WEBVTT NOTE Chicago Economics v. Austrian Economics 1 00:00:00.000 --> 00:00:11.000 Thank you very much. It's a pleasure to once again attend a libertarian conference and have so many people come out for it. 2 00:00:11.000 --> 00:00:21.000 I'm also kind of a tough spot here, personally, because I make sure you get into the previous debate. 3 00:00:21.000 --> 00:00:51.000 The basic problem, I think, the fundamental basic problem with Chicago, well, first of all, you have to, the average person, the average intellectual or 4 00:01:21.000 --> 00:01:26.000 They push each other into positions and get each other jobs and that sort of thing. 5 00:01:26.000 --> 00:01:33.000 So there are small types of intras Chicago Solidarity. 6 00:01:33.000 --> 00:01:47.000 The basic problem, I think from the point of view of truth, freedom, liberty and justice about a Chicago school, 7 00:01:47.000 --> 00:01:52.000 Well, there are a couple of basic problems. One basic problem is their attitude towards the state. 8 00:01:52.000 --> 00:01:59.000 They regard the state as an equivalent arm of social action. 9 00:01:59.000 --> 00:02:05.000 In other words, you've got the market out here, you've got voluntary clubs out there, 10 00:02:05.000 --> 00:02:09.000 you've got the state over here, and all of that, in fact, there's no moral distinction, 11 00:02:09.000 --> 00:02:14.000 no logical distinction between the two or three of them. 12 00:02:14.000 --> 00:02:23.000 So that the Chicago-wide is never against government action because they're moral or criminal or whatever. 13 00:02:23.000 --> 00:02:27.000 Consider it another social tool of government. 14 00:02:27.000 --> 00:02:29.000 Well, we look at each situation ad hoc. 15 00:02:29.000 --> 00:02:32.000 Should the government build a steel plant? 16 00:02:32.000 --> 00:02:37.000 Well, we look at the situation, we examine the statistical correlations, et cetera. 17 00:02:37.000 --> 00:02:42.000 And we usually wind up with conclusions they shouldn't, but it's less efficient than the market's doing. 18 00:02:42.000 --> 00:02:58.000 But you'll never know from one ad hoc problem to the next what the Chicagoite is going to come up with because each area, each field is a separate distinct field for investigation. 19 00:02:58.000 --> 00:03:11.000 The Chicagoite has therefore no general theory attacking the state or pursuing the state is even somehow different anyway from a private action. 20 00:03:11.000 --> 00:03:23.000 The color of this is the fact that Chicagoites have no theory of justice in property rights. 21 00:03:23.000 --> 00:03:33.000 Now, they talk a lot about private property, at least the last few years, but their view of private property is purely instrumental. 22 00:03:33.000 --> 00:03:37.000 In other words, government decides who should get this property. 23 00:03:37.000 --> 00:03:45.000 Social Efficiency 24 00:04:07.000 --> 00:04:31.000 The question is, who should pay who? Who owns the property? Should the railroads have to compensate the farmers for the damage? Or should the farmers have to pay, beg the railroads to stop by paying them more? 25 00:05:01.000 --> 00:05:18.000 The Chicago School, starting off with the idea of completely value free economics, economics supposedly shorn of any kind of moral or ethical position. 26 00:05:18.000 --> 00:05:48.000 Why not, however, taking all sorts of more political positions, making all sorts of political statements, presumably also value-free, in other words, have a leap from a supposedly value-free science to a supposedly value-free politics, which I don't think can exist, and it's not a value-free species, one of us say the state is some sort of a neutral tool, and sure, the concept is so-called social efficiency in some way, it's more 27 00:05:48.000 --> 00:05:54.000 The Theory of Money and Credit 28 00:06:18.000 --> 00:06:29.000 The Austrian has been very weak on tax theory also, and as a matter of fact, this is true for women and government types in general. 29 00:06:29.000 --> 00:06:41.000 If a women and government person favors taxes, which most of them did, I'm not saying objectivist in this discussion, but most women and government people favor taxes. 30 00:06:41.000 --> 00:06:45.000 How do you raise the taxes, and which taxes, and so forth, and so on? 31 00:06:45.000 --> 00:06:50.000 And a lot of justifications for that, and it gets pretty dicey. 32 00:06:50.000 --> 00:06:57.000 Well, usually the Austrian position on taxes is that they like to have a lower tax structure as possible, which I go along with. 33 00:06:57.000 --> 00:07:03.000 And two, it should not be progressive. The income taxes should not be progressive, for example. 34 00:07:03.000 --> 00:07:09.000 And three, they should somehow be neutral with respect to the market, which is really impossible. 35 00:07:09.000 --> 00:07:19.000 This is just about as far as Austrians will go in a tax theory, but at least most Austrians aren't really enamored of taxes. 36 00:07:19.000 --> 00:07:23.000 They don't consider taxes somehow a lovable instrument. 37 00:07:23.000 --> 00:07:31.000 What Chicago whites really do, once they get around to the doctrine of taxes, is really more efficient in this particular area. 38 00:07:31.000 --> 00:07:39.000 So if you turn those Chicago writings on taxation, there's a big yammer for taxes in many ways. 39 00:07:39.000 --> 00:07:47.000 For example, I remember a few years ago there was a meeting of the Montelorado Society, 40 00:07:47.000 --> 00:07:53.000 which is a meeting of a group of international free markets, semi-free markets, 41 00:07:53.000 --> 00:07:58.000 and one-tenth free market economists, and social philosophers, and journalists, and businessmen. 42 00:07:58.000 --> 00:08:14.000 They gather every year at a pleasant summer resort, and one year, three Chicagoans zeroed in on Belgian delivers and eating with hell, and three of them had independently arrived with this magnificent theory of a new kind of tax. 43 00:08:14.000 --> 00:08:23.000 I don't know if they've ever published this, but at any rate, they'd arrived at this, and they were all great minds, you know, working independently on a problem, or arrive at the same solution. 44 00:08:23.000 --> 00:08:33.000 I think all I have to do is to follow the Chicago White mentality and Chicago White attitude towards property in general. 45 00:08:33.000 --> 00:08:40.000 I want something like this. Here's what we do. We get everybody to assess their own property. 46 00:08:40.000 --> 00:08:45.000 In other words, I have a set of books that you have a house or a factory or whatever it is. 47 00:08:45.000 --> 00:08:47.000 Each guy puts down his own assessment. 48 00:08:47.000 --> 00:08:54.500 Well, that's pretty good, you know, because if each guy's allowed to put his own assessment down, and then he's going to have to stop all investigations, 49 00:08:54.500 --> 00:09:02.000 the usual presentation put out, you know, an evaluation of something like half a penny, and then you pay your rate on it. 50 00:09:02.000 --> 00:09:06.500 Ah, but there's a clicker here, which shows Chicago people work that. 51 00:09:06.500 --> 00:09:14.500 If you, you are forced by the government to sell this particular property to anybody who comes along at that rate. 52 00:09:14.500 --> 00:09:23.500 So, I think they really lined this up. They really thought this was somehow the answer to the tax question. 53 00:09:23.500 --> 00:09:29.500 It's more efficient. You don't have to have a big arm of assessors investigating what your property really is. 54 00:09:29.500 --> 00:09:35.500 Why don't you let the guy assess it himself, and then whoever is smoothing down the block comes along and says, 55 00:09:35.500 --> 00:09:42.500 You can say you're half a word, half a cent, here's a half a penny, and you're forced to sell it to him. 56 00:09:42.500 --> 00:09:56.500 At this meeting, Friedrich Hayek, a distinguished free-market Austrian economist, was very concerned about this, particularly because he has a distinguished book collection. 57 00:09:56.500 --> 00:10:04.900 Well, my God, this means that if I evaluate a set of books, my books, you know, the Boeing Priceless today, 58 00:10:04.900 --> 00:10:13.700 it means that I would be forced to sell it to anybody, and this means of course, if I evaluate a book very highly, I have to put an enormous assessment on it. 59 00:10:13.700 --> 00:10:19.100 Say, in other words, at 30,000 people have to get you, you know, they want to destroy your book. 60 00:10:19.100 --> 00:10:23.100 You have to put in a section of $10 billion in your book collection. 61 00:10:23.100 --> 00:10:28.100 You have to pay $100,000 a year, whatever the property tax will be. 62 00:10:28.100 --> 00:10:30.100 You might not have. 63 00:10:30.100 --> 00:10:34.100 So, of course, the Chicago Antia, what about my book? 64 00:10:34.100 --> 00:10:40.100 Hayek said, of course, the Chicago Antia was tough on your book. 65 00:10:40.100 --> 00:10:59.100 I think this really sums up the Chicago position on taxes. It's a position of brutal indifference to genuine property rights and a desire to clean up the state, in other words, make the state as efficient as possible. 66 00:10:59.100 --> 00:11:29.100 The thing is, the Chicago people look, for example, the notorious Friedman-negative income tax, which I don't know if I went into it right, but in any case, Friedman looks around at the welfare system, it's a big mess, right, no question about that, I don't think anybody would argue about this, every city, every state, every region has its own crazy system, etc., and it's inefficient, and there are also the bureaucrats who 67 00:11:29.100 --> 00:11:35.100 The Theory of Money and Credit 68 00:11:59.100 --> 00:12:06.100 If your income happens to be $500 a year, you submit your form to the IRS, and you get back $1,500. 69 00:12:06.100 --> 00:12:13.100 Of course, people make certain adjustments to try to weaken some of the disincentive effect, which is pretty obvious in this thing. 70 00:12:13.100 --> 00:12:18.100 But basically, this is what happens. In other words, everybody gets that automatic claim on production. 71 00:12:18.100 --> 00:12:22.100 Instead of having to shuffle through a large welfare bureaucracy, 72 00:12:22.100 --> 00:12:28.100 and go up in the shuffle and get stepped on by arrogant welfare workers and that sort of thing, 73 00:12:28.100 --> 00:12:45.100 To simply submit your form and get the money, this might be more efficient in the sense of lower cost, greater uniformity, but it also means an automatic claim of production instead of a sort of shuffling, inefficient claim, which I think would have much more disastrous effect. 74 00:12:45.100 --> 00:12:51.100 An enormous shift from production to the welfare, to the negative income tax goal. 75 00:12:51.100 --> 00:13:03.100 This is typical of the attitude. For example, Milton Friedman is very proud of the fact that he was one of the people most instrumental in pushing through the withholding tax system in this country. 76 00:13:03.100 --> 00:13:11.100 He was working for the US Treasury Department during the war and came up with this brilliant idea, withholding tax. 77 00:13:11.100 --> 00:13:17.100 You see, the problem is, if you didn't handle the withholding tax, the whole income tax structure would collapse. 78 00:13:17.100 --> 00:13:38.100 I mean before the war it went fairly well because taxes were pretty low, but if you try to extract 20%, 30%, 70% income tax in person, and you let them, you know, you say well let's do it on April 15th, period, and you're not going to diligently save up over the year, and then hand it over to the government. 79 00:13:38.100 --> 00:13:42.100 The Enforcement, a tremendous tag of enforcement things that break down. 80 00:13:42.100 --> 00:13:53.100 So Friedman and his colleagues come up with a brilliant idea of extracting the payments every day from his paychecks using the employer's unpaid agency in this regard. 81 00:13:53.100 --> 00:13:57.100 So this makes the income tax system much more efficient. 82 00:13:57.100 --> 00:14:05.100 It allows the growth of an enormous Manhattan State, enormous income tax burden and criminality, etc. 83 00:14:05.100 --> 00:14:15.100 And it's none other than the level of efficiency, and in fact it is more efficient, but it comes to the state operation, in my view, the less efficiency, the better. 84 00:14:20.100 --> 00:14:29.100 You know, if I was talking about the operations of a criminal gang, you know, it wasn't going to be efficient, you know, it wasn't going to be, you know, the backstages and, you know, how to get it going. 85 00:14:29.100 --> 00:14:40.600 I don't know if it's apocryphal or not, but it's a great story anyway, about Charles Kettering, 86 00:14:40.600 --> 00:14:44.600 an distinguished free market industrialist. 87 00:14:44.600 --> 00:14:49.100 And he was trying to cheer up a friend of his who was in the hospital. 88 00:14:49.100 --> 00:14:54.600 The friend of his was complaining about the local government and how terrible it was and so on. 89 00:14:54.600 --> 00:15:01.600 As Tony said, Terry said, cheer up Jim, thank God that we don't get as much government as we pay for. 90 00:15:01.600 --> 00:15:05.600 So I think it sums up the question of efficiency. 91 00:15:05.600 --> 00:15:16.600 If you're going to have to have the tax burden, at least let the money leak out all the way if you don't have an efficient governor coming to oppress you. 92 00:15:16.600 --> 00:15:20.600 And this is essentially what the Chicago White position does. 93 00:15:20.600 --> 00:15:31.600 The Chicagoite is an economic technician, society in quotes sets the ends for which he is working, and that means a state as a so-called representative of society sets the ends. 94 00:15:31.600 --> 00:15:44.600 And the Chicagoite is a technical advisor, you know, how do you, something like he's an incorporation type of thing, trying to decide where is the most efficient place to place the A-bomb or whatever. 95 00:15:44.600 --> 00:15:54.600 Where is the most efficient pinpoint? How do you fix the state after it's more efficient in terms of taxing and governing and subsidizing and whatever? 96 00:15:54.600 --> 00:16:02.600 And I think that's essentially why the Chicago opposition amassed it. 97 00:16:02.600 --> 00:16:16.600 As far as the math, back to the attitude of efficiency, we have another problem with the Chicago position, which is the original founding father of the Chicago school, Henry C. Simons, I think he's very instructive. 98 00:16:16.600 --> 00:16:25.600 Simons, everybody, go and read Simons' famous book, A Positive Program for Laissez-Faire, which came out in 1934. 99 00:16:25.600 --> 00:16:36.600 And because you see everybody before him, before the laissez-faire was essentially negative, where you tell the government, leave us alone, and the government is not supposed to do much. 100 00:16:36.600 --> 00:16:42.600 And finally it says, no, no, from my view, the government is out there doing a hell of a lot. It's a positive program. 101 00:16:42.600 --> 00:16:51.600 The positive program is essentially three things, I think. One is a very, very drastic egalitarian progressive income tax system. 102 00:16:51.600 --> 00:17:05.600 When you smash the rich, you take cash, almost, you know, supposedly you got a carrier, and you smash the rich and give all the money, you tax everybody above a certain amount, and you pay the money to everybody below a certain amount. 103 00:17:05.600 --> 00:17:17.600 Now we see in this, and one of the problems here is that, of course, the diamonds in the Chicago school believe that you can do this without affecting incentives at all. 104 00:17:47.600 --> 00:17:58.600 This is one of the problems that Chicagoism has taken us over from Orthodox economics. 105 00:17:58.600 --> 00:18:05.600 They have this very drastic progressive income tax set up. 106 00:18:05.600 --> 00:18:08.600 The president of Chicago School has happily weakened this. 107 00:18:08.600 --> 00:18:14.600 They've given up, they've grown well, they've retreated a great deal from the finance position. 108 00:18:14.600 --> 00:18:18.600 There's still this trailing cloud of glory that we get sometimes when we see science. 109 00:18:18.600 --> 00:18:21.600 The negative income tax is freedom of the example of it. 110 00:18:21.600 --> 00:18:26.600 We tax everybody above a certain amount, pay out money to those below it. 111 00:18:26.600 --> 00:18:29.600 Freedom would not advocate progressive income tax, 112 00:18:29.600 --> 00:18:32.600 but this is especially where romance is. 113 00:18:32.600 --> 00:18:39.600 At least progressive in the sense that the guy below, of course, 2000 or whatever, is not paying anything. 114 00:18:39.600 --> 00:18:43.600 Also, there's various other things that Chicagoites come up with from time to time. 115 00:18:43.600 --> 00:18:49.600 For example, the Chicago position now favors local government subsidies to factories. 116 00:18:49.600 --> 00:18:54.600 You know, we induce factories to come into the state of the South. 117 00:18:54.600 --> 00:18:57.600 Some of them are rural areas or whatever. 118 00:18:57.600 --> 00:19:02.600 A lot of factories come in there, so it's legitimate for local government subsidies. 119 00:19:02.600 --> 00:19:05.600 Then there's another position they came up with. 120 00:19:05.600 --> 00:19:09.600 I think that's a Buchanan, who might have shifted over from Chicago to Austrianism. 121 00:19:09.600 --> 00:19:13.600 This was in the Chicago Incarnation. 122 00:19:13.600 --> 00:19:17.600 Beccano was worried about the external, just autonomies again. 123 00:19:17.600 --> 00:19:19.600 And that took a whole neighborhood of effect. 124 00:19:19.600 --> 00:19:21.600 Of clowning and noise and all that. 125 00:19:21.600 --> 00:19:23.600 Saying Los Angeles. 126 00:19:23.600 --> 00:19:25.600 I think you can see the audience. 127 00:19:25.600 --> 00:19:27.600 He was a visiting professor at UCLA. 128 00:19:27.600 --> 00:19:31.600 He was kind of worried about urban growth and, you know, noise and congestion. 129 00:19:31.600 --> 00:19:33.600 Before that he was in Charlottesville, Virginia. 130 00:19:33.600 --> 00:19:35.600 He didn't have much of a response. 131 00:19:35.600 --> 00:19:49.600 And he said, well, let's see, there are three ways to handle it. One is you can enforce property rights. For example, you can enforce the property right against noise invasion of your property, or against air pollution against your lungs. 132 00:19:49.600 --> 00:19:54.600 And he clearly dismissed that. I want to ask this utopian. He dismissed that very quickly. That's out. 133 00:19:54.600 --> 00:20:09.600 The second thing he did do, which he really pounced for, was the ideal solution, was to set up a migration barrier in California, not submitting any outlander to come to move to California from the middle west, or set up immigration barriers in New York. 134 00:20:09.600 --> 00:20:18.600 Then he sighed, and said, well, we'll miss that unconstitutional problem we're dealing with, and then the Constitution will submit immigration barriers within the country. 135 00:20:18.600 --> 00:20:35.600 So for the third approximation pokes for the idea of taxing these people in Chicago, Los Angeles, New York, and using that money to subsidize Appalachia, other rural areas, in order to keep them there, they wouldn't create headaches by migrating to the city. 136 00:20:35.600 --> 00:20:39.600 That's a typical Chicagoite solution. 137 00:20:39.600 --> 00:20:47.600 Whatever it is, whatever we may say about it, has nothing to do with the free market. 138 00:20:47.600 --> 00:20:49.600 It's pretty clear. 139 00:20:49.600 --> 00:21:00.600 There are other examples of this point of view toward taxes and ad hoc solutions. 140 00:21:00.600 --> 00:21:04.600 The Friedman position, for example, about air pollution, water pollution. 141 00:21:04.600 --> 00:21:14.600 I'm not against the technicalities of that whole pollution question here, but the point is that their solution to it is a typical ad hoc utilitarian thing. 142 00:21:14.600 --> 00:21:18.600 Well, we balance, we decide, we, we mean the government for it. 143 00:21:18.600 --> 00:21:22.600 We decide how much pollution we want as opposed to how much industrial progress we want. 144 00:21:22.600 --> 00:21:28.600 How much we balance the factories as against the, you know, the lung cancer or whatever. 145 00:21:28.600 --> 00:21:33.600 We get some kind of a measure of social cost versus social benefit. 146 00:21:33.600 --> 00:21:38.600 And then we tax free the industries up to the pollution, up to this level. 147 00:21:38.600 --> 00:21:46.600 We make sure that they only pollute a certain amount, not more than the social benefit outweighing the social cost, outweighing the social benefit. 148 00:21:46.600 --> 00:21:50.600 But the ultimate position is that there's no such thing as social cost and social benefit. 149 00:21:50.600 --> 00:21:54.600 There are only individual costs and benefits, which you can't measure one against the other. 150 00:21:54.600 --> 00:21:58.600 But at any rate, this is, again, a simple situation. 151 00:21:58.600 --> 00:22:14.600 The whole situation is that the government sits down with wisdom and decides its values, which is supposed to represent the public as a whole in some way, in a much fewer manner, and then this is imposed upon everybody in society through tax subsidy adjustments. 152 00:22:14.600 --> 00:22:22.600 There's also, oh, I thought I'd mention five of them as three great positive functions for government. 153 00:22:22.600 --> 00:22:28.600 One of them was to smash everybody making over $5,000, $10,000, whatever the thing is, per year. 154 00:22:28.600 --> 00:22:39.600 Another one was extreme out, unlimited fanatical fuckbusting, so that every corporation above the size of a small blacksmith shop 155 00:22:39.600 --> 00:22:46.600 The Theory is still there. The theoretical framework of Chicago Economics still says that pure competition, quote, is not enough. 156 00:23:09.600 --> 00:23:13.600 is better than impure, imperfect competition. 157 00:23:13.600 --> 00:23:16.600 And imperfect competition means real world competition. 158 00:23:16.600 --> 00:23:18.600 There's no other than imperfect and close. 159 00:23:18.600 --> 00:23:21.600 Imperfect is a loaded term, that's part of the whole problem. 160 00:23:21.600 --> 00:23:26.600 At any rate, they still have a theory that pure competition is better than impure. 161 00:23:26.600 --> 00:23:29.600 And even though they say in practice, government is the main source of monopoly, 162 00:23:29.600 --> 00:23:33.600 even if we have to zero in on appealing government privileges and so on and so on, 163 00:23:33.600 --> 00:23:38.600 but still the theory is back there as a canker, no bigger than a man's hand, 164 00:23:38.600 --> 00:23:44.600 which wasn't one that popped out. For example, it wasn't too many years ago when Professor George Friedler, 165 00:23:44.600 --> 00:23:52.600 number two man on the Chicago hierarchy to the state, advocated before a committee of Congress the breaking up of U.S. steel, 166 00:23:52.600 --> 00:23:55.600 which was monopolistic and busted into constituent parts. 167 00:23:55.600 --> 00:24:02.600 So every once in a while an old stuff-busting element will pop up in Chicagoism. 168 00:24:02.600 --> 00:24:27.600 This is not only a Chicago argument, which is one of the reasons I have against Chicago is that they are not too different from regular economics, this is one of the reasons why they are so popular in the economic profession. 169 00:24:27.600 --> 00:24:36.600 In other words, accept that anything that you do affects the guy next to you, affects somebody else in society. 170 00:24:36.600 --> 00:24:43.600 Of course, from my point of view, this is an open step to me to any type of intervention, because anything you do affects somebody, somewhere. 171 00:24:43.600 --> 00:24:51.600 I mean, if I read Human Action, I acquire more wisdom and I benefit other people who come in contact with me. 172 00:24:51.600 --> 00:24:59.600 Therefore, in order to internalize the costs and all that sort of thing, they should be taxed for paying me or eating that. 173 00:24:59.600 --> 00:25:06.600 In other words, you're not internalizing the costs, and therefore somebody's got to do it for you. 174 00:25:06.600 --> 00:25:11.600 In other words, the government's got to step in and correct the so-called B-Site in the market. 175 00:25:11.600 --> 00:25:26.600 If I'm enjoying, well it could be anything, if I'm enjoying the, for example, I used to use it in class, which used to be pretty effective before women's web came around with miniskirts. 176 00:25:26.600 --> 00:25:32.600 But if you watch, especially in older male schools, it's even more effective. 177 00:25:32.600 --> 00:25:42.600 The point being that if you watch and enjoy the fight of girls walking out of street in miniskirts, you're getting a slightly benefit from this. 178 00:25:42.600 --> 00:25:52.600 And according to Chicago opposition, you should be taxed to subsidize or wear miniskirts, because they're not capturing the court. 179 00:25:52.600 --> 00:25:57.600 I'm getting a free benefit out of this case, a free writer out of this situation. 180 00:25:57.600 --> 00:26:05.600 And this permeates, again, I think that Stigman himself will limit this argument to two things, basically. 181 00:26:05.600 --> 00:26:09.600 One is urban parks. For some reason he's very worried about places like Central Park. 182 00:26:09.600 --> 00:26:18.600 Because if Central Park was private, my god, somebody on Columbus Avenue might look at Central Park and be able to enjoy a leaf of tall trees. 183 00:26:18.600 --> 00:26:22.600 And you're not capturing that benefit, you're not making a take for it. 184 00:26:22.600 --> 00:26:26.600 I'm not really concerned with making people pay for stuff. I mean, that's not my stick. 185 00:26:26.600 --> 00:26:32.600 I don't see why this is particularly better. I can see a lot of reasons why it's worse than a free system. 186 00:26:32.600 --> 00:26:39.600 Certainly, if I don't have a membership in Central Park, I'm not an annual member, let's say, in a private park, 187 00:26:39.600 --> 00:26:48.600 I might be able to watch the trees, and nobody's going to, you know, unless the treatment is stopped, they'll get after me and fuel me for doing it. 188 00:26:48.600 --> 00:26:56.600 But I wouldn't be able to be in the park. I'd still be a class citizen. I'd still be able to enjoy the park itself. I could only watch the outside. 189 00:26:56.600 --> 00:27:05.600 But things like that really bother Chicago whites. It makes them pay. If it so happens, the free market doesn't make them pay. 190 00:27:05.600 --> 00:27:13.600 But who limits this to two things, basically. One is urban parks, because you recognize that Yellowstone will keep people out. 191 00:27:13.600 --> 00:27:29.600 Education Education is a very big deviation. It favors government subsidy and payment for 192 00:27:29.600 --> 00:27:35.600 education for little kids, not necessarily in public schools, but in schools with tax 193 00:27:35.600 --> 00:27:42.600 systems. One kid is educated, I'm being better for him, he's a better kid. He's more productive. 194 00:27:42.600 --> 00:27:58.600 Let him pay for it, or his parents, or if I fall for the freedom of view, if I fall for the idea of neighborhood effect, I can voluntarily subsidize this kid. 195 00:27:58.600 --> 00:28:04.600 I mean, in a free society, he's free to do this, but this is not enough for the neighborhood effect position. 196 00:28:04.600 --> 00:28:08.600 He's forced to quote the societies of education. 197 00:28:08.600 --> 00:28:15.600 So, uh, but he would limit it. Friedman would especially limit this to urban plots and education. 198 00:28:15.600 --> 00:28:20.600 But, as I've said, you can apply it to anything. You can apply it anywhere, all the way down the line. 199 00:28:20.600 --> 00:28:23.600 To subsidize a mini-skirt, to subsidize anything. 200 00:28:23.600 --> 00:28:28.600 Uh, reading newspapers, like, oh, I read the Times, like, I'd better start learning something. 201 00:28:28.600 --> 00:28:32.600 So everybody should be taxed to pay me to read it. It's still below and so on. 202 00:28:32.600 --> 00:28:51.600 and so on. And interestingly enough, if you challenge the catallactics with this argument, you will say, yeah, logically you're correct, but, you know, who's going to apply this to this case, which is, I think, an interesting commentary on the consistency of the general intellectual standards around a culture. 203 00:28:51.600 --> 00:29:11.600 The neighborhood effect is a hole in the sense of a market big enough for a max truck to ride into, and those people on the left were smart enough to realize this and take full advantage of the neighborhood effect and their gap. 204 00:29:11.600 --> 00:29:20.600 Another problem is, I mentioned the neighborhood effect, excuse me, I mentioned negative income tax, 205 00:29:20.600 --> 00:29:27.600 but I think it would be total disaster. I hope that the president, in Congress right now, the Left-Right Coalition, 206 00:29:27.600 --> 00:29:33.600 a very peculiar store against the Family Assistance Plan, essentially the Friedman Plan, 207 00:29:33.600 --> 00:29:40.600 leftists would want to go further, right-wingers would want to go that far, and this plan was able to block, 208 00:29:40.600 --> 00:29:43.600 I mean, this college was able to block this thing last year. 209 00:29:43.600 --> 00:29:46.600 I don't know if it'll have the same respect this year. 210 00:29:46.600 --> 00:29:51.600 Anyway, I foresee it's fantastic, just in set of respects, in a normal proportion. 211 00:29:51.600 --> 00:29:57.600 To put it briefly, wherever you set the floor, let's say you set the floor at $2,000, 212 00:29:57.600 --> 00:30:05.600 that means that the guy making $2,100 a year has gotten rather disgruntled, rather edgy, by the whole set-up. 213 00:30:35.600 --> 00:30:43.000 and the drop out, and receive the 2000, and as he drops out, this will be true for people 214 00:30:43.000 --> 00:30:49.300 making 2100, 2200, 2800, 3000, etc., etc., as these guys drop out, this course will add 215 00:30:49.300 --> 00:30:53.500 more people on the bill, the course will go up, the tax course on the people still working 216 00:30:53.500 --> 00:30:57.500 will keep going up, and this will induce more people to leave the working and go on the 217 00:30:57.500 --> 00:30:58.500 bill. 218 00:30:58.500 --> 00:31:01.500 You have a taxing vicious circle. 219 00:31:01.500 --> 00:31:10.500 The court estimates the statement that other people have given about how much this thing would amount to for a year seem pretty reasonable now, $10 billion or whatever it is. 220 00:31:10.500 --> 00:31:17.500 The budget goes up about $20 billion every year anyway, you could say, well, why not devote $10 billion to this? 221 00:31:17.500 --> 00:31:26.500 But all these court estimates assume that everybody will keep working in the same intensity and degree as they do now, which of course is a clinker in the whole argument. 222 00:31:26.500 --> 00:31:28.500 It's the question begging the clinker. 223 00:31:28.500 --> 00:31:40.500 The point is that when I keep working, unless there's a complete boat, they will join me on the automatic goal, there will be no stigma attached to it, it's one of those things with the stigmatizer. 224 00:31:40.500 --> 00:31:45.500 And certainly, you've got to remove the stigma from being on a boat there, okay, the stigma's removed, everybody gets on it. 225 00:31:45.500 --> 00:32:03.500 Which of course is the real point, which is really forgotten now, because the Chicago people consider themselves as heir to 19th century liberalism. They're not really, because 19th century liberalism is much better than that. 226 00:32:03.500 --> 00:32:13.500 And the reason why 19th century liberalism was favored with stigma, and coming to work houses and, you know, the ceilings falling down every once in a while, things of that sort, 227 00:32:13.500 --> 00:32:19.500 The President wanted to have a strong, negative incentive for people not to go on the convalescence. 228 00:32:19.500 --> 00:32:27.500 And so this was the real point. This has been forgotten in the present so-called pre-modernist people. 229 00:32:27.500 --> 00:32:34.500 And as this happens, the things snowball, accelerate, and you increase the taxes and so forth. 230 00:32:34.500 --> 00:32:38.500 And so finally I think you wind up with conditions that everybody is going to be on. 231 00:33:08.500 --> 00:33:23.500 In addition to everything else, I foresee complete disaster as the negative income tax guarantee goes through. 232 00:33:23.500 --> 00:33:37.500 So that's one big area, clunker area. The free market solution of the libertarian solution of the welfare question, of course, is that, well, in several steps. 233 00:33:37.500 --> 00:33:52.500 One is that free market capitalism is the same, it eliminates poverty, which has brought us up from the caves to the present system, which has created the Industrial Revolution and so forth. 234 00:33:52.500 --> 00:34:05.500 And, secondly, whatever quality does exist can be aided by voluntary effort, either self-help, short-term programs, community health programs, or whatever. 235 00:34:05.500 --> 00:34:12.500 All of which, since voluntary agencies, for example, do not have the unlimited funds that the state has, 236 00:34:12.500 --> 00:34:18.500 all of which will necessarily be based on the idea of helping people to help themselves, to get them on their feet. 237 00:34:18.500 --> 00:34:33.500 which again was a 19th century view of a private charity, voluntary charity and of course also the values of the public, the values of the groups on welfare come in here. 238 00:34:33.500 --> 00:34:41.500 The Charming Harbor, I don't know how many people saw it, the New York Times I think about a year ago, about the Albanian population in New York City. 239 00:34:41.500 --> 00:34:45.500 I didn't know there were any Albanians in New York City, but there are. 240 00:34:45.500 --> 00:34:48.500 They've just set up their first Albanian church anywhere in the world. 241 00:34:48.500 --> 00:34:51.500 That's how these churches are outlawed in Albania. 242 00:34:51.500 --> 00:34:56.500 And the Albanians are very, very poor. 243 00:34:56.500 --> 00:34:59.500 There are not wealthy Albanians in New York. 244 00:34:59.500 --> 00:35:02.500 There's probably no wealthy Albanians anywhere. 245 00:35:02.500 --> 00:35:04.500 Anyway, certainly not in New York. 246 00:35:04.500 --> 00:35:08.500 Albanians are very poor, and the Albanian spokesman was saying, 247 00:35:08.500 --> 00:35:12.500 I know of Albanians on welfare, period. Outcoming is a very poor group. 248 00:35:12.500 --> 00:35:18.500 Albanians regard being on welfare as begging, begging on the street, and they refuse to bet, period. 249 00:35:18.500 --> 00:35:22.500 And they manage it so they don't get on welfare. 250 00:35:22.500 --> 00:35:28.500 So cultural values, social attitudes, that's also a terrible equation. 251 00:35:28.500 --> 00:35:35.500 Anyway, going on to the third big sign on Chicago deviations from the free market. 252 00:35:35.500 --> 00:35:39.500 There is a whole money government spending area. 253 00:35:39.500 --> 00:35:46.500 Essentially, one of the things that we said recently in an article about the Chicago School, 254 00:35:46.500 --> 00:35:51.500 the reason why they didn't become Keynesians is that they were Keynesians before Keynes ever arose. 255 00:35:51.500 --> 00:35:55.500 So they didn't fall into the sway of the Keynesian Revolution. 256 00:35:55.500 --> 00:36:03.500 During the early 1930s, they were considered leftist, radical, socialistic by the Chicago School, by the rest of the profession. 257 00:36:03.500 --> 00:36:33.500 and so they advocated enormous public work during these sessions, inflationary credit, going off of gold standards, and so on, and these people, these online economists, practical economists, were correct, they were socialistic in a sense, but what happened of course, the rest of the economic profession has moved much more socialistic since then, so they look like stream-moderateeers at this point, but their position is basically the same, and that is that the government, 258 00:36:33.500 --> 00:36:39.500 The government has to have an absolute control of the monetary system, an absolute dictation of the money. 259 00:36:39.500 --> 00:36:45.500 The way you get absolute dictation of the money is to abolish gold altogether or silver or any other commodity 260 00:36:45.500 --> 00:36:50.500 and make money the legal ticket put out by the government, by the treasury. 261 00:36:50.500 --> 00:36:57.500 The treasury puts out a ticket of the Federal Reserve Board, puts out a ticket saying $1 or $10, you make that money and nothing else. 262 00:36:57.500 --> 00:37:08.500 So this means that this money is another of the market economies. This is the single most important commodity or element in the economy. 263 00:37:08.500 --> 00:37:17.500 Since money participates in every exchange that you ever make in the system, this means that if you allow government to total control of money, you allow government to really total control of the whole system. 264 00:37:17.500 --> 00:37:22.500 You've given up a way to even start it. And this is what the Chicago advocate is doing. 265 00:37:22.500 --> 00:37:33.500 Chicago's position on money is to cut all even present tenuous. Right now they have very tenuous and ridiculous but similar in length with international gold. 266 00:37:33.500 --> 00:37:39.500 They would cut it completely and have freely fluctuating exchange rates between the dollar and other currencies. 267 00:37:39.500 --> 00:37:48.500 Which puts the absolute control of the money completely in the hands of the state without even a balance of payments check. 268 00:37:48.500 --> 00:37:52.500 payment checks, and now at least once in a while they have a balance of payment crisis. 269 00:37:52.500 --> 00:37:56.500 This puts a limit upon government inflation of money. 270 00:37:56.500 --> 00:38:00.500 But if you thought it was a little female limit, the only limit would be Milton Friedman telling them 271 00:38:00.500 --> 00:38:04.500 please don't inflate more than 3% per year. 272 00:38:04.500 --> 00:38:08.500 In other words, Friedman telling, admonishing 273 00:38:08.500 --> 00:38:12.500 Hector and Hirany in the Federal Reserve system, now you're inflating too much, 274 00:38:12.500 --> 00:38:16.500 now you're inflating too little, you should only inflate 3% more, but they keep changing 275 00:38:16.500 --> 00:38:24.500 The way, again, which is consistent with the Chicago position, of being sort of technical advisers of the state, 276 00:38:24.500 --> 00:38:30.500 is that the federal government is not going to be able to do this. 277 00:38:30.500 --> 00:38:34.500 The federal government is not going to be able to do this. 278 00:38:34.500 --> 00:38:38.500 The federal government is not going to be able to do this. 279 00:38:38.500 --> 00:38:46.500 And I think this is a ridiculous way to proceed, but it's a way, again, which is consistent with the Chicago position of being sort of technical advisors to the state. 280 00:38:46.500 --> 00:38:52.500 You have all power over the state, and you advise them technically. No, you shouldn't do that because it's inefficient. It's the best of this thing out here. 281 00:38:52.500 --> 00:38:57.500 Please don't do that. It feels like the advisors of the Court of Collegial Law. 282 00:38:57.500 --> 00:39:06.500 Don't burn the city because it's, you know, reducing the essential products or whatever the advice is. 283 00:39:06.500 --> 00:39:09.500 I did it. It's not going to be made effective by my predictions. 284 00:39:09.500 --> 00:39:13.500 If a female is interested in social predictions so she can see the truth, 285 00:39:13.500 --> 00:39:16.500 my prediction is not going to work. 286 00:39:16.500 --> 00:39:18.500 And it hasn't. 287 00:39:18.500 --> 00:39:22.500 The reason why people want the 2% to 3% for year inflation, 288 00:39:22.500 --> 00:39:25.500 I guess it'd be a lot of technical and I don't want to get into that, 289 00:39:25.500 --> 00:39:29.500 but basically the old Chicago assignment position of stabilizing the price level, 290 00:39:29.500 --> 00:39:31.500 the price level should remain constant. 291 00:39:31.500 --> 00:39:34.500 This became some mystical idea, literally, in the Chicago school, 292 00:39:34.500 --> 00:39:38.900 School, or somehow a constant price level of these things that means the money is performing 293 00:39:38.900 --> 00:39:44.740 its measuring function, and so on, so if I were to say on this, on a truly free market, 294 00:39:44.740 --> 00:39:49.460 unhappily by government inflation and government banking and government money, prices generally 295 00:39:49.460 --> 00:39:54.500 tend to fall considerably as the supply of business services and productivity increases. 296 00:39:54.500 --> 00:40:00.260 Prices fall, just like the price of TV sets has fallen from $2,000 per coming set to 20 297 00:40:00.260 --> 00:40:06.260 This is generally what happens to prices in the free market. 298 00:40:06.260 --> 00:40:10.260 For some reason, Chicago people hate this idea. 299 00:40:10.260 --> 00:40:15.260 They want the government to step in to keep the sports supply levels remain constant in the whole time. 300 00:40:15.260 --> 00:40:22.260 And this leads them to this idea of 3% inflation in money supplies, the balance increases business services, etc. 301 00:40:22.260 --> 00:40:34.260 There's also a difference in business cycle theory, but I don't, again, just a little technical go into that. 302 00:40:34.260 --> 00:40:45.260 Again, I just want to say that there's a bit of confusion among some people, because both Friedman and the Austrians agree that the Federal Reserve was responsible for the 1929 depression. 303 00:40:45.260 --> 00:40:50.260 So consider that they really agree basically on the whole problem. They don't, completely the opposite. 304 00:40:50.260 --> 00:41:06.260 The Austrian view is that the 1939 recession was brought about by the Federal Reserve for expansion of the microply during the 1920s and later, which brought about a situation which caused a depression. 305 00:41:06.260 --> 00:41:11.260 In other words, monitoring inflation by the Federal Reserve system bringing about an inevitable recession. 306 00:41:11.260 --> 00:41:23.260 The Sigma position is that the Federal Reserve didn't insulate enough, that they turned back to the popular rule of normative inflation to offset foreign prices, etc. 307 00:41:23.260 --> 00:41:31.260 So the Sigma position and the Austrian position is exactly the opposite. Both are zero in on the Federal Reserve system, that's true. 308 00:41:31.260 --> 00:41:38.260 But each one has a completely different view. The Chicago position is that they shouldn't have insulated more, the Austrian position is that they shouldn't have insulated at all. 309 00:41:38.260 --> 00:41:54.260 I think that more or less sums up at least the political and political economy of the section, 310 00:41:54.260 --> 00:41:59.260 and also the methodological and philosophical critiques that they make of Chicago's school. 311 00:41:59.260 --> 00:42:02.260 I think they're in a sense worse philosophically than they are even in politics. 312 00:42:02.260 --> 00:42:05.260 That's a whole other realm. 313 00:42:05.260 --> 00:42:11.260 The two things, of course, again, lack over, as I was trying to say about the theory of property and justice and so forth. 314 00:42:11.260 --> 00:42:25.260 Summing up, I think what the problem is, the free market, in quotes, which would exist under the Chicago system, would be only under the support of the central government advisers, technical advisers. 315 00:42:25.260 --> 00:42:33.260 If they fought for one minute, at any point, if the free market was, quote, not efficient, unquote, in relation to some other scheme, they would abandon it, abolish it. 316 00:42:33.260 --> 00:42:39.260 On the Chicago scheme, therefore, we have no dispensing of legal questions whatsoever. Thank you.