Tyler Cowen on Inequality, the Future, and Average is Over

Episode Summary

Executive Summary: Russ Roberts and Tyler Cowen discuss Average Is Over, a forecast of widening inequality driven by automation, globalization, and smart machines. Cowen argues the future will split workers into those who complement technology and prosper, and those who face stagnation or displacement, while also creating new opportunities in coaching, marketing, education, and human-machine teamwork.

Main Topics: Rising inequality and a bimodal labor market (Priority: 5/5): Cowen argues that income distribution will increasingly split, with many middle-class workers either moving up into high-earning roles or stagnating in lower-middle/service work. He sees the traditional mid-20th-century middle class as historically unusual. Automation, smart software, and machine-human complementarity (Priority: 5/5): The conversation focuses on how driverless cars, AI diagnosis, grading software, and other machine systems will replace some tasks while greatly amplifying the productivity of workers who can effectively use them. Globalization and sector-level wage pressures (Priority: 4/5): Cowen says global labor arbitrage pushes wages toward equality worldwide but raises inequality within countries. He points to sector examples like publishing, music, and academia to argue that top performers gain disproportionately while middle earners stagnate. Conscientiousness, coaching, and the changing value of human skills (Priority: 4/5): As information becomes abundant and quality is measured everywhere, Cowen predicts conscientiousness, modesty, and motivational skill will matter more. He expects women to benefit on average because of higher conscientiousness, and sees coaching and marketing as growth sectors. Education, gamification, and the future of universities (Priority: 4/5): Cowen envisions online learning, gamified instruction, and data-driven tutoring replacing some functions of traditional higher education. He expects tenure-track jobs to thin out, with top schools concentrating resources and tutors/motivators becoming more valuable. Politics, aging, and limited redistributive backlash (Priority: 4/5): Despite rising inequality, Cowen does not expect revolution. He argues older voters, wealthy professionals, and many poor people will form a conservative coalition, while the main political conflict becomes protecting entitlements for the elderly rather than broad redistribution. Cultural and personal adaptation to a measured world (Priority: 3/5): The discussion closes on how constant ratings, devices, and recorded behavior will change everyday life, reducing privacy and increasing pressure to conform to algorithmic advice. Cowen sees both benefits and discomfort in this shift.

Key Arguments: Automation and smart software will extend the reach of highly productive workers while displacing routine labor, producing large gains for a smaller share of workers. Globalization lowers labor costs worldwide but increases within-country inequality by moving production and wages toward global arbitrage. The best future human role is often not to outperform machines, but to ask better questions, interpret machine outputs wisely, and remain epistemically modest. Conscientiousness will be more valuable because free or low-cost educational resources will be abundant, making self-discipline a key differentiator. Women may benefit more than men on average because higher conscientiousness will be rewarded in an environment where self-directed learning and persistence matter more. Coaching, tutoring, and marketing will expand because computers are poor at motivating people and attention will remain scarce even as wealth rises. Traditional universities will face financial pressure, with more teaching delivered online and more emphasis on tutors and superstars than on broad tenure-track systems. Political instability is unlikely because older and wealthier citizens vote reliably, while many poor people are not radical and inequality does not automatically translate into revolt.

Data Points: Podcast date: September 16, 2013 - Introductory framing of the EconTalk episode Driverless cars: “save thirty five thousand lives potentially” - Cowen’s estimate of safety gains from autonomous vehicles Driverless AI diagnosis timeline: “less than five years and maybe less than two” - Cowen’s estimate for Watson-like medical diagnosis becoming widely available Future millionaire share: 15% - Cowen’s hypothetical future in which roughly 15% of Americans are millionaires or richer Top income share: 20% - Cowen’s example of a future where 20% of America could be millionaires or richer, increasing competition for attention Educational access: “within five years, the world’s best education will be available online and it will be free” - Cowen’s prediction about online education access State university attendance: 78% - Roberts cites the share of U.S. students attending state universities University budget share: over 30% to 10%–15% - Cowen predicts state support for universities may fall from above 30% to 10%–15% within five years in some systems Fastest-growing U.S. cities: 3 of the 5 are in Texas - Used to support Cowen’s view that people are moving toward low-cost, high-cash-in-pocket locations Historical wage lag after Industrial Revolution: 50–70 years - Cowen compares the current transition to the long lag before broad wage gains in industrial England Freestyle chess team advantage: Human+computer teams can beat computers - Illustration of complementarity rather than pure replacement Academic labor market: more adjuncts, fewer tenure-track hires - Cowen’s example of sector-specific inequality in higher education

Pivotal Quotes: "Average is Over is getting at exactly that increase in inequality of income." — Tyler Cowen: Defines the central thesis of the book and the episode "The really good human players, they're too tempted to override the computer and substitute in their own judgment." — Tyler Cowen: Freestyle chess example used to show the value of modest, question-asking humans "I think the radical thing to do is to write a book which isn't trying to be too normative. It's just trying to think through what things will be like." — Tyler Cowen: Cowen defends the book’s descriptive, non-moralizing approach

Implications: Listeners should expect a future of sharper income splits, more machine-human collaboration, and greater returns to discipline, adaptability, and modesty. Industries tied to motivation, tutoring, and high-end personalization may grow, while routine middle-skill work and many traditional institutions face pressure.