May 2, 2024 · 35m · american-optimist
Ep 87: Dr. Cliff Winston — Deregulate Lawyers, Deregulate Airlines & Let Markets Correct Themselves · Joe Lonsdale
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of American Optimist, host Joe Lonsdale interviews economist Dr. Cliff Winston to explore how free-market innovation and self-correction solve economic challenges far better than government intervention. They analyze government failure across airline regulation, antitrust enforcement, welfare, legal licensing, and emerging technologies like AI.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Joe holds 29.4% of the talking time here. How this is scored →
Joe as informed peer 5.3 Guest teaching 4.6 Guest disagreement 2.3 Joe pushing back 2.5
speaking balance: gold is Joe, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:06 Government stalling autonomous vehicle revolution
Cliff emphatically decries government delay in setting national autonomous vehicle testing standards as an impending tragedy that leaves trillions of dollars in safety and societal benefits unrealized.
Hardest push from Joe ▶ 11:55 Pushback on government inability to iterateJoe firmly pushes back on Cliff's thesis that government never reforms or iterates, citing his practical legislative work tying state vocational school funding directly to graduate salary outcomes.
Biggest teaching moment ▶ 7:37 Categorizing the three modes of government failureCliff systematically breaks down the economic definition of government failure into no-benefit policies, negligible-benefit programs, and inefficiently expensive anti-poverty measures that fail basic cost-benefit accounting.
Joe holds their own ▶ 20:20 Venture experience distinguishing software and drug patentsJoe draws directly on his career founding software companies to argue from direct market expertise that software patents primarily foster litigation trolling, while pharmaceutical patents remain necessary due to development costs.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Joe as informed peer | Guest teaching | Guest disagreement | Joe pushing back | Why |
|---|---|---|---|---|---|---|
| Airline Deregulation and Historical Success | 4 | 5 | 2 | 1 | Joe introduces Cliff's academic pedigree and his book on government failure. Cliff explains the historical academic trend where Nobel-winning economists focused on market failure while ignoring government failure. | |
| Evaluating Government Effectiveness and Private Sector Dynamism | 6 | 3 | 2 | 4 | Joe playfully pushes back on Cliff attributing the creation of Google to the government and articulates his own thesis about mid-century post-war competence versus modern dynamic private markets. Cliff agrees that talent has migrated to the private sector due to static bureaucratic constraints. | |
| Analyzing Anti-Poverty Welfare Programs and Cost-Benefit Discipline | 3 | 6 | 2 | 1 | Cliff outlines an economic framework for defining government failure across three distinct tiers, specifically noting that welfare programs achieve small gains at massive, unanalyzed taxpayer costs. Joe prompts for concrete cost-benefit mechanisms. | |
| Fixing Government Failure through Policy Iteration and State Experiments | 7 | 4 | 3 | 5 | Joe challenges Cliff's claim that government never iterates or learns, citing his own work with state-level vocational training programs funded by performance metrics. Cliff clarifies he was focusing on federal policies and validates state experimentation by noting airline deregulation began in California and Texas. | |
| Antitrust Policy and Regulatory Overreach | 6 | 5 | 3 | 2 | Joe and Cliff align against modern FTC and DOJ antitrust actions under Lina Khan, with Joe sharing insider details from selling a business for $1.8B and the blocked Illumina-Grail deal. Cliff highlights how antitrust regulators never conduct retrospective assessments to verify if consumer welfare actually improved. | |
| Institutional Inertia vs. Market Self-Correction | 6 | 4 | 2 | 3 | Cliff discusses how early Brookings scholars believed good advice could fix government, but decades of evidence show markets self-correct far better. Joe adds deep domain insight on the misuse of software patents versus the genuine necessity of pharmaceutical patents. | |
| Deregulating the Legal Profession and Occupational Licensing | 5 | 6 | 3 | 2 | Cliff makes the radical case for abolishing occupational licensing for lawyers to allow market credentialing and lower consumer costs. Joe shares a local story about a predatory ADA lawsuit closing a neighborhood coffee shop to illustrate legal system rent-seeking. | |
| Reforming Regulatory Code and State-Level Deregulation | 6 | 4 | 2 | 3 | Joe cites macroeconomic data showing regulatory accumulation reduced US GDP growth by trillions and asks for concrete state-level reform strategies. Cliff recommends eliminating occupational licensing and privatizing public airport monopolies to spark competition. | |
| AI, Autonomous Vehicles, and Emerging Technology Regulation | 5 | 5 | 3 | 3 | Cliff passionately argues that federal paralysis over autonomous vehicle testing standards delays massive safety and economic benefits. Joe points out the irony of advocating federal standard-setting while normally opposing regulation, prompting Cliff to explain why clear adoption frameworks enable private innovation. | |
| Conclusion: The Case for Long-Term Thinking and Market Optimism | 5 | 4 | 1 | 1 | Both agree on allowing foreign airlines onto domestic US routes and contrast political short-term election horizons with long-term capital ownership incentives in private markets. |
Statements from this episode (20)
Lonsdale: Government Interventions Often Create Worse Failures Than Market Failures
“Very often, just because there's a market failure, you try to intervene, the government failure is worse.”
Winston: Economics focuses on market failures while ignoring government failures
“So the theoretical instincts is that were that the action is really in market failures and very little attention Was given the government failures. And so as things go on, people think, yeah, market failure is a problem. They never stepped back and said, well,…”
Winston: Government seed funding successfully backed breakthroughs like Google and genomics
“There's certain things that government certainly has done that have been successful. Obviously it helped fund led to Google. It's funding you know, genome project, you know, various sort of things like that, where they've given some, you know seed money for in…”
Winston: Government anti-poverty programs succeed only at unnecessarily high costs
“Poverty has declined, and some of government policies have certainly contributed to that, but it's so expensive to do that, and oftentimes there's, you know, multiple policies, you know, to address poverty as opposed to something that's more streamlined, more …”
Winston: Retrospective assessments are not part of government policymaking agendas
“There's a sort of, you know, checklist of things that you want to go through, but obviously this is not what government does, because you can have failure along at any of these points, and more often than not, we just go ahead with things, and there's never be…”
Winston: Economists lack systematic evidence explaining why government interventions fail
“Is we really don't even know systematically why government fails. Oh, we can speculate about many things, but trying to find some hard evidence is this is why government fails. We have a theory. We test it. It applies to many things. We don't have that.”
Lonsdale: Tying vocational school funding to earnings can double graduate salaries
“Fund these state-based schools in a competitive way where the funding's tied to some kind of goal that they can't gain, then the results are vastly improved. We can basically double the salaries coming out of these schools, for example, over some number of yea…”
Winston: Intrastate airline deregulation in Texas and California sparked national deregulation
“There was intrastate deregulation of airlines in both California and Texas. Before we went to the national level, this was done at the state level, and national policy policymakers could see this is how this stuff is working, and they're, you know, they were a…”
Lonsdale sold an undisclosed co-founded company for $1.8B in April 2024
“Actually it's funny, I sold a company for 1.8 billion dollars last month, one of the companies we started, and it's the second biggest sale in three, in like, since 2021, thanks to Lena Kahn.”
Winston: Economic evidence shows antitrust actions rarely improve consumer welfare
“I went through all the evidence that economists had accumulated. I said, you know, where, where have they done well? You know, monopolization cases, collusion cases, merger cases. Where is there anything strong that shows, yes, consumer welfare, Has improved. …”
Lonsdale: Illumina acquiring Grail would have saved thousands of lives monthly
“I don't know if you saw the Illumina grill one. I wasn't personally involved in that financially, but I have friends on both sides and you probably, you know, grill is a blood test that detects cancer and Illumina was going to scale it up. And the models are t…”
Winston: Government innovation subsidies and tax credits produce very poor results
“Very, very poor results, as you'd expect though, right? The private sector already has incentives.”
Lonsdale: Software patents are unnecessary and primarily benefit bad actors
“Probably shouldn't be, there probably should not be software patents, for example, I say this as someone who's built tons of software companies, like, it's probably not necessary, probably just helps bad people, so that's very interesting.”
Winston: Occupational licensing only creates barriers, raises prices, and limits services
“So all occupational licensing is doing is putting up entry barriers to new suppliers, raising prices, and limiting service because, you know, there are not as many people around.”
Winston: Practicing law should require zero mandatory licensing or credentials
“The legal profession can be free to provide credentialing all they want, but my sense is, you don't, you shouldn't have to have anything to be a lawyer. Compete on your own”
Lonsdale: Study shows regulatory buildup reduced U.S. GDP threefold
“One study I really like found that without the regulatory buildup since like the late 19 forties, you know, to early 2005, You would have had a three times higher GDP would have been maybe 39 versus 13 trillion.”
Lonsdale employs 25 people to draft legislation for multiple state governments
“I'm in a lucky position because I have like 25 people working for me. We're drawing up laws. We have governors and legislatures taking our advice in a bunch of states.”
Winston: Opening new competitive airports in the U.S. is impossible
“They make it really hard to open new airports, huh? That's kind of crazy. It's impossible. I mean, impossible.”