WEBVTT

NOTE Austrian Economics

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I understand that there's a lot of disagreement

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on the intellectual property thing.

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All I can say to you is read the Kinsella piece, K-I-N-S-E-L-L-A.

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When I read it, I was unconvinced by it.

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Maybe I'm not doing a good job of giving you his views,

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but it's available.

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Look under K for Kinsella in the Journal of Libertarian Studies.

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It won the award for the best article

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in the Journal of Libertarian Studies

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in the last two years when it was published.

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So I stand by it, but I think I want to move on now to Austrianism.

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I have been asked to go over the abortion case, even though strictly speaking it's not economics,

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and I will do that during the question period, and also I hadn't planned on, but I've been convinced by Mike

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that I should do public goods, and I'll add that onto the list.

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What I was going to do, well, the applications I was going to do was trade, poverty, what about the poor, how would libertarianism answer the problem of the poor, monopoly and antitrust, gold, the Austrian business cycle theory, taxes, profits and fractional reserve banking.

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But I'll put in public goods higher on the list, so at least I get to it since I was asked about it, and maybe other people don't have interest in these other things.

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So without any further ado, let me get into the second session, which is devoted not to libertarianism, but rather to Austrianism, and as we said, libertarianism is a theory about what should be the law,

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and Austrian economics is about something very different, namely, what is the cause of economic phenomenon.

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Okay, first of all, Austrian economics, I won't say has nothing to do with Austria,

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but it has nothing to do with the economics of Austria, it just has to do with the fact that the first progenitors,

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the original people who created Austrian economics, happened to come from the country Austria.

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So it has nothing to do with the economics of Austria, rather that Carl Menger and Eugen von Boehm-Bawerk, Friedrich von Wieser, Ludwig von Mises and Friedrich Hayek were all from Austria.

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The leaders after them, I guess, would be Murray Rothbard and Israel Kirzner, who both came from New York City as it happened.

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But we are all Austrian economists in the sense that we adhere to the principles of this school of thought.

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Similarly, with the Chicago School, the reason you call it the Chicago School is that it emanated from Chicago, but there are Chicago economists everywhere.

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Okay, what is the principles or the axioms of Austrian economics?

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Similar with libertarianism, there are certain axioms and then there are applications.

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And I'll do the same one-two punch on the Austrian economics as I did on the libertarian theory.

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The main axiom of Austrian economics is that there are certain principles of economics that are undeniable and yet have to do with the real world.

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This is in sharp contrast to the mainstream economists who believe that economics is not a rigorous, hierarchical, deductive system where you start with a basic premise and you deduce and deduce and deduce.

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Rather they believe that it is more on the model of physics or chemistry or biology, namely it's a science, a physical science, and you come up with a hypothesis, who knows from where, but then you test the hypothesis, the hypothesis has to be falsifiable, at least in principle, otherwise it has nothing to do with the real world, they say, they're sort of like the Vienna School of Logical Positivism, for those of you who are into that. For them, the key is a controlled experiment.

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The salt vaccine, we had a controlled experiment, we had a double-blind test, half the people in the room got the salt vaccine, half the people got a placebo, lest not giving you anything would mess up the results, because we wanted to see if the salt vaccine did it, not if just giving attention to you would stop polio. We did it double-blind, namely, not only didn't you people know who got the salt vaccine and who got the water placebo, but neither did the doctor, lest the doctor

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would give off emanations and sort of implicitly say,

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well, you people aren't getting it,

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so you people will get more polio than you people.

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So this is sort of the ideal for physical sciences.

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How close do we come to this in economics?

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Not very close.

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The closest we come to it, perhaps,

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is East Germany versus West Germany

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and North Korea versus South Korea.

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In both cases, due to an accident of war,

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countries were separated.

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It was the same people, the same culture, the same intelligence,

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the same educational skills, the same resources, the same everything, pretty much, except one had a roughly free enterprise society and prospered, and the other had a communist society and went down to the pits and from that we deduce or we say that since there was only one thing varying, that shows that that's the cause of it, namely it was communism versus capitalism. The obvious excuse on the part of the communists, well maybe everything wasn't perfectly the same.

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Or maybe you had bad communist leaders or something. In other words there's no

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knockout punch in mainstream economics. Whereas in Austrian economics we start

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from basic premises which we claim are undeniable or deniable only upon the

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pain of contradiction and yet have to do with the real world and indeed explain

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the real world and help us understand the real world. For example, man acts

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It's impossible to deny, since the very denial of it is a purposeful act.

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So you're sort of caught in it.

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Teleological thinking is illicit in the physical sciences.

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Like you don't say that the reason the sun comes up in the east is because it wants to illuminate the world,

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and then the reason it goes down in the west is because it's tired or something like that.

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You don't attribute motives to inanimate objects, and that's fine in the physical sciences,

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But, since economics is so beholden, we have physics envy, or at least the mainstream economists have physics envy, or science envy, or physical science envy, empirical envy.

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They don't like anthropomorphism. Okay, anthropomorphism is fine to get rid of when you talk about the sun or the moon or a molecule, but when it comes to a person, well, anthropomorphism is a great thing. People have purposes.

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Okay. Here, let me give you another one. There is a tendency for the rates of return on invested capital profits to equalize in all industries, assuming away differentials and risk. I claim that that is an insight into how the economy works that is undeniable and unfalsifiable. So again, if there are five industries, let's say there are three industries. There's industry A, there's industry B, and there's industry C.

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You see, and here is the profits in all the industries, and here it's 50% profit, and

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here it's 10% profit, and here it's minus 5% profit. I say there's a tendency for profits

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to equalize assuming equal risk, forget about risk for the moment, which means that it's

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got to come down from 50 to, oh, say 15, and go up from 10 to 15, and it's got to go from

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minus 5 to plus 15. That would be equalizing. Now, I don't think we ever get there, because

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Because long before we get there, something else changes, a compliment or a substitute

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good or the demand or the change in taste or a war or a frost or a hurricane, something

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will happen and push things around. But there's always a tendency. Because look, if industry

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A was making 50% profit, where would you put your money? A, B or C? Well, obviously you're

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going to put it in A, but if you put it in A, you're going to reduce the profits because

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The supply of A's will now be increased.

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And you're gonna take your money out of C,

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which will raise the profits there.

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But at any given time, it'll never be equal

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because all I say is this is a tendency.

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So it's unfalsifiable because you can't prove it wrong.

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And yet, I think it says something about the economy.

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It helps us understand the allocation of resources,

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that there's a tendency for profits

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to equalize in all industries.

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Another one, all voluntary trade creates mutual benefit in the ex ante sense.

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Okay, so here we go. Your name is Anatoly. Anatoly has a pencil, and I'm going to hold up his pencil.

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Here's his pencil, and I have a tie, and I claim that if Anatoly and I trade his pencil for my tie,

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He values the time more than the pencil,

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values the time he's gonna get

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more than the pencil he's gonna give up.

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I, on the other hand,

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since I'm also a voluntary participant in this trade,

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I value the pencil more than the time.

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So the reason we trade is because we expect,

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in prospect, ex ante to be made better off.

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Now ex post, one or the other or both

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might regret our trade,

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and it's an empirical claim.

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Most trades we make, we don't regret.

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Every once in a while, you buy a lemon car

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or you buy a meal that you didn't really like.

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But by and large, you know, you buy a tie or a pen

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or eyeglasses or something or a haircut.

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You know what you're gonna get.

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You benefit not only ex ante, which you must,

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but you also gain ex post.

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But you see, this idea that you must gain

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seems to be unscientific to the mainstream economists.

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Whereas to the Austrians, how else can you explain

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Another synthetic, a-priorized statement or basic premise, people act so as to render the future more desirable to them than had they not acted.

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Again, it's inconceivable that they would act in any other way.

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Now, it might be that the reason Anatoly wants to trade the pencil for the tie

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is because I told him that there's going to be a quiz and he wants to get an A,

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and he thinks that he can butter me up by making that trade.

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We don't know the reason why he wants to do that.

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It could be for any number of reasons.

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But we know that there's something about the tie that he likes better than the pencil.

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Otherwise, he wouldn't be giving up the pencil for the tie.

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Okay, these are the praxeological, logical, distinct elements of Austrian economics and there are many others that I'll get to as we go along.

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Let me talk a little bit about transitivity. We Austrians are down on transitivity. What is transitivity?

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Transitivity is something beloved of the mainstream.

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Transitivity means that if you prefer A to B,

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you prefer A to B, and also you prefer B to C,

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therefore you will prefer A to C.

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Now this transitivity makes some sense.

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For example, if I tell you that the number eight

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is bigger than the number seven,

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and the number seven is bigger than the number six,

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it follows that the number eight

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is bigger than the number six.

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So I'm not against transitivity always.

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In other words, there's some coherence to transitivity.

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I'm not an anti-transitivityist.

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But when the mainstream economists say

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that there's something illogical,

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if you don't prefer A to C,

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what they're reckoning in the absence of

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is that this took place at time t1,

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this took place at time t2,

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a second or five minutes later,

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and this took place at time T3

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and you could have changed your mind.

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Namely that there are no preferences out there

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that you have to accord to,

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rather each trade has preferences implicit in it.

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So this is a different methodological distinction

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between the Austrian School of Thought

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and the mainstream School of Thought.

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Okay, I gave out, okay, the first thing I want to talk about is monopoly, and in order

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to give you the Austrian flavor of the monopoly and antitrust laws, let me tell you the following

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set of jokes.

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There were three Russian prisoners in Gulag, and as prisoners do, they trade stories as

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as to why they're in prison.

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So the first guy said, well, I came to work late

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and they accused me of cheating the state

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out of my labor services.

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Second guy says, well, I came to work early.

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Every day I came early and they accused me of brown-nosing.

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The third guy said, I came to work every day

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exactly on time and they put me in jail

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because they accused me of owning a western wristwatch.

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Sort of, you know, when a bear plays a violin,

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You don't ask how well he plays, you know, just the fact that he can play is pretty good.

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Well, when an economist tells a joke, you know, it's the same kind of a thing.

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Okay, now there are three people in U.S. jail, and they're all guilty of violations of the anti-trust law.

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And the first guy says, I charge higher prices than anyone else,

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and they accuse me of being a gouger and a profiteer.

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The second guy says, well, I charge lower prices than everyone else,

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and they accuse me of being a cutthroat competitor and a predatory pricer.

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The third guy said, I charge the same prices as everyone else.

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It's hard to see how he did, given these other two guys, but let's forget about that.

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And they accuse me of being a colluder, a price fixer, and a cartelist.

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Now, all these things are illegal under that law.

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You can go to jail for any of them, but I submit to you, you've got to do one of them.

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So you can go to jail for anything.

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Anytime they want you in jail,

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they can put you in jail for that.

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Well, what kind of a law is that?

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It's a crazy law.

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Now, if I were to harken back to,

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I don't want to lose my audience,

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but I'll take a risk here, and it'll only be for a minute.

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So if this is despicable and disgusting, you know,

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avert your eyes, here is the monopoly diagram.

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Here is quantity, here is price, and here is demand curve, and here is a marginal revenue curve, and we're going to assume that this is a marginal cost curve.

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And according to the neoclassical economists, this is the optimal point. You should be producing that much, call it OJ,

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Whereas, you will produce where marginal cost hits marginal revenue and your price up here.

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And this is not the optimal, but this is the monopoly amount of production.

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Now, if you don't know what marginal cost is and you don't know what marginal revenue is

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and you don't know why they have to equal,

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that would take me an awful long time to explain, so I'm not going to do that.

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All I can say is that according to the economist's way of looking at this thing,

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What the monopolist is guilty of is producing too little and charging too high a price.

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Now, you'll remember when Anatoly and I were trading a pencil and a tie,

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I said that it's a matter of undeniable logic that we both gain in the ex-ante sense.

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Fine. So we each gained from trading one pencil.

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And maybe we traded two pencils, and maybe we traded three pencils.

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And now, Anatoly, the dirty rat monopolist, refuses to trade any more pencils.

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We put him in jail for that because he's ruining consumer welfare.

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Notice the subtle difference between saying that you gain from trading and that you lose from not trading.

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See, suppose he refuses to trade the fourth pencil for the fourth tie or buy the fourth wristwatch or whatever it is.

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From the Austrian point of view, nothing follows. All that follows is that he doesn't prefer the fourth tie to the fourth pencil, so we don't have a trade.

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Nothing follows other than that. From the neoclassical perspective, you know, he or I or both of us could be a monopolist.

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Let's try again. Who is the heavyweight champion of the world in boxing nowadays?

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Who knows? Mike Tyson. He's the one I remember. Okay, so here's Mike Tyson. And according to the neoclassicist, Mike Tyson should be fighting 12 times a year, once a month.

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But Mike, the monopolist, is withholding in order to jack up his price. He only fights nine fights.

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and we lose this deadweight loss triangle because of that in terms of welfare.

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This is the way the antitrust economist from the neoclassical perspective would talk.

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What I would say is from Mike Tyson's first nine fights,

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he gains more than it costs him in the form of being punched and the alternative leisure

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and the fans gain more from watching him than the price of the ticket.

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So there's mutual gain in the ex-ante sense.

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What about the other three fights? The Austrians say you can't say anything about those fights.

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Nothing follows from them. You shouldn't make them fight three more times.

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And that's what antitrust law is predicated on when you look at the economics of it.

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Okay, the next thing I want to talk about is poverty. What about poor people?

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How will libertarianism or how will the free enterprise system handle the problem of poverty?

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And I gave out a handout that I hope everyone's got, and if you don't have it, raise your hand, come up here and I'll give you an extra copy.

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Well, I first put it in the form of a cartoon, helping the poor. There are two ways to help the poor.

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On the left side, in both cases, there are people at the bottom of the pit who are poor, and there are people at the top of the pit who can help them.

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And in the top, the big government answer is the poor are yelling more food and they're tossing down welfare buckets or stuff in buckets.

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In the second one, the free market answer is more rungs, freedom rungs to let them climb out of that hole.

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And I think that, you know, they say a picture says a thousand words and I think that's a thousand words worth.

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Our contention as Austrians, and I suppose as libertarians too, is that the best way to help the poor is with economic freedom.

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The best way to help the poor is not to give them welfare.

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The best way to help the poor is to make them economically free because the people who are poor in relatively rich countries are infinitely richer than even the middle class in countries that are not free.

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In this country, the poor people don't just have a television, they've got a calling television.

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They've got air conditioning, not just fans. They've got maybe not a new Maserati, but they've got a car.

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I remember in the early, in the 80s when the Soviets, during the Olympics, when a Soviet would win a gold medal,

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they'd have a little interview with them, and they didn't variably show them in a little car and in an apartment.

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And I was wondering, why do they always show every bloody Soviet in a little car in an apartment?

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And the answer was, these are 23-year-old kids who are winning gold medals, 25, 18, whatever it is.

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Who in the Soviet Union can afford a car when you're 23?

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Only a gold medal winner.

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Whereas here, you work in McDonald's, you can get an old beat-up Volkswagen.

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You can get your own apartment, maybe not on Park Avenue or at least this part of Park Avenue, but somewhere.

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So the poor and the rich countries, the free countries, do much better than even the middle class in the unfree countries.

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Now, the other three things I have, the other page, what I did with the two co-authors is we took about 100 countries and we had 17 different criteria for what economic freedom was.

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And on the basis of these 17 different criteria, we rated all the countries and we gave them an A through an F minus.

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What were the criteria? Things like, oh, lack of regulation, low taxes, low union rates, free trade, things like that.

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The less government you had, the more economically free you were.

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And I'm not gonna go over the 17 different criteria. It's a book I did with Gortney and Lawson.

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If you want more on that, just get a hold of me.

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My email address is wblock, W-B-L-O-C-K, at loino.edu.

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And I'll send you more information on this than you want to read.

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So anyway, what we do is we rate all 110 or 120 countries in our sample

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on the basis of these 17 criteria.

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And we give them a 10 if they are economically free

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and a 0 if they're not economically free.

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and then we, I think we said that A was a country that gave eight or nine and B was a country with a seven out of ten and so on down the line and we define these criteria solely in terms of economic freedom, not in terms of wealth, otherwise we would prejudice the case and we found that countries who had the most economic freedom and that was, if I remember it correctly at the time, it was Hong Kong number one,

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Singapore number two, Switzerland and New Zealand were three and four, I forget which was which, and the US was five, so we're only the fifth freest economically speaking country, but we're very economically free.

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Most of the reaction I get from people from around the world, whenever they see this, they say, my country you put too high, because they know their country very well and they don't know other countries as well.

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How could you put the country so high, because we have this, we have that, we have that, that is free enterprise types.

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All I can say is other countries are even worse.

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Okay, so exhibit A, part one, is that the richer you are, the freer you are, or rather to put it in the causal relation, the freer you are, the richer you are.

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And it's got nothing to do with resources.

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Hong Kong doesn't have one resource to rub against another.

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Singapore, they're the same.

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Whereas Brazil and India and China, they've got resources up to their armpits.

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And yet they're very poor with resources, so resources don't do it. IQ doesn't do it.

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Israel is probably the country with the average IQ the highest, the most PhDs and the most MDs and the most everything.

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And they're an economic basket case. So it's not IQ. It's not resources. It's economic freedom.

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It's bloody economic freedom. That's the biggest explanation of this.

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Not only are countries that are economically free richer, countries that are economically freer are growing faster.

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That's the second one. This is as of 1995.

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You can see that countries in the A category are growing at the rate of 3.3, even though they're starting at a higher level,

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and it's harder to increase proportionately when you start out at a higher level.

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It's easier when you start out in the basement.

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and countries at the bottom are not developing countries, they are retrogressing countries, they are losing income.

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Charles Murray has done wonderful work on domestic welfare systems and Peter Bauer has done wonderful work on international welfare systems showing that you don't do well when you give people welfare.

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Peter Bauer has this thing I call the three M's, the three M's of foreign aid.

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What are the three M's? The three M's of foreign aid are monuments, doesn't have to be a monument to the dictator, it could be a steel mill that would be unviable since you could buy steel at one-tenth the price, then it costs you to make it, Mercedes, that's how the dictator gets around, and machine guns to keep power. That's where the foreign aid goes. And he says that when you have foreign aid, even though it's a very small proportion of our budget, one percent, half a percent,

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Left Liberals are trying to raise it to 1%.

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It's a tremendous amount of money for the recipient country.

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So tremendous that the young, smart kids,

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instead of going to become engineers or doctors or farmers,

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they go and become bureaucrats to get some of that money.

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Well, what kind of a way to develop the country

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if the best and brightest of the youth

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have an incentive not to produce things

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but to grab some of that money?

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And also this enhances and exacerbates tribal warfare,

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Inter-Tribal Warfare, because look, under laissez-faire,

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it really doesn't matter who the president is,

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because the government does very little.

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Under lots of foreign aid and under centralism,

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it's crucial who the dictator is.

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It better be in your tribe,

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because otherwise you're in trouble.

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So this exacerbates international warfare.

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Charles Murray, famous for The Bell Curve,

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did a lot of good work on domestic welfare.

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and he says that domestic welfare ruined the black family.

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What he says is that, to put it in my own words,

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there are two ways to kill a frog

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or there are two ways to try to kill a frog

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with regards to boiling water.

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One, you throw him in boiling water and he jumps right out

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because he knows darn well

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that boiling water is no good for him.

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The other way is you put him in cold water

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and you heat it up slowly and the frog stays there

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and gets boiled.

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Well, what Charles Murray says is that

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The slave system was like boiling water.

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The slaves knew that slave,

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the blacks knew that slavery was no good.

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After the slave episode was over in 1865,

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the black family was almost as intact as the white family.

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Not quite, but almost as intact.

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There were messages in the newspapers

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all throughout the South,

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Lula Mae looking for Joe,

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we were both married on Jones' plantation, where are you?

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And they would try to get back together.

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The black family was very strong.

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In 1910 census, the divorce rate of blacks and whites

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was about the same.

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The family formation rate,

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blacks was always a little bit worse, but very close.

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That was the boiling water.

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It didn't negatively impact the black family much at all.

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A little bit, I mean, slavery isn't good.

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But the welfare system was insidious.

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That was boiling the water very slowly

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and they stayed in there.

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The black family fell apart.

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Not only was there the rate of divorce,

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it was that the family didn't form in the first place.

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And we know from our sociological friends

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who are no good on most things,

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but on this they're pretty good,

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that when you have an intact family,

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this is sort of a proxy variable

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for all sorts of economic health.

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And when you have a broken up family

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or a family that doesn't form

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or a girl of 19 with three kids or something like that,

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everything is bad.

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So what welfare did is undermine the black family

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and the undermining of the family

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is a way of ruining the economy of them

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and you're not helping them.

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So the free enterprise answer to the question

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of what do you do about the poor,

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what you do about the poor

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is you don't have minimum wage laws that don't employ them,

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you don't have unions that exclude them from jobs,

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you don't have high taxes, you have a free economy,

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which is a very prosperous economy,

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and you don't have welfare that undermines their family,

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that's how you help the poor.

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Okay, the next thing on my list is trade. And now look at the thing with the boxes on the other side of the handout where the cartoon was.

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And what I'm going to do is to try to illustrate two things.

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One is a thing called absolute advantage and the other thing is a thing called comparative advantage.

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See, right now there's all this talk about what is it we're exporting jobs to India or Mexico or Japan or somewhere.

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All the jobs will go. It's just a craziness.

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What I assume is two countries, Canada and Costa Rica, everyone's got this in front of you if you don't speak up now or forever hold your silence, and two products, bananas and maple syrup, two days or two seasons, and I'm assuming that you can add a unit of bananas and a unit of maple syrup.

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And in the first case, there's no trade. Canada can produce 110,000 units of maple syrup. Why? Because trees grow like crazy up there. It's so cold. Maple trees thrive. How do they produce bananas in Canada? Greenhouses. Greenhouses, it's very expensive. A banana can cost 50 bucks if you do it that way. In Costa Rica, bananas, they're up to their armpits in bananas. Bananas grow like weeds.

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How do you get maple syrup in Costa Rica?

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Gigantic refrigerators.

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I mean, it's a little silly, but I'm purposely picking dramatic cases

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to make a sharp point.

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So they can't produce too much maple syrup.

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What's the GDP of Canada without trade? 10,005.

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What's the GDP of Costa Rica without trade? 15,020.

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What is the total world banana production? 15,005.

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25. That is, these are the only two countries in the world, I'm assuming. And what are the number of maple syrup units? 10,020. Everyone following where I'm getting the numbers from? Okay. And what's world GDP? 25,025. Fine. Okay, now we engage in trade. What does each country specialize? Well, obviously, Canada makes no bananas, and Costa Rica spends two seasons on bananas, not one on bananas and one on maple syrup, so they go twice 15,000

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30,000, whereas from the Canadian point of view, they produce 10,000 per season, but

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we now have two seasons, they're not going to waste one season on what they call it bananas.

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So they'll produce 20,000, and together 30 plus 20 is 50,000, and notice that world GDP

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practically doubles. This is the case for free trade. We're going to have a debate between

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Bush and Kerry, and they're each going to argue about which one will have more tariffs

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and more protection of U.S. steel and more protection of U.S. jobs, you know.

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It's lunatic. It's lunatic for Canada to produce bananas and it's lunatic for Costa Rica to produce maple syrup.

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But what about the poor workers in Canada who are making bananas?

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Do you know what's going to happen to them? According to Keynesians, they're going to stop producing

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because they'll all be broke and they'll stop buying bicycles and TV sets

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and you'll have a depression in the bicycle and the TV set area,

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which will spread like you throw a rock in the still water and the waves go out from where the rock hit.

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Well, that's lunatic. That's a way to have a starvation.

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Look, if we each had to have individual self-sufficiency, we had to produce everything for ourselves, we'd all die.

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Ninety-seven percent of us would die. Ninety-eight percent of us would die.

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Ninety-seven or ninety-eight percent of the human race owes its very life to trade, whatever trade we do have.

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In countries where you don't have free trade, one country has a boom crop and the other has a starvation, and the other one will starve.

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In this country, happily, you have bad times in Louisiana or Florida, stuff comes in because the prices go up in Florida and you attract stuff,

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although they're now having anti-gouging laws in Florida, which is not going to help get candles and batteries and water and milk in those states.

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But we don't do it as badly as some countries.

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Okay, so this is the case for absolute advantage.

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And most anti-free traders, most people who are afraid of outsourcing jobs,

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even they will admit, okay, okay, in the case of absolute advantage, we'll go for free trade.

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We don't have to, you know, import the tropical fruit.

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We can, you know, or rather, we can import tropical fruit.

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We don't have to worry about the banana manufacturers in Canada.

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And indeed, if you're worried about the problem of poverty,

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Who is going to take the biggest hit in the Canadian banana industry?

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The low-skilled worker who is just pushing a broom in the banana industry?

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Or the high-skilled worker who is a biologist of bananas?

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Or the stock owner, the guy who owns the banana factory?

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Obviously, the latter two.

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Because if you push a broom in the banana industry,

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you can push a broom in the maple syrup industry.

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You lose very little.

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But if you're a theoretician of bananas,

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Because it might not translate as easily to being a theoretician of something else, because

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you had to put many years of practice in that, and if it's the capital equipment, the greenhouses

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are no longer going to be, they'll lose all their capital value, or virtually all their

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capital value in Canada, except for what you could do with melted down glass or something.

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Okay, now let's get to the tougher challenge, the challenge of comparative advantage. And

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And here again we have two countries and two dates and two products.

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Only now we're looking at it from the Canadian eye perspective and we assume that the evil

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Japanese are better at both than us Canadians.

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We could have used the Mexicans who are better at both, not because they're good at things

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because they work cheap, but I've illustrated with the Japanese, the menace from Japan.

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They can produce twice as many wheats as us, 70 to 35.

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But in TV sets, they're really good, they're 33 times better than us.

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So before trade, Canada has GDP of 38, same way I got the numbers above, and Japan 170,

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in the world GDP is 208, and there are 105 weeks and 103 TV sets.

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Okay now we open up trade, and what I want to prove to you or demonstrate to you or illustrate

415
00:35:14.680 --> 00:35:19.680
to you, is that even if the other country is better than us in both, it still pays for

416
00:35:19.680 --> 00:35:23.880
them to trade with us, we can still cooperate, we can still benefit from trading with each

417
00:35:23.880 --> 00:35:31.360
other. So, if we have trade, who's going to do what? Well, obviously, you specialize not

418
00:35:31.360 --> 00:35:35.000
in your absolute advantage, because Japan has an absolute advantage in both, rather you

419
00:35:35.000 --> 00:35:39.160
specialize in your comparative advantage, and Japan only has a comparative advantage

420
00:35:39.160 --> 00:35:44.160
Comparative Advantage in TVs, namely they're 33 times as good as us, whereas they don't

421
00:35:44.160 --> 00:35:48.120
have us Canadians, whereas they don't have a comparative advantage in wheat, they're

422
00:35:48.120 --> 00:35:53.180
only twice as good as us in wheat. Or looking at it from the other point of view, we Canadians

423
00:35:53.180 --> 00:35:59.560
are fully half as good as these supermen Japanese people, but we're only 3% as good as them

424
00:35:59.560 --> 00:36:06.960
in TVs. So the Japanese specialize in TVs and we get 200 TVs instead of 100. We Canadians

425
00:36:06.960 --> 00:36:15.960
Specialized in Wheat, and we produce 35 for a grand total of 70 for two days, and now GDP goes up to 270 from 208.

426
00:36:15.960 --> 00:36:22.660
So again, we show that the benefits of trade, even when one party is better at both things than the other.

427
00:36:22.660 --> 00:36:26.160
One more example, the lawyer and the typist.

428
00:36:26.160 --> 00:36:34.360
Here you have a lawyer who can produce 1,000 a day lawyering and 150 a day typing.

429
00:36:34.360 --> 00:36:35.760
So what should he do?

430
00:36:35.760 --> 00:36:39.620
And you need an equal amount of secretarying and lawyering,

431
00:36:39.620 --> 00:36:42.240
I'm assuming, to get the case done.

432
00:36:42.240 --> 00:36:45.460
So should he just do both and not specialize?

433
00:36:48.320 --> 00:36:52.440
Well, if he does that, he'll make 1,000 a day from lawyering

434
00:36:52.440 --> 00:36:56.040
and 150 a day from typing for a grand total of 1,150.

435
00:36:56.040 --> 00:36:58.400
On the other hand, if he's smart, he'll say,

436
00:36:58.400 --> 00:37:01.440
look, I can type, but it's silly,

437
00:37:01.440 --> 00:37:02.900
I might as well specialize.

438
00:37:02.900 --> 00:37:11.900
I'll spend two days in lawyering for a grand total of $2,000. I'll have to pay the type is $300, but I'll have $1,700.

439
00:37:11.900 --> 00:37:18.900
So no matter how you slice it, whether it's a nation or an individual, free trade is a good thing.

440
00:37:18.900 --> 00:37:23.900
Why then do we have so much steel tariffs and all this?

441
00:37:23.900 --> 00:37:28.900
The reason we have it is because of the differential concentration of producers and consumers.

442
00:37:28.900 --> 00:37:37.900
As consumers, how many items do we consume in a year if you include wedding rings and shirts and ties and toothpaste and everything else under the sun?

443
00:37:37.900 --> 00:37:40.900
Thousands. How many do we produce?

444
00:37:40.900 --> 00:37:47.900
Unless we work for Heinz, which means we produce 57 varieties of stuff, we produce one thing.

445
00:37:47.900 --> 00:37:55.900
We produce lawyer services, doctor services, concert violin services, plumbing services, what have you.

446
00:37:55.900 --> 00:38:05.900
So what happens when the toothbrush manufacturers go to Washington D.C. and either ask for a subsidy or tariff protection against evil, I don't know, Paraguayan toothbrushes?

447
00:38:05.900 --> 00:38:13.900
Well, if there are 10 of them and it costs us a dollar each, they can make 300 million and divide that and make 30 million each.

448
00:38:13.900 --> 00:38:17.900
It only costs us a dollar each, but it'll mean 300 million for them.

449
00:38:17.900 --> 00:38:20.900
Will we so much as lift a finger to stop it? No.

450
00:38:20.900 --> 00:38:23.900
Putting a stamp on an envelope is 37 cents.

451
00:38:23.900 --> 00:38:29.900
Writing a letter costs us a half hour and if our time is worth $10 an hour that's $5.37.

452
00:38:29.900 --> 00:38:32.900
We're only losing a dollar. Why pay $5.37?

453
00:38:32.900 --> 00:38:39.900
They'll take some of this $30 million each or $300 million that they're going to get from us in the form of a dollar each

454
00:38:39.900 --> 00:38:42.900
and they'll bribe their way through Washington.

455
00:38:42.900 --> 00:38:45.900
That's why we have this sort of a thing.

456
00:38:45.900 --> 00:39:01.900
And if we somehow got off our hind legs and stopped them dead tracks in the toothbrush monstrosity outrage, next week the rubber band people move into town or the paperclip people move into town. We're tired. We got our own business to do.

457
00:39:01.900 --> 00:39:14.900
That's why we have so much regulation and subsidy and tariff protection. That's why, you know, the toothbrush manufacturers can come up with all sorts of great slogans, you know, America depends on its teeth or something.

458
00:39:14.900 --> 00:39:18.860
or something, and you know, if you don't give us money, you'll have lousy teeth.

459
00:39:18.860 --> 00:39:21.260
And we're not gonna stop that.

460
00:39:21.260 --> 00:39:23.260
That's why we have that sort of a thing.

461
00:39:24.220 --> 00:39:28.460
Okay, I've done monopoly, poverty, trade.

462
00:39:28.460 --> 00:39:30.020
I now move on to gold.

463
00:39:31.060 --> 00:39:33.060
What's going on with gold?

464
00:39:33.060 --> 00:39:36.560
Well, let me read a quote, a very good quote

465
00:39:36.560 --> 00:39:40.220
from Milton Friedman, who is no friend of the gold standard.

466
00:39:40.220 --> 00:40:10.220
And what Milton said is that the classical liberal is suspicious of assigning the government any functions that can be performed through the market, both because this substitutes coercion for voluntary cooperation, notice the libertarian element, in the area in question, and because by giving government an increased role it threatens freedom in other areas. Control over monetary and banking arrangements is a particularly dangerous power to entrust the government because of its far-reaching effects

467
00:40:10.220 --> 00:40:15.660
on Economic Activity at Large, as numerous episodes from ancient times to the present

468
00:40:15.660 --> 00:40:17.900
and over the whole of the globe tragically demonstrate.

469
00:40:17.900 --> 00:40:23.600
Okay, this sounds pretty good. I mean, I'm tempted to say, okay, Melty, you know, you're

470
00:40:23.600 --> 00:40:28.620
an Austrian. Come on down to the Mises Institute. You're one of us. But not so fast, because

471
00:40:28.620 --> 00:40:33.940
I have another quote from our friend Melton. And what he says here is, quote, the fundamental

472
00:40:33.940 --> 00:40:39.100
defect of a commodity standard, that is a gold standard, is a commodity standard, from

473
00:40:39.100 --> 00:40:52.100
And the point of view of society as a whole, something of which methodological individualists like Austrians are very suspicious, what's this society as a whole, is that it requires the use of real resources to add to the stock of money.

474
00:40:52.100 --> 00:40:59.100
People must work hard to dig gold out of the ground in South Africa in order to rebury it in Fort Knox.

475
00:40:59.100 --> 00:41:08.100
The necessity of using real resources for the operation of a commodity standard establishes a strong incentive for people to find ways to achieve the same result without employing those resources.

476
00:41:08.100 --> 00:41:23.100
Resources. If people will accept this money, piece of paper on which it is printed, I promise to pay X units of the commodity standard, these pieces of paper can form the same function as the physical pieces of gold or silver, and they require very much less in the form of resources.

477
00:41:23.100 --> 00:41:37.100
Well, this is a very different kind of a statement. The first one is, you know, markets, voluntary cooperation, better than coercion, tragic history of government money control. But in the second one, I'm very disappointed.

478
00:41:37.100 --> 00:41:43.100
The argument amounts to the statement, freedom costs real resources, therefore, don't do it.

479
00:41:43.100 --> 00:41:47.100
Well, this is hardly a ringing endorsement of liberty.

480
00:41:47.100 --> 00:41:52.100
What about justice though the heavens fall?

481
00:41:52.100 --> 00:41:55.100
What about our lives, our fortunes, our sacred honors?

482
00:41:55.100 --> 00:41:58.100
What about millions for defense, not a penny for tribute?

483
00:41:58.100 --> 00:42:02.100
We don't get that. We get, well, a ringing declaration for freedom,

484
00:42:02.100 --> 00:42:05.100
but it costs money, therefore, let's forget about it.

485
00:42:05.100 --> 00:42:12.100
First of all, it's not true that it costs real resources, or if it's true, it's true in a very greatly attenuated way,

486
00:42:12.100 --> 00:42:18.100
because that gold would be dug up anyway for teeth and for industrial purposes.

487
00:42:18.100 --> 00:42:25.100
It's only the differential because the gold would be slightly more valuable when it's also used for money that would maybe get a little bit more gold,

488
00:42:25.100 --> 00:42:31.100
but it's not certainly the whole amount of gold that's mined.

489
00:42:31.100 --> 00:42:35.100
But suppose it did cost resources. That doesn't follow that we shouldn't have it.

490
00:42:35.100 --> 00:42:38.100
The question that the economists would ask, well, is it worth it?

491
00:42:38.100 --> 00:42:45.100
Look, fences, gates, locks cost money. Does that mean we shouldn't do it?

492
00:42:45.100 --> 00:42:52.100
No. It means we only do it if the value of it to us is worth more than the cost of it.

493
00:42:52.100 --> 00:42:56.100
Well, the costs of not having gold standard are very serious.

494
00:42:56.100 --> 00:42:59.100
Some people say that we had World War II because of this.

495
00:42:59.100 --> 00:43:05.100
World War II because of the German hyperinflation of 1923 which brought Hitler into power.

496
00:43:05.100 --> 00:43:15.100
Had we not had the German hyperinflation in 1923, the German society might not have been so messed up and Hitler might not have been able to get through.

497
00:43:15.100 --> 00:43:19.100
So this is conjectural, who knows, but this is certainly an instance.

498
00:43:19.100 --> 00:43:25.100
Another point is that the Austrian analysis of the business cycle is that it comes about from inflation.

499
00:43:25.100 --> 00:43:27.580
So our Great Depression came about from this.

500
00:43:27.580 --> 00:43:29.620
Well, these things seem very serious,

501
00:43:30.620 --> 00:43:32.700
certainly worth an insurance policy.

502
00:43:34.540 --> 00:43:36.300
Let's go back a little bit in history

503
00:43:36.300 --> 00:43:39.500
and theoretical history and ask,

504
00:43:39.500 --> 00:43:41.620
why do we need money in the first place?

505
00:43:42.540 --> 00:43:43.740
And then I'm gonna try to prove to you

506
00:43:43.740 --> 00:43:46.260
that money has to start as a commodity.

507
00:43:46.260 --> 00:43:47.940
Again, this is not original with me.

508
00:43:47.940 --> 00:43:51.180
It started with Rothbard and came with Austrians before that,

509
00:43:51.180 --> 00:43:53.820
but I'm just sort of passing on the baton now,

510
00:43:53.820 --> 00:43:55.860
as I am for most of my lectures.

511
00:43:55.860 --> 00:43:57.540
Most of this stuff is not original with me.

512
00:43:57.540 --> 00:44:00.300
Some of it is, but most of it is not.

513
00:44:00.300 --> 00:44:02.900
So why do we have money in the first place?

514
00:44:02.900 --> 00:44:04.020
We have money in the first place

515
00:44:04.020 --> 00:44:07.060
because of a thing called the double coincidence of wants.

516
00:44:08.580 --> 00:44:10.260
I have a chicken and I want pickles.

517
00:44:10.260 --> 00:44:12.700
I have to find a pickle-owning chicken-wonter,

518
00:44:13.820 --> 00:44:15.140
which is tough.

519
00:44:15.140 --> 00:44:16.100
I mean, where are you gonna find a guy

520
00:44:16.100 --> 00:44:17.900
who's got pickles and wants chickens?

521
00:44:17.900 --> 00:44:20.260
Do you know what the odds of that are?

522
00:44:20.260 --> 00:44:24.760
And I have to, I can't produce everything that I want.

523
00:44:24.760 --> 00:44:27.660
I can't produce both the chickens and the pickles

524
00:44:27.660 --> 00:44:31.320
and the rye bread and the wristwatches and the shirts

525
00:44:31.320 --> 00:44:33.600
because that way lies death.

526
00:44:33.600 --> 00:44:34.960
We've established if we're gonna live,

527
00:44:34.960 --> 00:44:36.400
we have to specialize in something

528
00:44:36.400 --> 00:44:38.360
and have a division of labor and specialization

529
00:44:38.360 --> 00:44:42.120
and more productivity and learn and have R&D

530
00:44:42.120 --> 00:44:44.000
and stuff like that.

531
00:44:44.000 --> 00:44:46.080
Okay, so we have to trade.

532
00:44:46.080 --> 00:44:48.700
So instead of making a direct trade,

533
00:44:48.700 --> 00:44:51.580
A direct trade, I make an indirect trade.

534
00:44:51.580 --> 00:44:52.760
I know I'll never find a guy

535
00:44:52.760 --> 00:44:54.660
who's got pickles and wants chickens.

536
00:44:55.720 --> 00:44:58.360
What do I do with my chickens?

537
00:44:59.300 --> 00:45:00.560
I'll trade them in for something

538
00:45:00.560 --> 00:45:03.140
that I know everyone will accept.

539
00:45:03.140 --> 00:45:04.300
And then I take that thing

540
00:45:04.300 --> 00:45:06.060
and I trade it in for the pickles.

541
00:45:06.060 --> 00:45:08.420
Because he'll accept that because everyone will accept that.

542
00:45:08.420 --> 00:45:11.380
The whole reason that we have these pieces of paper

543
00:45:11.380 --> 00:45:13.220
of money is because we fully expect

544
00:45:13.220 --> 00:45:14.820
that everyone else will take it from us

545
00:45:14.820 --> 00:45:17.180
when we want to spend it, right?

546
00:45:17.180 --> 00:45:18.780
That's why we accept it.

547
00:45:18.780 --> 00:45:21.080
If we didn't think that other people would take it,

548
00:45:21.080 --> 00:45:23.540
we wouldn't take it in the first place.

549
00:45:23.540 --> 00:45:24.980
Murray Rothbard used to say, well,

550
00:45:24.980 --> 00:45:27.660
suppose I come up with a thing called 100 Rothbards

551
00:45:27.660 --> 00:45:30.040
and I start trying to buy stuff with it.

552
00:45:30.040 --> 00:45:30.880
No one would buy it.

553
00:45:30.880 --> 00:45:33.140
And I always used to say, well, Murray, I would buy one,

554
00:45:33.140 --> 00:45:35.500
just sort of put it up on my door or something like that.

555
00:45:35.500 --> 00:45:40.260
But that was just sort of a giddy kind of a counterexample.

556
00:45:40.260 --> 00:45:43.020
The reality is that he couldn't put Rothbards

557
00:45:43.020 --> 00:45:45.300
and then start buying cars or houses.

558
00:45:45.300 --> 00:45:55.300
Okay, so what sort of things were there that everyone would accept?

559
00:45:55.300 --> 00:46:00.300
Well, everyone accepts sugar, salt.

560
00:46:00.300 --> 00:46:05.300
Sugar and salt and fish hooks in fishing communities last a long time.

561
00:46:05.300 --> 00:46:07.300
Bananas would make a very lousy money.

562
00:46:07.300 --> 00:46:10.300
Cement would make a very lousy money for opposite reasons.

563
00:46:10.300 --> 00:46:11.300
Bananas because they'll go bad.

564
00:46:11.300 --> 00:46:16.780
They'll go bad. Cement won't go bad, but it's so heavy compared to the value of it.

565
00:46:16.780 --> 00:46:23.740
Diamonds would make a lousy money because you can't make change in it, because if you cut a diamond in half, you get one-eighth the value.

566
00:46:23.740 --> 00:46:30.020
So whenever there was competition between these various commodities, gold and sometimes silver won out.

567
00:46:30.020 --> 00:46:36.180
That's why Austrians and libertarians favored the gold standard. Not because we're fetishists.

568
00:46:36.180 --> 00:46:40.980
Even though I accused somebody of being a fetishist here before, I don't know if it was a gold fetishist.

569
00:46:40.980 --> 00:46:44.700
One of my favorite cartoon characters was Scrooge McDuck.

570
00:46:44.700 --> 00:46:47.180
And what old Scrooge would do is he'd get in his money bin,

571
00:46:47.180 --> 00:46:50.540
he'd throw the money and it would sort of land on him, go, ooh, you know.

572
00:46:50.540 --> 00:46:53.540
Well, we're accused of that, but we're really, you know, we're not into that.

573
00:46:53.540 --> 00:46:56.580
We have our other perversions, but not that one.

574
00:46:56.580 --> 00:46:59.380
We're really not into this gold fetishism.

575
00:46:59.380 --> 00:47:03.980
So the gold standard is really shorthand for market money.

576
00:47:03.980 --> 00:47:05.740
I mean, we favor whatever...

577
00:47:05.740 --> 00:47:08.740
We look back at history and say whenever people were free to choose,

578
00:47:08.740 --> 00:47:11.260
which is the title of one of Friedman's books.

579
00:47:11.260 --> 00:47:13.420
They always pick gold, so we favor gold.

580
00:47:13.420 --> 00:47:15.780
Look, if tomorrow we had free enterprise money

581
00:47:15.780 --> 00:47:18.740
and people picked platinum or molybdenum

582
00:47:18.740 --> 00:47:20.980
or something else that I can't pronounce,

583
00:47:20.980 --> 00:47:22.940
we would have no problem with that.

584
00:47:22.940 --> 00:47:24.460
So it's only called the gold standard

585
00:47:24.460 --> 00:47:26.740
because of this historical accident.

586
00:47:26.740 --> 00:47:28.980
Really what it is is free enterprise money

587
00:47:28.980 --> 00:47:31.820
or free market money or capitalist money.

588
00:47:31.820 --> 00:47:34.440
But it always has to start out as a commodity

589
00:47:34.440 --> 00:47:36.980
because it's only a commodity that we know

590
00:47:36.980 --> 00:47:38.060
that other people will accept

591
00:47:38.060 --> 00:47:39.740
because of its commodity value.

592
00:47:44.620 --> 00:47:45.460
Whoops.

593
00:47:47.940 --> 00:47:49.480
Okay, enough of gold.

594
00:47:51.460 --> 00:47:55.460
Now, I had other things on my list to do,

595
00:47:57.380 --> 00:48:02.180
and the other things I had on my list to do are,

596
00:48:03.460 --> 00:48:06.580
can't find my list, oh, here it is.

597
00:48:06.580 --> 00:48:11.520
I was going to do the Austrian Business Cycle Theory, Taxes, Profits and Fractional Reserve Banking,

598
00:48:11.520 --> 00:48:17.820
but since I'm sort of running out of time and since I was specifically asked to do public goods,

599
00:48:17.820 --> 00:48:29.320
I'm going to move into public goods.

600
00:48:29.320 --> 00:48:39.880
Now, public goods are an instance of so-called market failure.

601
00:48:39.880 --> 00:48:46.520
The big three market failures are monopoly, externalities, and public goods.

602
00:48:46.520 --> 00:48:48.000
There are many other market failures.

603
00:48:48.000 --> 00:48:50.640
It seems sometimes you read the American Economic Review,

604
00:48:50.640 --> 00:48:55.440
which is the flagship journal in the profession,

605
00:48:55.440 --> 00:48:58.600
and every article is coming up with a new market failure.

606
00:48:58.600 --> 00:49:00.600
They just love market failures.

607
00:49:00.600 --> 00:49:07.600
Well, our Austrian economics is sort of predicated on the idea

608
00:49:07.600 --> 00:49:10.600
that there's no such thing as market failure.

609
00:49:10.600 --> 00:49:15.600
And what I'm going to do first is to make the public goods argument of market failure,

610
00:49:15.600 --> 00:49:18.600
and then I'll try to show why that's wrong.

611
00:49:18.600 --> 00:49:25.600
So, for the market failure types, there are two things.

612
00:49:25.600 --> 00:49:54.600
Two things, one is excludability, and the other is a thing called rivalrousness, this is the idea that you really can't have a free enterprise lighthouse, or a free enterprise army, because you'll protect free riders, and if the free riders don't pay, well then how can you finance it in the first place?

613
00:49:55.600 --> 00:50:06.040
okay so let's develop it the question is can you exclude people that is thank you

614
00:50:06.040 --> 00:50:13.160
for a little musical break can you exclude non-payers the key is can you

615
00:50:13.160 --> 00:50:21.520
exclude non-payers and we say yes you can or no you can't and we divide all

616
00:50:21.520 --> 00:50:38.520
And then here you say, is it rivalrous? This is the question, should you exclude? Should exclude? And the question comes about, if there are marginal costs or zero, then you should not exclude.

617
00:50:38.520 --> 00:50:47.520
If marginal costs are zero, you should not exclude. And if marginal costs are positive, then yes, you should exclude.

618
00:50:47.520 --> 00:50:52.520
Marginal costs means there's a cost extra to service one more person.

619
00:50:52.520 --> 00:50:56.520
And if it doesn't cost extra to service one more person, the argument says,

620
00:50:56.520 --> 00:50:59.520
well, then you shouldn't exclude even if you can exclude.

621
00:50:59.520 --> 00:51:04.520
I don't think this is fully coherent yet, but when I give examples,

622
00:51:04.520 --> 00:51:07.520
that I think will put flesh on the bones of this argument.

623
00:51:07.520 --> 00:51:11.520
It's a coherent argument. It's a rational argument. It's not just gibberish.

624
00:51:11.520 --> 00:51:15.520
So we have to do full justice to it if we're going to then criticize it.

625
00:51:15.520 --> 00:51:30.520
Okay, so what kinds of goods are there that the marginal costs are greater than zero of servicing one more person and that you can exclude them?

626
00:51:30.520 --> 00:51:41.520
For example, a hot dog. Is a hot dog, can you exclude non-hot dog eaters from eating hot dogs when they don't pay?

627
00:51:41.520 --> 00:51:57.520
Yes. You threaten to call the cops on them. Okay, there are a few hot dog thieves, but by and large, most people, let's forget about thieves. You can exclude non-paying hot dog eaters by just threatening to throw them in jail if they grab your hot dogs without paying.

628
00:51:57.520 --> 00:52:05.520
Should you exclude them? Yes, you should, because one guy eats up a hot dog, it costs real money.

629
00:52:05.520 --> 00:52:08.020
Okay, everyone with me on that first case?

630
00:52:08.020 --> 00:52:12.520
Okay, let's take a case here where you can exclude, but you shouldn't.

631
00:52:12.520 --> 00:52:19.020
And the example usually offered there is a broadcast.

632
00:52:19.020 --> 00:52:22.320
Can you exclude people from TV or radio?

633
00:52:22.320 --> 00:52:28.320
Yes, you can, by jamming the thing and then selling them a box that unjams it

634
00:52:28.320 --> 00:52:31.020
and charging them a monthly fee for unjamming it.

635
00:52:31.020 --> 00:52:33.620
You can exclude it pretty cheaply.

636
00:52:33.620 --> 00:52:53.620
Should you? No. Because if I'm broadcasting a show, the Jay Leno show, and everyone is watching here, except David, and everyone is paying, but David isn't, does it cost anything else to let him watch it? No, it costs nothing.

637
00:52:53.620 --> 00:52:59.420
So I shouldn't exclude him, because it costs nothing for him to enjoy it.

638
00:52:59.420 --> 00:53:05.060
So if I exclude him, GDP is lower than it would otherwise be.

639
00:53:05.060 --> 00:53:08.900
And for the mainstream economist, this is a big no-no.

640
00:53:08.900 --> 00:53:12.180
So a broadcast is a case where you can exclude, but you shouldn't,

641
00:53:12.180 --> 00:53:15.700
because the cost of adding one more listener is zero,

642
00:53:15.700 --> 00:53:19.820
because you have to undergo all the costs to put on the show.

643
00:53:19.820 --> 00:53:21.500
So we say that this is a private good,

644
00:53:21.500 --> 00:53:24.700
and now we have the first case of a public good.

645
00:53:24.700 --> 00:53:27.500
What's the second case of a public good?

646
00:53:27.500 --> 00:53:30.540
Second case of a public good is where you can't exclude,

647
00:53:32.060 --> 00:53:33.660
but there are extra costs.

648
00:53:33.660 --> 00:53:38.660
And the example there is a crowded city street.

649
00:53:42.540 --> 00:53:47.540
Here, it's impossible to exclude, say those guys,

650
00:53:47.860 --> 00:53:50.940
to anticipate my criticism.

651
00:53:50.940 --> 00:53:55.780
Maybe the government can't exclude, but I'll bet your private street owners sure could.

652
00:53:55.780 --> 00:54:01.780
You know, they exclude from Disney World, they don't exclude from Central Park,

653
00:54:01.780 --> 00:54:07.200
because the people that run Central Park are government.

654
00:54:07.200 --> 00:54:11.300
By the way, just off the point a little bit, where do you feel safer?

655
00:54:11.300 --> 00:54:16.060
In Central Park at three in the morning on a Saturday or in Disney World?

656
00:54:16.060 --> 00:54:19.300
Obviously in Disney World, because if a murder or a rape occurs there,

657
00:54:19.300 --> 00:54:20.640
They lose tons of money.

658
00:54:22.100 --> 00:54:25.300
Whereas in Central Park, when I used to live here,

659
00:54:25.300 --> 00:54:26.760
I don't know what it's like now, but you know,

660
00:54:26.760 --> 00:54:28.220
no one meets anyone at three in the morning

661
00:54:28.220 --> 00:54:30.360
in Central Park, that's muggers' terrain.

662
00:54:31.900 --> 00:54:33.660
Okay, so in a crowded city street,

663
00:54:33.660 --> 00:54:36.860
they say you can't exclude, but it does use real resources

664
00:54:36.860 --> 00:54:39.140
because when it's a crowded city street,

665
00:54:39.140 --> 00:54:42.060
any new person who enters slows everyone else down.

666
00:54:43.100 --> 00:54:43.940
Got it?

667
00:54:44.900 --> 00:54:47.540
Okay, and what are the cases here?

668
00:54:47.540 --> 00:54:48.700
So that's also a public good,

669
00:54:48.700 --> 00:54:54.100
And then the fourth case is a public good, both on excludability and rivalrousness grounds.

670
00:54:54.100 --> 00:55:03.100
And here you have the lighthouse and you have national defense.

671
00:55:03.100 --> 00:55:09.500
Okay, so I hope now by giving examples, I've articulated exactly what it is that these people are saying,

672
00:55:09.500 --> 00:55:14.800
whereas before when it was just the principles, it was maybe too airy-fairy and theoretical.

673
00:55:14.800 --> 00:55:18.320
So the argument is that this is private goods,

674
00:55:18.320 --> 00:55:21.040
but these all three have public good in this

675
00:55:21.040 --> 00:55:23.160
and therefore the government has to subsidize

676
00:55:23.160 --> 00:55:26.200
or tax or do something to fix the market failure

677
00:55:26.200 --> 00:55:28.060
because the market can't provide it.

678
00:55:29.440 --> 00:55:32.660
Or if the market can do it, the market shouldn't

679
00:55:32.660 --> 00:55:35.300
because it's inefficient to exclude people

680
00:55:35.300 --> 00:55:37.740
for whom including costs nothing.

681
00:55:39.080 --> 00:55:40.120
Okay, that's the argument.

682
00:55:40.120 --> 00:55:42.720
And now what I'm gonna try to do is criticize this.

683
00:55:42.720 --> 00:55:50.720
Well, first of all, let's take this case here. Let's call this A, B, C and D.

684
00:55:50.720 --> 00:55:55.720
First of all, don't get the impression that there are 25% of the goods in all these categories.

685
00:55:55.720 --> 00:56:02.720
Rather, here it's 90% of the goods, and the other three, it's 10% of the goods, to just give you rough numbers.

686
00:56:02.720 --> 00:56:10.720
These are not socialists. These are actually what passes for free market economists of the non-Austrian stamp.

687
00:56:10.720 --> 00:56:17.720
Okay, I mean, the Marxists would say everything should be a public good and, you know, market can't do anything.

688
00:56:17.720 --> 00:56:19.720
Okay, so what are some of the problems with this?

689
00:56:19.720 --> 00:56:25.720
First of all, I object to saying that the marginal costs here are zero.

690
00:56:25.720 --> 00:56:32.720
Whether there are marginal costs or not is a subjective thing.

691
00:56:32.720 --> 00:56:35.720
Austrians are subjectivists in these costs.

692
00:56:35.720 --> 00:56:38.720
Costs are subjective things. They are undergone by individuals.

693
00:56:38.720 --> 00:56:46.720
If I start up the Jay Leno show and I sell it to all you guys, I might resent giving it to David for free.

694
00:56:46.720 --> 00:56:53.720
Maybe it'll cost me in terms of personal terms. Who the hell is he to get the show for free? Everyone else is paying for it.

695
00:56:53.720 --> 00:57:02.720
So I dispute the argument that marginal cost is zero. Secondly, I have a reductio.

696
00:57:02.720 --> 00:57:12.720
Every enterprise that is less than at full capacity has marginal cost of zero for the extra amount.

697
00:57:12.720 --> 00:57:22.720
Take a baseball game and everyone paid 10, 20, 30 bucks to go to the baseball game, but only 90% of the seats are filled, right?

698
00:57:22.720 --> 00:57:26.720
Well, would it cost anything to let one more guy in there?

699
00:57:26.720 --> 00:57:30.720
No, wouldn't cost anything. He'll sit there quietly. He won't disrupt or anything.

700
00:57:30.720 --> 00:57:46.720
be a nice guy, just like everyone else. So therefore, according to the logic of this, baseball or any institution that has less than full capacity always is a public good and the government should become involved.

701
00:57:46.720 --> 00:57:55.720
Look, they put me up at a hotel. Does that hotel have 100% capacity? No. If they have 70% capacity or 80% capacity, they're doing pretty well.

702
00:57:55.720 --> 00:57:58.220
So to take one extra guy off the street and say,

703
00:57:58.220 --> 00:58:01.720
hey, my good man, how would you like to stay in this hotel tonight?

704
00:58:01.720 --> 00:58:07.720
Would only cost them zero if you forget about the laundry and stuff like that.

705
00:58:07.720 --> 00:58:11.420
Right here, we have this room. It's only, I don't know, 70, 80 percent full.

706
00:58:11.420 --> 00:58:14.520
Here's a seat right in the front row.

707
00:58:14.520 --> 00:58:16.020
We could put one more person in there.

708
00:58:16.020 --> 00:58:18.520
Now, not that we're charging here, but it's the same principle.

709
00:58:18.520 --> 00:58:24.120
I'm just giving more examples to solidify the understanding of the case.

710
00:58:24.120 --> 00:58:31.120
So the reductio ad absurdum of this stuff is that everything with less than full capacity,

711
00:58:31.120 --> 00:58:36.440
which means virtually everything, even tomatoes, not every tomato gets sold.

712
00:58:36.440 --> 00:58:37.440
Some go to rot.

713
00:58:37.440 --> 00:58:40.900
So does that mean we should force them to give all tomatoes away for free, which means

714
00:58:40.900 --> 00:58:44.280
that the market can't produce them, which means that only government can produce potatoes

715
00:58:44.280 --> 00:58:48.840
or tomatoes or hotel rooms or anything else like that?

716
00:58:48.840 --> 00:58:53.160
Well that's a recipe for disaster or it's a recipe for socialism.

717
00:58:53.160 --> 00:58:58.000
Okay, now let's take B, crowded city street.

718
00:58:58.000 --> 00:59:01.760
Well, the government road owner can't exclude,

719
00:59:01.760 --> 00:59:04.160
but a market guy could exclude.

720
00:59:04.160 --> 00:59:06.000
How could the market guy exclude?

721
00:59:06.000 --> 00:59:08.080
I didn't do a full job on the private roads

722
00:59:08.080 --> 00:59:11.400
because I said I was just hitting the high points.

723
00:59:16.280 --> 00:59:17.600
You don't put a penny in in front

724
00:59:17.600 --> 00:59:19.520
of every little old lady's house.

725
00:59:19.520 --> 00:59:26.040
Rather you, you know those universal product codes on the bottle of soda?

726
00:59:26.040 --> 00:59:28.400
And when you go to the grocery store you go blip.

727
00:59:28.400 --> 00:59:30.960
Well you could put them on the underbodies of cars.

728
00:59:30.960 --> 00:59:35.720
And then as you go over the road you register and at the end of the month you get a bill.

729
00:59:35.720 --> 00:59:42.280
And anyone who doesn't have a universal product code or doesn't pay the bill or whatever,

730
00:59:42.280 --> 00:59:43.760
you come get them.

731
00:59:43.760 --> 00:59:45.040
You can exclude them.

732
00:59:45.040 --> 00:59:49.080
You don't have to stop them each time and say give us a penny now, give us another penny.

733
00:59:49.080 --> 01:00:10.080
Ronald Coase wrote an article that everyone interprets as saying that there were private linehouses in Great Britain in the 17th or 18th century.

734
01:00:10.080 --> 01:00:18.080
My buddy and I, Bill Barnett, have an article out, or at least floating the rounds of the journals, saying that this isn't quite so.

735
01:00:18.080 --> 01:00:23.360
Let's forget about that curlicue. What Ronald Coase showed and what other people actually

736
01:00:23.360 --> 01:00:27.080
showed, what Ronald Coase failed to show in my view, but what other people did show, is

737
01:00:27.080 --> 01:00:33.440
that you had private lighthouses. Now how can you have a private lighthouse? Surely

738
01:00:33.440 --> 01:00:39.200
the cost of allowing one more boat to benefit from the lighthouse is zero, and surely you

739
01:00:39.200 --> 01:00:44.640
can't exclude a boat, but they did exclude the boat. What they had was a credible threat.

740
01:00:44.640 --> 01:01:14.640
I say, okay, look, this time you'll get away with it. But next time, if we see that you're the only boat out, we're shutting out the lighthouse, and then you might crash on the rocks, and your sailors are going to know this, and you're going to have to pay those sailors twice as much. And also, you're going to have to go slower, and slower means more costly. So we have a credible threat to exclude you, and if you don't pay, we're going to do all these things.

741
01:01:14.640 --> 01:01:26.940
National Defense, same thing, whether it's national defense against the Iraqis or the Ayatollahs or the Soviets or the Martians or whoever it is, same principle, whether it's domestic or international terrorists.

742
01:01:26.940 --> 01:01:39.040
Can you exclude non-protected people? Sure, if you think about it. Look, on your house, you've got a seal of approval that Walter Block will protect you. On your house, you don't. You dirty rat, you didn't pay.

743
01:01:39.040 --> 01:01:46.480
So that tells somebody else, your house, if you attack your house, I won't stop them.

744
01:01:46.480 --> 01:01:49.480
It might not be something, it might be something, who knows?

745
01:01:49.480 --> 01:01:51.840
Everyone wears a little thing on their lapel.

746
01:01:51.840 --> 01:01:56.360
I'm protected by Walter Block Protection Services, or not, or Acme Protection Services.

747
01:01:56.360 --> 01:01:59.360
We can exclude non-payers.

748
01:01:59.360 --> 01:02:04.880
Most property, you see, you might ask, well, how could the poor pay for protection?

749
01:02:04.880 --> 01:02:29.880
The way the poor pay for protection is the poor rent apartments, and when the poor rent apartments, they rented from rich landlords, capitalist pig landlords, and the capitalist pig landlords would have an incentive to make sure that the people who were renting weren't accosted, as the case I gave you in Disneyland.

750
01:02:29.880 --> 01:02:32.480
When people go to Disneyland, they feel safe.

751
01:02:32.480 --> 01:02:35.360
If anyone acts obstreperously, they're surrounded

752
01:02:35.360 --> 01:02:39.320
by a bunch of ducks and geese and mice all packing heat,

753
01:02:39.320 --> 01:02:42.160
saying, you know, sir, come with me, go quietly,

754
01:02:42.160 --> 01:02:43.920
or we're gonna kick your butt or something.

755
01:02:43.920 --> 01:02:44.760
I don't know what they say.

756
01:02:44.760 --> 01:02:47.600
I've never been on the receiving end of that stuff.

757
01:02:47.600 --> 01:02:49.960
But you can exclude people.

758
01:02:49.960 --> 01:02:52.040
You can protect people with private property.

759
01:02:52.040 --> 01:02:54.880
You don't need the government to do this.

760
01:02:54.880 --> 01:02:59.000
You can say, look, people in Massachusetts

761
01:02:59.000 --> 01:03:06.000
So taxachusets don't pay for defense and tell the ayatollah, you know, if you guys go there, we're not going to mess with you.

762
01:03:06.000 --> 01:03:12.000
Now, it's not a perfect exclusion, but it's, nothing is perfect.

763
01:03:12.000 --> 01:03:20.000
Okay, I'm supposed to go from six to seven, and I've already gone over and I forgot to do the abortion,

764
01:03:20.000 --> 01:03:27.000
which I won't do because no one's asked me yet, but now we're having a question for it, right?

765
01:03:27.000 --> 01:03:35.000
Till 730, okay. What about abortion? Speaking of Austrian economics, what about abortion?

766
01:03:35.000 --> 01:03:48.000
Okay. Whoops, I keep stepping on that thing. I don't know what's wrong with me. Well, I'll give you the quick and dirty answer on that one.

767
01:03:48.000 --> 01:03:55.000
This is a very tough, tough question, and libertarians disagree. Needless to say, those who disagree with me are on the wrong side of this issue.

768
01:03:55.000 --> 01:04:12.000
There are two schools of thought on the abortion issue. There are the pro-choice people who believe that you can have an abortion pretty much at any time, at the extreme, and then there are the pro-life people who say you can't.

769
01:04:12.000 --> 01:04:22.000
I think that the libertarians offer a third alternative, a real third alternative, not just a compromise, but a real philosophical third alternative.

770
01:04:22.000 --> 01:04:27.280
and even if it's wrong I recommend it to you on that ground because here we have

771
01:04:27.280 --> 01:04:32.440
this horrible philosophical dispute where well-meaning people on both sides

772
01:04:32.440 --> 01:04:37.400
of the issue find themselves at loggerheads probably since slavery in the

773
01:04:37.400 --> 01:04:46.120
1860s there was there is no dispute that more pulls ourselves apart from each

774
01:04:46.120 --> 01:04:56.120
So a third alternative, evictionism, the libertarian view, which stems from private property rights, which I gave in my first lecture.

775
01:04:56.120 --> 01:05:03.120
And let me tell you how that works. Now, I am going to, in some sense, take the pro-choice position.

776
01:05:03.120 --> 01:05:08.120
So when should I say that life begins? Well, it's hard to say when life begins.

777
01:05:08.120 --> 01:05:17.120
You know, is it at birth or is it at conception when the sperm and the egg get together and you have a fertilized egg?

778
01:05:17.120 --> 01:05:25.120
In order to make it toughest for myself, because I am going to come out in some sense for the abortion pro-choice situation,

779
01:05:25.120 --> 01:05:31.120
I'm going to assume the very worst case for myself, namely, I'm going to assume that life starts at inception.

780
01:05:31.120 --> 01:05:36.120
A fertilized egg is a human being. Why? Because it has the potential to grow.

781
01:05:36.120 --> 01:05:43.120
and also, because I don't want to get away with easy arguing, assuming something that makes my case easy.

782
01:05:43.120 --> 01:05:51.120
So what is the evictionist philosophy? The evictionist philosophy is you have no right to abort,

783
01:05:51.120 --> 01:05:58.120
because abort equals evict plus kill, and the fetus, the little person in you, is an innocent person,

784
01:05:58.120 --> 01:06:02.120
hasn't first initiated violence, so you're not entitled to initiate violence against him,

785
01:06:02.120 --> 01:06:09.120
But you are justified in removing them from your property.

786
01:06:09.120 --> 01:06:16.120
Now take the case of a pregnancy that results as a result of rape.

787
01:06:16.120 --> 01:06:21.120
So here you have a 15-year-old girl walking down the street, gets grabbed, gets raped,

788
01:06:21.120 --> 01:06:24.120
and all of a sudden she's got this thing growing in her.

789
01:06:24.120 --> 01:06:27.120
It's a human being, but it's a trespasser.

790
01:06:27.120 --> 01:06:30.120
It's an unwanted tenant.

791
01:06:30.120 --> 01:06:43.120
It's, what's that word I'm looking for when one animal lives inside there? It's a parasite. Not intentionally, but in effect, it's a parasite.

792
01:06:43.120 --> 01:06:58.120
She has a right to rid herself of that. To kill it? No. Now in 500 years from now, there's no one who doubts, I think, that all such fetuses will be able to be removed from the woman's body without being harmed in the slightest.

793
01:06:58.120 --> 01:07:04.120
I mean, if we live that long, surely in 500 years we'll have the technology that we can remove it.

794
01:07:04.120 --> 01:07:13.120
Will she then have the right to kill it too? Absolutely not. 500 years ago or 50 years ago, the only way to remove a fetus is to kill it.

795
01:07:13.120 --> 01:07:26.120
Right now, if we adopt the libertarian evictionist theory, we will at one fell swoop at least get rid of partial birth abortions, which is a monstrosity.

796
01:07:26.120 --> 01:07:33.120
Anestrosity, where you have a baby that's just about coming out of the womb and they kill it.

797
01:07:33.120 --> 01:07:37.120
A greater injustice than that is hard to imagine.

798
01:07:37.120 --> 01:07:42.120
Because there are many people that are willing to take over the baby and raise it, and this woman kills it.

799
01:07:42.120 --> 01:07:44.120
That's just downright murder.

800
01:07:44.120 --> 01:07:50.120
And as the years progress, every 10 years we'll be able to go back a few weeks, maybe now.

801
01:07:50.120 --> 01:07:56.120
In the ninth month, all babies will be viable if they're merely evicted but not aborted.

802
01:07:56.120 --> 01:08:00.120
And maybe in 10 or 20 years, we can go back to the eighth or seventh or sixth month.

803
01:08:00.120 --> 01:08:10.120
And when we get to the year 500 from now, the year 2504, we'll get right back to the beginning.

804
01:08:10.120 --> 01:08:20.320
So I'm offering this as a pragmatic way of solving the problem from the pro-life point

805
01:08:20.320 --> 01:08:21.320
of view.

806
01:08:21.320 --> 01:08:23.400
Right now, the pro-life people are losing.

807
01:08:23.400 --> 01:08:28.640
I happen to be a pro-life person philosophically or out of purpose.

808
01:08:28.640 --> 01:08:32.720
I don't like the idea of baby human beings being killed.

809
01:08:32.720 --> 01:08:37.700
If we adopt evictionism, medical technology is on our side.

810
01:08:37.700 --> 01:08:41.460
As the medical technology improves, the problem will end.

811
01:08:41.460 --> 01:08:47.500
If we don't, if we stick with our present guns and say, no, it's got to be none of this,

812
01:08:47.500 --> 01:08:51.860
no evictionism, and we stick with what we got, even in 500 years from now, we'll still

813
01:08:51.860 --> 01:08:53.500
have babies being slaughtered.

814
01:08:53.500 --> 01:08:59.140
Okay, now what are the objections to my modest proposal?

815
01:08:59.140 --> 01:09:02.300
One objection to my modest proposal is the following.

816
01:09:02.300 --> 01:09:05.640
I invite you for a trip on my airplane.

817
01:09:05.640 --> 01:09:10.640
We get up to 30,000 feet, I say, okay, time for you to leave.

818
01:09:10.840 --> 01:09:12.240
You say, well, what about a parachute?

819
01:09:12.240 --> 01:09:13.800
I say, well, we don't have parachutes,

820
01:09:13.800 --> 01:09:16.860
and no parachutes for you, leave.

821
01:09:19.000 --> 01:09:21.160
The point is, the analogy is that the mother

822
01:09:21.160 --> 01:09:25.600
invited the baby on board, and it was a nine-month trip,

823
01:09:25.600 --> 01:09:27.760
or when I invite you on board, you know,

824
01:09:27.760 --> 01:09:29.520
I'm supposed to take you up and then take you back,

825
01:09:29.520 --> 01:09:31.760
and none of this in the middle get rid of you.

826
01:09:35.640 --> 01:09:41.640
The one problem with that analogy is the case of the rape.

827
01:09:41.640 --> 01:09:45.640
The rape mother or the rape victim did not invite anyone anywhere.

828
01:09:45.640 --> 01:09:50.640
And if all babies have equal rights because they're all equally innocent,

829
01:09:50.640 --> 01:09:52.640
that baby has no right at all to be in there.

830
01:09:52.640 --> 01:09:56.640
And if that baby has no right at all to be in there, then no baby has the right to be in there.

831
01:09:56.640 --> 01:10:02.640
Second argument against this criticism is the following.

832
01:10:02.640 --> 01:10:06.640
I believe in implicit contracts.

833
01:10:06.640 --> 01:10:10.640
And the argument here is that the mother has an implicit contract with the baby.

834
01:10:10.640 --> 01:10:13.640
For example, if you go to a restaurant and you order a cup of coffee and drink it down

835
01:10:13.640 --> 01:10:17.640
and they present you with a bill for a million dollars,

836
01:10:17.640 --> 01:10:20.640
forget it.

837
01:10:20.640 --> 01:10:23.640
There's no way in libertarian society that you're going to have to pay a million dollars

838
01:10:23.640 --> 01:10:27.640
because the implicit contract is that a cup of coffee costs a buck or two

839
01:10:27.640 --> 01:10:31.640
if you go to some fancy schmancy place, you know, five or ten bucks.

840
01:10:31.640 --> 01:10:39.640
I don't know about a hundred or a thousand bucks, now we're getting in that gray area, but certainly if it's a million bucks, that's crazy.

841
01:10:39.640 --> 01:10:46.640
So I'm open to the idea of implicit contracts. Does the mother have an implicit contract with the baby? I say no.

842
01:10:46.640 --> 01:10:59.640
Forget about the father for the moment. If there is an agreement with the father, as in the Mary Beth Whitehead, I think it was, who was hired to have a baby, contractually obligated, well then she had an obligation to keep that baby because she would be violating the contract.

843
01:10:59.640 --> 01:11:11.640
Fine. So if there's an agreement with the husband, okay, but just suppose a woman goes to a bar, gets impregnated, and that's it. There's no husband in the picture. Does she have an implicit contract with the baby?

844
01:11:11.640 --> 01:11:26.640
Well, I say a necessary condition for an implicit contract is that there be two parties. Now, I'm willing to consider the baby as a party, or the fetus, or the fertilized egg, but at the time of intercourse, there's no one with whom to have a contract.

845
01:11:26.640 --> 01:11:31.640
Because at the time of intercourse, the sperm and the egg are not yet together.

846
01:11:31.640 --> 01:11:37.640
Another argument against my view is, quote, if you make your bed, you have to lie in it.

847
01:11:37.640 --> 01:11:40.640
If you get pregnant, you have to go through with it.

848
01:11:40.640 --> 01:11:43.640
Why? Why do you have to lie in your bed?

849
01:11:43.640 --> 01:11:47.640
If I'm stupid enough to go rock climbing and I fall and I get a broken leg,

850
01:11:47.640 --> 01:11:51.640
do I have to lie in my bed and that is not get my broken leg mended?

851
01:11:51.640 --> 01:11:55.640
No, I can get my broken leg mended. I don't have to lie in the bed of broken legs.

852
01:11:55.640 --> 01:12:15.640
So I reject the argument that you have to lie in the bed that you've made, and I conclude that on pragmatic and on philosophical principled reasons, the only correct view on this is the eviction theory.

853
01:12:15.640 --> 01:12:22.640
Unfortunately, very few people have heard about it. I had one article on this in Reason Magazine in 1972.

854
01:12:22.640 --> 01:12:35.640
I have another article coming out in a law review, which has been accepted by three different law reviews, the kids love it, and then when the adults hear about it, they renege on their agreement. It's the most amazing thing.

855
01:12:35.640 --> 01:12:44.640
Three law reviews in succession have accepted it and then have reneged, and now a fourth law review has said, well, accept it, and I said, well, get me a letter from your dean.

856
01:12:44.640 --> 01:12:50.640
Otherwise, I'm taking it to another law review. In law reviews, you're allowed to send multiple submissions.

857
01:12:50.640 --> 01:12:55.640
One of these days, it's going to hit the fan, this stuff is going to get publicized.

858
01:12:55.640 --> 01:13:00.640
Not that it's original with me, Murray Rothbard had some of it in him, but in his writings.

859
01:13:00.640 --> 01:13:06.640
But I think this is something that libertarianism can contribute to the overall debate on this,

860
01:13:06.640 --> 01:13:13.640
and this is a crucial debate, and yet what I'm doing is harking back to what I started with two hours ago

861
01:13:13.640 --> 01:13:17.640
when I started talking about property rights. Anne?

862
01:13:17.640 --> 01:13:41.640
It seems to me that this argument is clever, but it seems to me that every argument you've made so far comes to a collision and the issue of abortion, because, okay, I can see you mentioned argument, but you're not talking about a mature tenant, you're talking about a creature that requires care for at least six years, a minimum, to even become functional.

863
01:13:41.640 --> 01:13:56.640
So, I mean, now you've got a public goods argument. If the mother gives up a property right, somehow that child is viable. Who's going to provide that protection, instead of becoming an obligation to the public?

864
01:13:56.640 --> 01:14:11.640
I mean, even though, I don't know, it just seems to me that this argument resists property rights, it's coming at these arguments in another way, that I don't know that eviction is a quiet solve.

865
01:14:11.640 --> 01:14:17.640
Everyone able to hear that? If I were to summarize it, I'm too clever by half.

866
01:14:17.640 --> 01:14:22.640
I think that you're raising a very interesting question, but one that's a bit tangential.

867
01:14:22.640 --> 01:14:30.640
You see, I'm talking about just abortion. You're talking about who has the obligation to take care of the baby afterward.

868
01:14:30.640 --> 01:14:33.640
It's a different question, so we're not really conflicting.

869
01:14:47.640 --> 01:15:14.640
Well, under libertarianism, there are no good Samaritan laws. There are no positive obligations. There are only negative obligations. Remember, we said the non-aggression axiom means you've got to keep your mitts off of other people.

870
01:15:14.640 --> 01:15:33.640
If there's someone drowning in that pool over there and I could just throw him this life raft and then just walk away and I don't, do I go to jail? No, because I didn't. Now if I pushed him in, that's a different thing. But if he's just lying there, I don't owe him any positive obligation.

871
01:15:33.640 --> 01:15:43.640
If we have positive obligations, right now all of you people and me should be in jail because we know darn well that there are now people starving in Africa or Asia or somewhere, South America,

872
01:15:43.640 --> 01:15:46.840
and yet you've got a wristwatch, you've got a car, you've got a house.

873
01:15:46.840 --> 01:15:49.880
What are you doing with that stuff if there are positive obligations?

874
01:15:49.880 --> 01:15:55.000
There are no positive obligations and this applies to parents and children.

875
01:15:55.000 --> 01:15:57.920
Parents have no positive obligations to bring up children.

876
01:15:57.920 --> 01:16:03.680
Now happily, for the preservation of the human race, we are constructed in such a way,

877
01:16:03.680 --> 01:16:07.280
there are good sociobiological reasons for thinking this,

878
01:16:07.280 --> 01:16:11.960
that when a baby smiles, we light up and when a baby cries, we feel very upset

879
01:16:11.960 --> 01:16:14.120
and we're ready to help that baby.

880
01:16:15.000 --> 01:16:17.760
So I think that for all practical purposes,

881
01:16:17.760 --> 01:16:20.560
most babies have someone that wants to take care of them

882
01:16:20.560 --> 01:16:22.640
and even if they don't, there are other people

883
01:16:22.640 --> 01:16:24.160
who are willing to adopt them.

884
01:16:24.160 --> 01:16:28.400
Indeed, because some couples are infertile

885
01:16:28.400 --> 01:16:30.600
and they're not able to have babies,

886
01:16:30.600 --> 01:16:34.300
if there were no baby black market or black market in babies,

887
01:16:35.320 --> 01:16:38.000
right now it costs 20, 30, $40,000

888
01:16:38.000 --> 01:16:39.680
to get one on the black market.

889
01:16:39.680 --> 01:16:41.560
With a non-black market would cost less,

890
01:16:41.560 --> 01:16:47.560
would be a positive price, namely there's always someone ready to take care of babies.

891
01:16:47.560 --> 01:16:53.060
Even, there was this case in Canada where you had a baby with spinal bifida and this and that

892
01:16:53.060 --> 01:16:55.060
and everything else under the sun wrong with the baby.

893
01:16:55.060 --> 01:17:02.060
It wasn't a baby, it was 13 years old and the father killed it, or killed the child, I shouldn't say it.

894
01:17:02.060 --> 01:17:04.560
The father killed the child.

895
01:17:04.560 --> 01:17:08.760
I would say, and then there was this other case just in newspapers where there was a husband and a wife

896
01:17:08.760 --> 01:17:38.760
The libertarian answer, as far as I'm concerned, are based on my understanding of libertarianism, and you know, I'm not the authority, everyone's got their own views, but my own view is there are no positive obligations, but you homestead. We human beings are situated that we like to take care of babies. Look, if there were two tribes a million years ago, one like us and one that didn't like to take care of babies, there's a name for that tribe.

897
01:17:38.760 --> 01:17:40.560
It's called extinct.

898
01:17:40.560 --> 01:17:43.960
We come from a long line of people that love babies.

899
01:17:43.960 --> 01:17:44.900
And it's in our guts.

900
01:17:44.900 --> 01:17:47.800
We're hardwired for loving babies.

901
01:17:47.800 --> 01:17:49.280
So I don't think we have to worry about that.

902
01:17:49.280 --> 01:17:50.880
And the question you're raising, I insist,

903
01:17:50.880 --> 01:17:52.860
is a different one than the one I raised.

904
01:17:52.860 --> 01:17:54.240
The one I was talking about was abortion.

905
01:17:54.240 --> 01:17:56.080
The one you're talking about is taking care of children

906
01:17:56.080 --> 01:17:58.440
after abortion, two separate issues.

907
01:17:59.840 --> 01:18:01.100
Other questions?

908
01:18:02.920 --> 01:18:03.760
Yes.

909
01:18:03.760 --> 01:18:12.760
What about the defense? The example you gave really was more police action, local defense. What about missile defense?

910
01:18:33.760 --> 01:18:36.160
And you're in trouble.

911
01:18:36.160 --> 01:18:40.160
But in Massachusetts and in, I don't know, Minnesota,

912
01:18:40.160 --> 01:18:42.640
PINCO places, they don't believe in defense,

913
01:18:43.600 --> 01:18:45.720
you can go nuke them as far as I'm concerned.

914
01:18:45.720 --> 01:18:47.680
I'm not going to stop you.

915
01:18:47.680 --> 01:18:49.520
I am now exclu...

916
01:18:49.520 --> 01:18:53.320
No, no, it's not facetious, it's the same thing

917
01:18:53.320 --> 01:18:55.200
as the Lighthouse case.

918
01:18:55.200 --> 01:18:57.560
I have a credible threat to make to non-payers

919
01:18:57.560 --> 01:18:58.520
to make them pay.

920
01:18:59.520 --> 01:19:01.520
Remember, the debate is can you have this stuff

921
01:19:01.520 --> 01:19:03.200
on the free enterprise system?

922
01:19:03.200 --> 01:19:05.200
The only way you can have it on the free enterprise system

923
01:19:05.200 --> 01:19:07.200
if you can exclude non-payers,

924
01:19:07.200 --> 01:19:09.900
because if you can't exclude non-payers,

925
01:19:09.900 --> 01:19:12.100
everyone's gonna say, well, let George do it.

926
01:19:12.100 --> 01:19:15.900
Let George pay, I'll free ride on him.

927
01:19:15.900 --> 01:19:18.600
So you have to have a credible threat to exclude.

928
01:19:18.600 --> 01:19:21.860
And I think we have credible threats to exclude in anything.

929
01:19:21.860 --> 01:19:25.020
We can credibly say that unless you pay me,

930
01:19:25.020 --> 01:19:28.280
the ACME Defense Agency, I will not protect you.

931
01:19:28.280 --> 01:19:30.380
And I will announce that I'm not protecting you.

932
01:19:30.380 --> 01:19:33.660
Brittany refuses to subscribe to my service.

933
01:19:33.660 --> 01:19:35.540
Now, if she puts on a sign on her lapel

934
01:19:35.540 --> 01:19:37.300
that she's protected by my service,

935
01:19:37.300 --> 01:19:40.300
if she, what do you call it, counterfeits one,

936
01:19:40.300 --> 01:19:43.220
she goes to jail for theft, fraud.

937
01:19:44.300 --> 01:19:46.220
But she doesn't have to, she can be a pacifist,

938
01:19:46.220 --> 01:19:48.620
she can say, look, I don't want to be protected.

939
01:19:50.180 --> 01:19:52.020
And I think this applies to police actions,

940
01:19:52.020 --> 01:19:53.700
international, Martians, I mean,

941
01:19:53.700 --> 01:19:55.620
if we ever get to Martians, we can say to the Martians,

942
01:19:55.620 --> 01:19:58.900
look, you mess with the payers, we're gonna come get you.

943
01:19:58.900 --> 01:20:00.740
Those guys over there who haven't paid,

944
01:20:02.980 --> 01:20:05.780
you need not worry about the Acme Company.

945
01:20:05.780 --> 01:20:07.220
That's all we have to say.

946
01:20:07.220 --> 01:20:08.780
Now, is this a perfect exclusion?

947
01:20:08.780 --> 01:20:10.160
No, it's never a perfect exclusion.

948
01:20:10.160 --> 01:20:12.700
You can't perfectly exclude hot dog people.

949
01:20:12.700 --> 01:20:14.900
There are always a hot dog thief out there.

950
01:20:16.020 --> 01:20:17.280
That's the answer.

951
01:20:17.280 --> 01:20:19.660
I can't do any better, I'm sorry.

952
01:20:19.660 --> 01:20:20.760
I did my best.

953
01:20:21.820 --> 01:20:23.040
Any other questions?

954
01:20:23.040 --> 01:20:27.500
Well, I guess we can finish now and have our snacks.

955
01:20:27.500 --> 01:20:28.860
Thanks for your attention.

956
01:20:28.860 --> 01:20:30.860
Thank you very much.