WEBVTT NOTE Legalize Consenting Capitalist Acts 1 00:00:00.000 --> 00:00:07.480 Before I get into my talk, I wanted to just mention very briefly how I met Kirk Doolittle. 2 00:00:07.480 --> 00:00:12.240 My son Matthew had just got a job working at Microsoft and he was my baby and all alone 3 00:00:12.240 --> 00:00:16.880 here and we were in Vancouver at the time and I saw this guy just sitting at a Mises 4 00:00:16.880 --> 00:00:23.360 Institute event with a thing that said, Kirk Doolittle Bellevue and I figured, wow, you 5 00:00:23.360 --> 00:00:24.720 know, this is amazing. 6 00:00:24.720 --> 00:00:29.680 So I went over to him and tried to get him, cajole him to sort of mentor my son because 7 00:00:29.680 --> 00:00:52.680 I didn't realize that he was a nerd also, a fellow geek of my son, but it turned out that he was, and I'm just very delighted that Kurt and I and Laura, his lovely wife, who I met later, have become friends, and he has been a mentor to my son, so I thank him not only personally but also professionally for putting on this event. 8 00:00:52.680 --> 00:01:01.680 Thank you. We're just good friends. Our wives are here. We have to behave. 9 00:01:01.680 --> 00:01:03.680 I love you too. 10 00:01:03.680 --> 00:01:07.680 Uh-oh. I'm in trouble now. 11 00:01:07.680 --> 00:01:21.680 The title of this conference has to do with capitalism, capitalism the creator, and my topic is legalizing consenting capitalist acts. 12 00:01:21.680 --> 00:01:27.840 So I thought I'd start with a discussion of the word capitalism. The word 13 00:01:27.840 --> 00:01:34.400 capitalism was a denigration created by Marx to derogate free enterprise, 14 00:01:34.400 --> 00:01:42.760 businessmen, profits, earning a living through markets. And what we have done, it 15 00:01:42.760 --> 00:01:47.680 seems, has been similar to what the gays have done with queer. At one time the 16 00:01:47.680 --> 00:01:51.480 word queer was a denigration and they took it on themselves and they said okay 17 00:01:51.480 --> 00:01:55.480 Today we favor queer studies and we're queer, we're here, whatever. 18 00:01:55.480 --> 00:01:58.480 Similarly with the N-word for black people. 19 00:01:58.480 --> 00:02:03.480 At one time the N-word was a clear derogation and no one would dare use it, 20 00:02:03.480 --> 00:02:08.480 except in very malevolent ways, but black people have adopted it for themselves 21 00:02:08.480 --> 00:02:15.480 and use it with regard to each other as a way of sort of being in your face. 22 00:02:15.480 --> 00:02:21.480 Well, capitalism provides somewhat of a similar function for libertarians, 23 00:02:21.480 --> 00:02:29.480 because it started out as a derogation of what we regard as good and proper, namely free enterprise. 24 00:02:29.480 --> 00:02:40.480 And we have used this word as a word of trust or benefit or what have you. It's our flag, in a sense. 25 00:02:40.480 --> 00:02:45.480 How did I come up with this legalizing, consenting capitalist act? 26 00:02:45.480 --> 00:02:53.480 This came up from a person named Robert Nozick, who in some circles is perhaps the most famous libertarian. 27 00:02:53.480 --> 00:02:57.480 He was a Harvard professor, recently deceased, too early. 28 00:02:57.480 --> 00:03:07.480 He wrote a very famous book, Anarchy, State and Utopia, which was perhaps the only book that was given some sort of respect in academia. 29 00:03:07.480 --> 00:03:12.440 The books of Rothbard, who I regard as much, that I regard as much better, were not given 30 00:03:12.440 --> 00:03:16.480 the same accord in academia. 31 00:03:16.480 --> 00:03:24.960 And he had this phrase that we should legalize capitalist acts between consenting adults. 32 00:03:24.960 --> 00:03:28.980 And that sort of stuck in my craw, I thought that was a very nice way of saying it because 33 00:03:28.980 --> 00:03:35.380 our friends on the left were always saying that they favored consenting adult behavior. 34 00:03:35.380 --> 00:03:41.380 And for them, consenting adult behavior were things like pornography, prostitution, drugs, 35 00:03:41.380 --> 00:03:43.460 things like that. 36 00:03:43.460 --> 00:03:48.340 And what Nozick was saying is, yes, yes, we favor the legalization of those things. 37 00:03:48.340 --> 00:03:52.460 We don't have to favor them themselves, but we don't want to put people in jail for adult 38 00:03:52.460 --> 00:03:54.900 consensual behavior. 39 00:03:54.900 --> 00:04:00.940 That's a very subtle distinction that I have to make clear. 40 00:04:00.940 --> 00:04:05.680 As a libertarian, I do not favor these things themselves. 41 00:04:05.680 --> 00:04:08.960 I think they're harmful, immoral, what have you. 42 00:04:08.960 --> 00:04:11.800 But I think that since they do not initiate violence 43 00:04:11.800 --> 00:04:14.520 against non-aggressors, the people who perpetrate them 44 00:04:14.520 --> 00:04:16.120 or the people who engage in them 45 00:04:16.120 --> 00:04:18.880 should not have violence perpetrated against them, 46 00:04:18.880 --> 00:04:20.880 namely, they shouldn't be put in jail. 47 00:04:21.960 --> 00:04:24.520 So what Robert Nozick said is, okay, lefties, 48 00:04:25.560 --> 00:04:26.880 we'll do you one better. 49 00:04:26.880 --> 00:04:31.240 You say you're in favor of consenting adult behavior. 50 00:04:31.240 --> 00:04:34.560 Well, how about capitalist acts between consenting adults? 51 00:04:34.560 --> 00:04:37.560 Namely, he's trying to say, you know, in karate, 52 00:04:37.560 --> 00:04:40.040 what you do is you punch the opposite guy. 53 00:04:40.040 --> 00:04:42.240 In judo, you use the opposite guys 54 00:04:42.240 --> 00:04:44.100 or your opponent's momentum. 55 00:04:44.100 --> 00:04:46.640 He charges you, you toss him over your shoulder. 56 00:04:46.640 --> 00:04:50.680 So what Robert Nozick was doing was a sort of judo move. 57 00:04:50.680 --> 00:04:51.900 He was saying, okay, lefties, 58 00:04:51.900 --> 00:04:55.520 you favor consenting adult behavior. 59 00:04:55.520 --> 00:04:58.740 How Bad Capitalists Consenting Adult Behavior, namely markets. 60 00:04:59.740 --> 00:05:00.880 I don't know if this succeeded, 61 00:05:00.880 --> 00:05:03.120 but I thought it was a very good ploy, 62 00:05:03.120 --> 00:05:05.200 and that's how I got the title of this. 63 00:05:06.460 --> 00:05:10.080 Now, to return to Marx for a second, 64 00:05:10.080 --> 00:05:13.800 he thought that capitalists, that there were two forces, 65 00:05:13.800 --> 00:05:15.760 there was capitalists here and there was labor here, 66 00:05:15.760 --> 00:05:18.520 and the function or the purpose of capitalists 67 00:05:18.520 --> 00:05:19.980 was to exploit labor. 68 00:05:21.760 --> 00:05:24.960 And von Boehm-Bawerk, Eugen von Boehm-Bawerk, 69 00:05:24.960 --> 00:05:29.360 A famous Austrian economist wrote blistering attack on Marx. 70 00:05:29.360 --> 00:05:32.280 And after Boehm-Bawerk, there was really nothing left 71 00:05:32.280 --> 00:05:35.040 intellectually from the neck up of Marx. 72 00:05:36.240 --> 00:05:39.160 Boehm-Bawerk is part of the Austrian School. 73 00:05:39.160 --> 00:05:42.280 The main contributors to the Austrian School 74 00:05:42.280 --> 00:05:45.760 are Carl Menger, who started it, Boehm-Bawerk, 75 00:05:45.760 --> 00:05:48.440 Ludwig von Mises, after whom the Ludwig von Mises 76 00:05:48.440 --> 00:05:52.760 Institute is named, and Murray Rothbard, his chief student. 77 00:05:52.760 --> 00:06:06.760 What Marx said was that capital exploits labor, and he didn't realize what capital or capitalists or entrepreneurs provide for labor. 78 00:06:06.760 --> 00:06:15.760 Now, for example, suppose I am a capitalist and all of you people are workers, or as we used to say in Brooklyn, voycas. 79 00:06:15.760 --> 00:06:21.000 You're all white guys and what we want to do is go into business making these 80 00:06:21.000 --> 00:06:28.100 podiums. Well, we're starting from scratch right now. You're all poor workers. You 81 00:06:28.100 --> 00:06:32.400 don't have much money. I've got a bit of money. Suppose you were to try to do this 82 00:06:32.400 --> 00:06:37.600 by yourselves without me. In other words, if I'm exploiting you, well, get me out of 83 00:06:37.600 --> 00:06:41.560 the picture and let's see how you guys do on your own. Well, before you can make 84 00:06:41.560 --> 00:06:55.560 If you want to make these podiums, you've got to buy some land, you've got to put a factory up, you've got to buy some wood, you've got to get machines that will cut the wood and you've got to buy some screwdrivers and other things that make these podiums. 85 00:06:55.560 --> 00:07:04.560 How long is that going to take you? How long before the first podium comes off the assembly line? I don't know, half year, year, whatever. 86 00:07:04.560 --> 00:07:11.360 do in the meantime to eat. There's no salary because the capitalist supplies the salary. 87 00:07:11.360 --> 00:07:18.080 What you people are going to have to do is use your own savings to finance yourself for the year 88 00:07:18.080 --> 00:07:23.360 or the half year that it takes to make these podiums. So that's the first thing that the 89 00:07:23.360 --> 00:07:30.640 capitalist provides for the workers. He provides time between the onset of the business and the 90 00:07:30.640 --> 00:07:37.400 The first product of the business comes off the assembly line. 91 00:07:37.400 --> 00:07:44.640 But he provides something else, because suppose we make these dark brown podiums, and in a 92 00:07:44.640 --> 00:07:48.440 year later, right now they're selling, everyone wants one, but a year later what they want 93 00:07:48.440 --> 00:07:54.180 is short truce podiums, or pink ones, or something like that, and we can't sell them. 94 00:07:54.180 --> 00:07:59.400 So now you guys are up to your armpits in podiums, but they can't sell, so again you're 95 00:07:59.400 --> 00:08:07.360 You're in trouble. Whereas, if there's a capitalist, what the capitalist can do is bear the risk. 96 00:08:07.360 --> 00:08:11.320 So that's the second function of the capitalist. He bears the risk. The capitalist can't come 97 00:08:11.320 --> 00:08:14.780 to you and say, hey, you know that salary I paid you for the year necessary to get the 98 00:08:14.780 --> 00:08:19.560 thing going? Well, guess what? It didn't sell, so give me your salary back. You can't say 99 00:08:19.560 --> 00:08:25.920 that because it's contractual that he is going to be the one who bears the risk. 100 00:08:25.920 --> 00:08:30.600 And the third thing that the capitalist gives to the workers to indicate that he's not exploiting 101 00:08:30.600 --> 00:08:32.760 the workers is entrepreneurship. 102 00:08:32.760 --> 00:08:37.840 It's usually the capitalist's idea to produce these things or a better mouse or a better 103 00:08:37.840 --> 00:08:39.720 mouse trap or whatever it is. 104 00:08:39.720 --> 00:08:45.400 Better mouse as in the Disney kind of mouse, not the mouse that crawls around. 105 00:08:45.400 --> 00:08:55.200 So the capitalist is giving something on the basis of which he deserves his recompense, 106 00:08:55.200 --> 00:09:16.200 I venture to say that if Marx were alive now, and the present Marxists, who would their public enemy number one be? Who would their poster-trial for evil capitalists be? Walmart. 107 00:09:16.200 --> 00:09:21.200 Walmart, as we know, exploits workers. Ha ha. 108 00:09:21.200 --> 00:09:36.200 They set up a new place in Bellevue or in Seattle or wherever, in some places they're not allowed to, like New York City, they've tried, but the political powers that be will not allow them to set up a place in New York City. 109 00:09:36.200 --> 00:09:48.200 But let's say they set up a place and they're looking for 500 workers, typically they'll get 5,000 people lining up to get those jobs to be exploited, which is ludicrous. 110 00:09:48.200 --> 00:09:54.440 As an Austrian economist, and by the way, Austrian economics has nothing to do with the economics of Austria, 111 00:09:54.440 --> 00:10:01.000 it just so happens that the leading Austrian economists all came from Austria, that's why it's called Austrian economics. 112 00:10:01.000 --> 00:10:07.200 As an Austrian economist, we can deduce from the fact that somebody's working for Walmart, 113 00:10:07.200 --> 00:10:12.200 the fact that, at least in his or her own eyes, that's the best option available, 114 00:10:12.200 --> 00:10:16.200 because there are other options available that they regarded as better, 115 00:10:16.200 --> 00:10:40.200 What am I doing wrong? Chad, are you? I'll just keep going, okay? Maybe if I go like this, it's bad. Whoops. I can't do that. That takes away half my power here. This is my favorite move. 116 00:10:40.200 --> 00:11:10.200 So what I was saying is that the Walmartians are not exploiting anyone. And yes, they are putting some mom and pop shops out of business, but so did Henry Ford put the horse and buggy industry out of the market when he came out with the horseless carriage. That's what capitalism is. It's an attempt, as Mises saw so clearly, to get things for the consumer. It's no accident that the relative 117 00:11:10.200 --> 00:11:26.200 There are relatively poor people in areas where you have capitalism, have refrigerators, have air conditioners, have radios, TVs, refrigerators, all sorts of things that would be the envy of most of the rest of the world. 118 00:11:26.200 --> 00:11:36.200 Mises makes the point that capitalism helps the poor more than the rich, because take a small car. 119 00:11:36.200 --> 00:11:46.880 Well, compare the people nowadays with a small car with 200 years ago when the king or the prince had a carriage or the poor had a walk. 120 00:11:46.880 --> 00:11:51.840 Okay, now the king or the prince or the big businessman now has a Cadillac or a Mercedes, 121 00:11:51.840 --> 00:12:01.880 but a little teeny car is closer to a Mercedes than walking into a carriage with four horses or take light bulbs. 122 00:12:01.880 --> 00:12:05.160 The rich person has a wonderful chandelier. 123 00:12:05.160 --> 00:12:07.720 The poor person just has an electric light. 124 00:12:07.720 --> 00:12:10.840 But in the bad old days, the king had all the candles 125 00:12:10.840 --> 00:12:13.980 he wanted, whereas the poor were consigned to the darkness. 126 00:12:13.980 --> 00:12:17.440 So what Mises mentions and emphasizes 127 00:12:18.760 --> 00:12:21.120 is that capitalism makes everyone richer, 128 00:12:21.120 --> 00:12:23.180 but it makes the poor relatively more richer 129 00:12:23.180 --> 00:12:26.880 than the rich because of this sort of mass production. 130 00:12:26.880 --> 00:12:31.240 So what Walmart is doing is bringing lower prices 131 00:12:31.240 --> 00:12:37.160 to the Poor People and yet they are the poster enemy number one of the modern day Marxists 132 00:12:37.160 --> 00:12:47.520 and it's just a big problem. 133 00:12:47.520 --> 00:12:55.320 There are three areas in which a political philosopher or an economist can have views 134 00:12:55.320 --> 00:12:56.320 as I see it. 135 00:12:56.320 --> 00:13:26.320 It's interesting that libertarians agree with the left more than the right on two out of these three issues, foreign policy and civil liberties, civil rights, than with conservatives, and yet somehow I feel more of a kinship with conservatives. I think that most people who are now libertarians came from conservativism. I'm not sure why that is. It's a puzzle. We'll have to write something. If anyone's got a great idea, tell me in the comments. 136 00:13:26.320 --> 00:13:43.320 Well, on foreign policy, Ron Paul has mentioned again and again, eloquently, that the U.S. has, what is it, some 700 military bases in 130 different foreign countries? 137 00:13:43.320 --> 00:13:50.320 And to think that this is defensive, I mean, suppose another country did that, China, Russia, Iran, whatever. 138 00:13:50.320 --> 00:13:54.320 Would we think that that was defense? No, we would think it's offense. 139 00:13:54.320 --> 00:14:04.320 Not that the left is good on this, the democrats sort of like democrat wars, they hate republican wars, but they're sort of a little bit better than the mad bombers on the right. 140 00:14:04.320 --> 00:14:10.320 So I would say libertarians agree a little bit more with the left on that view than with the right. 141 00:14:10.320 --> 00:14:16.320 Not that much more because they're not that much better, the left than the right, but a little bit. 142 00:14:16.320 --> 00:14:22.320 What about civil liberties, civil rights, discrimination? 143 00:14:22.320 --> 00:14:30.320 Well here, I think the left is very bad, and this is the area where, well, I don't know. 144 00:14:32.320 --> 00:14:44.320 I changed my mind on that. I think, again, the left is a little bit better on this than the right is in terms of legalizing all sorts of sexual and drug-related kinds of things. 145 00:14:44.320 --> 00:14:58.320 In Canada, the only party that wants to legalize drugs is the NDP, which is the far-left party, whereas the right-wing party, the progressive conservatives now are dead-set against that. 146 00:14:58.320 --> 00:15:05.320 Let me talk a little bit about drugs, heroin, marijuana, cocaine, things like that. 147 00:15:05.320 --> 00:15:13.320 Again, I am certainly as a libertarian not advocating their use, but I am saying that if we prohibit them, we have problems. 148 00:15:13.320 --> 00:15:43.320 Problems. Happily, for intellectual purposes, we have a wonderful example, or horrible example, however you want to look at it, namely the prohibition of alcohol. We had alcohol prohibition in the thirties, and we saw what happened to that. Bathtub gin, people dying of impure drugs, alcohol, people shooting each other in the streets over alcohol. Nowadays, under legalization, it is still a social problem, there are alcoholics, but it's not 149 00:15:43.320 --> 00:15:55.320 It is a medical problem, but it is not a social problem. Nobody is in jail for killing anyone over alcohol. 150 00:15:55.320 --> 00:16:03.320 Whereas nowadays, the estimates are that some 60% of all people in prison are in prison for drug-related issues. 151 00:16:03.320 --> 00:16:12.320 Either buying and selling drugs, or shooting each other over drugs, or since the price of drugs is so high because of the prohibition of it, 152 00:16:12.320 --> 00:16:15.160 They're stealing stuff in order to feed their habits. 153 00:16:16.520 --> 00:16:19.340 This is a devastating policy. 154 00:16:19.340 --> 00:16:21.540 And again, the left is a little bit better on this. 155 00:16:21.540 --> 00:16:24.340 Libertarians are clear, we should legalize these things. 156 00:16:28.940 --> 00:16:32.160 Again, we have children. 157 00:16:32.160 --> 00:16:34.080 We would not want our children to do this. 158 00:16:34.080 --> 00:16:36.420 But if our children did this, 159 00:16:36.420 --> 00:16:38.500 we wouldn't want them to be put in jail. 160 00:16:38.500 --> 00:16:40.760 That would be the ad insult to injury. 161 00:16:40.760 --> 00:16:48.200 So again, I'm not favoring the use of these things, but I am saying that the prohibition of them is highly problematic. 162 00:16:48.200 --> 00:16:51.640 Similarly with prostitution. 163 00:16:51.640 --> 00:16:58.560 There are places in this country where prostitution is legal, namely Nevada, except for Las Vegas. 164 00:16:58.560 --> 00:17:06.240 And there, the problems of pimping and beatings and bad health and other things do not arise. 165 00:17:06.240 --> 00:17:11.880 When the market is allowed to operate, the industry is much more rational than when it 166 00:17:11.880 --> 00:17:15.240 has to go underground and it is criminalized. 167 00:17:15.240 --> 00:17:22.200 So here, the libertarian, with maybe the exception of the feminists on the left who are against 168 00:17:22.200 --> 00:17:27.520 these things as much as people on the right, the libertarian sort of veers a little closer 169 00:17:27.520 --> 00:17:28.520 to the left. 170 00:17:28.520 --> 00:17:32.360 So here we have two out of three areas where libertarians and leftists are a little bit 171 00:17:32.360 --> 00:17:33.400 closer to each other. 172 00:17:33.400 --> 00:17:35.680 Not much closer, but a little bit. 173 00:17:35.680 --> 00:17:42.240 How about on economics? Well, on economics, clearly the libertarians are close of conservatives. 174 00:17:42.240 --> 00:17:48.120 Not that the conservatives are all that good. I remember watching the Republican debates 175 00:17:48.120 --> 00:17:53.320 and Ron Paul was there. He wasn't allowed to say much, but he was there. And you had 176 00:17:53.320 --> 00:18:00.720 Matt Barmer, McCain. And what McCain said was, I think it was sort of an aside, but 177 00:18:00.720 --> 00:18:04.640 sometimes asides indicate where your heart really is. And what he said is, well, these 178 00:18:04.640 --> 00:18:10.160 These people were out after profits, and he sneered, you know, profits are evil. 179 00:18:10.160 --> 00:18:15.240 Well with a guy like that, championing our cause, you know, we're in trouble. 180 00:18:15.240 --> 00:18:22.880 Profits aren't evil, profits are part of voluntary transactions, indeed every voluntary transaction 181 00:18:22.880 --> 00:18:23.880 you make profits. 182 00:18:23.880 --> 00:18:28.280 Look, if I want to trade you this pen, your pen for my tie, I like your pen more than 183 00:18:28.280 --> 00:18:32.900 my tie, so I'm willing to give up my tie for your pen, I make a profit of the difference 184 00:18:32.900 --> 00:18:36.900 The difference between the value I place on the pen and the value I place on the time. 185 00:18:36.900 --> 00:18:39.900 You people, on the other hand, are giving up your pen for my time. 186 00:18:39.900 --> 00:18:45.900 That means, necessarily, that you value my time more than the pen. 187 00:18:45.900 --> 00:18:51.900 And the profit to you is the difference between how you evaluate the time and the pen. 188 00:18:51.900 --> 00:18:53.900 So we're both making profits. 189 00:18:53.900 --> 00:18:55.900 We're both exploiting each other. 190 00:18:55.900 --> 00:18:56.900 Come on, give me a break. 191 00:18:56.900 --> 00:18:58.900 We're not exploiting each other. 192 00:18:58.900 --> 00:19:02.900 Or rather, what we're doing is each cooperating with each other. 193 00:19:05.900 --> 00:19:08.900 Let me talk about a few economic issues. 194 00:19:09.900 --> 00:19:16.900 Because sometimes economics are more complex than these other social issues. 195 00:19:18.900 --> 00:19:21.900 Let me talk about the minimum wage for a few minutes. 196 00:19:21.900 --> 00:19:25.900 That's one of my favorite examples to indicate or illustrate 197 00:19:25.900 --> 00:19:29.900 and the perniciousness of the left's view on economics. 198 00:19:29.900 --> 00:19:32.900 What is the minimum wage law? 199 00:19:32.900 --> 00:19:39.900 The minimum wage law is a law that says it shall be illegal to pay anyone less than $6 an hour. 200 00:19:39.900 --> 00:19:43.900 I don't know what the level is. It went up from $5.15 or $6.15 or something like that. 201 00:19:43.900 --> 00:19:47.900 It's on its way up to $7, but let's suppose it's $6 an hour. 202 00:19:47.900 --> 00:19:53.900 The law says that it shall be illegal to pay anyone less than $6 an hour. 203 00:19:53.900 --> 00:19:57.900 What's your name, Mark? Here's a guy in a pink shirt. Suppose I go to Mark and I say, 204 00:19:57.900 --> 00:20:05.900 Hey, Mark, please wash my car and I'll pay you $4 an hour. And he agrees. We can both go to jail for that. 205 00:20:05.900 --> 00:20:11.900 Talk about a capitalist act between consenting adults. Imagine putting me in jail and him in jail. 206 00:20:11.900 --> 00:20:15.900 They've never put him in jail, but they should, according to the law. 207 00:20:15.900 --> 00:20:21.900 For making an offer to an adult person to make a commercial transaction, you go to jail for that. 208 00:20:21.900 --> 00:20:38.900 Now why is it that people accept this sort of a thing, that the average person acquiesces in the minimum wage law, when they have plebiscites or referendums on the minimum wage law, typically it'll win by three to one, four to one. 209 00:20:38.900 --> 00:20:44.900 The reason is, I think, that most people think that a minimum wage law is sort of like a floor under wages. 210 00:20:44.900 --> 00:20:50.400 If you keep it at $6 an hour, then no wage can go below $6. 211 00:20:50.400 --> 00:20:56.900 And if somebody like Mark is now making $4, well, the $4 will push him up to $6. 212 00:20:56.900 --> 00:21:01.900 And this sounds nice. I mean, it sounds humane. 213 00:21:01.900 --> 00:21:04.400 The poor are poor because they're making low wages. 214 00:21:04.400 --> 00:21:07.900 Well, with a stroke of the pen, we'll just raise their wages. 215 00:21:07.900 --> 00:21:09.900 What could be wrong with that? 216 00:21:09.900 --> 00:21:12.400 Well, one thing wrong with that is a violation of rights. 217 00:21:12.400 --> 00:21:16.400 I mean, I'm going to jail for making a perfectly reasonable offer. 218 00:21:16.400 --> 00:21:23.400 On an economic basis, though, this is totally misbegotten and mistaken. 219 00:21:23.400 --> 00:21:28.400 The minimum wage law is not a floor under wages that raises wages. 220 00:21:28.400 --> 00:21:34.400 Rather, the minimum wage law is a hurdle over which you have to jump to get a job. 221 00:21:34.400 --> 00:21:40.400 Let's discuss why people get jobs in the first place to make it a little bit more basic. 222 00:21:40.400 --> 00:21:47.400 What does the employer want out of the employee? What the employer wants out of the employee is his productivity. 223 00:21:47.400 --> 00:21:54.400 Namely, how much can this worker add to the bottom line? That establishes a maximum that he'll pay. 224 00:21:54.400 --> 00:22:01.400 So, for example, if Mork's productivity is $4 an hour, I hope you don't mind me using you as this negative example. 225 00:22:01.400 --> 00:22:06.400 The only reason I pick on people close is I can't see far away and I can't see who's out there, 226 00:22:06.400 --> 00:22:12.400 He had the misfortune of sitting close to me, so I can sort of see him. 227 00:22:12.400 --> 00:22:18.400 His productivity is $4 an hour. I, as a capitalist pig, what would I like to pay him? 228 00:22:18.400 --> 00:22:22.400 Well, I'd like to pay him negative infinity. 229 00:22:22.400 --> 00:22:27.400 But I'm humane. I'll offer him a penny an hour. 230 00:22:27.400 --> 00:22:30.400 I don't want to get him uppity with too high a wage rate. 231 00:22:30.400 --> 00:22:35.400 But if I offer him a penny an hour, that means I'll be making $3.99 pure profit off of him. 232 00:22:35.400 --> 00:22:46.400 And we have this young man here, Zed, who was also a capitalist pig, who sort of is rooting me on to say, yeah, go get him, exploit the hell out of him. 233 00:22:46.400 --> 00:23:02.400 But then he says, but better than I make $3.98 off of him than Block makes $3.99. You get it? So what Zed will do is offer him $0.02 an hour. 234 00:23:02.400 --> 00:23:08.720 Now my wife here, Marybeth, is also a capitalist pig. She wants to maximize profits, and she'll offer three cents an hour. 235 00:23:09.120 --> 00:23:13.760 Because better that she make 397 exploiting mark, than 236 00:23:14.360 --> 00:23:19.760 Isaiah 398 or me, 399. You see where this is going. It's going up toward four dollars an hour. 237 00:23:20.680 --> 00:23:26.560 Because if the wage is below productivity, that opens up a profit opportunity for exploiting 238 00:23:27.360 --> 00:23:30.400 employers to exploit workers by offering higher wages. 239 00:23:30.400 --> 00:23:38.400 Suppose the wage is somehow $7 an hour, and his productivity, remember, is $4 an hour. 240 00:23:38.400 --> 00:23:42.400 Well, that means I'm losing $3 an hour on his work for every hour I have him. 241 00:23:42.400 --> 00:23:45.400 If I keep doing that, I'm going to go broke. 242 00:23:45.400 --> 00:23:51.400 Maybe I can do it if I'm rich enough, one or two employees, but that's no way to run a railroad. 243 00:23:51.400 --> 00:23:58.400 So the wages tend to be $4 an hour, and if you compel an employer to pay a worker $6 an hour, 244 00:23:58.400 --> 00:24:03.400 nd the worker is only worth $4 an hour, he's going to lose $2 an hour on him, he's not going to hire him. 245 00:24:03.400 --> 00:24:10.400 That's why you have unemployment rates that are much higher for blacks than whites, 246 00:24:10.400 --> 00:24:15.400 that are much higher for teens than adults, because blacks have lower productivity than whites, 247 00:24:15.400 --> 00:24:18.400 for reasons that we don't get into as economists. 248 00:24:18.400 --> 00:24:23.400 Older people in their 50s and 40s have higher productivity than teenagers. 249 00:24:23.400 --> 00:24:27.400 That's why you have higher unemployment rates for people with lower productivity, 250 00:24:27.400 --> 00:24:32.400 Because fewer of them can jump over the hurdle to get a job in the first place. 251 00:24:32.400 --> 00:24:40.400 If the minimum wage law was such a great idea, why be so niggardly, use that word advisedly, 252 00:24:40.400 --> 00:24:44.400 somebody got in trouble for using it, but I think I'm safe here. 253 00:24:44.400 --> 00:24:52.400 Why be so niggardly? Why raise it to six or seven? Why not raise it to, I don't know, 100,000 an hour? 254 00:24:52.400 --> 00:25:05.400 I mean, we'd all be rich. We could cure poverty. But no, those pinkos in the Congress, they won't do it. Why? They should do it. 255 00:25:05.400 --> 00:25:12.400 Of course, we'd all be unemployed at $100,000 an hour, because the minimum wage is not a floor under wages raising it. 256 00:25:12.400 --> 00:25:16.400 Rather, it's a barrier over which you have to jump to get a job. 257 00:25:16.400 --> 00:25:21.400 If the minimum wage law is such a great idea, why do we have exceptions to it? 258 00:25:21.400 --> 00:25:23.400 Who do we have exceptions for? 259 00:25:23.400 --> 00:25:26.400 Preeminently teenagers who have low productivity. 260 00:25:26.400 --> 00:25:33.400 And during the summer, all these people are always advertising that we should give teenagers a job. 261 00:25:33.400 --> 00:25:36.400 And also for mentally handicapped people. 262 00:25:36.400 --> 00:25:39.400 Physical handicaps don't matter too much with regards to productivity. 263 00:25:39.400 --> 00:25:43.400 I could give this lecture in a wheelchair, right? 264 00:25:43.400 --> 00:25:49.080 Mental handicap is a problem in terms of productivity and what they discovered with regard to mentally 265 00:25:49.080 --> 00:25:53.280 handicapped people is that it helps them to have jobs and somehow they consent when it's 266 00:25:53.280 --> 00:25:58.000 a real job job and when it's just raking leaves for the government. 267 00:25:58.000 --> 00:26:06.440 And when they had the first minimum wage law in 1934, 43, somewhere in there, I forget, 268 00:26:06.440 --> 00:26:10.840 they didn't have an exception for handicapped people and no one would hire any handicapped 269 00:26:10.840 --> 00:26:12.880 people so they made an exception. 270 00:26:12.880 --> 00:26:18.280 But if you have to make an exception, how does that indicate that it's a help, that 271 00:26:18.280 --> 00:26:22.820 it's a floor under wages raising, and rather it's more evidence that it's a barrier over 272 00:26:22.820 --> 00:26:30.000 which you have to jump in order to get a job? 273 00:26:30.000 --> 00:26:33.600 There are some people, Cardin Kruger, you have to go to Princeton or be a Princeton 274 00:26:33.600 --> 00:26:40.520 economist to make this kind of mistake, who wrote this paper saying, well, the minimum 275 00:26:40.520 --> 00:26:48.520 Minimum wage law isn't so bad, you know, it actually raised wages, and when other people try to replicate their empirical research, they were unable to. 276 00:26:48.520 --> 00:26:55.520 And Clinton, that is Bill Clinton, relied on this in support of the minimum wage. 277 00:26:55.520 --> 00:27:00.520 Look, this is not an empirical issue. For Austrians, it's an apodictic, logical thing. 278 00:27:00.520 --> 00:27:05.520 It's sort of like triangles have 360 degrees, or the Pythagorean theorem is correct. 279 00:27:05.520 --> 00:27:08.080 and measure triangles and see if they have 360 degrees. 280 00:27:08.080 --> 00:27:10.360 If they don't, they're not triangles. 281 00:27:10.360 --> 00:27:12.440 This minimum wage law that says that 282 00:27:12.440 --> 00:27:14.960 if you assume profit-maximizing behavior 283 00:27:14.960 --> 00:27:16.880 or profit-seeking behavior, 284 00:27:16.880 --> 00:27:19.480 raising a minimum wage above productivity 285 00:27:19.480 --> 00:27:20.440 means unemployment. 286 00:27:20.440 --> 00:27:23.160 You don't test that, you illustrate that. 287 00:27:23.160 --> 00:27:25.600 Similarly with the pen and the tie, 288 00:27:25.600 --> 00:27:28.560 you don't test that, you illustrate that. 289 00:27:28.560 --> 00:27:31.620 And if you try to illustrate and you don't do it correctly, 290 00:27:31.620 --> 00:27:32.880 well, you know you're wrong, 291 00:27:32.880 --> 00:27:35.680 because we know which is the dog and which is the tail. 292 00:27:35.680 --> 00:27:39.520 The logic for the Austrians is the dog, 293 00:27:39.520 --> 00:27:42.520 not for our friends who are the mainstream economists. 294 00:27:43.600 --> 00:27:46.940 See, the point is, suppose I am now hiring you 295 00:27:46.940 --> 00:27:48.440 and we're all making these podiums 296 00:27:48.440 --> 00:27:52.880 and your productivity is all, oh, $4 an hour 297 00:27:52.880 --> 00:27:55.120 and we raise the minimum wage law to $6 an hour, 298 00:27:55.120 --> 00:27:58.080 do I fire you all in one second? 299 00:27:58.080 --> 00:28:00.880 No, I can't fire you all in one second. 300 00:28:00.880 --> 00:28:04.880 Look, the reason that Major League Baseball players throw the ball at the batters at 301 00:28:04.880 --> 00:28:09.680 around 100 miles an hour, 90 miles an hour, is because the faster the ball comes, the 302 00:28:09.680 --> 00:28:16.080 less time you have to react. Well, the shorter the time you have to react, the less reacting 303 00:28:16.080 --> 00:28:21.560 you can do. So yes, in the next minute, I'm not firing all of you guys, but over the next 304 00:28:21.560 --> 00:28:26.720 weeks and months, what I'm going to do is start hiring higher productivity workers with 305 00:28:26.720 --> 00:28:33.280 and maybe more sophisticated capital equipment, and one by one letting all you guys go. 306 00:28:33.280 --> 00:28:39.340 The minimum wage law was raised from 40 cents to 75 cents in 1951 or something, I forget 307 00:28:39.340 --> 00:28:42.960 the numbers, the exact year. 308 00:28:42.960 --> 00:28:47.080 In the old days, some of you people my age will remember this, you'd get into an elevator 309 00:28:47.080 --> 00:28:48.920 and there'd be this guy standing there. 310 00:28:48.920 --> 00:28:49.920 He wasn't a pervert. 311 00:28:49.920 --> 00:28:55.640 Rather, you would tell him what floor you wanted and he would sort of move this thing 312 00:28:55.640 --> 00:29:00.640 Young people, you whippersnappers, you don't know from this stuff. 313 00:29:00.640 --> 00:29:03.640 I say, I don't think he understands. 314 00:29:03.640 --> 00:29:05.640 What? What are you talking about? 315 00:29:05.640 --> 00:29:09.640 The guy's a pervert if he's hanging around in an elevator. 316 00:29:09.640 --> 00:29:12.640 They raised it from 40 to 70 cents, 317 00:29:12.640 --> 00:29:17.640 which was the highest percentage raise of the minimum wage ever raised, almost a doubling. 318 00:29:17.640 --> 00:29:23.640 And the next day, how many manually operated elevator people got fired? 319 00:29:23.640 --> 00:29:30.640 None. Not a single one. Everyone said, whoa, look at that. What do you do? The minimum wage law is great, great shakes. 320 00:29:30.640 --> 00:29:44.640 Everyone's wages rose. It is a floor under wages. But then what happened? Over the next six months, 12 months, 15 months, they started bringing in automatic elevators. 321 00:29:44.640 --> 00:29:54.640 And there was no connection made by anyone. Everyone thought, oh well, you know, it's the interest rate, or the times are changing, or it's innovation. 322 00:29:54.640 --> 00:30:03.640 They had this technology. It's just that the technology was not able to out-compete 40 cent workers, but it was able to out-compete 70 cent an hour workers. 323 00:30:03.640 --> 00:30:13.640 So don't expect the minimum wage law to have effects right away. It takes a little time, and then economic theory kicks in, 324 00:30:13.640 --> 00:30:16.840 takes in because economic theory says that things take time. 325 00:30:16.840 --> 00:30:21.480 You can't act instantaneously unless you're in the never, never world of perfect competition, 326 00:30:21.480 --> 00:30:28.320 beloved of our friends on the mainstream economics. 327 00:30:28.320 --> 00:30:33.980 Let me take a few more examples to illustrate the benefits of capitalism and the problems 328 00:30:33.980 --> 00:30:39.440 of regulation, interferences with markets. 329 00:30:39.440 --> 00:30:44.640 One of my favorites is the laws against sexual discrimination and racial discrimination. 330 00:30:44.640 --> 00:30:46.200 I just love this stuff. 331 00:30:46.200 --> 00:30:51.720 No, I'm not serious here, I'm joking. 332 00:30:51.720 --> 00:30:57.840 Walter Williams, a black friend of mine, tells the story of when he wanted to get married. 333 00:30:57.840 --> 00:31:04.320 And he decided, he played for the hetero team, so he decided to marry a woman. 334 00:31:04.320 --> 00:31:08.480 Well right then and there he is discriminated against half the human race. 335 00:31:08.480 --> 00:31:10.480 Despicable fellow! 336 00:31:10.480 --> 00:31:16.480 Look, heterosexuals discriminate against half the human race. 337 00:31:16.480 --> 00:31:19.480 Male heterosexual refuses to go to bed with another man. 338 00:31:19.480 --> 00:31:23.480 Female heterosexual refuses to go to bed with another woman. 339 00:31:23.480 --> 00:31:28.480 So all heterosexuals should be in jail for violation of human rights. 340 00:31:28.480 --> 00:31:32.480 But even homosexuals, disgusting pigs that they are, 341 00:31:32.480 --> 00:31:34.480 also discriminate against half the human race. 342 00:31:34.480 --> 00:31:41.480 Mainly, male homosexuals refuse to go to bed with any female, and female homosexuals refuse to go to bed with any male. 343 00:31:41.480 --> 00:31:47.480 The only people that pass the muster under this law are bisexuals. 344 00:31:47.480 --> 00:31:54.480 So, what we really should have is compulsory bisexuality for everybody. 345 00:31:54.480 --> 00:31:58.480 That is, if they were serious about their crappy views. 346 00:31:58.480 --> 00:32:06.380 I mean, you know, one way to see if these people are serious about the views is to take them to the logical conclusion, to try a reductio. 347 00:32:06.380 --> 00:32:10.280 We say, okay, you're against sexual discrimination? Well, let's try it out. 348 00:32:10.280 --> 00:32:16.680 Homosexuals? No. Heteros? No. Bi. Bisexuals. Groovy. 349 00:32:16.680 --> 00:32:20.280 Take this thing about restaurants. 350 00:32:20.280 --> 00:32:28.980 Now, it would be illegal for a restaurant to refuse service or employment to an Italian person. 351 00:32:28.980 --> 00:32:33.020 But suppose we're in an Italian restaurant, so I'm picking that as an example. 352 00:32:33.020 --> 00:32:36.140 Suppose we say we hate Italian food. 353 00:32:36.140 --> 00:32:39.820 Is anyone going to force us to come to an Italian restaurant to eat pizza? 354 00:32:39.820 --> 00:32:42.580 No, but they should, if they were serious. 355 00:32:42.580 --> 00:32:46.140 Now, it's true you can't figure it out, it's theoretical, it's hard to do. 356 00:32:46.140 --> 00:32:51.340 But if somehow we had God's eye view and we could look down on people and see their inner minds and say, 357 00:32:51.340 --> 00:32:57.140 Aha, you hate Chinese food, off to jail. You hate the soul food, you're a racist, you know. 358 00:32:57.140 --> 00:33:06.700 And we'd put people in jail for refusing to patronize the restaurants that we think they should be patronizing. 359 00:33:06.700 --> 00:33:13.180 Walter Williams is despicable on many other levels. In addition to wanting a woman, he wanted a black woman. 360 00:33:13.180 --> 00:33:18.180 Horrible, man. And he wanted a pretty one, so he was a lookist. 361 00:33:18.180 --> 00:33:28.180 And he also wanted an intelligent black woman with a sense of humor and, you know, sort of who was there together, you know, not mentally ill or whatever. 362 00:33:28.180 --> 00:33:39.180 So he was discriminating on many, many bases. He really should be in jail five, ten times over, as should we all, because we're all a bunch of pigs on the basis of these crazy laws. 363 00:33:39.180 --> 00:33:47.780 laws, and yet somehow these laws are seen as okay, preposterous. Why is it that women 364 00:33:47.780 --> 00:33:55.140 earn 70 cents for every dollar that men earn on the market? Well, our friends on the left 365 00:33:55.140 --> 00:34:04.700 will tell us that this is due to the inveterate, basic sexism of the market. This is nonsense 366 00:34:04.700 --> 00:34:24.700 Supposed Colin and I can each run the mile in 4 minutes and 30 seconds and we get up to the starting line and all of a sudden I put a 50-pound sack on his back. Who's going to win the race? 367 00:34:24.700 --> 00:34:30.700 Obviously, I'll win the race. Well, men and women are equally productive this century. 368 00:34:30.700 --> 00:34:35.400 In past centuries, men were a little bit more productive because upper body strength meant something. 369 00:34:35.400 --> 00:34:42.500 You know, you had to push that plow or lift that bale, tilt that something or other. 370 00:34:42.500 --> 00:34:45.000 Men were a little stronger, so men were a little bit more productive. 371 00:34:45.000 --> 00:34:50.800 But nowadays, the way to excavate a big hole for a new building is with a steam shovel, 372 00:34:50.800 --> 00:34:53.600 and women can push the button just as well as men. 373 00:34:53.600 --> 00:34:59.600 So there is no difference in productivity between men and women. 374 00:34:59.600 --> 00:35:04.400 But women have a 50-pound sack on their back. 375 00:35:04.400 --> 00:35:11.700 It's called household baby care, non-market activity in the home. 376 00:35:11.700 --> 00:35:15.100 I want to take a little survey here, and I'm going to give you three choices. 377 00:35:15.100 --> 00:35:18.600 And if you're married, use your own marriage as an example. 378 00:35:18.600 --> 00:35:24.400 And if you're not married, use the marriage as an example with which you're most familiar, presumably that of your parents. 379 00:35:24.400 --> 00:35:25.900 And I give you three choices. 380 00:35:25.900 --> 00:35:42.900 In your marriage, or the marriage that you're now contemplating, the wife does more housekeeping, baby care, shopping, cleaning, all sorts of household-related issues, and the husband does less. Raise your hand. 381 00:35:42.900 --> 00:35:49.900 Virtually most people. Okay. How many think that it's equal between the wife and the husband? Roughly equal. 382 00:35:49.900 --> 00:35:57.680 bunch of liars out there and how many people think that it's the other way 383 00:35:57.680 --> 00:36:05.500 around that the husband does more than the life ah one liar okay two liars 384 00:36:05.500 --> 00:36:09.180 sociologists I'm no big fan of sociologists either all a bunch of 385 00:36:09.180 --> 00:36:17.960 commies have done studies showing that the numbers that I got here namely 90 386 00:36:17.960 --> 00:36:26.460 I mean, 95% gave more husband than wife household and a few gave equal and one or two gave the opposite. 387 00:36:26.460 --> 00:36:31.460 That's true. And it's been true for years and years and years. 388 00:36:31.460 --> 00:36:37.460 Look, how many concert pianists are professional golfers? 389 00:36:37.460 --> 00:36:43.460 How many top flight physicians are great tennis players? 390 00:36:43.460 --> 00:36:48.660 Very few. We have such a thing called specialization in division of labor. If you're going to put 391 00:36:48.660 --> 00:36:54.180 a lot of time and effort into housekeeping, it's a little difficult to also be very productive 392 00:36:54.180 --> 00:36:59.820 in the market. You get this cartoon where the husband and the wife, they're both PhDs 393 00:36:59.820 --> 00:37:04.220 in chemistry and they both work from nine till nine and then they come home. And what 394 00:37:04.220 --> 00:37:10.580 does the husband say to the wife? What's for dinner, dear? In other words, even when they're 395 00:37:10.580 --> 00:37:15.580 are equally productive in the market, still the wife is doing way more of the housekeeping 396 00:37:15.580 --> 00:37:20.100 and the cooking and the cleaning and stuff like that, and the wife has much of a less 397 00:37:20.100 --> 00:37:25.660 of an attachment to the labor force, so they both get a job, they're both living in Seattle 398 00:37:25.660 --> 00:37:30.540 and one of them gets a job in Boston, if it's the husband who gets it and the wife is the 399 00:37:30.540 --> 00:37:36.740 trailing spouse, they're more likely to take it than if it's the opposite. 400 00:37:36.740 --> 00:37:42.180 And also, if the wife thinks that she's going to have three kids aged three years apart, 401 00:37:42.180 --> 00:37:46.500 so from the time the first kid is born until the last kid is in grade school and can go 402 00:37:46.500 --> 00:37:53.700 off to school, it's 10, 15 years, even though she has a PhD in chemistry equal to her husband's 403 00:37:53.700 --> 00:37:57.640 and even though she's as bright as him, she's not going to be able to keep up with him because 404 00:37:57.640 --> 00:38:01.620 she's got a 50-pound sack on her back. 405 00:38:01.620 --> 00:38:04.920 Now, there are two proofs of this, or two evidences of this. 406 00:38:04.920 --> 00:38:09.920 One is that if you take all females and all males 407 00:38:11.000 --> 00:38:12.560 and you compare their wages, 408 00:38:12.560 --> 00:38:15.320 the females earn 70% as much as the males. 409 00:38:15.320 --> 00:38:17.320 But if you take never married females 410 00:38:17.320 --> 00:38:20.000 and compare them to never married males, 411 00:38:20.000 --> 00:38:21.800 the wage differential disappears. 412 00:38:23.480 --> 00:38:26.600 And if you just take married or ever married, 413 00:38:26.600 --> 00:38:28.240 widowed, divorced, separated, whatever, 414 00:38:28.240 --> 00:38:31.300 then the ratio is way below 70, it's more like 40. 415 00:38:31.620 --> 00:38:42.620 That's one indication. If you take age as a proxy for marital status and look at the male-female ratio of people under 23, again, there's no difference. 416 00:38:42.620 --> 00:38:48.620 Because most people under 23 haven't been married, haven't been biased by the institution of marriage. 417 00:38:48.620 --> 00:38:54.620 So it's the institution of marriage, it's not anything endemic to capitalism that is unfair. 418 00:38:54.620 --> 00:39:12.620 Let me give you another one. CEO salaries. Everyone says, well, CEO salaries, they're just out of control. The CEOs are making zillions, and the people on the shop floor are making $12 an hour, and it's unfair. 419 00:39:12.620 --> 00:39:18.620 And capitalism helps the CEOs and hurts everyone else. 420 00:39:18.620 --> 00:39:28.620 Well, there's this guy, Michael Milken, who, before he went to jail, specialized. He was the market's antidote to this sort of a thing. 421 00:39:28.620 --> 00:39:40.620 What he would do is, when he saw a CEO's salary way above reasonableness, he would buy shares of stock in that company, and he would make a hostile takeover. 422 00:39:40.620 --> 00:39:46.620 That's an interesting one, hostile takeover. You know, in the market, the market consists of all sorts of voluntary actions. 423 00:39:46.620 --> 00:39:50.620 Remember the pen and the tie? How can you have a hostile takeover? 424 00:39:50.620 --> 00:39:58.620 I mean, if I want to buy Isaiah's wristwatch and he agrees, where's the hostility? 425 00:39:58.620 --> 00:40:05.620 He agreed. The hostility comes about similar with the Microsoft trying to take over Yahoo, 426 00:40:05.620 --> 00:40:09.620 its so-called hostile takeover. It's hostile in terms of the managers of Yahoo, 427 00:40:09.620 --> 00:40:13.620 but it's not hostile in terms of the stockholders of Yahoo. 428 00:40:13.620 --> 00:40:15.620 If they're willing, then there's no hostility. 429 00:40:15.620 --> 00:40:20.620 So what Michael Milken would do is would buy up shares of stock and then take 430 00:40:20.620 --> 00:40:25.460 over the the executive or take over the company and boot out the overpaid 431 00:40:25.460 --> 00:40:29.140 executives and we saw what happened to him he was put in jail on all sorts of 432 00:40:29.140 --> 00:40:33.580 nefarious charges so here the the critics of the capitalism the critics of 433 00:40:33.580 --> 00:40:38.100 the market have the effrontery to say that CEO salaries out of hand and it's 434 00:40:38.100 --> 00:40:43.100 due to capitalism on the one hand and on the other hand they put in jail the 435 00:40:43.100 --> 00:40:47.100 and the person who is acting so as to ameliorate the problem. 436 00:40:47.100 --> 00:40:52.100 Well of course there's going to be a problem if you prohibit the market's response to it. 437 00:40:52.100 --> 00:40:57.100 So we have another invalid criticism of the market. 438 00:40:57.100 --> 00:41:00.100 Let me try another one on you. 439 00:41:00.100 --> 00:41:08.100 I teach in Loyola University, New Orleans, and we had Katrina a little while ago, three years ago. 440 00:41:08.100 --> 00:41:11.100 I say a little while ago because we're still not past it 441 00:41:11.100 --> 00:41:16.100 You can still go to New Orleans and see houses that are halfway up a tree or something. 442 00:41:16.100 --> 00:41:19.100 I mean, it hasn't been solved yet. 443 00:41:19.100 --> 00:41:25.100 See, I'm not really that angry at FEMA or the Army Corps of Engineers. 444 00:41:25.100 --> 00:41:30.100 So what? They killed 1,000 people. What the heck? You know, 1,000 people. 445 00:41:30.100 --> 00:41:34.100 What really bugs me is that they're still in business. 446 00:41:34.100 --> 00:41:39.100 Look, the reason they put erasers on the end of pencils is because people make mistakes. 447 00:41:39.100 --> 00:41:43.900 Mistakes. The vicious part of it is that in the market when you make a mistake 448 00:41:43.900 --> 00:41:50.020 you're out of business. You lose money and then you go bankrupt and other people 449 00:41:50.020 --> 00:41:53.980 come in. Where is Pan Am? Where are these other companies that didn't do so well? 450 00:41:53.980 --> 00:42:00.940 Where is Snyder Baker? The Army Corps of Engineers and FEMA, my favorite bumper 451 00:42:00.940 --> 00:42:08.180 sticker is FEMA happens. I've got it right on the door of my office, wonderful 452 00:42:08.180 --> 00:42:34.180 In any case, what happened right after FEMA was just really great. Not only couldn't they help the people of New Orleans at all, but Lew and I have an article co-authored, a series of two articles on that, where we show what they did mainly was prevent places like Walmart from coming in and bringing stuff to help the people. 453 00:42:34.180 --> 00:42:49.180 Well, what happened to prices of things like flashlight batteries, orange juice, milk, water, bread, things that people needed in the aftermath of Katrina? Gasoline. 454 00:42:49.180 --> 00:42:53.180 They went up. They went way up. 455 00:42:53.180 --> 00:43:01.180 Now there are salutary benefits of high prices for things like that. 456 00:43:01.180 --> 00:43:05.180 One of them is rationing. 457 00:43:05.180 --> 00:43:09.180 At the old prices, if you're the first in line at Walmart, 458 00:43:09.180 --> 00:43:14.180 and the prices of orange juice and flashlight batteries and candles are at the old low level, 459 00:43:14.180 --> 00:43:19.180 What you do is you grab up as much as you can, because who knows if you'll need it or not, and you march out of the store. 460 00:43:19.180 --> 00:43:29.180 Namely, you're not acting in a cooperative way with regard to people at the back of the line who aren't going to get anything if the people in the front of the line hog it all up. 461 00:43:29.180 --> 00:43:35.180 But if the price rises tenfold, you start saying, well, do I really need 3,000 flashlight batteries? 462 00:43:35.180 --> 00:43:40.180 No, you know, I can do with 10. Thus, you leave some for the other people. 463 00:43:40.180 --> 00:43:46.880 by the people, namely, the market capitalism is encouraging us to act in a way that is 464 00:43:46.880 --> 00:43:50.740 reasonable and responsible. 465 00:43:50.740 --> 00:43:58.380 The second benefit of a catapulting price is, well you see right now, or right then, 466 00:43:58.380 --> 00:44:03.000 the only motivation people had at the old low price to bring stuff in from Kentucky 467 00:44:03.000 --> 00:44:09.440 and Seattle or wherever was compassion, benevolence, people in New Orleans are hurting so let's 468 00:44:09.440 --> 00:44:21.440 But as Adam Smith said, you can only go so far with benevolence. If you have a problem, you want to mobilize all human capacities, not just benevolence, of which we have plenty. 469 00:44:21.440 --> 00:44:27.440 But you want to mobilize selfishness too. So at a high price, not only do we have benevolence, but now we have selfishness. 470 00:44:27.440 --> 00:44:36.440 People say, well, I'm not selling any flashlight batteries in Seattle. Or someone says, I'm not selling any orange juice in San Francisco. 471 00:44:36.440 --> 00:44:39.700 San Francisco, I'm going to bring it to New Orleans to take advantage of the high prices 472 00:44:39.700 --> 00:44:46.480 to exploit those people by bringing in stuff that they're in desperate need of. 473 00:44:46.480 --> 00:44:52.560 And when they do that, the prices then tend to move toward some sort of equilibration. 474 00:44:52.560 --> 00:44:54.560 But Governor Blanco is having none of this. 475 00:44:54.560 --> 00:44:55.560 Oh no, no, no. 476 00:44:55.560 --> 00:45:00.740 These price gougers, they're evil, they've got to be put in jail. 477 00:45:00.740 --> 00:45:04.440 And the people were applauding her, whoop-de-doo, put the price gougers in jail. 478 00:45:04.440 --> 00:45:14.440 See, they just, they're economic illiterates. They think that somehow that the market, capitalism, the price system, the profit system is against them. 479 00:45:14.440 --> 00:45:28.440 They don't realize the benefits of it. They don't realize this benefit in terms of rationing and bringing forth new supplies, and they applaud this. 480 00:45:28.440 --> 00:45:33.440 Let me give you another example, public housing. 481 00:45:33.440 --> 00:45:41.440 Two of my favorite boxes were the Spinks Brothers, S-P-I-N-K-S, Michael and Leon. 482 00:45:41.440 --> 00:45:45.440 They both won gold medals in the Olympics in 84. 483 00:45:45.440 --> 00:45:48.440 One of them lost to Mike Tyson later on. 484 00:45:48.440 --> 00:45:55.440 The reason I bring up the Spinks Brothers is they lived in the Pruitt-Igoe houses in St. Louis. 485 00:45:55.440 --> 00:46:02.440 St. Louis, and the Pruegot-Igoe Houses where it was a public housing unit of just gargantuan 486 00:46:02.440 --> 00:46:07.680 proportions. There were maybe 50 buildings each 30 stories high, really, really big, 487 00:46:07.680 --> 00:46:12.000 and they had to blow them up, and this wasn't terrorist. Well, it was. The U.S. government 488 00:46:12.000 --> 00:46:20.840 had to blow it up. Why? Because these places became dens of iniquity. 489 00:46:20.840 --> 00:46:25.160 You know, there's that movie Lord of the Flies, and in Lord of the Flies you sort of get a 490 00:46:25.160 --> 00:46:30.240 A Ten-Year-Old Boy's Version of Heaven, Killing Each Other 491 00:46:30.240 --> 00:46:37.000 Well, the Pruitt-Igall Houses and public housing are more like a 15-year-old boy's version of heaven. 492 00:46:37.000 --> 00:46:44.080 Because what they do in public housing is they have, public housing is supposed to help the poor, so you have an income level. 493 00:46:44.080 --> 00:46:47.000 And if you get above the income level, you get booted out. 494 00:46:47.000 --> 00:46:51.880 Well, who's going to get above the income level, or who's not going to be allowed in the public housing in the first place? 495 00:46:51.880 --> 00:46:57.800 intact families with a father present. So the people in public housing are female-headed 496 00:46:57.800 --> 00:47:02.660 households and the women are unable to control the teenage boys because traditionally the 497 00:47:02.660 --> 00:47:10.200 people who teach teenage boys respect, watch out Isaiah, are adult males. But if there 498 00:47:10.200 --> 00:47:16.160 are no adult males there then the place becomes havoc. Did they learn anything from this? 499 00:47:16.160 --> 00:47:21.720 No. They decided well instead of having high-rise we'll have low-rise public housing. But it's 500 00:47:21.720 --> 00:47:26.720 That's the same thing. It doesn't matter how high the buildings are. If there are no adult 501 00:47:26.720 --> 00:47:33.240 males around, you're going to have chaos. This latest thing with microfinance, where 502 00:47:33.240 --> 00:47:38.520 the eunice has got some sort of medals for giving money to women, cut out men, men are 503 00:47:38.520 --> 00:47:44.920 the evil. Look, an intact family is one of the best ways to cure poverty. If you try 504 00:47:44.920 --> 00:47:51.200 to break up the family, whether with welfare, with public housing, with microfinance, with 505 00:47:51.200 --> 00:47:56.200 or any other way, men are part of the solution, not part of the problem. 506 00:47:56.200 --> 00:48:03.200 The problem in the black community, the poor community is not men, it's the fact that there are no men there. 507 00:48:03.200 --> 00:48:14.200 A lot of them are in jail or they're in their grave before their time due to drug prohibition. 508 00:48:14.200 --> 00:48:25.200 Why is it that if the case for capitalism is so rational and so secure based on empirical findings, 509 00:48:25.200 --> 00:48:27.200 why is it that we don't have capitalism? 510 00:48:27.200 --> 00:48:32.200 Why is it that Ron Paul only got five, eight percent of the vote? 511 00:48:32.200 --> 00:48:36.200 Why is it that there isn't a Mises Institute in every city 512 00:48:36.200 --> 00:48:42.200 or that there's no Mises Institute at all because we don't need one? 513 00:48:42.200 --> 00:48:57.200 My explanation for this, is pushing up the rock of Sisyphus, and then it comes down the fact that every time I got a freshman class, they're all a bunch of commie, pinko kids, and I have to sort of, you know, bring it out of them. 514 00:48:57.200 --> 00:49:06.200 It's due to sociobiology. Sociobiology is the theory that we are the way we are now because of what it took to survive a million years ago. 515 00:49:06.200 --> 00:49:11.200 50, and there you could only have explicit cooperation. 516 00:49:11.200 --> 00:49:15.200 I scratch your back, you scratch mine, I help you move this bowl, you help me move that log, 517 00:49:15.200 --> 00:49:19.200 I help you with food when you didn't get any, you help me the next day. 518 00:49:19.200 --> 00:49:21.200 Explicit cooperation. 519 00:49:21.200 --> 00:49:22.200 We're hard-wired for that. 520 00:49:22.200 --> 00:49:26.200 That's why when there's a tragedy somewhere in Myanmar, Burma, 521 00:49:26.200 --> 00:49:29.200 everyone is saying, oh wow, you know, we've got to help. 522 00:49:29.200 --> 00:49:34.200 It's the human condition. 523 00:49:34.200 --> 00:49:40.200 But we're not hardwired for explicit cooperation, or rather implicit cooperation, through markets. 524 00:49:40.200 --> 00:49:45.500 The only way you can deal with 300 million people, or 6 billion people, is implicitly 525 00:49:45.500 --> 00:49:46.500 through markets. 526 00:49:46.500 --> 00:49:50.200 You know, the Hollywood people say they're going to invite 10,000 of their best friends 527 00:49:50.200 --> 00:49:52.160 to their birthday party. 528 00:49:52.160 --> 00:49:55.040 We're not constituted to have 10,000 best friends. 529 00:49:55.040 --> 00:49:56.040 We can't. 530 00:49:56.040 --> 00:50:02.840 We can hardly remember, you know, 100 people, 500 tops, whatever, namely, what it meant 531 00:50:02.840 --> 00:50:06.960 to survive and leave genes to the next generation a million years ago. 532 00:50:06.960 --> 00:50:08.600 That's why we don't appreciate markets. 533 00:50:08.600 --> 00:50:10.680 That's why we don't appreciate capitalism. 534 00:50:10.680 --> 00:50:16.700 That's why there'll always be a need for the Mises Institute until biology changes, which 535 00:50:16.700 --> 00:50:18.880 takes a long time. 536 00:50:18.880 --> 00:50:22.960 That's why it's an upward struggle. 537 00:50:22.960 --> 00:50:27.060 I'm not depressed about this. 538 00:50:27.060 --> 00:50:37.260 To me, it's the most enjoyable thing in the world to tweak noses, to promote liberty where 539 00:50:37.260 --> 00:50:42.800 we need it very much, even though it's hard to do because people are biologically not 540 00:50:42.800 --> 00:50:43.800 attuned to it. 541 00:50:43.800 --> 00:50:44.800 Thanks for your attention. 542 00:50:44.800 --> 00:50:46.800 Thanks for your attention.