WEBVTT

NOTE Response and Comments

1
00:00:00.000 --> 00:00:09.200
Well, they say the longevity is the great revenge, but I tell you there's something else about longevity.

2
00:00:09.200 --> 00:00:18.600
It's the opportunity to hear things said very nicely about you that normally only get into the obituaries.

3
00:00:18.600 --> 00:00:26.100
I had two very strong sensations as I was hearing this.

4
00:00:26.100 --> 00:00:33.660
One is, I wish I could turn a phrase today like I could 40 years ago.

5
00:00:33.660 --> 00:00:39.300
The other is, I wish I looked like that.

6
00:00:39.300 --> 00:00:47.340
I think I'll give some of the background on my own Austrian connection because it is perhaps

7
00:00:47.340 --> 00:00:55.020
stronger than many people realize and indeed stronger than I realized for a long, long time.

8
00:00:55.020 --> 00:01:03.660
I had two years of happy association with Lew Rockwell. I don't recall us ever even

9
00:01:03.660 --> 00:01:11.860
the phrase Austrian. We may have been doing some of it, but those were really the early

10
00:01:11.860 --> 00:01:21.500
days. Murray Rothbard was still around. Ludwig von Mises congratulated me personally on that

11
00:01:21.500 --> 00:01:27.180
University speech, which was originally after the Liberty Fund was given at a

12
00:01:27.180 --> 00:01:34.220
feast of fee program, it's an invited lecture, and he thought it was just right

13
00:01:34.220 --> 00:01:43.060
on, so you're right on too. But my connection is an unusual one, and it's

14
00:01:43.060 --> 00:01:49.140
someone whose name was mentioned only in passing, but who played a gigantic role

15
00:01:49.140 --> 00:01:54.820
School in my life. I can't conceive of having the kind of career I've had, but for this

16
00:01:54.820 --> 00:02:01.660
one individual. And I'll tell you a little of the background of it. To avoid military

17
00:02:01.660 --> 00:02:07.940
service after I finished law school for as long as I could, I only postponed it, I went

18
00:02:07.940 --> 00:02:14.200
to Yale Law School for a year. You could still get student deferments. I had finished three

19
00:02:14.200 --> 00:02:20.720
Three years at Chicago where I had come heavily under the influence of Aaron Director, less

20
00:02:20.720 --> 00:02:24.280
so Milton Friedman, but Hayek was there.

21
00:02:24.280 --> 00:02:31.080
Aaron was closer to an Austrian than many people understood, and of course Frank Knight

22
00:02:31.080 --> 00:02:37.680
was still flourishing at that time.

23
00:02:37.680 --> 00:02:48.160
The year at Yale started off, I just realized, was a total bust.

24
00:02:48.160 --> 00:02:54.480
The fads and reputations of law schools and universities generally usually lag by many,

25
00:02:54.480 --> 00:02:56.080
many, many years.

26
00:02:56.080 --> 00:03:01.880
Chicago was a great and exciting and intellectual, high-powered university.

27
00:03:01.880 --> 00:03:04.480
Yale was child's play.

28
00:03:04.480 --> 00:03:10.080
They just weren't doing anything in the law school that was anywhere near as intellectually

29
00:03:10.080 --> 00:03:13.680
interesting as what I had encountered at Chicago.

30
00:03:13.680 --> 00:03:19.920
And so I spent the year largely catching up on readings that I had learned about while

31
00:03:19.920 --> 00:03:26.360
at Chicago, including most of Hayek's work, and I claimed to be one of the few people

32
00:03:26.360 --> 00:03:30.720
in the world to have read Human Action.

33
00:03:30.720 --> 00:03:35.120
in that first very bad translation too.

34
00:03:35.120 --> 00:03:42.760
Nonetheless, that's a part of the story because three or four years later, I had started law

35
00:03:42.760 --> 00:03:52.000
teaching and was invited to a small conference, again, may have played a role in my own career

36
00:03:52.000 --> 00:03:53.980
by a man named Arthur Kemp.

37
00:03:53.980 --> 00:03:59.560
Some of you may remember, Kemp was one of the stalwarts of the Mont Pelerin Society

38
00:03:59.560 --> 00:04:11.600
and Strong Hayekian, and he put on these summer programs, two-week programs for young professors.

39
00:04:11.600 --> 00:04:20.160
I really don't know how my name came to his attention, I was invited, but the three speakers

40
00:04:20.160 --> 00:04:27.960
were Felix Morley, John Hicks, the famous economist from Oxford who had just then spent

41
00:04:27.960 --> 00:04:34.880
I spent a year with Aaron Director at Chicago and a man named Armin Altschen, I'd never

42
00:04:34.880 --> 00:04:43.680
heard of him, but the very first session, the first day, the first moments, I think

43
00:04:43.680 --> 00:04:52.200
there were 15, 16 young professors sitting around, Armin at a podium, reading a paragraph

44
00:04:52.200 --> 00:05:00.280
and he said, does anyone know where that came from? I did. I recognized it as coming from

45
00:05:00.280 --> 00:05:09.720
human action. Now, I didn't think much of it then. At the break from that, Armand went

46
00:05:09.720 --> 00:05:17.560
on to give what became, I think perhaps, for me, the most significant economics article

47
00:05:17.560 --> 00:05:24.160
ever, called The Economics of Property Rights, certainly right up there with Evolution, Uncertainty

48
00:05:24.160 --> 00:05:33.720
and Economic Theory, but Armand preferred playing golf, he really wasn't very energetically

49
00:05:33.720 --> 00:05:42.440
ambitious as an academic, as a result, that was in 1957, as a result that article was

50
00:05:42.440 --> 00:05:52.040
was published in Il Publico in 1965, after the Coase Theorem appeared, tremendous overlap

51
00:05:52.040 --> 00:05:56.640
with the Coase Theorem. Had Armand gotten that out earlier, I have no doubt that he

52
00:05:56.640 --> 00:06:03.040
would have been a Nobel Laureate today, and that article would be vastly better known

53
00:06:03.040 --> 00:06:12.160
than it is. The thrust of it was the thrust of one of the key points that Mises was dealing

54
00:06:12.160 --> 00:06:42.160
The Theory of Money and Credit

55
00:06:42.160 --> 00:06:47.520
Day-to-Day Life. Well, that was the point of Human Action and that was the point of

56
00:06:47.520 --> 00:06:56.440
Armand's Property Rights Theory. Though I think, in all fairness, that's not the central

57
00:06:56.440 --> 00:07:02.140
point that most people have taken out of that article. Though that article is still, I think,

58
00:07:02.140 --> 00:07:11.480
the beginnings of modern property rights theory. Many years later and after a lifetime of wonderful

59
00:07:11.480 --> 00:07:25.480
I called his attention to that day. I had always wondered about it. Where did he pick up that quote from Human Action?

60
00:07:25.480 --> 00:07:37.480
Oh, he said that was very simple. When he was a Ph.D. student at Stanford, he was the only student who had the guts, the courage, the brains

61
00:07:37.480 --> 00:07:43.480
to do a Ph.D. dissertation under the famous Alan Wallace.

62
00:07:43.480 --> 00:07:51.480
Now, Wallace was one of the famous threesome of Frank Knight students, Milton Friedman, George Stigler, and Alan Wallace.

63
00:07:51.480 --> 00:07:59.480
Wallace later went on to be president of the University of Rochester and undersecretary of state under George Schultz.

64
00:07:59.480 --> 00:08:04.480
Also, I think, a founding member of the Montelerin Society.

65
00:08:04.480 --> 00:08:28.980
He said that Wallace had put him on to Mises and there this whole connection came back and long after that, you know, at one time, may come as a surprise to some of you here, particularly after some of the almost nice things that were said about the Austrian-Chicago nexus.

66
00:08:28.980 --> 00:08:39.980
For years in Mont Pelerin Society meetings, there was inevitably a panel on what was the difference between Austrian economics and the University of Chicago economics.

67
00:08:39.980 --> 00:08:45.980
And it was a bitter feud every time, except it was much about nothing.

68
00:08:45.980 --> 00:08:50.980
The overlap was so much vastly greater than the real differences.

69
00:08:50.980 --> 00:08:57.980
Certainly there were significant differences of emphasis, particularly on empirical work, I might say.

70
00:08:57.980 --> 00:09:06.740
that it's not true, not fair to say that they were the same, they weren't all that different.

71
00:09:06.740 --> 00:09:14.420
And one could come out of a Chicago background with a little bit of an Austrian whitewash

72
00:09:14.420 --> 00:09:26.860
on it from Mises and Alchin and Hayek and really have gotten the best of both worlds.

73
00:09:26.860 --> 00:09:32.460
So, that's sort of the background of this. Now, incidentally, I want to correct a couple

74
00:09:32.460 --> 00:09:40.660
of things. At the time I wrote the Insider Trading book, Kirzner had already written

75
00:09:40.660 --> 00:09:48.020
about the entrepreneur, not that book, Capitalism, Competition and Entrepreneurship. That came

76
00:09:48.020 --> 00:09:56.020
out a little later. But the thrust of it already existed, and it is cited in that book, and

77
00:09:56.020 --> 00:10:05.860
He was very generous to me. I've always had just gigantic regard for Israel. He was very

78
00:10:05.860 --> 00:10:14.740
kind about that work and about the most recent piece of mine that Alex mentioned on compensation

79
00:10:14.740 --> 00:10:22.300
of entrepreneurship. I made my day when I sent it to Israel and he wrote back, this

80
00:10:22.300 --> 00:10:30.060
This is a breath of fresh air. So at least I figured I was on the right track, even though

81
00:10:30.060 --> 00:10:39.560
I never closely identified myself, mainly because I just never was one for labeling

82
00:10:39.560 --> 00:10:46.780
myself any more as an Austrian than as a non-Austrian. I was very close to the public choice group,

83
00:10:46.780 --> 00:10:52.260
both before they were George Mason and afterwards. I had very good friends in the economics department,

84
00:10:52.260 --> 00:11:00.560
Department, George Mason, I just never gave much thought to the labeling and I think we

85
00:11:00.560 --> 00:11:07.980
even now do too much of it even though there's a lot less of it now than there used to be.

86
00:11:07.980 --> 00:11:14.940
Well to get on to some of the substantive things, I want to correct one thing having

87
00:11:14.940 --> 00:11:21.340
said nice things about Mises, I want to correct something that Peter said because it's come

88
00:11:21.340 --> 00:11:26.260
came up before, and not just from Peter.

89
00:11:26.260 --> 00:11:34.940
Others have noticed a similarity between my concept of the market for corporate control

90
00:11:34.940 --> 00:11:43.380
and Mises' reference to fundamentally the Berlian means hypothesis.

91
00:11:43.380 --> 00:11:44.380
Not the same.

92
00:11:44.380 --> 00:11:53.380
The context in which he was writing was, the thrust of it was, capital markets restrain managers.

93
00:11:53.380 --> 00:12:02.380
Not that a market for corporate control exists, he has no reference and no recognition of a market in votes.

94
00:12:02.380 --> 00:12:27.180
Now that came out of public choice theory much later, incidentally introduced to me by Armin Altschen who told me to take a look at Anthony Downe's book that preceded Buchanan and Tellich and was consummate work, if not really the original work in public choice theory.

95
00:12:27.180 --> 00:12:35.100
But you can you can see again the connection, the idea here, the Alchin idea, my stuff.

96
00:12:36.780 --> 00:12:45.180
I often, I'm not by nature a modest person, but I often do think that it's a little bit exaggerated.

97
00:12:45.180 --> 00:12:50.940
Some of these things just flowed out of what I had done. I'd had the good fortune of meeting

98
00:12:50.940 --> 00:12:58.740
reading Armin Auchin, reading Anthony Downs, knowing a little bit about Hayek and Mises.

99
00:12:58.740 --> 00:13:05.580
All these things came together so naturally that I had a terrible time and was in the

100
00:13:05.580 --> 00:13:07.620
academic room.

101
00:13:07.620 --> 00:13:08.620
It was gruesome.

102
00:13:08.620 --> 00:13:11.980
It was no fun, I can tell you.

103
00:13:11.980 --> 00:13:14.220
Economists weren't quite so bad.

104
00:13:14.220 --> 00:13:20.660
In fact, I used to get nice invitations to economics conferences and I was once nominated

105
00:13:20.660 --> 00:13:24.340
to be Vice President of the Southern Economics Association.

106
00:13:24.340 --> 00:13:31.180
That was the highest ranking I ever got among economists, but it was nice anyway.

107
00:13:31.180 --> 00:13:33.220
Nothing like that happened in law.

108
00:13:33.220 --> 00:13:36.780
I can tell you a story.

109
00:13:36.780 --> 00:13:44.100
When I first met the great guru of securities regulation, a man named Louis Laws at Harvard

110
00:13:44.100 --> 00:13:45.500
Law School.

111
00:13:45.500 --> 00:13:51.580
He was a God figure to every law professor in the securities field.

112
00:13:51.580 --> 00:13:56.020
Somebody grabbed me and took me over to introduce me to Louis Laws.

113
00:13:56.020 --> 00:14:00.500
His back was to us and said, Louis, I'd like you to meet Henry Manning.

114
00:14:00.500 --> 00:14:05.220
He turned around and he said, we didn't need a book on insider trading.

115
00:14:05.220 --> 00:14:06.860
I know it's wrong.

116
00:14:06.860 --> 00:14:08.540
And he turned around and walked away.

117
00:14:08.540 --> 00:14:12.980
Well, there were a few people standing there and I was able to come up with one of those

118
00:14:12.980 --> 00:14:13.980
great remarks.

119
00:14:13.980 --> 00:14:18.980
I said, that is the level of intellectual discourse at the Harvard Law School.

120
00:14:18.980 --> 00:14:22.980
I've always loved that.

121
00:14:22.980 --> 00:14:31.980
It was true, that was my name because of these articles that I had written

122
00:14:31.980 --> 00:14:38.980
that certainly had to be noticed in the JPE and the Columbia Law Review

123
00:14:38.980 --> 00:14:41.980
and the Harvard Business Review.

124
00:14:41.980 --> 00:14:56.980
My name would come up regularly at every major law school and just as regularly, the leading guy in Harvard and Corporation Law would say we can't have a conservative kook like that on this faculty.

125
00:14:56.980 --> 00:15:09.980
There was no generosity of spirit. There was, incidentally was, one person, strangely enough, did not fit that category.

126
00:15:09.980 --> 00:15:17.860
That was Adolf Berle. I decimated Berle in the 62 article. There was nothing left to

127
00:15:17.860 --> 00:15:24.780
his economic theory of Berle and Mises. I mean, literally, it was gone. That was a whole,

128
00:15:24.780 --> 00:15:34.080
what do you call it, a paradigm change from one short article. He didn't understand it.

129
00:15:34.080 --> 00:15:39.300
But he knew that it was important, and he made a real effort to get me on the faculty

130
00:15:39.300 --> 00:15:45.660
at Columbia Law School. It was only vetoed by Bill Carey, later the chairman of the SEC

131
00:15:45.660 --> 00:15:59.220
and the author of the Law on Insider Trading. He and I were never terribly friendly. I want

132
00:15:59.220 --> 00:16:08.700
to say a word about the libertarian view criticism of corporation law. I think it's, it is a

133
00:16:08.700 --> 00:16:18.020
a domination of principle carried to an extreme.

134
00:16:18.020 --> 00:16:23.060
There is an argument that limited liability could have been invented and indeed was well

135
00:16:23.060 --> 00:16:27.180
underway as an invention of the common law.

136
00:16:27.180 --> 00:16:34.580
Now we know that by and large it existed outside of the torts field where you had involuntary

137
00:16:34.580 --> 00:16:38.340
creditors.

138
00:16:38.340 --> 00:16:43.940
The corporations corrected that problem almost overnight when it was recognized, and that

139
00:16:43.940 --> 00:16:50.860
is the corporations didn't have limited liability for paying off injuries to workers.

140
00:16:50.860 --> 00:16:55.180
That was late 19th century legislation, but that happened.

141
00:16:55.180 --> 00:17:02.060
I think the limited liability was one of the great inventions, and I know it's a terrible

142
00:17:02.060 --> 00:17:07.900
venue in which to give credit, it's perhaps the one invention I can think of that the

143
00:17:07.900 --> 00:17:13.940
government was right about it. I thought long and hard about it. I've given up on central

144
00:17:13.940 --> 00:17:20.740
banking. I've given up on a few other things. But I think the limited liability is right

145
00:17:20.740 --> 00:17:30.740
because it allowed a securities market to exist that could not exist without it. Now,

146
00:17:30.740 --> 00:17:36.020
I don't want to push that too far because I think there were things the common law could

147
00:17:36.020 --> 00:17:42.460
would have done. For instance, one of the reasons you had to have a rule of limited

148
00:17:42.460 --> 00:17:51.520
liability, if you were to have a broad-scale popular stock market, you had to have some

149
00:17:51.520 --> 00:17:59.740
low-cost method of dealing with the liability of millions of, in those days, tens or hundreds

150
00:17:59.740 --> 00:18:07.160
of Thousands of Shareholders, we didn't even have class actions then, the joint actions

151
00:18:07.160 --> 00:18:10.940
that the common law allowed would have been impossible.

152
00:18:10.940 --> 00:18:18.100
And so, in effect, you would have had limited liability anyway simply because the cost of

153
00:18:18.100 --> 00:18:22.000
going against those shareholders would have been too great.

154
00:18:22.000 --> 00:18:27.660
The alternative, and lasted in the law in New York and a couple of other states until

155
00:18:27.660 --> 00:18:37.660
Well into the 20th century in banks only was unlimited liability and what happens was you always went for the deep pocket.

156
00:18:37.660 --> 00:18:47.660
You would go only for the very wealthy shareholder because it was joint in several liability and they didn't have limited liability.

157
00:18:47.660 --> 00:18:54.660
Well the problem with that of course was that you'd never get one person to put a lot of money into a venture.

158
00:18:54.660 --> 00:19:00.220
Adventure, unless you could get a lot of people putting a small amount in that would be the

159
00:19:00.220 --> 00:19:09.220
limit of their liability, or excuse me, excuse me, you'd get only poor people coming into

160
00:19:09.220 --> 00:19:14.780
these things, wealthy people wouldn't do it because a tiny infraction could put their

161
00:19:14.780 --> 00:19:20.140
entire estate at risk because they might be the only selected plaintiff.

162
00:19:20.140 --> 00:19:36.140
At any rate, those are arguments in favor of limited liability, and I think they're pretty strong arguments, and I'm not sure we'd have as free a system as we have without it.

163
00:19:36.140 --> 00:19:44.980
I want to turn to Alex's very nice comments about my insider trading article and the role

164
00:19:44.980 --> 00:19:55.580
that it's played in generating not merely a lot of articles, a whole institution.

165
00:19:55.580 --> 00:20:02.980
It's just astounding when you look at a bibliography today of articles on insider trading and realize,

166
00:20:02.980 --> 00:20:12.860
As Alex said, there were two law pieces mentioning insider trading prior to 1966.

167
00:20:12.860 --> 00:20:20.120
One was Burley and Means that has literally in passing one of the problems with separation

168
00:20:20.120 --> 00:20:24.260
of ownership and control was that managers could engage in insider trading.

169
00:20:24.260 --> 00:20:28.580
They didn't say anything else, it was a minor problem.

170
00:20:28.580 --> 00:20:38.800
The other was a 1914 article, notice long, long before, indeed long before we really

171
00:20:38.800 --> 00:20:45.980
had a popular stock market, but it appeared in the Michigan Law Review in 1914 and it

172
00:20:45.980 --> 00:20:54.280
made most of the moral and ethical arguments that we still hear.

173
00:20:54.280 --> 00:21:03.880
The vitriol that I suffered or that I heard as a result of that book, so I got some benefits

174
00:21:03.880 --> 00:21:11.840
out of that book too, and still do, but the hostility and the vitriol and the hatred and

175
00:21:11.840 --> 00:21:17.440
the bitterness astounded me, I just could not understand it.

176
00:21:17.440 --> 00:21:26.880
I didn't have any acts to grind. I thought I was just writing an economics analysis of

177
00:21:26.880 --> 00:21:32.760
something that people would either disprove or prove, but I didn't think they'd get so

178
00:21:32.760 --> 00:21:39.440
very angry about it. Louis Lawson's comment is an illustration. And I've troubled about

179
00:21:39.440 --> 00:21:47.420
that for a long, long time until really only in very recent years have I come to understand

180
00:21:47.420 --> 00:21:55.720
Something about that, and I think a lesson about human nature and psychology,

181
00:21:55.720 --> 00:22:04.620
one that goes far beyond the insider trading issue and involves us with much larger questions

182
00:22:04.620 --> 00:22:08.820
that Mises and Hayek addressed for a long time.

183
00:22:08.820 --> 00:22:16.820
And that is that the power of the psychology of envy in the human mind is gigantic.

184
00:22:18.260 --> 00:22:22.740
I'd never really appreciated this. I mean, we all know that envy is there.

185
00:22:23.940 --> 00:22:32.420
Teenagers envy the straight teeth of their colleagues. They envy the fashion jeans that

186
00:22:32.420 --> 00:22:37.060
their friends are wearing. And, you know, that's sort of the level we put it at.

187
00:22:37.060 --> 00:22:49.060
Then we think, well, we also envy very wealthy people, that's another human trait that we find, particularly among a lot of leftists in the United States.

188
00:22:49.060 --> 00:23:01.060
Nobody is worth getting 22 million dollars a year. Nobody should be worth 3 billion or 30 billion dollars or whatever Gates or Buffett is.

189
00:23:01.060 --> 00:23:10.140
and yet I think a lot of that missed the point that was a comparison of wealth I

190
00:23:10.140 --> 00:23:16.180
think the nature of envy this human psychology is a little different and I

191
00:23:16.180 --> 00:23:25.380
think it comes to the fore with the idea that the stock market's a lotto and I

192
00:23:25.380 --> 00:23:34.380
I should have just as much a chance to win the lottery as Tom or Alex or anyone else.

193
00:23:34.380 --> 00:23:43.380
And yet, these guys on the inside, they've got something unfair because they're winning and I'm not.

194
00:23:43.380 --> 00:23:50.380
Now, notice that that necessarily incorporates an ignorance about how markets work.

195
00:23:50.380 --> 00:23:54.380
Certainly indicates an ignorance how a market for information works.

196
00:23:54.380 --> 00:24:05.760
But I think it does explain the intensity of the emotion on the insider trading subject.

197
00:24:05.760 --> 00:24:11.340
Any of you can go out of here next week, go to a cocktail party, mention the phrase insider

198
00:24:11.340 --> 00:24:13.500
trading and you'll get it immediately.

199
00:24:13.500 --> 00:24:15.620
You'll just hear it.

200
00:24:15.620 --> 00:24:21.380
It's astounding how ubiquitous it is.

201
00:24:21.380 --> 00:24:26.380
Well, that's my explanation of what I think is going on there.

202
00:24:26.380 --> 00:24:35.380
Actually, we're really out of time, but why don't we take a few extra minutes if it's

203
00:24:35.380 --> 00:24:40.380
okay. Would you like to entertain a question or two now, just in case people have to run

204
00:24:40.380 --> 00:24:41.380
out of time?

205
00:24:41.380 --> 00:24:43.380
No, I'd rather give two cute points.

206
00:24:43.380 --> 00:24:44.380
Please do.

207
00:24:44.380 --> 00:24:59.540
One is one that Rich Vedder omitted, and he omitted it maybe because I didn't have it

208
00:24:59.540 --> 00:25:03.420
in the original article, but somewhere later I published it, but I've never been able to

209
00:25:03.420 --> 00:25:07.380
find it, but I've given it in speeches a lot of times.

210
00:25:07.380 --> 00:25:15.600
The original blame for the poor quality of American universities today, which Richard

211
00:25:15.600 --> 00:25:25.180
did a wonderful job of telling the scenario of what it looks like, all starts in a very,

212
00:25:25.180 --> 00:25:31.400
very strange place, but it's a great little bit of historical trivia that you can tell

213
00:25:31.400 --> 00:25:44.400
I'll use in stories. It all begins with Henry VIII's domestic relations problems. He was married to Catherine of Aragon. He didn't like her for whatever reason.

214
00:25:44.400 --> 00:25:52.400
I don't know if it was political or romantic or what. He wanted to get rid of her, and so he asked the Pope to give him an annulment, and the Pope wouldn't do it.

215
00:25:52.400 --> 00:25:59.400
And so he said, well, the hell with the Pope and the hell with the Catholic Church. We disestablished the Church.

216
00:25:59.400 --> 00:26:09.340
Now, thereby hangs one of the incredible accidents of legal and economic history, because in

217
00:26:09.340 --> 00:26:18.300
the earliest common law, dating back much earlier, Henry's, back into the 13th century,

218
00:26:18.300 --> 00:26:22.300
there was a doctrine in common law.

219
00:26:22.300 --> 00:26:27.660
First of all, there was a rule known as the rule against perpetuities.

220
00:26:27.660 --> 00:26:32.920
Peace was a wonderful rule and is a wonderful rule today.

221
00:26:32.920 --> 00:26:39.980
What it says is that the title to property cannot be kept off the market forever, only

222
00:26:39.980 --> 00:26:47.020
for a life and lives and being or a few months later.

223
00:26:47.020 --> 00:26:56.760
What that did was the common law built in a rule that said ever so often, every generation

224
00:26:56.760 --> 00:27:03.640
or so, every piece of property has to be subject to a market test.

225
00:27:03.640 --> 00:27:09.320
That was a salutary rule and it is today and it's a wonderful rule.

226
00:27:09.320 --> 00:27:12.900
There were three exceptions in the time of Henry VIII.

227
00:27:12.900 --> 00:27:20.040
The Crown, naturally the Crown went on forever and could own property in perpetuity.

228
00:27:20.040 --> 00:27:27.440
Civil corporations, which, like for some of the same reason as today's corporations, were

229
00:27:27.440 --> 00:27:34.960
a revolving continuity of organization, so they could own property in perpetuity.

230
00:27:34.960 --> 00:27:38.560
And the third was the Catholic Church.

231
00:27:38.560 --> 00:27:42.200
The Church could own property in perpetuity.

232
00:27:42.200 --> 00:27:51.200
When he disestablished the church, all the church institutions, including the universities,

233
00:27:51.200 --> 00:27:57.760
no longer had the benefit of the exception to the rule against perpetuities.

234
00:27:57.760 --> 00:28:05.200
The professors and dons and lecturers at Oxford and Cambridge and where else were up in arms.

235
00:28:05.200 --> 00:28:12.840
Obviously, here they lived this charmed existence of what our professors live in today, and

236
00:28:12.840 --> 00:28:18.280
all of a sudden, since this rule against, this exception to the rule against perpetuities

237
00:28:18.280 --> 00:28:22.380
was removed, they were going to be out on the market.

238
00:28:22.380 --> 00:28:26.200
There was going to be a competitive market for education.

239
00:28:26.200 --> 00:28:28.400
They didn't want that.

240
00:28:28.400 --> 00:28:34.600
And so they brought enormous pressure, Henry gave in, went to parliament, and got them

241
00:28:34.600 --> 00:28:42.320
came to adopt something called the Statute of Charitable Uses, I think 1528, I'm not

242
00:28:42.320 --> 00:28:44.180
exactly sure.

243
00:28:44.180 --> 00:28:50.600
It became part of the English common law, even though it was a statute, and was adopted

244
00:28:50.600 --> 00:28:57.080
as part of the English common law in the colonies and in the early United States, and has remained

245
00:28:57.080 --> 00:28:59.240
ever since.

246
00:28:59.240 --> 00:29:08.280
And that's why charities, including universities, have this godawful structure they do of freedom

247
00:29:08.280 --> 00:29:18.080
from any market test, any form of competition, any of the restraints or benign effects of

248
00:29:18.080 --> 00:29:23.320
having property rights because they can exist in perpetuity.

249
00:29:23.320 --> 00:29:30.320
So, our problems with universities, Henry VIII's problem.

250
00:29:30.320 --> 00:29:31.320
I'll stop there.

251
00:29:31.320 --> 00:29:34.320
I wanted to get that one in because I love that story.

252
00:29:34.320 --> 00:29:39.320
I've mismanaged our time by letting the Lorenzo talk way more than I should have.

253
00:29:39.320 --> 00:29:44.320
There's another session that begins at 4.30, so we're close to close now, but I'm sure

254
00:29:44.320 --> 00:29:49.320
that Professor Manning will be happy to answer any questions during the breaks the rest of the day.

255
00:29:49.320 --> 00:29:50.320
Thank you all.

256
00:29:50.320 --> 00:29:52.320
Thank you very much.