for their products. So it seems like the profit motive should have kept some of these tendencies in check. And you could say, well, maybe it's the interest rates, maybe it's some other things, but it seems like something has gone wrong. At least how can I just like my mental model of the business world? Because it just does not fit with what has actually happened.
Peter: Yeah, some of what I said previously has to do with it. We've seen the growth of government to a point where it really sort of seeps into everything. So if in 1955, the government had told some firms or a firm what to do in terms of its hiring policies, there would have been a backlash. But now, after a while, everything sort of becomes part of the background and it looks pretty appropriate, or at least it doesn't really cause any sort of surprise.
And again, like I said, we've had this, I think 15 of the last 21 years or something like that. We have interest rates at between zero and 1%. And those are very heady times. And during the pandemic, we had these massively expansionary monetary and fiscal programs. And so all of that really changes the calculus of decision making in large firms. And you can get away with a lot of nonsense when money is basically free.
But now we've got not so much now, but by last summer we had inflation at four decade highs. It's battering the cost of firms, battering the cost of doing business. Right now we have consumers, and they're just now starting to as a whole, I don't like to talk about aggregate consumption because I'm not a Keynesian. But what we do know is that the average consumer has basically worked through their pandemic stimulus payments.
And more and more with inflation, even now, and with lower growth, consumers are cutting back on expenditures. And I think we're starting to see also consumers, their voice is getting louder. The whole debacle at Bud Light, disney releasing movie bomb after movie bomb, people are really upset about this new Indiana Jones movie, things like that. So I think things are coming together now that represent the pushback. But a lot of it started with monetary policy and with fiscal policy leading up to, and especially during the early stage of the pandemic.
Max: I've been thinking about what you said in my mind a little bit. It almost seems like the government says, okay, you can act on behalf of shareholders a certain percent, let's say it's 90%. Then 10%, you have to siphon off to these other kind of ill-defined interests, the interests of stakeholders, which just end up being everybody, which just end up being the government.
So I'm almost trying to push it to the extreme. Like what if that 10% goes to 100%? You have to do 100% what we want. Isn't that communism, fascism? They're just like, “Okay, but we only need a little bit.” I don't know if I'm describing it correctly.
Peter: Yeah. Now tell me if I'm wrong. You're asking if there is an equilibrium point where firms can make just enough profit that everything else that they do is basically wokeism and it's shareholder support rather than making a profit or whatever is that number…
Max: I'm sort of asking that. I'm also asking, “Are they injecting a tiny bit of poison in my sandwich, but you won't notice, it won't affect you, but they're still injecting it in there?”
Peter: What's amazing is that one of the things that makes people really realize the power of markets and prices is that if you look at the size of just look at the massive raft of regulation that's been levied on firms over the last, say, 100 years. Private enterprise is still mightily lifting people out of poverty. It's still increasing our longevity, it's still increasing the quality and the number of goods and services that are available to us every year.
And that's with chains on it. I mean, markets and firms are more constricted than they've ever been. Every year the amount goes up, and yet they still have that power. And usually when I say that to a student or when I say that to somebody who sort of seems to realize that dynamic, I say,” now imagine what it would be like if we got rid of a quarter or half of those regulations.” I guess my point is, I think the government realizes and by the way, this goes with what I said in the beginning, the whole rise of ESG sort of concedes, especially the far left's recognition of the power of markets.
I think they know that you can squeeze a lot out of firms before you kill the golden goose. I think that's what they're saying. I think they can get a lot out. But the question is, “why should they?” I mean, especially because my firm or my investments are my private property and I'm supposed to have a legal claim on earnings or whatever. I'm not a partner, I'm not a bondholder. I'm a shareholder, I'm an owner.
Or the extent to which my ownership is spelled out is identified in the differences between corporate or rather common shareholders and preferred shareholders and all that. But those corporate managers are supposed to be charged with the duty of serving me as the shareholder. And I think eventually we're going to get one of these cases that's going to go to the Supreme Court or something.
Or I maintain a degree of optimism because I think there's only so long this can last for. And there's a few scenarios in which I see it ending. Most of them involve a whimper, not a bang. I don't think there's going to be some Norma Ray type that's probably a reference most people won't get. Some shareholder or some CEO is going to stand up and say “I refuse to do this or that.” But I do see some ways in which it comes to an end.
One is pretty quickly, the other takes a lot longer and does more damage. But both of them are somewhat insidious and would mean the end of ESG over some time period.
Max: I want to talk about that optimism for a little bit. But I want to come back to something else, because you said that sometimes this is pushed by the large shareholders in these companies themselves, which, I mean, I suppose if they're a 100% shareholder, that's their right, but it's certainly at the expense of the other shareholders there. But that's their money. If I'm a big investment firm and I own 30% of this other company, why would I be pushing this company to do things that are not in my interest as a shareholder? What's the motive here?
Peter: Well, I mean, there are two possible explanations for that. One is that a large shareholder may be essentially an activist and may have already either made a lot of money or may just want to push until they see pushback. Certainly one of the things we may see is that there are some ESG funds or there are some shareholders who don't realize how much can be squeezed out, how much blood can be squeezed from the rock until they actually squeeze it and get pushed back.
As you said, ultimately if some firm decides to spend all of its profits or devote all of its efforts towards causes which are not really related to doing business or to plow its profits into doing things like that. If I don't have any stock in that company, it's not my business really. I think I have an idea of what's best for America and all that sort of thing, but that's another issue. It really comes down to the shareholders.
And I would also say that when the stakeholder approach comes from within a firm, from the firm's management, if that internal origin is not spurred by coercion that derives from the monopoly of violence, all that stuff, government all that, or by the state's appendages like large asset managers who will I don't think they should remain nameless because I probably mentioned them already.
Vanguard BlackRock, those firms. We all know who they are. That is a legitimate commercial function. It may be a dumb idea, maybe costly. But that's an issue for shareholders and managers to fight of. It's one of those external pressures from government or large firms doing the bidding of their government partners pressure companies into unwanted activism, and you get those sort of corrupt economic influences. That's when it becomes a problem.
In either case, you're going to hear platitudes about doing right and doing well and all that. But in the former case, it's merely unwise. In the latter case, it's essentially a commandeering of the corporate mechanism, and it should be fought.
Max: Yeah, okay, so I want to come back and it's always good to finish with why are you optimistic about this? Why do you think this is going to get better, in well, I don't know what your timeline is here. I hope it's not like 100 years. The interest rate obviously has to be…
Peter: One is short term, and one is long term. So again, as I said, I think the end of ESG comes first of all, I don't think there is an end of ESG. I think there is a huge ratcheting back of ESG. And I also don't think that when companies turn away from it, they're going to do it with a raised fist or with a wave flag.
I think it's going to be quiet and sort of a shrinking back rather than a bold and public pronunciation pronouncement. Our dollars may be weakened after this quantitative easing, but they're not quiet. Finance still matters. And so I think that corporate wokeism and ESG is only going to last until we have shareholders really feeling the damage of distracted managements and then there's going to be pushback.
Again, I think it's going to be quiet. But if it doesn't okay, so what could wind up happening is if ESG gets entrenched and like I already said, businesses and commerce-free markets are powerful, and they can endure lots of weights attached to them and still change our lives. But if a generation or two from now people say, “hey, why were my parents able to retire at 70 and I can't? Why did stocks for decades return eight to 12% a year? And why is that now only 4% a year?”
I think that might force some people to really sort of look at what the big shift was, what the major change was over the last 20 years. In particular, I'd say that for anyone with a particularly insightful mind, the question would be asked why is the drop in annual stock market returns inversely proportional to the number of pages every year in the Federal Register? And that will be, I think, a real sort of agent of epiphany for many investors and for corporate shareholders for those who are depending upon those returns over the long term.
But I mean, my hope is that if we have a recession, even if we don't, if we have a soft or hard landing, either way, interest rates at five to six and a half percent unless the Fed lowers them, which they are prone to do when we have recessions. But interest rates at a higher level for a prolonged amount of time are going to force a more rational allocation of corporate responsibilities and sort of force a return to the business of business.
Even if ESG does have a sort of hangover in corporate consciousness, which it may. I do think we are past the high point right now.
Max: Yeah, that's kind of the sense that I get. And I wonder if there's and this might seem more like voodoo than economics, but I wonder if there's sort of just general moods that we go through where ten years ago or when I was working in New York, in the 2000s. Let's say it was not. No. People did bring their personal opinions into work, but there was, like, a limit to it. There was a definite limit to it.
And I use this example, like when I worked at a company in Brooklyn, Wireless Generation, we got bought by News Corp in 2010. Nobody who worked there was a fan of Rupert Murdoch and there was a little hand-wringing, but they were like, “that's the way it goes.” If that happened in 2018, I think the reaction would have been over-the-top hysterics and so on and so forth.
Peter: I was thinking about the other day, I was thinking about the open office craze where that was a big thing for a while, and then eventually it's a little bit different because there's not really external pressure. But I was thinking about corporate fads and ESG since it's being pushed by large firms which are pretty tightly knit to the government, it's a lot less innocuous than corporate fads. But I was thinking about exactly that.
There was a time when open offices were the thing and now people say, “oh my God, I'm so glad those are gone. We hated that.” Or even to some extent, I believe, some of the management crazes, like maybe not Six Sigma, but some of those were a big deal for a while. And now it turns out that this one size fits all sort of solution is just like so much else that comes down from the government and everything else like the minimum wage, everything else really.
Only large firms in a zero-interest rate environment can afford these things, and for many others they become a distraction. Or eventually, they just sort of fade away. I think that might be happening. Right. So that's why I'm optimistic. I think that eventually, dollars will speak louder than feelz. It lasts for a long time, people will start to feel it where it counts, “why did my parents have enough money, people will say, to retire when they're 65 or 70 and my 401K is 1/8th of their value when they retired when I'm 60 or whatever.”
I think we'll feel big changes like that. There'll be many changes of a less profitable, less productive corporate world, but I think that will be one of them. And that's a shame because there'll be a lot of waste and ruin in the meantime. But that will still force sort of a revisiting of what the economy and what firms used to be like before ESG took hold as a corporate guideline or whatever.
Max: So that's a really good know, your discussion of corporate fads. It kind of makes me want to almost I feel like I could do a whole show on that whole episode on what's the life and death of a corporate fad? Because we've been through so many of them. It's like you need something to hang on to, to tell your employees, we're doing Agile now. It's always like we're moving to Agile. We were never at Agile. We're always moving to Agile. That was a big one back in the day.
Peter: Yeah, I remember. Yeah, that's the one scrum, I worked at one firm and they were like, “oh, we have to do this morning stand up thing where everybody stands up and talks about what they're doing.” And after the first few weeks, it's like, I'm doing the same thing I was yesterday, man, I'm programming, or whatever. It becomes sort of a perfunctory thing. But I understand firms, many firms are sort of like labs, and they want to experiment with different ideas.
But I mean, it's one thing to try those out when it's on your dollar, it's another thing when it's being pushed by coercive entities from the outside. And it's very expensive. I don't think Scrum is very expensive or Agile is very expensive.
Max: Right.
Peter: But overhauling your high and…
Max: There are some good ideas in there.
Peter: Changing your manufacturing processes to untested sort of green measures or whatever, that can be very costly. And it's someone else's money, too. It's the shareholders' money. It's not external activist money. So we've covered this ground.
Max: Yeah. All right. So one more thing that's a little unrelated, but I just have to hook this back into my episode from, like, four weeks ago, which is I came across your name while reading Meganets for my interview with David back in Episode 282. It was in relation to this virtual outbreak that occurred in World of Warcraft many, many years ago. You had written about it. I'm sure you remember it because I saw you also wrote about it again in 2020.
I guess I read the chapter on it. But why does this keep coming up? This is just some video game thing. What is it?
Peter: Yeah, I think that piece comes up occasionally because it lays bare two very different aspects of using modeling or games as simulations. About ten years ago actually, ten years ago last month, I published an article about the hyperinflation Diablo Three. And what was interesting about that episode is that you can get some really great economic insights from games. And those insights can be real, they can be true, and they can be nontrivial.
But on the other side, I also think simultaneously there's a dangerous yawning gap between drawing conclusions from those models and turning them into policies that affect real human beings. It's one thing, and this, by the way, goes to the whole thing about econometrics and other forms of quantifying economics. It's one thing to use a formula or an agent-based model to outline a relationship in a virtual economy, and sort of wonder how those reflect the real world.
That's another entirely to treat human beings like characters in a first-person shooter or MMO. There's an old joke, and it says, “why are biologists so much better people than economists?” And the answer to the joke is that biologists have the decency to test their models on rats first. So I think that's why these are interesting insights, because people love thinking that their gaming has real-world insights or has interesting reflections of the real world.
But I also think there's a danger to looking at something like happened with the what is it called? The corrupted blood spell.
Max: Corrupted blood, yeah. Was it a fake pandemic or something?
Peter: Yeah. Very interesting that the programmers added this thing to the game. And I think that if I'm remembering correctly, I'm pretty sure this is what it was, that there was an event, you faced a boss in a cave or something like that. What happens is, as you fight this boss, the boss creates this disease which goes through your party. But what happened is the game designers didn't take into account the idea that somebody might leave the event.
So some people were infected with this, and they left the cave or whatever, and they infected the whole world, the whole game world. And of course, you can torture these analogies to death and look for meaning. But I thought one thing that to me was interesting is that there were griefers people who purposely sought out other people to infect. We could make an analogy to that in the real world of just being careless. Right. People who I'm going to go to the store, or whatever they'll find.
Max: And there were maybe like online trolls, people who are just purposefully messing with people on the internet.
Peter: But there were also people who said, “oh my gosh, this is terrible.” And they fled to the corners of the world where they could be. It sort of became symbolic of the whole idea of what was it called? Focused protection. Some people said, “okay, we're going to keep our small group isolated here, and all that.” Eventually they did, what do you call it, a cold start, and they just shut the game down or restarted.
But there's a lot of interesting measures there. My purpose in writing that was not only to show that there's interesting things that happen in games, just like with the hyperinflation in Diablo, but also that you're on very dodgy territory to draw conclusions from those sorts of events and translate them directly to policy. I think that's another form of malpractice, which is alluring but the downsides are many.
Max: Gotcha. Gotcha. All right, we're coming to time. Pete, thanks so much for coming on the show. Do you have any last thoughts about the conversation today and where can we find you and your work on this?
Peter: Sure. So I'm an economist at AIER. That's the American Institute for Economic Research. Our website is aier.org and I have articles there. I'm on Twitter as @peter_c_earle. And yeah, you can find you know, media stuff, articles I've written, things like that at that website. We have a bunch of other great writers too, Phil Magnus, Tom Hogan, a bunch of others.
And we write about all this sort of thing, economics, try to keep it mostly for the educated layperson. But we also do academic stuff, focused on monetary, fiscal policy, all that sort of thing. We cover a lot of area.
Max: Fantastic. Thank you very much.
Peter: Thanks for having me. Talk to you soon.
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