Dr. Zupans book look at the sources of national decline. Typically when people think about the sources of national decline they often look outside of government at specialInterest Groups that try to coopt government for their own benefit. However dr. Zupan takes a different approach and looks at the sources of national decline that come from inside government , from government insiders and it may cause even more harm to countries and civilizations than the harm that comes from outside of government we are really looking forward to hearing from dr. Zupan today. The way we will be framing todays book forums first we are going to hear remarks from dr. Zupan and then we will have comments from both Lindsay Cutshall from the Brookings Institute and myself. First i would like to introduce dr. Zupan. Dr. Zupan begin his tenure as the 14th president of alford university on july 1, 2016. Histidine at the Business School at the university of rochester from january 1, 2004. Zupan served as dean and professor of economics at the university of arizonas college of management from 1997 to 2003. Before his appointment at arizona zupan todd at the university of southern californias Marshall School of business where he also served as associate dean. He was also a Teaching Fellow at harvards department of Economics Program while pursuing his dog world studies at m. I. T. He is a faculty member at the Amos Tuck School of Business Administration at dartmouth university. He has a bachelors degree in economics from Harvard University and a ph. D. From Massachusetts Institute of technology. I will now turn to time over to dr. Zupan and we look forward to an exciting conversation. [applause] thanks emily for the kind introduction. Thank you all for being here. A special shout out to jim dornan who is in the back, the editor of the cato journal who provided me a space while he was on sabbatical and a lot of interesting leaves and thoughts about articles and research to pursue this work. Its been a work in progress for about 30 years but the sabbatical year and a half ago provided the opportunity for these ideas to come to fruition. The book is probably got more topical in light of our most recent president ial election. When you look at the Pew Research Poll that is done annually on trusting government the percentage of americans that trust government either all the time are most of the time is at an alltime low. Right now its 19 as of 1966 and the poll has been done for over 50 years. It was 77 . Its lower now than it was during watergate. There is probably some correlation i would argue between that assessment and the rising candidates like donald j. Trump and bernie sanders. Like emily said though the book deals with a topic thats been with us for a while why a nation succeeds and fails and its a topic that has been extensively thought of weather by columnists political scientists, sociologists etc. , philosophers. Looking at either a talker seas are democracies or both. The economic model of politics has been around roughly 50 years so it has grown out of a time where democracy has been the focus and it conceptualizes politics like other settings in life that economists look at. On the demand side or interest to compete for favorable rulings, policy decisions that generate positive wealth transfers for them. Whether these interests are as this is, labor unions, consumer activist environmentalists or general citizens. The supplyside according to this model is comprised of rulers or political leaders but more broadly also those that are appointed to execute policies, bureaucrats and also also anything more broadly the military and Public Employees. Where things go wrong as emily mentioned earlier the common belief among economists has been there has been capture in the system from the demand side of this political marketplace. George stigler who won a nobel prize in economics for this idea initially conceptualized this model and believed the producers because they are more copies concentrated and would be most likely to coopt the system. They are similar to the way karl marx look at what happened in politics. That conceptualization got robbed by other economists like gary becker, posner, elfman to be expanded to include other potential capturing Interest Groups on the demand side. We could certainly find cases where it seemed not producers but consumers were coopting the process for their benefit or environmentalists or one percenters or economic leaks. Any good criminal investigator though when you are trying to find out who may be at fault, what you look for is motive and means of opportunity. Those are all present on the supplyside of politics. Had we not been looking at just the last 50 years, hadley looked more broadly over the last several centuries were talker seas were the norm we would probably have a different perspective on this marketplace. When they were the norm for belief would be that the rulers owned the state the country and the citizens. Louix xiv saying. Its not to say the government cant advance the Public Interest. They are human beings like the rest of us and i dont know whether those human beings public the business settings, everyday workplaces they have capacity for great good or also great evil. Anybody who has been at the beaches in omaha and normandy cant help but be moved that the people who sacrifice for the greater good. Harold glass while the political scientist, to paraphrase whose definition of politics was who gets what, how, why, when and where and what this book does is look at those fundamental questions. If we were to pry open the black locks on the supplyside, who is it . What and why, what motivated to coopt the system, how do they do it and when and where have they done it . And its an important enough question in the Development World and now government accounted for 50 of gdp and 20 of the workforce. Who is on the supplyside . In autocracies we think of rulers. And democracies we think of decisions is people like ms. Caan and james b. Wilson appointed that we need to worry the people who populate our bureaucracies. They arent perfectly police. They have some latitude to design and implement policies. Also Public Employees in the military. There was a recent book review done of the praetorian guard in the roman empire and the role they played in figuring out who was going to be in power, stay in power and in many cases to the detriment of the roman citizenry. There have been other similar reviews. A recent book that came out on alexander the great or the elite military troops that defended bizarre. The supply side shows up in a few places. This is what first got me started on the question back in the 80s. A colleague looking at democratic settings. We were trying to test george stiglers model and what other economists have done was to try to find out to what extent Interest Groups could actually explain individual issue outcomes that we started looking at voting on surfline the legislation. While there was some it explanatory power from the demand side it was surprisingly limited and also surprised as to what extent we could explain senators votes with how they voted on abortion bills. So there was something about the ideological motives. Police perhaps they were policed at election time round individual issues but they seem to matter and even when you look at the broader people that we elect in congressional settings and democracies there seem to be a presentday United States a bit of latitude. Whether republican or democrat they had different you points to pursue their nonpecuniary object gives. What are the motives . We usually think of clip talker cs at pecuniary motive than they are certainly examples we could point to in the play out in the daily press most recently rulers in places or officials in places like malaysia or what was revealed in the panama papers. Historically we can point to the marcos family or even further back. Trujillo in the Dominican Republic. At one point his family was 100 of gdp in this country and he accounted for 60 of the hiring. We certainly can find examples of that but we also have to leave room for nonpecuniary motives. Again for good or for ill. We can strictly point to what hitler accomplished once in power and was able to move germany from a democracy to an autocracy. Its not to say the capture just occurs on the playa site or just occurs on the demand side. As the book argues we often see symbiotic cases. The best way to think about it is like dna. Therefore nuclear type aces. Sitin seen only, so even if the capture occurs on the demand side we should expect to see something awry on the supplyside. Or if the captures motivated from the supplyside there will be something a kilter on the demand side. Roads and friedman have this up separation theres nothing so permanent as a temporary Government Program and other washington pundits have observed the staying power policies even though the explanations may vary over time why they have their lasting nature people only think about both sides in what the vested interest might be in keeping those policies in place that inertia becomes easier to understand. Where and when has it occurred . If you look at paul kennedys work and its now been 30 years to rise to great powers what is striking in rereading his two principle stories, and he goes back to 1400, 1300 asks fundamental questions, if we were to predicted that point what would be the dominant powers nowadays we would pick china and we would pick the Ottoman Empire. How they unwound themselves, its hard not to construe that as a supplyside story. From looking at the population, the technological advances, the military prowess, the chinese empire and how under the meng dynasty they start to turn inward due to either what Francis Fukuyama calls the bad emperor problem in terms of facing should the link, moving and restricting trade, shifting the border and word, the skepticism about entrepreneurship as a bureaucracy starts to weigh in on it and the last two starts to set in when it came time to support a technological innovation. Likewise in the Ottoman Empire batch mobile closet the idiot problem and there certainly cases we can point to succession planning that wasnt well thought out but often with two constantinople who pass with the most is because of the number of male errors but also the bureaucracy, the elite fighting troops. They figured out a very creative way to probe their talker sand to avoid favoritism. They would. Christian lands to identify ablebodied males conserving their army and brought them back to constantinople to train them. It was a one generation based military with the feared fighting force. Once in place some of the seeds of the cave lay with the adversaries. If im here, why not my son and the benefit starts to bargain. Two were murdered attempting to promote reforms. The Ottoman Empire became the dash of europe that wasnt just the embassy area. It was also the large army of scribes who were threatened by the Printing Press and similar worries in meng china about the spread of information. As robinson talked about the Ottoman Empire went 225 years without a Printing Press. By 1800 only 2 of the empire was literate where is places like germany and england had 50 literacy rates. Very much as applied side story if you read the book 30 years later. The new kingdom of ancient egypt comes the latest statue has just been found. The greek name in his famous poem. Beyond its military conquest when you look at the history and the extent of building projects, the palaces of selfaggrandizement, putting a larger priesthood on the payroll part of Public Employment plus 30 was accounted for by a part of Land Ownership and 30 was accounted for by priests in that period. It became increasingly hard to sustain under the new kingdom. The regime, the venetian republic, trujillo again the Dominican Republic but also it democratic examples and a marvelous book a year and half ago about boom and dust of the United States looking at places like boston and San Francisco and when they became extractive. The ability to not only selfaggrandizement but also to chase out opponents. Looking closer to home my hometown and till recently was rochester new york and the state of new york. A Public Investment made it a boom town. The erie canal lowering transportation costs by 90 . Rochester went from 15 people in 1817 to being the United States 13th largest city by 1840. Growth of the roh rode slowly loosened some of rochesters preeminence but rochester and the rest of upstate new york dont start falling off the wagon until the 1940s and the 1950s. Its a story that cant connect to the demise of kodak or carrier that can more generally be correlated to the new york state becoming a high tax state. Recent book by steven moore a look at nine states without income taxes versus the tenth highest income tax states and migration rates. A very similar story in seattle last week for an alumni event. Its striking how many are there in my absent of my former hometown of rochester. More modern examples youve read about them in the news whether they are autocracies are democracies. North korea three generation of the kims and russia and putin and the treats you boys. The Iranian Revolutionary guard. By conservative estimates owns 33 of their country. What chavez has been doing in venezuela but it applies to democracies to. In india most recent surveys taken 54 of citizens report having to pay for bribes to get a public service. Even higher for the lowest income class, 75 . 34 of recent electoral candidates were under criminal indictment. It pays to be in the assembly there. When you look at a recent general economy article or you look at argentina bronzer kirchners more recently and anyone who has traveled to argentina under the kirchner there are three Different Exchange rates and the best one is typically the corner bakery where the suites are good in argentina but the Foreign Exchange was trading more briskly. Some of the challenges in the eu , Hans Warner Simms in his book theyearold trap, some of the challenges they beat the European Union faces than the periphery countries. These issues apply to china and the u. S. Whether we look at china under mao or more recently under xi. An interesting read is the most recent economist issue and the consolidation of the power under xi and the Upcoming Congress and the fall and the words will that trend continue. Also in the United States there is a chapter that deals with some of the challenges we face. We are the Worlds Largest democracy. Whether its more professional congress and tenure of being roughly doubled over the last 100 years. Robert caro has a wonderful book on Lyndon Johnson and how he was one of the first to figure out if you do this service well it would insulate you from any of the voting, the roll call voting and it would increase your tenure and your political power. Whether you look at unfunded pension liabilities. Paul krugman will argue its only detroit whether its failing cities like San Bernardino in california or puerto rico or philadelphia. Yesterdays news in new jersey, dallas or houston. Josh rao and robert marks josh in stanford and robert at the university of stanford estimates these unfunded liabilities our second visit biggest fiscal challenge conservative base at 5 trillion. Whether you look at how more monopolized our Education Sector has gotten. The number of districts since 1950 has decreased by over 80 . We are spending in real terms per student three times more than in 1960. The publicsector unionization rates and some of the challenges that Daniel Disalvo has pointed to. There are some issues for us that we need to think about on the supplyside in the United States. Its a simple book in one respect. There is only one figure, one equation and two dates and heres the equation. Just to conceptualize its important to capture the process that government insiders lean. Its a combination of how much potential there is to be captured. The slack on the supplyside, how imperfectly competitive and the slack can vary from zero to one with zero being no slack at all for a full week police supplyside, one being perfectly untethered and then how much interest is there in this . Michael sandel earlier philosophers like aristotle who also argued about the importance of needing to instill civic mindedness and relying on virtue so even when there is lack we can rely on that factor to diminish the chance that those on the supplyside will operate not to the benefit of the Public Interest. Theres a chapter on what drives potential gains. The perks, the patronage, the bureaucracy, the transactions. Potentially and this is something the ruler in persia argued in 500 a. D. If i let the economy grow that will mean more tax revenue so theres potential one could argue having an economy thats productive and that will allow the gut greatest gains to the government insiders. The transaction cost with operating a government tax and transfer programs which b