So I'm talking a little bit about technology today and its history, but I'd first like
to raise a point.
You know how when you read history, you quite often imagine what you might be doing in that
situation?
I mean when I read like ancient history and I read about the death of Socrates or something,
I imagine myself as a Greek citizen.
What would I have done?
I've supported him, you know, what I've opposed him.
You know, I don't know, I would like to have gone back.
You probably have your favorite period of history.
You know, some people imagine themselves fighting it out
during the Civil War or perhaps being there,
you know, as part of the greatest generation
at Iwo Jima or something like that.
Well, so I wanna share with you
what my own sort of fantasy is about history.
And that would be to be at the Chicago World's Fair
and 1893, which suffice I can tell is like the most interesting thing that's ever happened
in history and hardly anybody ever talks about this.
But this was in many ways the dawn of modernity as we know it and the culmination of a thousand
years of capital accumulation all sort of sitting in one city.
Now, these World's Fairs were very interesting. I guess they're not really common anymore
and they sort of fell apart sometime in the middle of the 20th century. But back in the
day, in the 19th century, World's Fairs were the place where the great entrepreneurs
and the great capitalists and the great captains of industry and governments too would come
and display their wares for the public just to show what's coming. I mean, the 19th
The 18th century was an age of unbelievable optimism and hope, actually it's true, the 18th century too.
People had a profound sense that everything that lies in front of us is going to be progress.
And what does progress mean? It means more peace, more prosperity, more wealth for everyone,
more gizmos, more fun things to do, spectacular stuff all around.
The World's Fairs were times when all these things were kind of gathered in one place.
This is your future.
It gave you a chance to look at the future before it really came.
That World's Fair in 1893, the US was in a unique position to reveal really to all
people of the world all the great things that were happening in this country.
The civil war had ended, which is a catastrophic thing for the country, but very quickly the country got back on track again.
So that tariff barriers were low. We didn't have a lot of barriers to imports and exports. The taxes were very, very low.
There was no such thing as an income tax. Imagine, you make money, you keep it, that's the end.
I have to say that out loud because it seems almost hard to believe. No income tax. We were on a gold standard. So we did have a situation like Mark and Doug were talking about where a central banker could just crank out dollars endlessly. If a business failed, it failed. If a business succeeded, it profited. And that was true after the Civil War up until this great
World's Fair.
And remarkable things were happening.
I mean this is a period that's called in history the Gilded Age.
It's called the Gilded Age, okay.
Beautiful image of captains of industry amassing massive amounts of wealth for themselves but
also they became benefactors to the public both in terms of the great things they were
doing with their industries and the employment that they were able to create but also in
in terms of the charitable activities.
I was just in Pittsburgh and I went to the Pittsburgh Cathedral, which is one of the
most beautiful buildings I've ever seen.
Okay, so I haven't been to Chartres, I haven't seen the cathedrals there but I can't imagine
there is grand and magnificent as the Pittsburgh Cathedral.
I mean the pillars inside the church are as big around as like this room or something.
I mean the scale is beyond belief.
I mean it's the sort of thing you can't even imagine being built today.
You can't even imagine such a thing existing.
So I just inquired, well, when did it go up?
Well, 1914, right at the end of the Gilded Age.
And how did it come to be?
Did they raise money from the workers and peasants?
No.
Andrew Carnegie wanted to buy some land from the Archdiocese of Pittsburgh.
So he said, well, I tell you what, if you'll sell me this land, I'll build you a cathedral.
I will build you a cathedral just down the street.
and so the Archdiocese agreed to it and with his own money, he paid for this cathedral.
Now there was no revenue bounce back to this thing, right?
It's not like building a casino in Las Vegas, you know, where you're expecting the returns
to pay.
No, it was a gift.
It was a gift not only to the Catholic Church but he himself was Episcopalian by the way
but also to the whole of Pittsburgh and to the whole community.
I mean this is a grand achievement.
This kind of thing was very, very common.
There was a great belief in the Gilded Age that America was giving rise to a new form
of aristocrats.
They weren't lords and barons appointed by kings and queens and given land titles by
virtue of their connections to the state or by virtue of their birth, their heritage and
walking around titles.
No, that was not America.
The new aristocracy in America was going to be an aristocracy of merit.
You know, if you did great things, then you could be known as a great person.
So that's a cool system, right?
You provide jobs, you build great industries, you build brilliant businesses, an advanced
civilization, then you're highly regarded and respected.
And then you can wear a top hat and strut down the street in fancy clothes, right?
But that's not something you do by virtue of birth.
American was a great country because this system was really born here.
So between 1850 and 1900, we saw unbelievable amounts of economic growth.
There was a full decade, I think between 1880 and 1890 where the economy was growing as
high as 6% and 7% per year.
There are unimaginable levels of growth and a low growth in those days was 4-5%. There was no inflation. There were little miniature banking panics that came and went. A few big shots went belly up and that was the end of it. Nobody intervened. There was no Keynesian fiscal policy. The government didn't have the money to spend so they couldn't bail out anybody. They couldn't stimulate the economy with ridiculous projects. They didn't have the money. It was not even a question.
Just that GDP was – essentially it was doubling like every 10 years during the Gilded Age.
Imagine such a thing.
And keep in mind, wealth was increasing, per capita income was growing as it had never
grown in any country in all of human history.
And keep in mind this is an age of fantastic growth of immigration too.
We had all these countries in Europe, the people from countries all over Europe were coming here from all over the world really.
So the population was booming and people were living longer.
I mean, in 1850 the average lifespan was 40.
So like, I would not be giving the speech right now, for sure.
And some of you might not be here.
By 1900, so the lifespans had increased to 49, which sounds low to us, but that was an
unbelievable increase.
I mean we had never seen anything like that in the whole history of the world, that people
be living the average lifespan was 49 years and infant mortality was plummeting, income
was rising, economic growth is booming.
And what was causing this?
Well, it was caused because of new technologies like railroads, new communications technologies
and just the accumulation of capital.
As savings rose, their investment could rise too and this all kind of built on this powerful
foundation that capitalism had provided creating therefore the most mighty economy in the entire
world.
to the U.S. Past Britain and Economic Growth and Overall Wealth.
So in other words, this is the place where it was happening.
So 1893 comes and what kind of cool things were going on at the Chicago World's Fair?
Well, the big thing was – well, let me just mention a small thing.
Scott Joplin was there playing ragtime.
That's a neat little contribution, the foundation of modern jazz, you know, that was neat.
Some people say the hamburger was displayed at the World's Fair for the first time.
I mean there's big arguments about who invented the hamburger but anyway, some people lay
claim to that there.
And there was the Ferris wheel, I don't know if you've ever seen pictures of this gigantic,
the guy was named something Ferris and he built this Ferris wheel which is this gigantic
round thing that held, I forget now how many hundreds of people it would put on this wheel
that went around and around.
The Big Thing was Electricity Electricity was new and there were two companies competing,
each with their own team of scientists and innovators for who could provide the most
smashing electrical displays.
This is a time too when electricity was becoming a luxury good so that the great captains of
industry would build gigantic new homes and they would wire it with electricity.
So instead of lighting candles all over the house as you had done from the beginning of
the history of time up until about this time, now you could just push a button and the light
would come on.
How great is that?
We're talking about man conquering nature here, unimaginable.
We take all this stuff for granted. Actually, electricity went out a couple of days ago at the Mises Institute.
Really, it was like civilization just sort of died, you know, for like an hour and a half.
You know, we all sat there, you know. It's kind of a scary prospect.
Anyway, so electricity was the really cool thing that was going on there.
These were all luxury goods that we saw. Oh, also the first display of something approaching the modern movies, you know,
went on at the World's Fair. An exciting time of great, great progress.
It was in many ways the culmination of everything that had come before, not only in this country but around the world in terms of economic exchange, capital investment, innovation, everything, all of it done by private entrepreneurs.
So who funded the World's Fair? Well, governments gave a little bit of contributions, but as I mentioned, in those days, governments didn't have much money at all.
The whole thing in Chicago was funded by private enterprise. I mean private money.
Money.
We can't even imagine this sort of thing.
I don't know what – you know, there's – yes, there's pistaches of private wealth
around nowadays but nothing that could fund something like a Chicago World Fair like we
saw back then.
It's unbelievable and there was no question that it was going to be funded by private
money.
That's the way things were done.
And it was to show and put on display this beautiful thing, the practical art of technology
and entrepreneurship.
So you can imagine yourself coming out of this. The Civil War was a catastrophe. Then we had
this great period of peace and prosperity, low taxes, no government involvement at anything,
huge accumulation of capital, the rise of a new aristocratic class in the United States
Based on not on title or grant approvals from the government, but rather by merit and achievement.
In 1893, you know, the literary writers at the time, what were they writing about?
What were the great injustices that they were concerned, that they concerned themselves
with?
Well, they were interested in things like penal reform.
You know, we've got to make our prisons a little more humanitarian.
We've got to improve the way courts deal with issues of crime.
We've got to end terrible squabbles between families and groups.
In other words, there were small issues.
They were important issues to them, but compared to what we dealt with in the 20th century, these things were nothing.
I mean, it seemed as if, in 1893, that there were only just a few small improvements
to make it a perfect place. A perfect place of peace, prosperity and well-being for all. Endlessly increasing lifespans, forever increasing technology, an ever nicer, more beautiful utopia for all people.
That was 1893 and nobody could know what was coming. But what was coming?
I mean, essentially, the end of civilization was coming. Nobody knew it. And we stumbled
into it almost inadvertently, didn't we, with World War I, a war that hardly anybody
today can even explain at all. I mean, how did it happen? A series of diplomatic missteps.
And next thing you know, everybody's killing each other. Bloodshed and death and destruction
all over the place. Governments are drafting people, sending them off to foreign lands
to kill and be killed and so on, it went for years and years.
And that was the beginning of the end, folks.
That was the beginning of the end.
And then in 1913, we got the Federal Reserve, this magic money machine that permitted the
government to create endless quantities of the thing that everybody wanted and debase
the currency and fund the state and fund ever more wars.
And that led to all kinds of government planning.
And eventually because of the unresolved problems of World War I, we got another world war that
led to massacres, holocaust, gulags and disaster than another 40 years of the Cold War where
half the world's population was shut behind an iron curtain and cut off from exchange.
You know, none of this, 100 million people dead by government at least in the 20th century
at the hands of the state.
Nobody could imagine such a thing in 1893 where everything was bright and beautiful
and then just like in an instant everything turned to darkness.
So I tell that story because, well, one reason is that we never really know what the future
is going to hold.
It's naive of us to believe that whatever good things that exist in the world today
can't be taken away from us immediately.
We can't know that for sure.
All we can really do is work for good things and work against bad things so we can hope
that we can provide a world for our children and their children that is more like the Gilded
Age and less like the Holocaust and gulags of the 20th century.
So how do we go about that?
Well, one way is to think, in terms of economics, about the science of wealth, the science of
things that lead to prosperity, so we can recreate the beautiful age of the Gilded Age.
By the way, you know, one of the things that's very interesting about today's intellectual
elites and public culture, you've probably heard maybe a little bit about the Gilded
Age, maybe not that much, I don't know.
Can anybody name a president from the Gilded Age? Probably not, right? Hey, that's good.
You know, when you don't know the name of the president, things are probably going pretty
well. You know? When presidents become famous, there's usually a problem. Something bad is
brewing. So the Gilded Age, nobody even knows who those guys were. They're called the postage
stamp presidents. Bring it back, I say. Bring back presidents whose names we don't know.
I was in Costa Rica one year and I was stunned to learn that anybody in Costa Rica knows
the name of the president and he lives in like a regular house, you know, like you would
find in suburbia or something like that.
Seems like a pretty good system to me.
So what does economics teach us about how to continue and perpetuate peace and prosperity
of the sort that we saw during the Gilded Age?
Well, the main thing Mark mentioned, and that's that we need to understand the source of wealth
And the source of creativity and the source of innovation is not the public sector, rather
it's the private sector.
And it's not just private entrepreneurs need to understand this, also the public sector
needs to understand this.
If you're in the military for example, I mean I think the American military has learned
over the years and discovered that the private enterprise is going to be the main source
of all the great innovations that are being used by the military.
Every great military will ultimately have to depend primarily on the products of private
enterprise because that's where the innovations come from.
But more importantly than that, in the private sector we find features that lead to wealth
creation that do not exist in the public sector.
For one thing, in the private sector you have a clear goal.
Everything at the world's fair, think about all the goods at the world's fair.
What is the point of all that stuff?
The point is to serve the consuming public.
So there's a goal.
The goal is to find things that people want and can afford and provide those things to
them.
Every private enterprise in the whole world is devoted to that end mainly.
If you achieve that goal, you profit.
If you don't achieve that goal, you lose money.
There's nothing in between.
Profit is a bad word to people these days. It was very strange to me. It's like, well, you either have profits or you have losses, you know.
I mean, are we supposed to favor losses? I mean, there's nothing wrong with profits. Profits are the reward, are the sign and the signal that you've done well, that you've served the public in the best possible way.
People talk about these, the tycoons of the Gilded Age and how evil they were, the robber barons. What was their goal? What was their primary purpose?
Whether it was coal or railroads or steel or whatever your industry was, electricity,
the goal was to make human life better for the people on this earth.
That's a beautiful image.
It's a wonderful thing.
So there's a clear goal in the private sector.
In the public sector, there's not so much a clear goal, is there?
I once went to a seminar that was sponsored, just because I was curious, by the Department
of Human Services in the Washington bureaucracy, and they had like a jobs fair.
And a person stood up and they said, well, you know, our department, we're part of a
great growth industry.
Last year we managed to get, you know, 10,000 new people on welfare.
Next year we hope to get another, you know, say 20,000 new people on welfare.
And this means jobs, jobs, jobs.
This is a strange goal. This is not exactly serving the consumers. It's a different kind of goal. It's a goal of building the bureaucracy and building its clients.
In the private sector, there's always a goal. In the private sector, both the risk and the reward for everything you do is always borne by the owners of the things being invested.
That is not true in the public sector. Every day we listen to interviews with politicians who tell us all the things they want to do.
Well, what if their plans don't work? How do we know? What's the test? We don't really have a test.
And let's say we did have a test and we can declare their programs to be failures.
Are they going to pay a price for this? Not really. They're just going to get sort of slink away, you know, or come up with some bogus excuse.
I mean ultimately there's no punishment in the public sector for doing bad things instead
of good things.
One of the reasons I like Donald Trump for all of his disgusting habits is that he puts
his name all over everything.
So if anything goes wrong, you always know who to blame and he's always willing to take
the blame.
I mean this is typical in private enterprise, there's a tremendous accountability always
there.
In the private sector there's the ability to calculate profit and loss and that's the number one most powerful tool that is enjoyed by private enterprise that government does not have access to.
Every day at the end of the day you've got to balance the books and the price signals that you're given permit you to calculate whether what you have done is the right thing or the wrong thing.
In a bureaucratic world, those price signals do not exist. Ultimately, you're guessing, really.
And this is true even when it comes to budget cuts. For example, if I own a cupcake shop on the other
side of town and I go for a full month with losing money and I'm facing serious problems,
I'm going to have to look at my books to try to figure out where I can cut back,
Where I can buy cheaper ingredients, whether I need to fire employees, whether I need to use less electricity, maybe not stay open as many hours, or maybe I need to stay open longer hours and serve even more consumers so I can get more revenue.
Whatever the results are, there's always constantly a test, and the test is the profit and loss test.
In bureaucracies, it's completely different because, you know, an order will come down that says,
well, we had planned to grow your revenue 5% next year.
It turns out it's only going to grow 3%.
So whatever expansions you had planned, there needed to be cuts.
Well, where? Where do you cut?
Where do you cut when the money stops coming in?
Nobody really knows for sure.
And there's no real test to know whether you're doing the right thing.
Ultimately, it's a political decision and it's not an economic decision.
The other interesting thing about the private sector is that the private sector is careful to not introduce technology before its time has come.
In the 20th century, we found governments in love with the idea of technology.
Space travel was very enticing to Russia and then US politicians got very jealous of Russia's interest in space so we funded this gigantic space program too.
Whether space travel is the right thing or not is hard to say in the abstract.
All technology comes in its time, and technology that's really serving consumers has to be introduced not at the expense of other things, but in accord with the preferences of the public.
Governments will typically ignore this sort of thing. They will just kind of look out and say, well, you know, it strikes me that we've got to create a lot of jobs, so let's take 10 years and build a gigantic dam here.
The Internet is a very interesting idea, but how do we know that's the right decision?
I mean, can you do this abstractly, really?
Do we know for sure this is the right time, the right place, the right use of these resources?
We don't know for sure.
Ultimately, it's a political decision.
So no technology comes before its time.
Some people say that the government should be given great credit for inventing the Internet.
Well, in the first place, the internet we use today, government had virtually nothing
to do with it.
The infrastructure was created long ago by the government for serving the government
purposes, but it was the private sector that put the fire under it, that made it serve
the public in such a beautiful way.
The other thing is, I mean, even when technology comes about by virtue of public investment,
We don't know for sure that that's the best use of those resources at any one time.
The essential economic problem we're always dealing with is that there are two kinds of
goods in the world.
There are scarce goods and there are non-scarce goods.
Like this speech I'm giving you is a non-scarce good.
You can take it with you, but it doesn't take it away from me.
A song I sing you, you can go out singing that song, it doesn't take that song away
from me.
It's very beautiful.
Information, pictures, sounds. There's no reason to restrict or allocate these things or ration them once they're made public. They're for everybody.
That's not true in the physical world. This podium I'm speaking from, this book, one copy so far.
All the chairs you sit in, all the clothes you wear, all the food you eat, everything you can see and touch, these are all scarce goods, which is a way of saying that there really isn't enough in existence right now to serve everybody who would like to have it.
So there has to be some mechanism we use to allocate these things. We can either allocate those things through political decisions or we can allocate them through economic decisions.
Decisions. The economic decisions use markets and prices and private owners.
Political decisions use things like public demand dates and force and
bureaucracies. Those are the essential choice that we face. And I think as the
illustration of the Gilded Age gives us, if we can unleash this power of private
Enterprise, to do amazing things, innovate, distribute, compete, it's a beautiful thing.
Then we can see a beautiful world emerge before our eyes, something like what was emerging
after the Civil War and before World War I, where we saw unrelenting progress, unrelenting
progress in incomes, lifespans, in every way.
I mean during that period we saw the seemingly impossible accomplished. Expanding population,
people living longer, growing wealthier, vast immigration and huge amount of economic growth
all coming together at once. That is a gigantic apparatus created entirely by the private
sector and the private sector alone. When we turned in the 20th century towards systems
In terms of government planning, we wrecked in many ways the possibilities of the private
sector to accomplish similar miracles.
However, at the end of the Cold War, we saw the opening up of that whole world that had
been shut behind the Iron Curtain.
Now we see all of these countries introduced into the worldwide division of labor.
So now we can trade with China, we're trading with Russia and all the former client states
of the Soviet Union, millions and millions and really billions of people newly introduced
into the world exchange system.
And as a result, we've seen fantastic innovation.
We're living in the age of the digital revolution, which in many ways is just as spectacular
as the first and second industrial revolution.
And this is mainly because of the elimination of government controls from major parts of
the world.
At the same time, we're seeing pressure in the other direction towards ever more and
more control.
The things that Mark and Doug were talking about, the attempts at stimulating the economy
through the printing press, through government spending and all these phony mechanisms that
they tell us is going to make us richer.
They don't.
They all make us poor because they take away our freedom.
The new book is called The Jetsons World, private miracles and public crimes, that sort
of sums up what I think we should all hope for, somebody like the old world that existed
in that show called The Jetsons, that's what I think of as kind of a space age, gilded
age you know, amazing gizmos all over the place, bourgeois society continues to exist
as it always has, peace and prosperity for all.
This is the dream of all the great philosophers, all the great economists, all the great thinkers
Thank you very much.