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FAREED ZAKARIA GPS

Hits and Misses of Our 2011 Prediction; The World in 2012: What Will Happen?; 2012, A Year of Planned Change; Interview with Lisa Randall; Interview with Daniel Kahneman

Aired January 1, 2012 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FAREED ZAKARIA, HOST: This is GPS, THE GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

I want to wish you all a happy New Year. We have a terrific show for you on this New Year.

First up, what better to do on the first day of 2012 than look at the entire year ahead? What will it bring in international affairs, economics and much more? I have a great panel of prognosticators who look into their crystal balls for us.

Next, we look really far ahead into the future with a brilliant Harvard physicist.

Then, we'll take you deep inside the way your mind works and sometimes doesn't, a fascinating conversation with Nobel Prize-winner Daniel Kahneman.

Finally, it's a big birthday today, but it's an awkward time to throw a big birthday bash. I'll explain.

First, here's my take. It's the start of a new year and we will do predictions on this show, so I thought I'd try my own hand at some before asking others to risk their reputations. And, in the spirit of keeping myself honest, I'm going to look back at what I said and wrote in "Time" magazine at the start of last year and see how I did. It's always risky to stick your neck out and humbling to look at your own predictions, but here goes.

The only indulgence I will allow myself is to start with areas where I did well. I said I thought that China would moderate its foreign policy behavior, recognizing that its assertiveness and arrogance over the last year had caused jitters throughout Asia. I think that happened.

I said the Taliban's momentum would be broken in Afghanistan. It has somewhat. And I said that the drawdown of American troops in Iraq would take place and would not cause great regional crises or instability.

All of that seemed to play out pretty much as I predicted. I said that Iran would continue to be checked by a large group of regional and global powers, but there would be no American or Israeli strike. So far, so good.

Now, my misses. I said that Europe would survive. It has taken the Europeans much time and many crises to come to the realization that they will have to bail out their spendthrift and unlucky partners in Greece, Ireland, perhaps Portugal, Spain as well. Germany can afford the bill. Well, Europe has survived, but I think the situation did not resolve itself nearly so easily as I thought it would.

But my biggest miss was probably the U.S. economy, which I thought would recover more vigorously than it did.

So, what do I think for this year? Well, believe it or not, I'm going to double down on my bets. I might have got the timing wrong, but I think I have the substance right. Europe will deal with its problems, not in a clean, dramatic way, perhaps not in the way that I had thought. There would be various complex mechanisms that will involve the stability fund, the European Central Bank, perhaps some kind of bund bond (ph) insurance.

I remain convinced that Germany will not let Europe fall apart, so if things get too dangerous Germany will write the checks. It is just trying to get the best deal it can, the most reforms from countries like Greece and Italy, before it does write those checks.

As for America, well, I'm still bullish. I think the American economy continues to have great strengths, consumers have rebuilt their balance sheets somewhat, the savings rate has gone from near zero to over 3.5 percent, corporations are flush with cash.

Yes, Washington remains dysfunctional, but remember there's a new dynamic at work even there. If Congress does nothing, something it does very well, there are two sequestrations that take place. One cuts spending by $1.2 trillion and one raises taxes by $3.9 trillion. Remember, the Bush tax cuts expire if Congress does nothing. So, all of a sudden, there are pressures that can bring the budget deficit down. Now, the deficit problem gets solved in a blunt, crude way, but maybe that's how democracy works.

It's easy to spot all the problems we face, but I think there are also some silver linings here, and that's where I'm putting my money. So let's get started.

(BEGIN VIDEOTAPE)

ZAKARIA: You've heard my thoughts. I'm now joined by three experts who've agreed to gaze into their crystal balls for 2012.

Anne-Marie Slaughter teaches at Princeton. She previously did strategic planning for Hillary Clinton. Ian Bremmer is the president of the Eurasia Group, a global risk research and consulting firm. And Daniel Franklin is the editor of "The Economist" magazine's "World in 2012 Special Edition."

Welcome.

So Ian, you do this kind of thing for a living. Let's first start with something simple, like Iran. Is - is the United States or Israel going to attack Iran in 2012?

IAN BREMMER, PRESIDENT, EURASIA GROUP: Absolutely not. I can't see the United States doing it. Keep in mind, it's still Obama, no matter what happens with the elections in 2012, at least for the purposes of that year.

And the Israelis are very highly incented to convince everyone that an attack could well come if they aren't satisfied. But if an attack's going to come from the Israeli perspective, it has to come from the U.S. And so these two sides aren't coming together. Sanctions are clearly going to escalate, and there's a lot of internal pressure within Iran.

I mean, when you have a potential assassination against the Saudi ambassador to Washington, when you have a British embassy being occupied, what that's telling you is there's a lot of internal instability at the top of the Iranian regime. There's some risk takers and there's some folks that may not like but they're much more pragmatic.

That plays out potentially in dangerous ways in 2012, but that's very different from saying that we're going to take out - attempt to take out the nuclear program.

ZAKARIA: Anne-Marie, one of the things that I've heard in Washington is there are a lot of people in Washington who feel that the Israeli belligerence is an effort to play us rather than a signal that they are about to strike Iran. Do you think that that's right, that they're trying to say to us, look, we're getting really serious so unless you guys in Washington do more, we might strike?

ANNE-MARIE SLAUGHTER, PROFESSOR, PRINCETON UNIVERSITY: I do, but I don't think it's working. I think everybody knows where everybody else is in the game, and I agree with Ian, that I don't think - I don't think there'll be a strike. This is - we'll just go ahead as we've been doing.

The policy is not actually working. The Iranians are getting closer and closer to a nuclear weapon, but I - I don't see any overt attack. Covert, maybe.

The one thing I would say, I'll go out on a limb here and make a point prediction. I think there is a substantial chance that Ahmadinejad could actually be impeached and that the Iranians would move more toward a parliamentary system, because you are seeing these tensions within the Iranian regime. Turkey is pushing very hard on Iran. I mean, really, Turkey is playing the role Iran wishes it were playing.

And with the turmoil in Syria, I think - I think Ahmadinejad, he has obviously allies, but he's got a lot of opposition within the top clerical establishment.

ZAKARIA: Well then, to your point about being impeached, the Supreme Leader made a very strange statement in which he said one wonders why we have a parliamentary system. There are - there are certainly benefits - why we have a presidential system - SLAUGHTER: The presidential system. Exactly.

ZAKARIA: -- the benefits you have in parliamentary.

SLAUGHTER: Yes.

ZAKARIA: And if you look at, you know, he's - he's had trouble with Ahmadinejad, who was sort of his guy. He had trouble with Khatami before that.

SLAUGHTER: Right. Right.

ZAKARIA: He's had trouble with Rafsanjani before that. So he may be thinking, look, why do I need this nationally elected figure who inevitably becomes a rival? Why not have a parliamentary system where you have this -

SLAUGHTER: You can -

(CROSSTALK)

ZAKARIA: -- much more low profile prime minister-like figure? And that's - you know, now of course the really interesting thing would be if the Supreme Leader, who is I think the longest serving leader in the Middle East now and very old, if he were to die, would - would you have a new Supreme Leader or would that call into question the whole system?

SLAUGHTER: That would be a mess, in my view. I mean, then - then, because you do. You have the rural constituencies versus clerical constituencies. I'm not going to call that one.

ZAKARIA: Daniel, Iran? Anything?

DANIEL FRANKLIN, EXECUTIVE DIRECTOR, THE ECONOMIST: Well, just I think what's been painted here is quite a benign scenario, one where not that, you know, the worst is avoided, the real - the real showdown. And if Ahmadinejad were to go, one way or another, that would obviously be a good thing as far as the West is concerned.

My fear is that it might not turn out quite as benign as that. And, at the very least, I - I think and I hope that you're right that Israel won't strike, but things could go wrong, and at the very least I think there'll be a ratcheting up of the rhetoric. And it is, after all, a very, very serious existential, potentially, concern for Israel. So I think you could see some nasty moments in - in the coming year with Iran.

ZAKARIA: Anne-Marie said that she thought the policy wasn't working in the sense that Iran is more moving forward. What is your best sense as to what the trajectory is, you know, in terms of Iran's nuclear development?

BREMMER: I think it's working for the Iranians, right? And I think that's part of the problem, right? I mean, in other words, that you can only get so much sanction against them. And I think this is part of the problem is that, you know, the United States, the Brits, the Europeans are all moving towards much tougher sanctions against Iranians, but you can't sanction on energy because in a recessionary environment or a low growth environment, that's going to spike oil prices. Who is going to do that, election period or no?

And you also can't get the Russians and Chinese to sign up the sanctions that are meaningful. This is not Libya, where everyone's going to say, OK, go ahead. Take these guys out. The Iranians know that they have a lot of leverage. Their nuclear program continues.

I think the real question, unlike North Korea, is would the Iranians actually test a nuke? There are lots of reasons they might not, right? One is that the Israelis have, we think, a couple hundred nuclear weapons. They've never tested one. If the Iranians do, what's the Israeli response? Do they suddenly force lots of Sunni states to move towards their own weapons, if they do so?

I think strategic ambiguity, from the Iranian perspective, is actually a reasonably serious strategy. No question that if Ahmadinejad stays in place and there's a big fight, there's greater potential for rogue sort of action, which is very destabilizing, all out of (ph) what we've seen out of the ISI in Pakistan. But that doesn't mean Israel's going to attack, and it also doesn't mean we see a nuclear weapon any time soon that's literally on our horizon in 2012.

ZAKARIA: You mentioned Syria. Is Assad going to be in power by the end of 2012?

SLAUGHTER: I do not think there's any chance that Assad will be in power by the end of 2012. Who will be in power, far more complicated, but I think the chances that he will hold on for another 12 months are nil.

ZAKARIA: Daniel?

FRANKLIN: I - I would agree with that. Well, not quite nil because we saw in - in Libya how -

SLAUGHTER: Oh, (INAUDIBLE).

FRANKLIN: -- long these regimes can be in falling. So I think it's inevitable that he goes, but it could be quite long and certainly messy.

BREMMER: I say a little bit longer, on balance. You know, does - does he have the military still behind him? In some ways, the military is leading, not Bashar al-Assad, so it's not just a question of getting rid of one person. This is not the Mubarak analogy. The opposition is still relatively inchoate, isn't well armed, and domestic opposition and international opposition is separate.

So the international pressure is huge. The sanctions from the Arab League are meaningful, and they're starting to really bite into the Syrian economy. But I wouldn't be stunned - I think he's going. I wouldn't be stunned if we have this conversation in 12 month's time and he's still there.

SLAUGHTER: Well, that's a pinpoint prediction. You can - you can call us back in a year and we will know.

ZAKARIA: What about looking at the - the region one last time, Israel? Is anything going to change in Israel? The Israeli- Palestinian situation hasn't changed for 35 years, so I suppose this would be a safe one to say nothing's going to change.

SLAUGHTER: I don't see anything changing between Israel and Palestine. I think there's more likelihood of real internal protests within Israel. We saw that this summer, but I - I don't see that translating into major movement in the peace - any peace process.

FRANKLIN: I think you're right. The - the change would have to come from within - in Israel in the coming - and not least because there's an American election so -

SLAUGHTER: Yes. You're not -

(CROSSTALK)

FRANKLIN: -- the likelihood of that - exactly.

SLAUGHTER: (INAUDIBLE).

FRANKLIN: There's not going to be a huge amount of external involvement.

BREMMER: Well, fine on the Israeli domestic environment, but internationally Israel is not a winner in this environment. You talk about Egyptian presidential elections, you're not going to run on let's keep the peace treaty, right? You're going to run on let's support the Arab street. And if that's true in Egypt, it's also true in places like Jordan. It's certainly true in Turkey.

A lot more pressure on the Israelis, and hard to imagine that with the geopolitical environment that's turning that much against them will be able to forestall, you know, violence some place, whether it's breaking open with Lebanon, maybe even on Syria. Certainly, with more Palestinian attacks, both ways. So that's something we need to be worried about.

ZAKARIA: All right. We're going to take a break. When we come back, more predictions, China, Pakistan, all kinds of fun, troubled countries, coming right up.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ZAKARIA: And we are back with Anne-Marie Slaughter, Daniel Franklin and Ian Bremmer, predictions for 2012. Daniel, in "The Economist" edition that you edit, you say that we spent the last few years talking about all the debt problems of the developed world, get ready for the debt problems of China. We don't think of China - we think of China as the world's great creditor.

FRANKLIN: Well, right. I mean, China intervened massively to support its own economy in response to the credit crunch that happened in 2007, 2008. So that is now a huge problem, and they face the difficulty of controlling that at a time when the Chinese economy is also slowing generally.

Bear in mind, 2012 is a year of transition in China. They have a leadership transition starting at the October - probably October party Congress. So the Chinese leadership is going to be struggling with a difficult situation at home while this delicate process of moving from one generation of leaders to the next is taking place.

ZAKARIA: They've generally handled these kinds of problems, you know, bad bank debt or real estate bubbles, because they have so many levers that they control. Do you think they will be able to get through this one?

BREMMER: The Chinese government, as stable as it is, has more capacity to kick a bigger can farther down the road than anyone else. Long term, that's a real problem. That created sort of a greater possibility of a hard landing and xenophobia and also other attendant risks. But for 2012, I think China is relatively safe on that front.

ZAKARIA: What do you - how do you - what do you feel internally, but also I want to ask you about externally.

SLAUGHTER: Yes.

ZAKARIA: Because what we've seen over the last two years is China, you know, got somewhat aggressive in - a year ago, and then for the last six or eight months have been dialing it back because they realized that that rattled their neighbors in Asia. Do you - where do you think China is going, first internally but also externally, over the next year?

SLAUGHTER: I think there's a better than even chance that there will be a naval incident between the Chinese and either the Vietnamese or the Philippines. Worse for the U.S. if it's Philippines because they're a treaty ally, but it could be actually provoked by China, and here I'm - I'm more with Daniel. I - I see more signs of instability, of kind of seesawing between trying to control inflation but then realizing they're choking off credit and going back and forth.

It's quite possible, if they really get into trouble, and it could be connected with the leadership fight, that they would provoke something.

FRANKLIN: I think they're going to try and keep their heads down, though, in 2012, precisely because of this leadership transition. I think they have every incentive not to - not to create any waves in the South China Sea or elsewhere. So, if they can possibly help it, I think they'll try to keep things very calm with - with their neighbors until this leadership transition is out of the way.

SLAUGHTER: But they may be provoked.

ZAKARIA: Arab spring. What countries are going to be clearly successful or clearly fail by 2012?

FRANKLIN: Well, I don't think that degree of clarity is going to be - is going to be easy to spot. What I do think you might well see is a - is a spreading south of the Arab spring to parts of sub-Saharan Africa. Now, those are - those are parts of the world -

ZAKARIA: (INAUDIBLE).

FRANKLIN: Well, I think in particular the most vulnerable countries are the nine countries that have had the same leaders in place for over two decades now. So countries like Zimbabwe, countries like Angola, Equatorial Guinea.

So I think that's where you will find this - this desire for change, among people who now see what's going on and have been following very closely what's been happening in North Africa and have the mobile telephones and the other means of communication to - to organize. So I don't think carbon copies, but very much a sense of the legitimacy of protest and the possibility of protest.

BREMMER: And I think there's been a presumption among us in the West that the Arab spring means authoritarian regimes transitioning to something else. There's an enormous amount of economic pressure on brittle democratic regimes as well.

I'm thinking particularly about the European periphery. I'm thinking about Greece. I'm thinking about Italy. I'm thinking about Hungary. Those are places where we could see a lot more social discontent. We could also see populism that moves them in a more authoritarian direction.

We shouldn't lose sight of that and presume that the Arab spring is just about countries we don't like.

ZAKARIA: And that brings us to Europe. Easy question, will the euro survive in its current form with all its members in 2012?

FRANKLIN: I think there's probably now about a - a slightly just above even chance that it will survive, but very uncomfortably large possibility that it won't. And I say uncomfortable because the - the precipice that that represents for Europe is - is a very scary one.

SLAUGHTER: I - I would probably give it a little better odds than that, more in the 60 to 70 percent range. I think it's striking that all the people who've been predicting that it would collapse, they wouldn't have believed in June that it was still around in December. They were sure it was gone long before.

And I - I do think not just that the Europeans are looking at the precipice, but so are the Chinese. They've been - Europe - Europe is China's biggest trading partner, and I think there are other sources of funds. And when - if it really comes down to it, there will be - they will - there's the funds available to make this happen. The real danger is miscalculation of timing.

ZAKARIA: And miscalculation of what the markets want -

SLAUGHTER: Exactly. The - the timing just isn't quite there.

FRANKLIN: What happens on the streets. I mean, it's not necessarily in - in the control of the - I mean, it goes back to -

ZAKARIA: A Lehman-like moment.

BREMMER: Yes.

ZAKARIA: But then - even then, if the Chinese suddenly were to come in with a big - big bushel of money, it would help.

BREMMER: Well, the Chinese aren't going to come in with a bushel of money. And I thought it was interesting when Sarkozy went over with (INAUDIBLE) in hand and said please help, the Chinese said let's be multi-lateral, which is Chinese for no.

And, you know, going forward, I think that the Eurozone actually stays together, but I also think that in 12 month's time we may still be asking this question. The ability to continue to muddle through, especially if we have a slightly more benign economic environment in the United States and Chinese is - China's continue to do well, is greater.

We've already seen the central banks in the developed world (ph) are able to coordinate. They're able to actually make money, pump money in. If Italy is now seen to be insolvent and if technocratic governments are able to stay in place and actually continue with austerity, then, you know, possibly the Germans and the French and the European institutions will continue to press down.

So muddle through, as unlikely as it seems to the market participants right now, may well be something we continue to see.

ZAKARIA: Technology, you in your issue have some interesting thoughts about what's going to happen in the world of technology.

FRANKLIN: Well, one, technology is of course always fascinating and moves very fast. But I think you could - you could imagine that there's a new territory to be fought over for technology in the year ahead. There are incredibly rich pickings here which are going to be fought over by a sort of fascinating combination of the existing tech titans and - and new startups who have new ideas, new exciting business models to take that sort of territory.

ZAKARIA: Do you think those new startups will, as has been true in the past over the last 50 years, overall come out of America?

FRANKLIN: I think they will tend to. America is just such a huge market and has the potential for a company to grow so quickly. And you have the whole infrastructure, the venture capital, the sort of ecosystem of - of Silicon Valley. So that makes America a very strong bet for at least the commercialization of these ideas.

BREMMER: I completely agree that the United States is still the bet you make. That's where the entrepreneurship is, that's where the technology investments are.

There are a lot of folks - the Chinese churn out millions and millions and millions of engineers. That's very different from folks that are actually creating new businesses. Fifty percent of Chinese millionaires say they want to live in the United States. The quality of life clearly matters.

So, look, Steve Jobs is dead, but long live Steve Jobs.

ZAKARIA: On that note, Ian Bremmer, Daniel Franklin, Anne-Marie Slaughter, thank you very much.

And we will be back.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

ZAKARIA: Now for our "What in the World" segment.

2011 ended just hours ago and it will likely be recorded as a year of historic change. Mass uprising up ended governments across the Arab world. Economic mismanagement in Europe led to changes at the top in Italy, Greece and Spain.

Three hundred and sixty-five days ago you couldn't have predicted these events. You couldn't have imagined so many leaders would lose their jobs.

So what if I told you you can predict that in 2012 a lot of leaders will say goodbye. No, I'm not gazing into a magic crystal ball.

You see, 2012 is the year of elections. Fifty-nine countries will be tallying up votes, local, state or national. There are 193 countries in the world, so that's about a third of the world's nations. Twenty- six of these may see a change in national leadership. Together these changes could affect 53 percent of the world's population representing half of the world's GDP. And a lot of the change is concentrated in the world's most powerful countries.

Four of the five U.N. Security Council members could see changes at the top. That's Russia, China, France, and of course the United States. These four countries alone represent 40 percent of the world's GDP.

Of all of them, China will not have democratic elections, of course, but it will see the biggest wholesale change at the top. Seventy percent of the country's leadership will be new. We're not expecting any surprises. It's widely believed that Hu Jintao and Wen Jiabao will be replaced by Xi Jinping and Li Keqiang. So get used to those names. You'll be hearing them a lot. Russia's election will be the most predictable. We already know that Prime Minister Putin is going to become President Putin once again. But even that change isn't as clear-cut as you would imagine. For the first time in years, it seems like it's becoming acceptable in Russia to criticize the Kremlin. Putin was recently booed at a boxing match and his party had a stunningly weak showing in the recent parliamentary elections.

What about Washington? Well, as you know, one year from now we could have a President Mitt Romney or Newt Gingrich or, of course, another Obama term.

South of the border that perennial pain in Washington's backside Hugo Chavez himself needs to win an election, though he rigged the last one. There will be changes, too, in Mexico, Egypt, Taiwan and Kenya just to name a few.

Some of these elections and leadership changes involve nothing more than personnel shifts. Others will be occasions for fundamental debates about the future course of the country. They could mean shifts so that we see a different Europe, a different China, or a different America in the next few years.

So for those of you who have been struck by the volatility of recent years, the roller coaster ride we've all been on from boom to bust, crisis to crisis, I would say keep that seat belt strapped on because you're going to see a lot of churn over the next year as well.

It may not be bad but there will be no shortage of political twists and turns around the world. And those are just the ones we know about. One thing I can promise you, we'll be tracking them all right here on GPS.

So Happy New Year and we'll be right back. We've looked at the short- term future. But coming up, we look way into the future of science and technology with Harvard physicist, Lisa Randall.

(COMMERCIAL BREAK)

ATHENA JONES, CNN CORRESPONDENT: Now a time for a check of today's top stories.

A 6.8 magnitude earthquake struck off the Coast of Japan today, southwest of Tokyo. There were no reports of injuries or damage and the Pacific Tsunami Warning Center did not issue a destructive tsunami warning.

And a 4.0 magnitude earthquake rattled Eastern Ohio yesterday. It was centered five miles northwest of Youngstown. The quake hit one week after a smaller tremor struck the region.

Iran says it has built and tested the country's first nuclear fuel rod. Iranians State TV reports that the country today also fired medium range anti-radar missiles and military drills near the Strait of Hormuz. Iran has threatened to shut down the Strait, which is a major pathway for the world's oil shipments. North Korea is urging its people to show allegiance to the country's new leader, Kim Jong-un. In a New Year's Eve message, the government said the entire army should place absolute trust in the son of the late Kim Jong-il. The message also said U.S. Forces were the obstacle to peace in the Korean Peninsula and called for their withdrawal from the region.

Those are your top stories. And now back to FAREED ZAKARIA GPS.

(BEGIN VIDEOTAPE)

ZAKARIA: The Large Hadron Collider may sound like a weapon out of "Star Wars." But in reality it's an extraordinary piece of engineering that has allowed for even more extraordinary breakthroughs in our understanding of the physical world.

Scientists there say that in 2012 they hope to find the elusive God particle which would unlock many mysteries about the beginning of the universe. In past decades, these sorts of advances would have naturally been made in America. So it is particularly galling to some that the collider was built near the border of France and Switzerland.

Lisa Randall is a top American scientist, who teaches Theoretical Particle Physics and Cosmology at Harvard. She has a new book called "Knocking On Heaven's Door: How Physics and Scientific Thinking Illuminate the Universe and the Modern World." She joins me now. Thank you for coming.

LISA RANDALL, THEORETICAL PHYSICIST, HARVARD UNIVERSITY: Thank you for having me here.

ZAKARIA: What is going on in science and physics that excites you? What do you look out? And how are we going to explain the world, the universe in different ways?

RANDALL: Well, right now, I'm very excited because this is the era of experiments, even if the experiment is in Europe. I don't care. I mean there's an experiment going on and it's going to tell us very fundamental things about the underlying nature of matter.

This Large Hadron Collider, it's large, it's 27 kilometers in circumference. It collides to get the protons. And they are at high energy, which means that we can look for things we've never seen before. Because as you know E equals MC squared, as Einstein tells us, which has bigger energy means bigger mass.

It can tell us about the nature of mass as particles, how masses come about, but also why masses are what they are. The thing that's amazing about this is how challenging that question is to answer. And that answer could tell us things about the symmetries of space and time.

So I've been doing this for a quarter of a century which is about the amount of time that the Large Hadron Collider has been under development. And we've really wanted to study this particular energy scale, and we're finally at a time where this is happening. So it's a very exciting time.

ZAKARIA: What does it say that this experiment was done in - in Europe? We have come to think of this kind of big scientific experiments as essentially being done in America and there were similar colliders in America.

RANDALL: We just shut down the closest thing we have, which was the Tevatron at Fermilab near Batavia, Illinois near Chicago.

ZAKARIA: And we shut it down because Congress refused to fund the last tranche of money?

RANDALL: Well, we shut it down for a couple of reasons. One is that the Large Hadron Collider clearly will be a better machine. It has higher energy. It has higher intensity, more events. But we probably could have kept it running for a couple of more years and gotten a lot of useful information out of it. And I think that was more political and money considerations. And a rather small amount of money on the scale of what a particle collider costs.

ZAKARIA: Do you worry that the federal government is not funding some basic science at the level it used to in the 1950s and '60s?

RANDALL: I worry that we don't have a vision of how we're going to continue funding it. I think, you know, for a long time America was the place where discoveries were made, at least in my field, in particle physics.

And I remember when I visited Fermilab once there's a European there saying we better find a bloody vector boson, which is some particle of the Standard Model, because they just - we're not going to find any things in Europe. They're all being found in America. And it's clear that now the attention has shifted to Europe at least as far as the experiment goes.

ZAKARIA: You're worried that that as you look forward into the future, America is losing faith in science, and if you watch the Republican primary debates, I think that you asked them how many of them believe that evolution is a - is a, you know, a valid theory, and I think there were maybe seven or eight people and only one or two who are willing to say that.

RANDALL: And I think that's what I'm worried about, where a country that's been built on scientific events of technology, and it's really served well for us. And I think we should value that.

And why we would want to ignore what is being shown scientifically is a little bit beyond me. Because obviously by dealing with the actual reality, even if we don't like it, we're more likely to come out ahead.

ZAKARIA: Do you think there's another form of life somewhere out there?

RANDALL: So the answer to that is, first of all, it's just my opinion. I have no evidence, one. But I think there probably is another form of life out there. I think we probably wouldn't ever know about it.

I think that given the vastness of the universe, given how many possibilities there are, it seems extremely unlikely that we would be the only form of life. But the odds that we would actually know about it because they communicate or interact or enough like us or close enough or that they could send - I think it's unlikely.

You know, we have these wonderful technological tools that let us get down to small scales and to look out into the universe, but there's a lot of the universe we don't see. And the fact that we basically see with various forms of light in some sense and that will only tell us so much at this point because there's - there's so many sources. You can only see so far very clearly.

But you know, having said that, that doesn't rule out the possibility that there will be evidence or that we will find planets that seem enough like ours. I mean - and it's certainly been quite impressive how many new planets have been discovered recently.

So I don't want to say this will never happen. I mean it's pretty easy. Everyone makes pronouncements this will never happen and then they do. But I just think that's unlikely that we will actually discover life.

ZAKARIA: Lisa Randall, pleasure to have you on.

RANDALL: Thank you very much.

ZAKARIA: And we will be back.

(END VIDEOTAPE)

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ZAKARIA: OK. Put on your thinking caps, it's time for a pop quiz.

A baseball bat and ball cost $1.10 together. The bat cost $1 more than the ball. Together they cost $1.10. How much does the ball cost? What is your answer?

So I bet you said that the ball costs $0.10. If you did, you'd be dead wrong. Don't worry. You have good company. The majority of students at MIT, Princeton and Harvard got it wrong, too.

By the way, the correct answer is the ball costs $0.05. The bat $1.05. If the bat costs $1 and a ball costs $0.10, there's only a $0.90 difference between the bat and ball, not a dollar. Why does everyone get it wrong?

My next guest is Daniel Kahneman and he will explain. He is the recipient of the Nobel Prize for Economics, but he is actually a psychologist. And he has a new book out, a terrific book, "Thinking, Fast and Slow."

Welcome. Professor, pleasure to have you on.

DANIEL KAHNEMAN, PHD, NOBEL LAUREATE IN ECONOMIC SCIENCES; AUTHOR OF "THINKING, FAST AND SLOW": Glad to be here.

ZAKARIA: So what struck me about that example is that it is a perfect example of why it's not a good idea to think fast. You know, you're convinced you're right and it's dead wrong. What is it that we're doing there that - that makes that happen?

KAHNEMAN: You know, there are two things. One is something that happens in your mind, it's the association. For some reason that problem brings $0.10 to mind. And the other thing is something that doesn't happen. You don't think and that's the key difference.

ZAKARIA: Right. If you wrote it out as an equation I found, you can't make a mistake.

KAHNEMAN: Then you don't make a mistake. But if people just check, they would know that $0.10 and another dollar that amounts to $1.20, so that's wrong. They don't check (ph).

And there are interesting differences between the people who check (ph) and the people who don't. And, you know, at Harvard, MIT or Princeton, half of the people, or a little over half in some cases make a mistake on that one. Other universities, you know, I have to stand up for Princeton, other universities it's worse.

ZAKARIA: But - but tell me this, is this a pattern that you - you detect in human behavior that there are some things that people think fast about and some things they think slow about? How would you describe this difference?

KAHNEMAN: Well, you know, most of the time we think fast. And most of the time we're really expert at what we're doing and most of the time what we do is right. And we do it with very little work and very little effort.

Now, there is slow thinking, it's effortful, it's hard work. And it turns out that by and large we clearly - most people are wired to avoid it. We try to do as little as possible of the slow thinking. It's very hard work.

And so sometimes when, you know, the fast thinking delivers the wrong suggestion and the slow thinking doesn't block it, then people come out with mistakes.

ZAKARIA: My people have pointed out that racism is often the, you know, a kind of a product of that kind of very quick thinking. That prejudice comes to mind very quickly.

KAHNEMAN: Well, of course. I mean, you know, we have associations to things. We have, you know, we have associations to tables and to - and to dogs and to cats and to Harvard professors and that's the way the mind works. It's an association machine.

ZAKARIA: When you think about this, does it make you feel that the way in which economics is done, the way we think about economics is all wrong? Because there is a sense in which what you're describing is - is the human capacity to really make false judgments all the time, so to not know what is in your best rational self-interest.

KAHNEMAN: The idea that people are completely rational it really entails something very important, which is that the - that the government has the responsibility to ensure disclosure. That people are given correct information when they interact in the market.

But it doesn't matter for a rational agent whether the print is small or large. It matters a lot for people with a lazy sort of system, too, lazy, slow thinking. They don't read the small print. None of us read, you know, those things that flash on the computer screen and that you say I agree at the end.

And that is a place where behavior economics is making an important contribution and I think a correction to the old, classical economic model of the rational agent.

ZAKARIA: The sort of classic example of what you're saying is that you - you give people the default option to save rather than not to save. So that on their - on their, you know, salary forms you say check here if you want to opt out of the IRA or the savings plan so that the default is that they save and the result is you have many, many more people saving.

KAHNEMAN: Well, I mean, you know, one of the most dramatic examples of that is in Europe. They have about half of the country on organ donation have an opt-in form so that you have to check if you want to donate your organs, otherwise you don't default as you don't.

The other half, the default is, is you do donate and you have to check if you don't. And the percentage of donations is roughly I think 90 percent in one case and about 15 percent in the other.

ZAKARIA: Wow.

KAHNEMAN: So on very consequential decisions people can be guided by those really - I would think completely superficial aspects of the situation.

ZAKARIA: Do you think what this tells you is that the government should be more active in trying to shape people's choices? And what areas would you advocate more is done?

KAHNEMAN: Well, you know, I think this is something that is actually happening today, I mean, in the Obama White House because you have a behavior economist, Cass Sunstein, who is in charge of regulation. And the focus there is consumer protection.

It's making sure not only that things are disclosed, which everybody agrees, I mean that's the law, they have to be disclosed, but they are disclosed in a way that accommodates the code (ph) of limitations of people.

ZAKARIA: And you don't think it interferes with the good - the good functioning of a market.

KAHNEMAN: Well, you know, I mean, that nobody wants a world in which another government will decide what you eat. That's not what will prevent people from eating fat food. So there is a limit. There is a balance.

There is a balance between freedom, which everybody wants to protect and, you know, the need of individuals to be in some cases helped make decisions that they would want to have made. I mean it's not that you're forcing people into things they don't want.

In the case of saving, most people want to save more than they do. And they're grateful when you help them save more than they do. So that is the balance that, you know, they're seeking and it's a difficult balance to achieve.

ZAKARIA: When you first saw that baseball bat and ball question, did you get it wrong or right?

KAHNEMAN: Well, I think I got it right. But I'm, you know, I'm good at those things and I check, so -

ZAKARIA: Daniel Kahneman, pleasure to have you on.

KAHNEMAN: It was a pleasure to be here. Thank you.

ZAKARIA: And we will be back.

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ZAKARIA: As we welcome 2012, one more look back at 2011 for our question this week.

What was the biggest story on Twitter in 2011 based on hashtag use? If you don't know what that means, ask your kids. Was it A) Egypt; B) Bin Laden; C) Japan; or D) the Super Bowl?

Stay tuned and we'll tell you the correct answer. Make sure to go to CNN.com/GPS for 10 more questions. And while you're there check out our website, the Global Public Square where you'll find smart interviews and takes by some of our favorite experts. Don't forget, you can follow us on Twitter and Facebook as well.

And if you haven't bought all your Christmas presents yet, maybe you can make up for it with a New Year resolution to buy this week's "Book of the Week."

Drum rolls for a bit of crass self-promotion here. The new version of my new book, "The Post American World Version 2.0." It's a revised and updated edition. And if you haven't yet bought a copy, please do. My publisher will thank you. My kids will thank you.

And while I'm at it, if you are a GPS fan, buy our mugs. Michael Lewis of "Blindside" and "Moneyball" told me they are the best TV show mugs he's ever seen. I think that's a compliment. Anyway, go to our website for the link.

Now, for the "Last Look." There's a big birthday to note today taking place on the other side of the pond. The celebrant is 10 years old. But sadly the youngster doesn't seem to be in much of a mood for a party today.

Ten years ago, the euro bank note was born. And to mark the occasion, the embattled European Central Bank spent some of its precious euros to make a video.

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UNIDENTIFIED FEMALE: Europe builds bridges and inspires hope. It enables its people to look to the future with confidence.

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ZAKARIA: Really? Hope, confidence? Has the ECB been reading the same news I have? The video goes on to tout the bills themselves.

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UNIDENTIFIED FEMALE: ... placed end to end, the 14.9 billion bank notes produced for the changeover could have stretched to the moon and back five times over.

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ZAKARIA: Quite impressive. But have you ever looked at any of those 14.9 billion euro notes? They are the epitome of the problem of design by committee. In order to come up with the designs that were sure not to offend any member countries, the bills depict no statesman, no landmarks, no identifiable anything. These bridges on the back of the bills, they don't exist anywhere, nor do the architectural fragments on the front.

Anyway, happy birthday, Euro. May you have a long and healthy life so that you stop causing global economic panics.

The correct answer to our "GPS Challenge Question" was A, Egypt. That was the most popular topic on Twitter around the world. The runner up, Tiger blood. And people say America doesn't export anything anymore.

Thanks to all of you for being part of my program this week. Happy New Year. I will see you next week.

Stay tuned for "RELIABLE SOURCES."