2025 Retrospective — A Listener Interviews Me
In this special end-of-year episode, the tables are turned: I’m the guest, and I’m interviewed by Zac Gross — an Australian macroeconomist and long-time listener of the show.
We reflect on what I learned on the podcast in 2025 and what I changed my mind about. We also discuss the behind-the-scenes work of running the show, and my plans for 2026.
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Transcript
JOSEPH WALKER: This is a special kind of episode. Today the tables are turned: I’m in the hot seat, and I’m going to be interviewed by a listener of the podcast.
I’ll introduce him in a moment, but just to provide a bit more context: we’re continuing a tradition I started in 2023. I wanted to do an end-of-year retrospective — reflect on the year, both in terms of the content of the episodes, but also the behind-the-scenes aspects of the podcast itself.
But I didn’t have anyone to interview me — no producer. It’s a one-man show. So I thought: wouldn’t it be fun to invite my listeners to apply to interview me?
It’s probably my only original contribution to the field of podcasting: having a listener interview the host. I don’t remember seeing that idea anywhere else, but I really enjoyed the experience. It was a nice way of drawing out and synthesising the lessons from the year, and also a good way to develop empathy for my guests and become a more thoughtful interviewer.
So about a month ago, in early December, I put out a call on Twitter and through my mailing list looking for listeners to interview me. I received a bunch of excellent applications, but the best was Zac Gross, who’s interviewing me today.
So, Zac — we were talking before we started recording. I think you first found the podcast maybe six or so years ago.
ZAC GROSS: Yeah about that.
WALKER: To introduce you briefly: you’re an Australian macroeconomist. You worked at the Reserve Bank of Australia, you worked as a lecturer at Oxford, and you’re currently an assistant professor at Monash University.
So it’s the afternoon of the 30th of December. We’re doing this in Melbourne. And thank you so much for doing this with me.
GROSS: No worries. Happy to be here.
WALKER: Over to you.
GROSS: Great, thanks, Joe.
At the end of your last [end-of-year retrospective] interview, you mentioned that you were going to take the podcast to the UK — back to the motherland — for ease of access to the intellectual environment that is London, and perhaps even closer access to the US.
I wanted to ask you how it went, and what’s been happening with the podcast, location-wise.
WALKER: So we never actually moved. Which hopefully is evident to people who follow me on Twitter and watch the podcast on YouTube, given the amount of Australian content I’ve done this year.
GROSS: I did think you must be racking up a lot of frequent flyer miles with the amount of Australian content.
WALKER: So the story is: we were on the brink of moving. I’d even got my British passport — we were ready to go.
And then we realised that the US was much more attainable; a US visa was much more attainable than I’d been led to believe.
The US was frankly always plan A, and the UK was plan B. Once we realised that, we sort of pivoted. Generally, I’d much rather live in the US than the UK.
That move has kind of been delayed. So I stayed in Australia because there was a lot I wanted to do in Australia first, in terms of the Australian content.
But I guess I don’t feel sufficiently famous that I need to update my audience on my movements. So I was in this weird position where that plan slipped out in the 2023 retrospective, and then I didn’t really have another chance to update people; didn’t feel like I needed to.
So I’m conscious that about half my audience probably thinks I’m in the UK right now. I haven’t been in the UK since a short trip in 2023.
GROSS: Oh, great. There goes all my questions on fish and chips and the London housing market. But we’ll see if we can pivot and make this work.
So that’s a big update on location — maybe the US in the future. Do you have any idea of which coast? Which side?
WALKER: West Coast.
But having learned my lesson with the UK experience, I don’t want to release too much before I’ve got boots on the ground.
GROSS: Fair enough. We’ll watch and find out.
Okay, well, let’s chat a bit about the podcast behind the scenes, and then we’ll dive into some of the more detailed content. So perhaps for those who aren’t interested in a two-hour serenade on Australian state capacity, you don’t have to stay to the bitter end.
First question: you’re a podcast, you’re running a business. Who do you see as your top three competitors in the industry?
WALKER: I try not to think in terms of competitors. It’s a very Zen kind of thing where I try to keep them out of my consciousness, because I think thinking in terms of your competition, or people you want to copy or emulate, can be quite toxic.
I want to maintain my independence. I don’t even listen to that many podcasts in my personal life.
One way to answer the question might be: my competitors are newspapers, or Substack, or anything else people could be doing to consume intellectual content.
GROSS: I was going to say: is a podcast even the competition or is it another app on someone’s phone?
WALKER: Yeah, it might be.
I think the direct competitors would be podcasts. But we try not to think about competition. [laughs]
GROSS: Fair enough.
Well, speaking of other podcasts: Derek Thompson, formerly of The Atlantic, now at Substack, I believe, outlined an interesting theory that basically all media is becoming television.
For a bit of behind the scenes — we actually spent much more time on the cameras and the lights here than on the microphones, so that you can all see us. And that’s a reflection of the fact that all podcasts are moving to video. The pivot to video is happening.
How has that affected the business of making a podcast?
WALKER: For me, in two ways.
The first — and most obvious — is just doing video, and needing to do video to grow the show. So I started doing video for every episode last year, and I publish video on YouTube, Substack, and X (formerly known as Twitter).
That has turned out to be kind of mandatory if you’re trying to grow a podcast, because you have access to the upside of those algorithms on those platforms. The discoverability on a platform like YouTube or X is just qualitatively different to the discoverability through a podcast app like Apple Podcasts or Spotify.
I don’t remember the last time I ever used Apple Podcasts or Spotify to find a new podcast. Usually you just learn about stuff through word of mouth, and then subscribe through those apps and keep listening to your same stable of shows. But you don’t use those apps to find new things.
I think the second way in which I’ve noticed the “everything is television” thesis apply to my show is doing ads in more creative ways. And I think this will be a theme for podcasts that we’ll see intensify over the next few years.
It’s no longer enough to just do a read where you’re reading the script the sponsor’s given you and you’re just plugging a product. I think ads will get increasingly more creative, much more personalised to the host and the show, and much more seamlessly integrated into the show.
And that, I think, has been facilitated and driven by the video medium, because there’s so much more you can do with the ads when you’ve got that video dimension.
One example from my show this year was an employer-branding ad for Eucalyptus, which appeared in the Hugh White episode. So I interviewed someone who’s a long-time listener of the show who now works at Eucalyptus.
Instead of me just singing the praises of working at Eucalyptus, the ad was a mini-interview: a two-minute interview where I interviewed that person, Jae, about what it was like to work at Eucalyptus and why they chose to work there.
So that’s an example. We’ll see more and more of that. And I think that’s a special case of the “everything is television” phenomenon applied to podcasts.
GROSS: And it even extended to having a live studio audience this year. Do you see more of that as well in the podcast future?
WALKER: Yeah, I think so.
And I think we’ll start to see a lot of innovation around what a podcast is. So it won’t just be a sit-down interview. There’ll be other elements blended in. It will become more sort of documentary-esque.
GROSS: So like maybe charts in the background, or—
WALKER: Exactly.
GROSS: Flashbacks to a previous episode.
WALKER: Exactly.
One thing I’ve been wanting to do for a while is: podcasts aren’t always the best medium to explore very difficult ideas. And having someone speak extemporaneously about a topic is a very challenging exercise for them. And there’s only so much you can do.
Wouldn’t it be cool if you could cut in other explainers? Or if you were talking to a guest about a very technical topic, maybe you could step aside and they could explain it on a whiteboard or something — and then you could cut that in. That kind of stuff.
I think we’ll start to see the definition of what a podcast interview is start to blur and change and morph.
GROSS: How much prep time do you usually give your interviewees?
Because obviously for some of them — you did a medical test on one, which I imagine required some preparation. Though I feel like some of the economists, you might ask them a question like, “What’s the effect size of this?” And I was always told never differentiate in public as a maths student, and I suspect most economists, unless they’ve spent their entire life studying this particular equation, would struggle — or at least be cautious about doing it on the fly.
So is that something that you’ll look to do more in the future?
WALKER: Wait — what was the question?
GROSS: How much prep do you give your interviewees?
WALKER: It’s very case-by-case. Generally, none.
I’ll let them know by email: these are the kinds of topics I want to discuss. But I don’t send them a list of the questions — partly because I don’t finish writing my questions until a few hours before, or the night before, the interview — but also because I like the spontaneity of it feeling like a real conversation. I don’t want them to rehearse their answers.
Sometimes I’ll send them a more detailed list beforehand if I think they might need it. Sometimes I’ll do some kind of intermediate approach where maybe I just send them the first question or something like that, so they can start the interview on a strong foot and go from there.
But it really varies.
GROSS: Fair enough.
It seems that every podcast has pivoted towards talking about AI these days; it's the only issue that people want to talk about.
But you seem to be an exception. With maybe one episode aside, you haven’t really dived into the AI takeoff — whether it’s going to take over the world or destroy it.
And I found this particularly odd, as you actually mentioned it in your 2023 [retrospective]: you were sort of like, “Oh yeah — have to get onto this.” But you managed to resist the temptation.
Personally, from my own interests, I actually think that’s a good thing. But I was wondering why you chose to stay pure.
WALKER: So in 2023 I said this is an important thing that I wish I did more of. In 2025, it’s been pretty undertreated on the podcast. So how do you reconcile that contradiction?
The reason is: the guiding principle of the podcast, in terms of guest and topic selection and then question-crafting, is: can I create as much counterfactual value as possible?
And in 2023 — I mean, this was when, if you remember, there was some point at which The New York Times still hadn’t written an article about ChatGPT or something. At that point AI was super underrated, and I felt like screaming from the rooftops: people need to take this more seriously.
At this point [in December 2025], I think there’s not as much counterfactual value I can have by doing anything on it.
Also, the preparation — from a technical perspective, in terms of trying to get myself up to a basic level of competence around LLMs and whatnot — is quite daunting. I don’t think I want to interview a leader of an AI lab without having done [what] might be three or four weeks of prep or something.
Also, [I’ve had] a general and dawning scepticism around LLMs and the scaling paradigm as the thing that will deliver artificial general intelligence. And I say this as a complete rank amateur, so people can take this opinion with a grain of salt.
But I’ve just been a bit sceptical… AI is both underrated and overrated, depending on which circle you’re operating in. And in the circles you and I probably tend to operate in on Twitter, I think I’ve been a bit sceptical of some of the hype.
And that’s been reflected in the podcast programming.
GROSS: I think that’s fair enough.
As I said, certainly not my interest. And I’m going to extrapolate that, as a single audience member, the rest of the audience feels the same.
But I thought it was worth asking, because it does seem to be ubiquitous — certainly on many other podcasts.
WALKER: I mean, it’s still a massive deal as a technological revolution.
GROSS: Do you use it at all in the production of the podcast?
WALKER: Absolutely. For every episode, in various ways.
GROSS: Just for transcripts and research?
WALKER: Definitely for polishing transcripts. Also for research.
And say I’m preparing for an episode — maybe I’m driving to the gym or driving to get groceries or something — I can be talking to the AI in voice mode about particular concepts I’m trying to learn.
I use it in all sorts of ways.
GROSS: Oh, great.
Well, it certainly seems to have increased your productivity, even if it hasn’t taken over the content mill.
So a lot of Australian podcasts — obviously they want to have an international audience — but I feel like they struggle to constantly maintain the balance. Like, “I’m going to interview this Australian thought leader,” but I’ve constantly got to introduce them or talk about what HECS is in an aside to keep the international listeners on board, or at least clued up to the context.
You’ve leaned very hard on the Australian side of that divide this year. I was wondering: was that a deliberate decision, purely financial, because of what your interests are?
WALKER: Definitely not a financial decision.
Originally it was: we had the election coming up. I was planning to, at some point, leave Australia and move (now) to the US. And I thought, in a very grandiose way, this policy series I did could be my sort of parting gift to Australia. [laughs]
GROSS: Swansong.
WALKER: Exactly.
And I felt uniquely well placed — in terms of my network and just general knowledge about Australia and Australian policy issues — to do that.
And I guess from there it’s kind of carried on, because I quickly realised this is very underserved. No-one’s really doing… I mean, I can’t really think of anyone who’s doing those kind of conversations in Australia, and I should keep serving that niche.
I guess the conundrum I’m facing at the moment is: do I continue down the Australian public policy path, or revert back to the general sort of intellectual path which obviously has international appeal?
And maybe this is kind of a cop-out, but I’ve decided to do both.
GROSS: Far be it for me to criticise, but I think it’s definitely reasonable to spend time on the Australian market.
Like many aspects in life: we might be 15% of the American market, but we get far less than 15% of local content produced that is specific to our region.
It does feel to me like it’s one of those classic public goods where, you know, if the ABC was fulfilling its mandate, this is the sort of content they should produce: sit-down, long-form interviews with Australia’s best and brightest.
And at least to my knowledge, they don’t seem to be doing it. Neither do any universities.
Would you be open to any partnerships with them — to help get some official branding, or more support — and sort of make an honest podcast out of you?
WALKER: [laughs] I’ve flirted with the idea.
I think the thing I struggle with is I’m pathologically independent [intellectually], and I don’t want to be part of any institution where I feel like my opinions need to be edited or censored.
I’m not sure that’s necessarily a massive problem working with an institution like the ABC or a university, but even just the niggling thought of that — or the prospect, the spectre of that — is enough to kind of turn me off and ruin my mojo.
This year I was quite lucky to receive some very generous support in the second half of the year from a long-time listener of the show — Bill Manos and his foundation. So that’s been incredibly helpful.
That’s probably the kind of thing that’s better suited to my temperament and preferences.
GROSS: And I guess, wrapping up the podcast section: on the quality-versus-quantity spectrum, you definitely lean much harder on the former.
WALKER: Yep.
GROSS: Is there a financial reason for that? Is it purely your interests?
Because I could imagine, if you’re doing a weekly cadence and you’re crawling through every professor who’s had a bright idea at some point, that might make it harder to get those superstar guests — as opposed to what it is now, where I wouldn’t say a Nobel Prize is compulsory to be on the podcast, but certainly quite helpful.
Has that played into your thinking in terms of how many guests to book?
WALKER: Yeah — if I was purely optimising for profit, I would be publishing a lot more and reducing the quality.
But temperamentally, I’m not going to do that. I’ll probably be dead in 70 or 80 years. I haven’t been put on the earth to create midwit slop. I’m not going to do that. [laughs]
GROSS: 80 years! Maybe we’ll get to life extension in a moment — but you’re certainly optimistic.
WALKER: [laughs] But one thing I will say is: I’m not at the kind of frontier where there’s a strict trade-off between quality and quantity.
I could be publishing so much more at the same, or even higher, level of quality. My big bottleneck is post-production.
So spending one to two weeks [cycle time] on average editing and producing and then marketing the episodes — that’s been killing me at the moment. That’s the main thing I need to solve right now.
And solving that requires hiring a talented editor or producer who understands my taste, and the kind of editorial decisions I would make — has extreme attention to detail — and then I’m compensating them appropriately to spend the time getting the episode right.
Because I think this year I must have trialled five to 10 different editors. I don’t think the bottleneck there is necessarily talent. I think it’s more funding.
If I had the money, I could probably get the right person.
This is the goal for next year: I should be publishing biweekly or weekly.
And with the right producer or editor, I can do that.
The three things I need to be spending most of my time on are booking the guests (which is a big task), researching for the interviews (which is the biggest task), and then recording the interviews.
And from when I press stop on the recording, ideally I’d outsource as much of that as possible.
GROSS: Yeah, I mean, makes sense from a comparative advantage point of view.
So stretching the definition of the year a little bit: one of your last episodes of 2024 had Nassim Taleb, and that went somewhat viral — at least viral in my neck of the Twitter woods. Although for not entirely positive reasons, I would say — something to do with negative probability. We don’t need to go into that here.
But I was interested: from the business side of you, is that a positive moment for you — going viral — even if it’s maybe not for the right reasons?
WALKER: I guess so. I mean, I guess it’s the “any press is good press” thing.
But there are better and worse forms of going viral for the wrong reasons. If it’s going viral because I’ve said something crazy, that’s probably the wrong reason.
GROSS: Save it for part three of the podcast.
WALKER: Yeah. [laughs]
WALKER: If it’s going viral because it’s sparking a conversation on Twitter about negative probability—
GROSS: I’m not going to lie, it was pretty niche, even for my tastes.
WALKER: It's not the worst scandal anyone’s ever been adjacent to.
GROSS: No, fair enough.
All right, well, I thought we’d go over the episode numbers. I think you’ve got the total — is it listeners, downloads, minutes listened?
WALKER: Yep. So this is the one segment where I’ll—
GROSS: I’m handing over control back to Joe.
WALKER: That’s right.
So this is, for each episode, the total downloads across all platforms. That’s audio, Substack, Twitter, and YouTube.
So I thought maybe I could just share the top three episodes this year in terms of downloads and views.
GROSS: Sure.
WALKER: Firstly, can you guess what they might be, in order?
GROSS: I would assume number one is Francis Fukuyama.
In terms of second and third, probably Ken Henry, because I know he was popular when he was last on the podcast.
And then, in terms of the third: I think this is where it gets down to the brass tacks of which Australian you like the most. But I would say potentially the Hugh White walk through history, as having a fairly universal appeal.
WALKER: So you got one out of three.
GROSS: Oof, that’s terrible. Which one was I right on?
WALKER: You were right on Hugh White. Although not the ranking.
So the third most popular was the Greg Kaplan and Michael Brennan episode on productivity.
The second most popular was Hugh White.
And the most popular — which was a dark horse, and actually only became the most popular in the last month or so — was Barry Marshall.
GROSS: Really?
WALKER: Yeah.
GROSS: There you go. Yeah, that was a good talk. But obviously outside of the theme for the year.
WALKER: Yeah.
GROSS: Do you have any sense of what made that one shoot up the leaderboards?
WALKER: Yeah.
It had a second wind on Twitter, where Steven Pinker shared it and a bunch of other people wrote fulsome endorsements and shared it. And so that drew a lot more attention to it.
GROSS: So it really can be as much as one or two superstars retweeting you, and then it’s off to the races.
WALKER: Sadly, yes.
So that was probably in the bottom half of episodes in terms of popularity until that happened. Now it’s number one.
I mean, it obviously does have a kind of international appeal, and it’s a great story. And, you know, 50% of the human population has H. pylori.
There’s obviously also a bias towards episodes that have been published a longer time ago. So I think Hugh White might eventually overtake the Barry Marshall one. But at the moment, that’s the top three.
GROSS: All right, well, let’s dive into the content of the interviews. And maybe around the halfway mark, we’ll keep things a bit more lively with a game of ‘Overrated or Underrated’ — to steal an innovation from Tyler Cowen.
So look: a big theme — probably the big theme of the year — was trying to explain Australia’s exceptionalism.
WALKER: Mm.
GROSS: Having listened to 30 — probably more than that — hours now, I kind of feel like I’ve got more questions than answers.
I guess the main answers seem to be: have a good culture, and maybe a side helping of “it’s good to have a lot of land”. Is that a satisfactory conclusion for you?
WALKER: What role do you see the large amount of land playing?
GROSS: I think in terms of having the wealth from mining, the wealth from housing.
WALKER: Okay, got it. Yep.
GROSS: The fact that we had the ability to add that as a factor of production into our production function helps explain a lot of our wealth, especially early on with the agricultural side of things.
Obviously we managed to avoid a commodity curse, which we might not have in a different universe. But certainly the good-culture thing stands out as practically the strongest explanatory factor — which in turn just says: well, what causes good culture?
WALKER: Yeah, exactly.
Unfortunately it’s a pretty boring explanation, but I think it’s some combination of those two things.
Obviously the good culture is upstream of a lot of more interesting proximate causes, like the good economic management and whatnot.
But yeah, as a first approximation, I can’t really do better than that.
GROSS: No, it’s fair enough. It seems like a big question mark itself — which at least you’ve got plenty more podcasts left to unpack it.
There’s a famous study in economics that looks at the correlation between height and performance amongst NBA players. And perhaps surprisingly — at least surprisingly for a non-expert like myself — they actually find a negative correlation: that within the NBA, shorter players tend to have slightly higher performance than taller players.
And this is not to say that height isn’t important in basketball — obviously that’s not true — but it’s an example of what’s known as selecting on the regressor.
If you only look at a portion of the sample that’s at the top of the field, you might be missing dynamics that filter through the rest of the population.
And so one question I had was: has the series of investigations into state capacity suffered from a similar issue? Because we’re looking all about Australia. We’re looking at the NBA of high state capacity.
Is it possible that instead of comparing, say, different prime ministers, different states, different departments, we might have come up with different answers if we’d looked at, say, the whole OECD and said: what makes Australia so much better than the UK, for example, the US, or France?
WALKER: Yeah, I think that’s a really fair criticism.
Peter Bowers and I, in our literature review on Australian state capacity, did a bit of comparative analysis where we looked at Australia against other OECD countries. So I feel like, outside of the podcast, I’ve thought about that.
But yeah — it’s dangerous to select on the regressor.
GROSS: Always risky.
And this is perhaps a bit more speculative, but: if you were to think about what is the “height” of state capacity — what is the one thing about Australia that it’s so ubiquitous, we have it so deeply, which makes us a fairly well-run country — but it’s so ubiquitous that we don’t even notice it’s there?
Do you have any thoughts about what such a thing could be?
WALKER: So what is “height” for Australian state capacity?
For me, the “dark matter” (to use a physics metaphor) of Australian state capacity is the political culture of faith in the administrative state and obedience towards impersonal authority. Maybe you could summarise all that in one word as statism…
When political scientists look at state capacity, they usually differentiate three different dimensions.
First, extractive capacity: how well can the state extract resources to do what it wants to do — through things like taxation.
Second, coordination capacity, which refers to the kind of Weberian bureaucracy.
And then finally, compliance capacity.
We’ve got a lot of all of those, but the compliance capacity really stands out. There’s a population that trusts its government, that complies with its government.
You know better than me from the Victorian lockdown experience. But when the government asks things of the population in Australia, people tend to go along and make things easy.
That would be the first thing I would think of. How does that sit with you?
GROSS: I think that makes a lot of sense to me.
In fact, I was thinking about how would we multidimensionalise state capacity as a concept. And I think when you look at the body of work you’ve done, there are some aspects that Australia is clearly a world leader at.
So one aspect that I think we do well at is big, technologically complicated projects — such as Single Touch Payroll, or the whole myGov system — which I think actually work really well.
I’ve lived in the UK, and we do much better than them at all these sorts of big technological projects. The Reserve Bank’s payment system, I would add to that.
One area where I think we probably fall down — and this is probably the flip side of that high compliance — is that sometimes we set up a bunch of experts to run public policy and we don’t question them if they start to go off and start making policy errors or start making mistakes.
The examples I’d cite for this are like the planning system. We’ve devolved planning to a whole bunch of architects and urban planners, and I think it took decades for us to wake up to the fact that they were probably stoking a massive housing shortage.
I could tell similar stories — and some of your guests have — about the Reserve Bank making mistakes and taking a long time to be corrected.
So I guess: it’s great to have a compliant population when you want to put them in lockdown, but perhaps the severe cost of that is: when you say, “Look, the experts have it right — don’t bother questioning them,” then even when they make mistakes, it takes a long time to pick up on them.
WALKER: Yeah, yeah. I think that’s a good point.
GROSS: So maybe this podcast is part of the antibody to that — because what you want to do is have experts like Richard Holden and Steven Hamilton on. They’re very good at shouting out when experts are making the wrong decision about, I guess, vaccine procurement.
And giving them a bigger microphone is part of trying to right the balance of that ship, I guess.
WALKER: Yeah, exactly.
GROSS: Several of your guests — Greg Kaplan and Ken Henry come to mind — seem quite concerned about congestion effects potentially outweighing the agglomeration effects that big cities provide.
I was wondering what your thoughts were on that. Because when I reflect: I used to live in high-density housing in an apartment in South Yarra, which is sort of the YIMBYism perfect dream world of lots of apartment buildings. I feel like I actually added very little to congestion, because I rode, walked, or maybe caught the train everywhere, and suffered very little from congestion in return.
So how do you think about that trade-off between agglomeration versus congestion?
WALKER: Yeah, I was always prima facie kind of sceptical of that claim.
Obviously it’s an empirical question and I’d love to see more research on this. This has been on my long list of things to go deeper on ever since those two interviews you mentioned.
The reason I’m prima facie sceptical is: firstly, for the reason you mentioned, which is in those higher-density environments, you’re getting around through walking or cycling or whatever.
Secondly, maybe it would be a congestion effect, on net, if you held infrastructure equal... But you don’t have to hold infrastructure equal. You can increase infrastructure as well.
GROSS: And that’s easy to do in a dense inner city.
WALKER: Yeah, exactly — because of the economies of scale.
So I would be surprised if the congestion effects outweigh the agglomeration effects. But I would love to see some empirical research on this.
Are you aware of any?
GROSS: Look, I did do a bit of a Google when I was thinking about this question. I wouldn’t say I saw… There were no studies on Australian cities, that’s for sure — that suggest that Sydney is too big for its boots and we need to send everyone out to Port Macquarie.
But what literature I did find about the US suggests that there’s still — if you scale it roughly to Australia — plenty of room to grow and benefit from those agglomeration benefits.
And if you do the urban planning right and you put the houses in the right place, congestion doesn’t seem like an insurmountable problem.
I guess stepping back: if we’re talking about Ken Henry and Greg Kaplan — probably two of the smartest economists Australia has produced in quite a while — is it tough to push back when you’re like, “Geez, I don’t know, my gut feels this is wrong”?
But in the space of a real-time interview, how do you push back on some of the smartest people certainly in the room?
WALKER: Ken was a bit different because it was a live event and we had time constraints, and there were a lot of questions you want to get through. And that’s one of the shortcomings of the live-event format.
I think with Greg it’s more just: this is an empirical question and I don’t have the information. So it’s one of those things that you just let go through to the keeper and then make a mental note to do some more research on that.
I will say, though — and I think this is interesting to talk about — I think there are potentially other good reasons for the “let’s densify other cities like Canberra” and potentially even build new major cities [argument].
One might be: we talk about the benefits of federalism and the laboratories of democracy. We don’t really have… It’s kind of a sham version of that here. I mean, really, it’s sort of an “n of 2”.
Just from a kind of Hayekian, “let people vote with their feet” perspective, it would be cool if we had more major cities.
And then secondly, following on from that: it would be cool if we had more major cities so that cities could be more specialised.
But push back on me.
GROSS: Yeah, no — I’ll take the opportunity.
I mean, we’ve done that with Canberra with no holds barred. We’ve given them half the APS, the army headquarters, the National Institute of basically everything is situated in Canberra.
WALKER: It’s in such a bad location, though.
GROSS: Well, blame the planners and not the free market economists.
WALKER: But imagine if Canberra had been in a better location.
GROSS: Look, I’m sure you can improve the location of Canberra. I can’t argue with that.
But I just feel like we’ve given Canberra so much and it’s still, what, half a million people?
I guess it depends on where you want to draw the line of what is a city. But I think if you’re optimistically saying we want 10 new cities of a million people — which I think Ken Henry sort of mentioned off the cuff at one point — it would be hard to think of a place that’s got more support than Canberra and is still, I would say, essentially still a government town — a one-industry town.
It's hard to fight against the fact that people want to live with other people. And it’s hard to convince a million people to set up shop somewhere completely new and trust that everyone else will do the same.
WALKER: Yeah.
And again, this is something best answered not through a podcast conversation, but I think we’d want to be a bit careful about how we interpret the Canberra example.
So for a long time the federal bureaucracy was housed in Melbourne, right? And then the size of the Commonwealth bureaucracy relative to the general population has maybe had a point of inflection in the postwar era. So maybe you want to start the clock from there or something.
And then if you think about Canberra’s population growth from that point, maybe it is actually a success story.
GROSS: Yeah, I mean, I suppose we shouldn’t be too harsh on Canberra. A lot of very fine people live there.
WALKER: Given a few more decades, could Canberra hit a million? Or what’s its growth rate? I don’t know.
GROSS: It’s a good question.
We could pause the podcast here, consult the ABS tables, and find out.
Look, there’s no doubt that Canberra now is at least a town and it will always be there — and I guess continue to grow.
I guess one question I have is: how much can the government do to change that?
I know the UK — this is coming from all my cut UK questions — but they’re trying to do a similar thing with perhaps an even more extreme problem. Instead of an n of two, they’ve got an n of one, which is London.
And I think they moved their national statistical agency out to Cardiff. And from talking to British economists, they say everyone was upset by this, except for the half a dozen Welsh statisticians who were like, “This is great — I’m moving home and keeping my fantastic job at the Office for National Statistics.”
So I don’t know. I feel like we’re always willing to undersell the benefits of big cities.
You want to move to a big city — an even bigger city than Sydney — whether it’s the UK or the US. I used to live in London. It was fantastic. Lots of aspects of London life that are better than what Melbourne and Sydney can offer, even with the UK’s low state capacity.
And I think those benefits are really real, and we should be careful before we throw them all away and say, “No, no — we’re going to sail completely upwind and start something fresh.”
Obviously cities can specialise, but you know what? Some of the most specialised industries are in the biggest cities of the world: the New Yorks, the Londons, the LAs.
I just think sometimes you’ve got to trust the people — and the people want to move to a big city. Not everyone, but quite a lot of people.
WALKER: And for the record, I’m on your side.
I just think it’s interesting to entertain the opposing arguments and really stress-test the idea.
GROSS: Yeah.
Well, look — I don’t think Canberra is going to be abolished any time soon, so we’ll always have that guinea pig out there.
So, for context for the other audience members: Joe and I first met in 2019 on Twitter, arguing over whether house prices were a bubble or not. Perhaps the most Australian way to meet someone.
WALKER: Just missing the barbecue.
GROSS: That’s right.
But I think in your policy salon with Peter Tulip, you confessed that you’d changed your mind — or at least admitted that that 2019 forecast was not right.
What else have you changed your mind about this year, based on the talks you’ve done?
And I guess if I could focus it down: has it changed how you vote, invest, or live your life in any other way?
WALKER: And I should say: at the start of that conversation with Peter, I gave a kind of mea culpa and expressed my gratitude to him for changing my mind on this.
You should be one of the other people on that short list of people who’ve changed my mind on that point.
So the question is: what else have I changed my mind on as a result of episodes done this year?
Okay. Let me pull up the list of episodes and look through them.
There’s stuff that doesn’t neatly fit into the category of “what have I changed my mind on”, but it’s stuff that’s a big update, or something new I learned.
So, for example, with the Abul Rizvi episode, I didn’t realise how much weight our policymakers had placed on slowing the rate of population ageing as a rationale for immigration policy. That was the main motivation for the 2001 changes.
GROSS: Right. Definitely undersold as a message to the people, in terms of the justification.
WALKER: Yeah, absolutely.
And I want to do some more on that; I’m planning to do some stuff on immigration early next year.
I just don’t know how much the population-ageing stuff really matters. It’s often framed in these kind of eschatological terms — as if there’s this impending judgement day where we’re not going to be able to support ourselves fiscally. And I just don’t know.
GROSS: One of the great things about demographics is you can accurately forecast them many years in advance. The problem is you can’t forecast almost any other aspect of society.
WALKER: Productivity growth.
GROSS: Exactly — AI, or just general demand.
So look: I think it’s reasonable to be concerned about an ageing society and the demands that might place on our healthcare system and residential system.
I think there is evidence — or mathematics — to show that migration slows that process down. But obviously can’t reverse it, because as people come here, they age themselves.
So, to be honest, it’s not clear to me whether that’s the best way of optimising our immigration system. I suspect it’s not optimal in a number of ways. But maybe we’ll find out more next year.
WALKER: Yeah.
The Peter Tulip episode was the site of my biggest intellectual update this year.
GROSS: All right. Tell me more.
WALKER: So for me, this was like a huge red-pill moment. No-one else seemed to pick up on it.
This was the highlight I pulled out in my “Eight Things I Learned” roundup of the policy salon series.
But the question I put to Peter was: if we could implement a maximally ambitious deregulatory agenda — so get rid of all of the kinds of planning restrictions he’s worried about — how long would it take for supply to accumulate sufficient to bring prices in Sydney and Melbourne down by, say, 30 to 40% relative to [today’s prices]?
And you can argue whether 30 to 40% should be the goal, but I guess on common measures of affordability, that is what you would want to aim for to make housing affordable in Australia.
And Peter’s answer was: 10 to 20 years. And he kind of extrapolated that using his and Trent Saunders’ rule of thumb around: a 1% increase in supply reduces prices by 2.5%, or something like that.
That was a huge red-pill moment for me because I think it showed me that this problem is not going to be solved any time soon — maybe even within our lifetimes, realistically.
And that was on a maximally ambitious deregulatory agenda, which is much more than the National Cabinet’s target of 1.2 million homes over five years — and even that we’re not going to achieve that. That is a very ambitious goal.
So that just showed me, I think YIMBY is good at the margin, we need more homes, we’ve got to do this. But a lot of the rhetoric around the YIMBY agenda as this being the solution or silver bullet to the housing crisis, I think is wrong.
And if we actually view this as something we need to solve urgently… You don’t want to solve it too quickly, right? Because then you can have—
GROSS: House prices falling by 20%.
WALKER: Exactly — you don’t want too much negative equity.
GROSS: Well, not falling by 20% again.
WALKER: Exactly, so you don’t want to solve it too quickly because you can cause those macroeconomic problems and financial instability.
But say you wanted to solve it in, I don’t know, three political terms or something — I don’t think you can do that under a YIMBY program.
I’m trying to write something on this.
But I think: all of these questions, like all of the things holding us back economically, things holding back our productivity growth — housing would probably be the first cab off the rank, right? — have much more urgency in a world in which Australia doesn’t have a great-power protector.
And that sounds like such a crazy kind of longbow, but I think all these debates — the stakes are going to become much higher. And you want to act now, when you still have the option, because geopolitically we’ll be isolated. We’ll be in a region where the great power is not an ally of ours. And you want to have a really strong, growing economy.
We should be aiming to solve things quickly.
And we’re not going to solve the housing crisis quickly.
GROSS: No.
If I could channel Peter Tulip for a second—
WALKER: Yeah, please.
GROSS: Bear with me while I get out my divining forks.
I think he would say: look, if a policy lever is relatively weak, that just means you have to pull it all the harder.
And so to the extent that full YIMBYism only gets you maybe half the problem solved, well then you better not dilly-dally around half YIMBYism. You better go full YIMBYism, and then investigate what other policies and fixes might be required on top of that.
And the second point I’d add, aside from my channeling of Peter: the Grattan Institute’s actually got a new report out that looks at the costs of housing, and especially in Melbourne, where the prices are substantially lower, they actually find that a lot of projects don’t pencil out. The economics, even with planning approval, often doesn’t stack up in a lot of different parts of Melbourne.
And so perhaps the companion piece of that full YIMBYism is a real examination of what are the costs going into our construction sector, and how we can bring those down.
But yeah — I guess that’s a podcast for another day.
WALKER: Yeah.
And one of the first questions I asked Greg and Michael in the podcast I did with them was: how big of a lever for supply is productivity?
Because if removing planning regulation is only going to get us so far, what other levers do we have?
GROSS: Yeah.
WALKER: There weren’t too many other big updates.
I always learn things through meeting guests and consuming the interview.
GROSS: I mean, in many ways, it’s an iterative process of learning, obviously.
WALKER: Yeah.
And I learned things about the guests, and the kinds of people who end up in the positions that the guests held or hold.
But maybe one interesting one with Fukuyama was that he’s working at Stanford, one of the major, if not the biggest, technological revolution of our times is happening right under his nose — and he hadn’t given much thought at that point to the implications it has for his work.
And it just shows: even our greatest public intellectuals can be slow to update on things.
GROSS: The ivory tower can be very high and very high up in the sky.
WALKER: Yeah. [laughs]
I think he’s since done a lot more stuff on AI. And maybe I’m being unfair to him because he is very sceptical about the concept of AGI generally. So if he were here, he might fairly push back on me.
But at least that was a thing I learned talking with him.
GROSS: On the topic of transparency: I feel like we got two different takes from Peter Costello and Ken Henry on the reform of the GST.
Because Peter Costello came up and said, “Look, you really have to restrict information. You have to keep everything bottled up. Once Cabinet is ready to be told, we’ll tell Cabinet, and then we’ll spiral it out from there,” and really control the flow of information.
Whereas Ken Henry placed a lot more emphasis on needing long-term legitimacy coming through transparency and institutional trust — which seemed a bit in tension [to] me.
You’ve got a treasurer who just wants to jam things through and orchestrate the whole show, whereas Ken Henry seemed to want to value the buy-in from both the broader population and, I guess, other actors in the government.
To what extent do you think these are in conflict — these two views?
WALKER: Probably not much. I think it’s a sequencing thing.
So you want buy-in from the general public at a conceptual level — in this case, around a broad-based consumption tax. And that started as early as the Asprey Review, which was tabled in 1975.
But then obviously we had Keating and Option C at the tax summit in 1985. And so for two and a half decades this idea had been socialised with the public, at a conceptual level.
I think Costello’s point is more around a specific tax change proposal. And yeah — I do think you want to keep that pretty bottled up until you’re ready, because otherwise you have what we saw with Turnbull, where before they could even consider that policy, they had to rule it out because it was leaked.
Remember the proposed change to the— maybe they were thinking about increasing it to 15% or something? And ScoMo was for that, and he might have leaked it from Cabinet. And so then they had to rule it out.
I might be getting the facts wrong, but I think that’s what happened.
GROSS: Sounds messy.
All right — let’s shake things up a bit with a game of ‘overrated or underrated’.
WALKER: All right. Credit to Tyler.
GROSS: Yeah, credit to Tyler.
Feel free to interpret the context as opposed to the baseline — up to you — and we’ll otherwise go through them.
All right: AUKUS. Overrated or underrated?
WALKER: Overrated.
GROSS: Overrated. Why?
WALKER: Probably underrated — or rightly rated — within my circles, but overrated generally.
Because I think the critics, including guests I’ve interviewed this year — like Sam Roggeveen and Hugh White — are probably right that the US isn’t going to make good on its promise. And the analysis there is pretty compelling.
GROSS: Fair enough.
London — I can only assume overrated, since you did not move there.
WALKER: I think it’s now pretty underrated.
Having travelled there, I think it’s one of the great cities of the world.
GROSS: I can’t disagree with that.
WALKER: Maybe better to visit than to live.
GROSS: Maybe visit during summer and then it’s perfection.
WALKER: Yeah.
GROSS: Productivity statistics. Overrated or underrated?
WALKER: Oh — slightly overrated.
GROSS: Yeah. I mean, I think obviously politicians like to talk about them, and journalists like to talk about them, but especially once you see how the sausage is made—
WALKER: Exactly.
GROSS: I suspect it’s hard to put as much importance on them as a lot of the talking heads do.
WALKER: Yep, yep.
GROSS: The likelihood of a US–China conflict. Overrated or underrated?
WALKER: Underrated, in the sense that public intellectuals should be worrying about this a lot more.
GROSS: Yeah, that seems reasonable.
Self-experimentation. Underrated or overrated?
WALKER: Underrated.
GROSS: Okay. I won’t inquire any further.
WALKER: The obvious critique is ‘n of one’, but I think there’s actually a lot you can learn through self-experimentation. There are a lot of hypotheses you can generate as well.
GROSS: It certainly helps with the paperwork.
WALKER: Yeah. Barry Marshall being a great example.
GROSS: The baby bonus. Underrated or overrated?
WALKER: Underrated.
GROSS: Why is that?
WALKER: This is one of the few instances of a developed country increasing its total fertility rate. And fertility declines are one of the great problems of our time.
We should be taking much more interest in policies to move the fertility rate.
GROSS: Australia’s use of international students as a migration pipeline. Underrated or overrated?
WALKER: A bit overrated now.
It’s obviously caused a lot of — and you would know this better than me — issues at universities around the quality of education.
I think we also have a problem where the vision was: these people would ultimately be put on a path to permanent residency and then citizenship. I think that doesn’t happen for a lot of them, and it’s kind of just a glorified form of cheap labour.
Obviously that doesn’t describe the majority of these migrants. So that’s why I’ll say only slightly overrated.
GROSS: Fair enough.
WALKER: What do you think?
GROSS: Look, there’s a lot of heterogeneity in terms of different universities, different courses.
I think as a way of filtering out the best and brightest, it’s still got a lot of value-add.
WALKER: Yep.
GROSS: I guess, as an economist, you always say: what’s the alternative? I don’t think we’re going to take the hundreds of thousands of students we get every year and cut to zero.
I guess the question is: could you do it another way? Possibly.
But in terms of attracting people who are both smart and willing to fund our universities, that at least ticks a few boxes — even if it maybe technically breaks the Tinbergen rule.
WALKER: I think at the time it was a stroke of policy genius to do it.
But I think it’s caused a lot of problems.
The thing with immigration policy is you have to manage perceptions as well, not just the reality.
GROSS: Which I think is something that Australia gets a lot of credit for in terms of — well, they don’t let illegal immigration — they clamp down on that through a lot of legally and morally dubious methods.
But that, at least historically, has managed to correlate with high support for legal immigration. Now, maybe that was just luck, but a lot of people argue that the former leads to the latter.
So I agree. National buy-in is important. And in some ways we were lucky it didn’t fall apart at the last election.
WALKER: National buy-in is how you get more immigration in the future.
GROSS: Yeah, I agree.
Australia’s National Cabinet. Underrated or overrated?
WALKER: The National Cabinet obviously referring to the group of the prime minister and premiers.
I think at the moment it’s a bit underrated.
It’s proven to be a really effective decision-making forum, and it’s still in its early days.
GROSS: That’s true. Hopefully plenty more crises to come that will get our best and brightest together.
WALKER: [laughs] Prove its worth.
GROSS: The Commonwealth Treasury. Underrated or overrated?
WALKER: Commonwealth Treasury.
GROSS: Or you could substitute this with ‘The Treasury View’.
WALKER: Yeah. My kind of inner wonk wants to say slightly underrated.
GROSS: The correct answer for someone who wants to interview more treasury secretaries.
WALKER: Because obviously the Treasury view is not always taken at the cabinet level.
GROSS: That’s true.
Maybe you could have different ratings for their microeconomics versus their macroeconomics. I think it was Terry Moran who loved his macroeconomists and was a little less enthusiastic about microeconomics. So I feel like that might be a perfectly respectable view as well.
WALKER: Saying this as a macroeconomist of course.
GROSS: Yep, completely unbiased.
The advent of AGI. Underrated or overrated?
WALKER: What do you mean?
GROSS: The fact that it’s imminently going to appear in the next couple of years and transform the world. Is that idea underrated or overrated as a probability?
WALKER: As a probability — overrated.
GROSS: Is that because you don’t think it will happen, or you don’t think it will transform the economy and society even if it does happen?
WALKER: A little bit of both.
I would be surprised if it happened by the end of the decade — very surprised.
Even if it did, I don’t think you see a shift to utopia overnight, for some of the reasons we’ve talked about on the podcast in the last couple of years — the Baumol’s cost disease-type arguments — but also all of the human, social, and institutional constraints.
For people who don’t have any context on this: there’s a distinction between coming up with a new technology, and then that technology diffusing through society and us finding ways to harness it economically.
GROSS: We’re already seeing very slow spread of AI in terms of the labour market and job loss. So I think that’s likely to continue.
WALKER: I mean, that’s what economic history teaches us, right?
GROSS: Yeah.
Although I guess every revolution, every crisis is different.
WALKER: That’s right.
Maybe there’s something about AI which helps with the diffusion itself.
GROSS: Mm. A self-diffusing technology.
WALKER: Yeah.
And it’s noteworthy that I think ChatGPT was one of the fastest-growing internet consumer products in history or whatever.
But yeah — I think it’s still not going to diffuse as rapidly as some people think.
GROSS: Life extension. Underrated or overrated?
WALKER: Underrated.
GROSS: Why is that?
WALKER: People are way too accepting of death.
GROSS: Do you think you’ll get that extra 80 years that you claimed at the top of the episode?
WALKER: Hopefully longer.
But yeah — the idea of trying to extend life and have agency over your death is still weirdly taboo in normal society. I think it’s quite normal in places like San Francisco.
But yeah — I think it’s underrated.
GROSS: Fair enough.
Nuclear weapons for liberal democracies such as Australia and Japan. Underrated or overrated?
WALKER: Becoming less overrated.
GROSS: So: was a bad idea, but maybe less of a bad idea today.
Is that just because of the rise of China and they’re using their conventional forces in the region?
WALKER: It’s becoming increasingly less credible that America’s extended deterrence — the nuclear umbrella — would be a credible deterrent for us, for anyone looking to attack us.
And I think in that world, you’ve got to make really hard choices.
GROSS: Fair enough.
The Thucydides Trap. Underrated or overrated?
WALKER: Probably overrated.
GROSS: And is that just because times have changed and we’re in a new paradigm?
WALKER: I think there are dynamics, and it’s pointing at a pattern in history, which is that where a rising power threatens the position of an incumbent power, that usually results in war.
Obviously the name “Thucydides Trap” refers to the Peloponnesian War between Athens and Sparta, where Athens was the rising power and Sparta was the incumbent.
But I think, as Hugh said in the interview I did with him, there’s just so much contingency involved in these decisions and events that anyone who thinks too deterministically about history and geopolitics is making a mistake.
So for the reference group I have in mind, I think it’s a bit overrated.
GROSS: And finally — and I kind of don’t know how this could be overrated at all — the Australian Cabinet Handbook.
I would say, prior to listening to your podcast, it would have received the lowest possible rating. And I’m guessing you think it should be higher.
WALKER: Massively underrated.
Doing that interview with Glyn and Terry gave me a renewed love for the cabinet system of government.
It’s beautifully malleable. I think it can adapt well to crises, and I think it’s maybe one of the explanatory factors for our high level of state capacity relative to other countries.
The functions of cabinet and the prime minister are not found in the Constitution or in legislation. But we’ve documented them through the Cabinet Handbook, and it’s just so interesting.
The government cops a lot of flak for being inefficient or whatever, and people always talk about how the government should be learning from the private sector.
It’s interesting to flip that lens and look at what can we learn from this institution that’s evolved over a century. It’s served us through times of crisis, through world wars — surely it has some pretty robust processes and things we could learn.
And all of that is documented in plain English in about 40 to 50 pages available online: the Cabinet Handbook.
It’s just so interesting.
Even questions like: if the prime minister’s role and functions aren’t defined anywhere, what is the actual institutional source of their power? It’s not just social influence over their colleagues. When push comes to shove, what are the actual levers available to the prime minister to exert their power?
And you learn through the Cabinet Handbook that some of the main levers are the ability, in virtue of being chair of cabinet, to determine the agenda. Because obviously stuff that doesn’t get put on the agenda can’t be decided upon.
And secondly, probably their ability to determine the cabinet committees. Because some of those committees — at the moment, the Parliamentary Business Committee and the National Security Committee — can make decisions without needing cabinet approval. But also: the prime minister can take a divide-and-conquer approach. You can set up these smaller committees, you can work on things in the margins of the committee, come to agreement, and the committee does all that decision-making, and then the full cabinet is kind of just a clearinghouse for a lot of work that’s already been done. So that’s another way the PM can kind of get their way.
That’s all really interesting stuff — and that’s what you learn through reading the Cabinet Handbook. Very underrated.
GROSS: [laughs] It was interesting in your chat on the cabinet process — I think it was Glyn Davis — mentioned that the cabinet system reforms around every prime minister.
But I’m guessing that their power within their party, or their ministry, also varies and fluctuates over time. So, you know, Anthony Albanese today is a lot more powerful than he was, say, just after the Voice referendum. And that presumably is reflected in his ability to set that agenda and rule things in or out.
I was wondering: did you talk about that with any of your interview subjects — how it fluctuates over time?
WALKER: How it fluctuates not just between prime ministerships, but within prime ministerships?
No. It’s a good question. We didn’t look at that.
But yeah, that sounds plausible.
I’m trying to think through examples from reading cabinet diaries and reading Pat Weller’s stuff on Malcolm Fraser’s prime ministership. I can’t think of ways in which prime ministerial power changed over time, but surely it’s happened.
It’s crazy, isn’t it, how there’s no induction, there’s no course. You just get thrust into this. So surely, even just from the perspective of learning on the job, you would think they would gain power.
GROSS: Well, you’d hope that Shadow Cabinet at least offers some sort of training ground — even if it’s obviously devoid of all power and responsibility.
At least the process with decisions, improving policies that you’re taking to the next election offers some insight. But obviously you’re still diving in on the deep end once you get sworn in.
WALKER: Yeah.
GROSS: Francis Fukuyama stated in his chat with you that the most dysfunctional organisations are the ones that don’t delegate enough authority.
But then when Richard Holden was citing examples of the many ways that the US is terrible — such as at the DMV or with pothole repair — they were all examples of institutions where it seemed like the local managers were either out to lunch or at least somewhat corrupt.
These two views seem in direct tension with each other.
Is it just the case that we’re never going to come up with a theory of state capacity that’s universal in nature, and we sort of should just analyse each situation — each country — with a different lens?
WALKER: I don’t think they’re necessarily in tension, because you’ve only stated half of Fukuyama’s principle.
This is straining my memory a little bit, but I think he said something like: the most effective organisations are the ones that delegate decision-making to the extent that you have capable individuals that you can delegate to.
So, for example, the Fed or the Reserve Bank of Australia can do a lot of delegation because you have a crazy proportion of PhD economists in the organisation. Maybe if you’re the DMV, you can’t delegate as much because you don’t have teams of PhD economists working in your organisation.
So I don’t think those are in tension.
But with respect to your general question about: can we have a general theory of state capacity? Probably not as much as we would like.
I think there are definitely some general principles that would apply across countries, but so much of it is tied to the culture — the “dark matter” that we’ve spoken about — and path dependency and historical contingency...
For example, to go back to that obedience-towards-government cultural trait that seems to be present in Australia: America’s just in a totally different equilibrium. You can’t just transplant Australian institutions and features of state capacity into America and expect them to work.
GROSS: I think that’s right. So if an abundance-pilled US governor was to call you up tomorrow and say, “What are the secrets of your high-capacity state of Australia?” — what would you tell them?
WALKER: Switch to a Westminster system. [laughs]
GROSS: [laughs] Break out the constitutional reform immediately.
WALKER: No, it might be something around evidence-based policy-making. We do that really well here.
Whereas so many of their think tanks are a case of “whoever pays the piper determines the tune”.
When Pete Bowers and I were writing that literature review, there was a kind of funny example of a gambling reform debate happening in America. And in the policy debate they’re citing evidence from the New South Wales or the national Productivity Commission in Australia, because they just don’t have many independent policy organisations they can trust over there.
So yeah — it might be something around setting up more independent institutions that can produce evidence-based policy.
GROSS: It’s funny — you wouldn’t usually think that America lacks for think tanks and policy wonks.
WALKER: Yeah.
GROSS: I would say historically something that Australia lacks — and we’ve got a few now that are relatively new that I think do really good work.
WALKER: But do they have an equivalent of something like the Productivity Commission?
GROSS: I’m not sure about an in-house research think tank.
There are plenty of PhD economists who do work in the US. The Federal Reserve is full of them. Whether they’re churning out those sorts of products—
I guess they’ve got the GAO — the Government Accountability Organisation — I might have the wrong acronym there — but they produce government reports.
I’m not sure if they hold up to Productivity Commission reports.
And I don’t think they get the sort of referrals from a treasurer who says, “Study X,” and, “I will hopefully implement some version of X,” which I think is also important.
Yes, you want reports to be written, but there are people everywhere churning out ideas of varying quality. You need a culture of treasurers saying: “If the Productivity Commission says something, I’ll listen to them seriously. I won’t accept everything, but I’ll definitely give them the time of day.”
WALKER: Yeah.
GROSS: And that’s something I think Australia definitely does have. That maybe is part of the reason why we’ve got that high state capacity.
WALKER: Yeah. It’s a good question, though. I don’t know what else you do. It’s a bit sad, isn’t it?
GROSS: Well, it’s tough. I mean, it’s very hard to turn a ship on a dime.
But there are clearly examples from Australia out there that other countries, I’d like to think, would be able to learn from — just as we constantly look at America and learn what to do, what not to do.
WALKER: The big problem I think they have is the risk aversion in the bureaucracy, and the kind of procedural fetish — which is a function, in part, of the risk aversion, because everyone’s trying to protect themselves legally. It’s obviously a much more adversarial legal environment.
But I don’t know how you change that.
GROSS: Was it Terry Moran who wistfully complained about being ruled by economists in Canberra?
I think the only thing worse than being ruled by economists is being ruled by lawyers.
So maybe the solution is to hire a few less lawyers and hire a few more economists.
Although I can’t vouch for the effects once you end up getting sued under the US legal system. It could get a bit hairy there.
All right — well, I think that brings us to the end of looking back.
Are there any other aspects of the interviews you wanted to touch on? Did you have a favourite — or a least-unfavourite child — you wanted to reminisce upon?
WALKER: Hard to pick a favourite child. I think I enjoyed all of them.
GROSS: And yet I’m going to ask you to do so.
I do feel like some of them didn’t get a full guernsey in the chat because someone like Andrew Leigh answers your question with information completely, and then the answer is fully formed and complete and citing Australian data, and you’re like: “Well, that’s the answer. Moving on.”
WALKER: Yeah, he’s pretty amazing like that.
I particularly enjoyed preparing for the Hugh White episode, and trying to read all of those 11 books — which I didn’t get to do, but I read a lot — because there’s just no other context in which that would be a responsible use of my time.
But I feel like it set me up with a lot of intellectual capital, sadly, to understand the next couple of decades.
GROSS: All right — let’s move on to the year ahead.
So I think you’ve already mentioned you’re planning to up the tempo of episodes hopefully.
WALKER: Yeah, if I can solve this bottleneck.
GROSS: And what sort of guests? Do you have any on the docket already? Or who would your dream guest be for 2026?
WALKER: Someone I’ve been trying to get for a while is Paul Keating, because I think we could do a great interview. And he’s in his early 80s now, so I want to do that as soon as possible.
I’ve got a few kind of on the cards. I probably won’t announce them, because things can happen.
GROSS: Not until the file’s in the can.
WALKER: Yeah, exactly.
But generally I’m going to do the mix of Australian public policy content and then the general intellectual stuff, and just see how far I can take that kind of bifurcated approach.
And I’ll have a labelling system where I differentiate those two kinds of content on the podcast — different numbering system or something.
So I’m going to keep doing both.
But yeah — I won’t give too much away about guests booked in. But PJK is definitely someone I’ve been working at for a while, and hopefully I can pull that off in 2026.
GROSS: I’m sure he’d have a lot of strongly held opinions.
WALKER: Absolutely.
GROSS: So I think this chat has been at least quite cathartic for one listener.
Have you ever considered adding, like, a listener’s rant to either the end of the episode, or maybe as a separate drop, or even as a Substack?
Because I feel like you’ve probably got a pretty smart audience — thinking about a sample size of one.
And many of these questions came from me listening on the train and thinking: God, can’t believe they said that. Outrageous. If only I had an outlet for my frustrations.
Fortunately you’ve afforded me one today, but I was wondering: have you given any thought to opening up and maybe either you summarise — perhaps even an AI summary summarising — how listeners react to the episode?
Obviously you don’t want to completely rubbish your guests, but I feel like that would certainly add to the dialogue.
WALKER: I guess we were kind of trying to do that with the policy salons.
People can always take to Twitter, or the comment section on YouTube. I always get a lot of email. I always get a lot of comments on Twitter. So definitely express your questions there if you have any.
But no — I haven’t thought about creating content around that. Maybe I should.
Would you regularly rant if I had that outlet?
GROSS: Oh, look — on a topic where I have strong opinions, I’d dash off an angry voicemail.
And I guess it goes back to what you want the pod to be.
WALKER: Why do you think I should? What would be a good reason to do that?
GROSS: There’s nothing people love more than the sound of their own voice and the sound of their own name.
The Quarterly Essay, for example—
WALKER: A great institution.
GROSS: A great institution in Australia — has not just an essay, but also responses to the previous [quarter’s essay].
WALKER: The correspondence.
GROSS: And I think, look: ranting on Twitter is great fun, but my assumption is approximately zero people ever read any reply, any quote tweet. Either that or it’s the same 10 people reading the same tweets over and again.
And if you want to build up a sense of community and get people to engage, that’s one avenue through which they could do that.
WALKER: It’s a good idea. I should think about this some more.
GROSS: Yeah.
I guess the real question is: how much effort is it to either summarise views or edit them together?
But if people send in their own voicemails, I guess that’s at least done the audio clip for you.
And whether you put it out on the main podcast feed, or maybe even have a side feed. I guess, you always want to be incentivising your customers to come back. And if I have to sit through some science podcast to listen to the hot takes on last week’s economics podcast, that would certainly incentivise me to do so.
WALKER: Yeah, it’s a really interesting idea.
That might be my next original contribution to the field of podcasting.
GROSS: Fair enough.
All right, Joe — thank you for being the subject today.
Any final thoughts on the state of the pod before we wrap?
WALKER: No — just thanks so much to everyone for listening to the show.
It’s a privilege to be able to do this — to be able to call this my job now. And that’s of course thanks to the audience. So I’m very grateful. Thank you.
And thank you especially to you for today — for putting in the work and doing this. It’s been a fantastic conversation.
GROSS: No worries. Thanks for having me. And we look forward to next year’s content.
WALKER: Great. Done.
Thanks, Zac.
GROSS: Thanks.
WALKER: Cheers. Thank you so much.