WEBVTT

NOTE Zoning and the Free Market

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With regard to the basic philosophy of the free market system,

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I would start off by calling to your attention a phrase that is much in vogue in some quarters,

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namely, anything goes between consenting adults.

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This is usually applied to sex or drugs or pornography or other exotic things,

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which I'm not really concerned with today.

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Today. I hope I don't disappoint you too much. But what I want to do is to apply these

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to the more prosaic economic or commercial realms. And I want to say that capitalist

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acts between consenting adults also ought to be allowed. That if people ought to be

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free to engage in exotic sexual or drug practices, they also ought to be free to engage in commercial

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Social Practices between two consenting adults without any overriding big brother kinds of

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regulations hemming them in at every turn.

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And there are two reasons for this, two basic reasons why I hold this position.

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One of them is that government is very less effective, very less efficient at providing

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all sorts of services that it has taken upon itself to provide.

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There are some four or five hundred crown corporations delivering or regulating everything from milk,

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wheat, eggs, to oil, housing, I mean you name it and the government is controlling it or

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owning it in some way, manner, shape or form.

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It's really hard to come up with an area where the weight of the government is not heavily

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focused upon.

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And I think one of the difficulties with this is that the government is very inefficient

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at doing these things.

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The reason it's so inefficient, I think, is not because businessmen are less able than

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bureaucrats, it's not because bureaucrats are less able than businessmen, nor is it

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that bureaucrats are less highly motivated.

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I think in some cases bureaucrats are even more highly motivated than businessmen to

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do what's in the public good, or what they think is in the public good.

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I think the basic reason for this is that businessmen, not bureaucrats, benefit from

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a survival test, a profit and loss test.

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Now you know in terms of providing consumer services what you have to do is work at them

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now, organize them now for sale some months or years hence.

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And what you have to do then is to anticipate what consumers will be wanting two, three,

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for more months or years in advance.

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Now there are some people that are very good at this.

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They can anticipate what the market will want,

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and they can provide it in an inefficient way.

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And those businessmen who do so prosper.

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The businessmen who don't suffer losses.

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And when you suffer losses once too often,

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there's only one recourse for you,

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and that is to stop being a business man as you go bankrupt.

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And it's this kind of a thing that is completely lacking in the bureaucracy. If a businessman does a good job, if a bureaucrat does a good job, he doesn't thereby gain, he doesn't increase his personal fortune necessarily, nor necessarily increase the influence that he has.

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And conversely, if he engages in a Chrysler bailout or another, say a post office mistake, which I think is a mistake in view of the fact that they're losing bushels of money, well he doesn't get caught short, he can continue his merry way in a way that the businessman could not.

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So, I think that this survival test, this profit and loss market test, which applies

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to business but not to the bureaucracy, is one reason why the businessman can be expected

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to be more efficient than the bureaucrat.

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Even if we start initially, if we start our mental experiment with two universes which

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are statistically indistinguishable, I still think the fact that we have this automatic

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reward and penalty system in the one area, but not in the other, will bias our results

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toward better results in the one than in the other area.

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Now I've spoken against government involvement and made several statements along that line.

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Let me clarify some views on that.

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I do think that there is a proper role for government.

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I'm not one of these that says that government shall not do anything at all.

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The kinds of roles I see for the government are peacekeeper, lawgiver, referee, adjudicator,

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rule setter, things like that.

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You might compare the government to a referee in a hockey game.

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The government should be the referee and it should not pick up the hockey stick because

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when it picks up the hockey stick and tries to knock the puck through the goal, one it

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does so very badly and I've tried to explain why I think it does so very badly, and two

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Two, it renounces the job that it is uniquely suited to pursuing, namely, law giving, rule

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giving, adjudication, protection, defense, etc.

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One example I might offer to you of this is the pollution case.

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Many people say, well, isn't pollution a case of government run, of businessmen run wild

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after the unholy buck they're trying to profiteer, they've just got their mind on the fast dock,

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and they don't care and they're polluting here and they're ruining the air, they're

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ruining the streams, etc., etc.

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My answer to that is that this is a perfect example of what I'm saying, namely renunciation

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of government's proper role and instead taking on all sorts of irrelevant roles, roles that

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I see as irrelevant to government.

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The reason for that is suppose you had a public-spirited businessman, suppose you had a businessman

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A businessman that was determined not to be a bad citizen.

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And what would he do?

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Well, he might put in a smoke prevention device on his chimney so that the fumes and soot

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didn't waft over innocent people.

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Or he might take special care not to dump his sewage in the river like everyone else

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is doing.

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But if he did that, what would happen to him?

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Well, we all know what would happen to him.

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He would be placing himself in a competitive disadvantage.

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Every other businessman would not have that cost.

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He would have that cost and in the long run we can predict that he would go broke.

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Now is the conclusion that therefore the invisible hand works by choking the body economic?

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I think not.

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I think this is a case where the government has failed to provide leadership or rule making

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or what have you.

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You people probably know a lot more about this and a lot better than I do but let me

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I don't want to risk exposing my ignorance by telling you a rough thumbnail sketch of legal history as I see it in the late 19th century.

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The first pollution cases in the US and in Canada as well were over the law of nuisance.

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You'd get some small businessman or consumer or some other person, a farmer,

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are complaining that either a railroad engine was wafting pollutants on his property, scaring

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the cows and burning the straw or getting the laundry dirty.

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And if you'll excuse my non-legalese jargon, the court held in effect that yes, private

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property rights were being violated by the polluter and that yes, if the law of nuisance

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This was a fine example of applying the law of nuisance.

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However, they did not grant an injunction against the pollution.

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What they said, in effect, is that there's something more important than mere personal private property rights,

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and that is the public good.

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And guess what the public good consisted of?

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The public good consisted of manufacturing.

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So, no injunction was granted.

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A carte blanche, on the contrary, was granted to the polluter,

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to the polluter and he just polluted his merrily way for about a century.

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Now had the injunction been granted, had governments upheld private property rights or had they

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come up upon different kinds of schemes, for example, we see we don't want to have zero

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pollution because if we had zero pollution we'd have zero production and we'd all die.

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On the other hand, we don't want to have as much pollution as we've got now or anyone

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One can pollute pretty much as much as he wants, like Witness the Love Canal or Lake

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Erie where I'm told that they have fires in the middle of Lake Erie. The oily water

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just burns every once in a while. We don't want that either.

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There is some sort of optimal amount of pollution which would balance our desire to have productivity

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and our desire to have clear, clean air and water. So what the government might do according

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to some of these schemes is to determine upon this amount and then sell pollution rights,

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just like they sell any other scarce resource. And if they did that, namely sell only the

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pollution rights up to the point that we'd have an optimal amount of pollution, this

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would be the other kind of a scheme. Having not instituted these schemes, industry went

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off on a certain tangent. Namely, it was accustomed to a zero price of pollution and it acted

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accordingly.

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See, given the parameters that business was operating with, the invisible hand, the seeking

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after profit was doing a fine job.

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It's just that the parameters were all crazy.

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Had they had more rational parameters, namely either granting these injunctions or this

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pollution rights sale scheme, well then I think business would have had a century of

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more investment in R&D, more responsible behavior, and businessmen would not have been blamed

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for something that could not have been their problem.

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So my analysis of the pollution problem is that it's not an example of government, of

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businessmen and profit motive run amok, rather it's a prime example of government not doing

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its job and being too busy doing a hundred thousand other things.

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Okay, with these brief remarks on the basic philosophy of the market system, I want to now read a more formal paper on zoning and then I hope to get into a question period where we can consider zoning and or any other thing that seems relevant to you.

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Let me start out with a statement from an astute commentator on the North American political scene.

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Alexis de Tocqueville warned of a government that works for the happiness of its people,

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but covers the surface of society with a network of small, complicated rules, minute and uniform.

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The will of man is not shattered, but softened, bent and guided.

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Men are seldom forced by it to act, but they are constantly restrained from acting.

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Such a power does not destroy, but it prevents existence.

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It does not tyrannize, but it compresses, innervates, extinguishes, and stupefies a

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people till each nation is reduced to be nothing better than a flock of timid and industrious

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animals of which the government is the shepherd.

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This was written quite a while ago, but I think it's an apt description of what's going

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on now as any.

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Now I don't think that zoning itself is responsible for all of that, but it does, I shall try

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What is zoning?

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Zoning can be defined as an attempt to legislatively prohibit so-called incompatible land usages

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in the urban environment, and to otherwise bring about government control and management

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of building settlement patterns.

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The fear is that without zoning, urban chaos will result, that external diseconomies will

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that, for example, Pickleworks will come to rest cheek by jowl with single-family homes, glue factories beside country clubs, etc.

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and that the result will be falling property values and poor planning.

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In my view, this fear is unfounded and for two reasons.

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First, governmental zoning is unnecessary because its avowed aims are better attained through private marketplace zoning.

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Zoning

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Second, governmental bureaucratic zoning creates positive harm, especially when compared to

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the private variety.

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This debate is really between public and private zoning, not between zoning and non-zoning.

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It's just like the debate over centralized planning of our economy.

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Although the central planners saw this as a choice between central planning and no planning

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Zoning at all, i.e. chaos, the real choice is always and was always between private through

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the price system and centralized public planning.

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It's between private planning, coordinated by the price system and centralized planning.

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We all know roughly how public zoning works, but what is this private zoning?

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One example of marketplace zoning is the management decisions made by the shopping center owner.

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He must decide where to locate each of his tenants in relation to the other in order to

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maximize the value of his holdings.

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He must provide convenient parking facilities and easy access to automobile traffic.

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He must rationally allocate the space, interspersing restaurants, variety and specialty stores.

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For example, if he accepts 10 hardware stores and no snack bars, he is unlikely to prosper.

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Another case occurs within each store, where the managers have to locate their wares the

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better to maximize total sales. If these private zoning efforts to arrange their goods are

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not done well, the store owner can lose customers.

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On a more basic level, private marketplace zoning occurs through the price system. The

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real reason we find no gasoline service stations on side streets, no hamburger fast food places

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No glue factories on the corner of our main streets in the central downtown area has little to do with zoning restrictions. It's because of the market mechanism. Quite simply, land prices in the top residential or commercial areas are just too high for the glue factory. Downtown land values effectively prohibit any but the most concentrated and valuable uses, such as office buildings or high-rise hotels and residences.

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In several areas, Fraser Institute research shows that the inhabitants look positively at the creation of commerce.

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It increases their local job opportunities.

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Moreover, it is only common sense that hamburger stands and filling stations would be located on large commercial thoroughfares or, even better, their intersections.

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Anywhere else would spell almost certain and immediate bankruptcy.

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Running through these examples is the theme of profit and loss as an incentive system.

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The affairs of the developer intimately depend upon the wisdom of his choices and those of the zoning bureaucrat do not.

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This is sort of repetitive of what I've said before.

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When the private investor makes a decision, he does so with his own money, which he can forfeit in the case of error.

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The zoning bureaucrat makes choices worth billions of dollars on behalf of an entire city.

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He places none of his own money at risk.

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The reason I expect better results, again, from business rather than bureaucracy is because of this weeding out process of profit and loss,

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which applies only in the market, not in civil service.

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I certainly don't think that the zoning bureaucrat is necessarily less intelligent than the land developer.

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He's got job security, doesn't he? That's pretty smart.

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No, the point is only that the market system of profit and loss continually weeds out inefficient businessmen,

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thus improving the breed, and that no such automatic system applies to civil service.

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Still another example of private zoning occurs in the system of restrictive land covenants

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Covenant, as practiced widely in the Southwestern United States and especially in Houston, Texas,

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where some 10,000 different covenants are on file.

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How does this scheme work?

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Although there are many differences, as you would expect from individual land contracts,

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several patterns emerge.

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A typical covenant might be drawn up by the land developer and becomes incumbent on the

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homebuyer as a precondition of purchase.

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It might specify just about anything from required exterior painting color to restrictions

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on building fences, dog houses, swimming pools, porches, etc. and might lapse after 20 or

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30 years or not, depending on a majority two-thirds or three-quarters of the vote at specified

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times in the future.

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It is important to realize how different this is from government zoning.

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For one thing, it's entirely voluntary.

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It applies only to the involved interested parties. True, the seller typically draws

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up the agreement, but if he is capricious, he won't be able to sell his house or he'll

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be forced to take a reduced amount. Like if he insists that all houses be painted with

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pink and blue polka dots, that would be capricious and he'd have to take a loss on that.

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The very existence of Houston, a large North American city with an area in excess of 500

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in a population of 1.6 million, which can function normally and continue to grow without zoning, is a major piece of evidence against the traditional view that zoning supposedly protects against chaos.

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City settlement patterns in Houston rely on the price system, economic forces, private zoning and land covenants.

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There are also several municipal land use ordinances covering minimum lot size, building setbacks, trailer densities, building lines, parking spaces, nuisance laws, billboard requirements and the location of tanning factories.

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But there is no zoning in Houston. The city is not divided into geographical zones, each with a different and special construction requirement.

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Billboards, for example, can be built anywhere in the city, and municipal laws concern only

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with their safety. Yet, for the economic reasons we have discussed, they do not appear in quiet

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residential streets or cul-de-sacs, only on large commercial streets, as in other cities.

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Houston has rejected zoning referendums in 1920, 38, 48, 62 and 69, according to Roscoe

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Francisco Jones, Houston's Director of City Planning and a Fraser Institute author and

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zoning opponent.

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And he says that Houston will reject it again if ever proposed.

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Let me turn now to some of the difficulties with zoning, the government variety.

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First and perhaps most important, zoning has contributed to an extremely serious housing

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shortage in the city of Vancouver, where I come from.

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The vacancy rate has been hovering at a virtual zero level for some time now, and things are

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so bad that people are actually talking of living in tents.

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There have been newspaper columns on the front page of Vancouver newspapers talking about

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this.

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I don't say that zoning is the only cause of this housing crisis.

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There are other things, preeminently rent controls and the government's abandonment

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of low tax policies for housing construction, such as the CCA.

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And then there's the agricultural reserve, whereby lands are frozen into agriculture

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and not allowed to be used for housing.

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But make no mistake about it, zoning legislation has played a part by reducing the supply of

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housing and the intensity with which land may be used.

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Density requirements have reduced the supply of housing that can be built even in residentially

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zoned areas.

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Instead of allowing high rises, construction has been limited to three-story low rises

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in many areas.

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All this, needless to say, reduces supply and drives the price of housing lots up through the roof.

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And then there are the petty regulations, which perhaps contribute only slightly to the shortage, but which set the tone of bureaucratic indifference.

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The so-called thin houses, houses of less than 15 feet in width, have been all but prohibited, and basement rentals in one or two family homes are not allowed.

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The Basement Prohibition is widely violated, but this just breeds contempt for all laws, good and bad, surely not a satisfactory result.

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Secondly, zoning hurts the poor.

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Apart from the skyrocketing rents and first home prices, there is exclusionary zoning, which compels large lot sizes.

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Sometimes racially motivated, but more often simply anti-poor,

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by Poor, these laws make it impossible to build for the poor and even the middle class

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in many desirable areas.

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And the less affluent are beginning to realize this.

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Election analysis of zoning referendums in the southwest of the United States shows the

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greatest disapproval rates in poor and middle class writings, not in rich ones.

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Thirdly, governmental zoning brings graft in its wake.

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The reason for this is easy to see.

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A less restrictive variance may be worth millions of dollars to the land developer.

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Be the bureaucrat ever so honest, he will be sorely tempted by a share in these gains.

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Paradoxically, this is not necessarily all to the bad.

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If a bribe can convert a land parcel to a use more highly prized by consumers, wealth

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in the allocation of resources will have been much more nearly optimized.

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This is not the first case on record attesting to the benefits of black markets.

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It is not difficult to see the implications for a city's tax base.

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If zoning prohibits, retards or delays the construction of the most highly valued uses

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in a snarl of bureaucratic red tape, then the tax base will be lower than it would otherwise

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have been in the absence of this policy.

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Then there is the question of aesthetics.

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Zoning advocates sometimes point to the ugliness of urban sprawl

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as a point in their favor.

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I would reply, one, that beauty is in the eye of the beholder,

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and that the typical owner of a small cottage in suburbia

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with its backyard grill and other middle class accessories

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is probably pleased with his house and way of life.

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He bought it, didn't he?

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Even if it offends the aesthetic sensibilities

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of Some Elitists.

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And that, for me, diversity is a part of beauty,

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not the conformity engendered by zoning.

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One testimonial to this view is the skyline

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of many of our major cities, which took place before zoning

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was very heavily in effect.

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Let me conclude by considering a vast injustice committed

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by zoning bureaucrats, their failure

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to compensate owners of land and property

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for Downzoning to Less-Valued Uses.

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According to eminent domain laws in most civilized countries,

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the government can condemn private property

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for public use, but only if it compensates owners fairly.

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Yet rezoning, which is nowadays a commonplace occurrence,

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can destroy thousands of dollars of value

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and leave the property owner no recourse in law.

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I advocate a complete elimination of zoning laws in Vancouver, in Halifax and in every

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other Canadian city where this mischievous legislation is in effect and that we should

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follow the Houston pattern of no zoning, no government zoning that is.

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But failing that, simple justice and human decency would demand at the very least that

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zoners be forced to take into consideration the costs of their activities.

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This may not stop them, since their own personal funds will still not be at stake, but it will

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be a step in the right direction.

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Question?

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Yes, sir.

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You mentioned the Fraser Institute with respect to some of the other institutes, like the

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Institute for Research on Political Policy.

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If you look quite right, they get a major amount of their funding from the university.

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You mentioned the Fraser Institute, with respect to some of the other institutes, like the institute for research on cost, they get a major amount of their funding from government, but in listening to the tenor of your address, it seemed to me to be like a symphony played on one instrument, one note, and that is that the government should get out of this, and government should get out of that, and government

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in regard to this. Now I would have to guess, and this is a total guess, that the major portion of the funding, the Fraser Institute, is coming from private industry. Is that true?

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And you see a correlation?

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Yes.

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Where does your money come from?

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Well, as a matter of fact, if you're frozen out of government funds, either by yourself or by volition or by other forces, there is only one other source of funding.

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Fund. That happens to be private funding. And the Fraser Institute is supported by funding from corporations ranging from the mom-and-pop grocery store to the biggest corporations all across Canada, from private foundations and from individuals.

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Now, with regard to your view about playing the symphony on one note or on one instrument,

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I don't think I can fairly be accused of that. There's at least a duet. There's at least one other instrument.

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Because you'll remember that not only did I say the government would be well advised not to do this, that, and the other, and the third thing, and the fourth, and the fifteenth,

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but also that there was a very important role for government,

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that only government could do, that government was uniquely capable of solving,

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but that government, in its haste to do everything else,

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has renounced this one thing, and this one thing is crucial.

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And I try to give an example through pollution, that if government...

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I mean, if we didn't have any policemen and we had Hobbes' war of all against all,

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we wouldn't have a very good society.

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And obviously, there's a very important role for government to play,

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So I don't think it's fair to say that I've been playing one note or one instrument that government ought to end this, that and the other.

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It's true there are many things I don't think government is congenitally able to do,

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but then there are certain things that I think private enterprise cannot do at all.

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And that only government can do, and are very crucial for our society,

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and it's government's lack in these areas, the lack in police protection, for example, is a strong case in point.

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The standard response to what you would have to say about government doing its job and not trying to do everyone else's

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is that when government does try to enact reasonably strong pollution laws or laws in other areas,

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private industry moves elsewhere.

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And we have provinces like down here, New Brunswick, Nova Scotia,

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trying to relax their laws and moving out of it to attract industry.

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So I don't think that you can say that the private enterprise should be left alone to do the manufacturing and the government should be in there and make the rules and that these two guys are going to get along because I think all that's going to happen is that private enterprise is going to take its ballgame elsewhere and where there are pollution havens and I think a study of pollution and environmental law might suggest that to you.

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Well, what you say is not without merit. I think there is some merit to that. But on the other hand, I would point to you the example, say, of the United States and Canada, where Ronald Reagan has just got elected on a basis of, among other things, a more free-enterprising kind of economy.

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And take the example of the oil pricing and punitive oil taxing, which does occur in Canada.

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and just today or yesterday they've announced that they've gone to the world prices in the US.

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And look at which way the flow of oil drilling rigs is going.

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I mean, is it going from south to north? Not on your whatever.

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It's going from north to south.

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And I think this is very analogous to looking at the one-way traffic from East Germany to West Germany, East Berlin to West Berlin.

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These people vote with their feet and I think that the business community is voting in this case for less government control.

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It's true that in some cases a government might be called upon to take a statesman-like act and go against the tide of business.

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And I think that it should and it would be well advised to do this in certain pollution cases.

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And I think that this is ultimately the best for business.

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and I think business would go along with that because businessmen don't want their kids to die of cancer either.

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I think it's a travesty of justice and fairness to say that businessmen want this.

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I think that if there were reasonable rules of the game and that if business could accustom itself to these rules of the game

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and invest in R&D in order to have smoke prevention devices

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and if it had been doing this for the past hundred years we wouldn't have had the problem.

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So I can't say that you and I are in complete accord.

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It seems that being drawn back to bureaucratic zoning, there's no incentive for that bureaucrat to zone properly.

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In the Houston mode of private zoning, where is the incentive for a private property owner to attach restrictive covenants to his property on which he wishes to realize the highest profit?

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If he has a ridiculous and absurd and arbitrary restrictive covenant, like you have to paint

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your house pink and blue polka dots and you can't have fences and you have to have the

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basement on the roof or various things like that, who's going to want to buy the house?

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And if they do, they'll buy it at a very reduced price.

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But if he has restrictive covenants of the sort that the people want, namely you have

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to paint your house white, say, if that's what people want, or you have to have a picket

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Fence or you can't have dogs or whatever it is and people with dogs will then sort

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themselves out or if he has a thing that people want say that in 20 years we can

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have a vote as to whether to sell it out for this that or the other this enhances

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the value of the property or that there's a rule that for some people that

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don't believe market forces that no gasoline station or McDonald's burger

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place can be located in the middle of it well many people would prefer to buy a

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by a house with those restrictive covenants, not because they look upon the restrictions to themselves,

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but because they realize that their neighbors are similarly restricted

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from doing things that they don't want their neighbors to be doing in the first place.

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I think, to get back to the salacious area,

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there are certain nudist apartment houses in Houston, which is the only city in the country or North America

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The idea here is that people with wild and exotic tastes can sort themselves out.

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I mean, if you're a nudist and you don't mind other nudists nudisting around or whatever they do,

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well then this is a benefit to you. This is a restrictive covenant that you like.

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Namely, nudism will be allowed. That will enhance the value of the property for nudists.

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And conversely, it'll enhance the value for the straights to have a new restrictive covenant that nobody can do anything like that except in the privacy of their own bed.

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So, there's a competition as to how to get the better restrictive covenant. People work at that. It's a sub-industry of law.

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Whereas here, you're quite right, there is no competition to make a better law. The people that fail don't lose money thereby.

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And we as social scientists can, I think, expect worse laws to be created through this mechanism than through the other.

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I don't see how you can then put the finger on one bureaucrat and say it's his fault.

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Judicial systems, based on the fact that our referees are impartial and aren't subject to termination or firing,

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or free from the threat of that sort of effect of losing your job based on an unprofitable or bad decision.

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defend the impartiality of the system based on the edges, as I see it.

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But the responsibility gets when you're not in the kitchen.

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If he carries the can, he's the one you fire, he's the one that makes the funds.

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How can you, by spending money, I just try to get through the question of zoning, how you can see the process first?

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I'm just trying to get through the question of zoning, how you can see the process first.

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Well, you're asking three or four questions, and I'm trying valiantly to do my best, but if you want to take another turn, it's okay.

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No, go ahead.

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Okay. I called on him again. I'm glad to hear the interest, but let me have my turn, and then I'll call on you again.

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What you're saying, I think, is a variant of the theme. X is good because X was the product of a democratic process.

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I don't believe that. I don't believe that just because a law was voted on by a majority that either it's efficient or that it's moral or anything else.

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We need point no further than to Nazi Germany, which came in under a democracy, to explode the myth that just because X erupts due to a democratic process, X is anything.

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I mean, we can't say anything about X just because we know that a majority or plurality of the people were in favor of it.

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Secondly, I think that, take the Chrysler case, I think that here is a perfect case

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in point.

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When we had the private Chrysler company, we now have a public Chrysler company, but

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when we had a private Chrysler company, they were competing with other automobile corporations

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for the consumer's dollar.

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They failed, and according to the market system, they should be allowed to go the way of the

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Dodo Bird or the, I don't know, whatever, the Tyrannosaurus Rex and go into bankruptcy

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and their capital would be taken over by other corporations that could use it better.

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Instead, what the government did was it bypassed this consumer choice and it said to the consumers

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in effect, even though you weren't willing to give this company your funds as a voter

395
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for your approval, we're going to take it from you in the form of taxes and give it to them.

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And then, since responsibility and power have to go together, they're going to start making the decisions.

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And now we have, really, in the US, a quasi-crown corporation for Chrysler.

398
00:36:51.720 --> 00:36:58.720
And even if, and this was all done by elected officials, there was nothing undemocratic about it,

399
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Well, I feel that it's proper to challenge the decisions made by popularly elected officials

400
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and say that they're unwise, that there's a better way of doing it, that instead of a

401
00:37:08.760 --> 00:37:13.280
political ballot box vote, the dollar vote is more efficient in this regard.

402
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Your turn.

403
00:37:14.280 --> 00:37:15.280
Well, I guess I would like to mention the guy with democracy.

404
00:37:15.280 --> 00:37:25.280
I would like to mention, regarding democracy, something in terms of what's said about being the worst system that you've ever seen, except for Ronald Allen and all others.

405
00:37:25.280 --> 00:37:32.280
The totalitarian system, or a system where I live in a community and trying to regulate what happens around me,

406
00:37:32.280 --> 00:37:42.280
the things that affect me directly by my spending power, I think immediately suggests that there's an inequitable system somewhere in the flow,

407
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The second big problem is, what we're dealing with here is the question of zoning, one of the issues you brought about, and you're putting blame on government.

408
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without, on bureaucrats, without saying, okay, the responsibility will be with the individuals.

409
00:38:14.280 --> 00:38:22.280
Now, we're saying in a low income, let's go, for example, your example of billboards in a low income area.

410
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If, and I think it's been shown in certain areas, such as Boston, where they banned all billboards in the city throughout,

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that in low-income areas, where community pride was fairly low, where the intricacies of juvenile delinquency, crime, that sort of thing, were high, that neighborhood pride in the area went up with the degree to which the overt symbols of commercialization were taken away.

412
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The people took greater pride in their properties and actually the tone and tenor of the neighborhoods improved

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and that they can show this in increased property value, the people were willing to move into these areas

414
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and actually the benefit to the people living there was a better sense of community by these certain types of controls

415
00:39:10.280 --> 00:39:16.280
and I think that those are the sorts of people who are willing to go to government to perform certain things for them

416
00:39:16.280 --> 00:39:22.280
and certain ones that they want. They don't want to go into a lottery system

417
00:39:22.280 --> 00:39:29.280
Okay, well you've made two claims here, and I'll try to answer them. The second one first. With regard to the idea that banning commercial billboards and other forms of commerce increase property values, this book, Zoning its Costs and Relevance for the 1980s, studies the following cities.

418
00:39:52.280 --> 00:39:57.320
is Pittsburgh, Boston, Rochester, Houston, and Vancouver.

419
00:39:57.320 --> 00:40:00.180
And the summary of all these empirical studies

420
00:40:00.180 --> 00:40:03.560
based on econometric techniques is the opposite.

421
00:40:03.560 --> 00:40:05.400
So we have an empirical dispute.

422
00:40:05.400 --> 00:40:06.920
Which way does it work?

423
00:40:06.920 --> 00:40:08.400
I say one way, you say the other way.

424
00:40:08.400 --> 00:40:12.800
We'd have to compare our t-values and all.

425
00:40:12.800 --> 00:40:16.840
On the other point about democracy and rich men running

426
00:40:16.840 --> 00:40:19.240
things and all, let me make two points on that.

427
00:40:19.240 --> 00:40:22.200
First of all, I was not advocating no democracy.

428
00:40:22.200 --> 00:40:29.200
So the point from Winston Churchill I agree with. It's a lousy system except that everything else is worse.

429
00:40:29.200 --> 00:40:35.200
However, there's a difference between what I would call limited democracy, where we don't vote on everything,

430
00:40:35.200 --> 00:40:39.200
and total democracy, where we can vote on everything.

431
00:40:39.200 --> 00:40:44.200
I mean, I don't think we should vote on whether left-handed, red-headed people should be thrown in jail.

432
00:40:44.200 --> 00:40:49.200
Are you left-handed? Good, okay, so we don't have anyone here.

433
00:40:49.200 --> 00:40:57.200
I don't think that such a thing is a votable issue, nor do I think that things like Chrysler bailouts should be votable issues.

434
00:40:57.200 --> 00:41:07.200
I believe in capitalist acts between consenting adults, and I don't think it's any business of the public to concern itself with the private capitalist acts of individuals.

435
00:41:07.200 --> 00:41:15.200
Now, with regard to your statement that if this were true, the rich men would run things, I would say just about the opposite is true.

436
00:41:15.200 --> 00:41:21.200
In Russia nowadays, and in China, for all I know, news is not as reliable as it might be,

437
00:41:21.200 --> 00:41:28.200
you don't have people that are rich in money, but if you win a gold medal or a bronze medal in weightlifting,

438
00:41:28.200 --> 00:41:36.200
you get a limousine at a place near the Caspian Sea or what have you, and you can get an apartment in Moscow.

439
00:41:36.200 --> 00:41:41.200
In other words, there are certain things that are given out, that a society has to give out,

440
00:41:41.200 --> 00:41:49.200
And one way to give it out is through the political process, as in Russia, and I think that that has great and fatal flaws.

441
00:41:49.200 --> 00:42:01.200
In contrast, when Henry Ford made a billion, or a trillion, or a jillion, or whatever he made, the only way he made it was by immeasurably enriching everyone else.

442
00:42:01.200 --> 00:42:07.200
The way he made that money was by providing automobiles for the middle class for the first time.

443
00:42:07.200 --> 00:42:18.200
See, what you have here is a positive sum game. True, the rich can make money, but in a market system, they can only make money by creating untold wealth for other people.

444
00:42:18.200 --> 00:42:28.200
I think the reason we have the standard of living that we now have is because of the businessmen, because of the creativity of the people that have earned vast richnesses.

445
00:42:28.200 --> 00:42:33.200
I don't believe that it's a zero-sum game, that everything I make, you lose.

446
00:42:33.200 --> 00:42:41.200
I think we've had the model of, you know that game Monopoly? You've all played Monopoly as kids.

447
00:42:41.200 --> 00:42:47.200
Many people see the game Monopoly as an apt description of the market, and I say it's not.

448
00:42:47.200 --> 00:42:52.200
Monopoly is a zero-sum game. When I make money, you lose money.

449
00:42:52.200 --> 00:42:57.200
And kids play that game and they sort of think, well, this guy is rich, it must be that that guy is poor.

450
00:42:57.200 --> 00:43:02.200
I mean, that's what Pierre Trudeau is doing in effect now, racing around to these other countries

451
00:43:02.200 --> 00:43:07.640
of the Countries, and saying, because we're rich, they're poor.

452
00:43:07.640 --> 00:43:09.240
The very opposite is true.

453
00:43:09.240 --> 00:43:12.040
Because we're rich, they're richer than they would have otherwise

454
00:43:12.040 --> 00:43:15.080
been had we not been so rich.

455
00:43:15.080 --> 00:43:19.520
And it's because of this positive sum game idea.

456
00:43:19.520 --> 00:43:20.400
Yes, sir?

457
00:43:20.400 --> 00:43:22.760
Well, I realize this is an awfully simplistic point.

458
00:43:22.760 --> 00:43:24.280
And you probably have all sorts of counters,

459
00:43:24.280 --> 00:43:26.000
but there have been just as many counters against them.

460
00:43:26.000 --> 00:43:27.920
Then it's that where you have an act with two

461
00:43:27.920 --> 00:43:30.080
considering adults in the sexual field may be fine.

462
00:43:30.080 --> 00:43:36.080
But in the business field, it seems to me that a lot of times there's going to be a lot of third parties getting hurt by that act.

463
00:43:36.080 --> 00:43:45.080
And, you know, I don't see any, you know, big alternative to a third party being injured so two other parties can get it.

464
00:43:45.080 --> 00:43:47.080
Would you care to give me an example of the third party?

465
00:43:47.080 --> 00:43:57.080
I think the pollution is an area where, you know, like you can go ahead and you can have these two great corporations trading off land and values

466
00:43:57.080 --> 00:44:00.580
and polluting the hell out of a river, which is kind of ruining, you know.

467
00:44:00.580 --> 00:44:05.880
Right, I get it. You want to mention another example, since I did deal with pollution for about 15 minutes?

468
00:44:05.880 --> 00:44:09.080
Well, I just think that it flows over in other areas as well.

469
00:44:09.080 --> 00:44:13.080
Well, first of all, about sex not affecting third parties is nonsense.

470
00:44:13.080 --> 00:44:16.080
I mean, it creates third parties.

471
00:44:16.080 --> 00:44:17.580
Let me go to that issue.

472
00:44:17.580 --> 00:44:21.580
Well, I love that issue. Let me talk about it.

473
00:44:21.580 --> 00:44:25.580
We do have anti-pornography moves.

474
00:44:25.580 --> 00:44:28.580
We have a lot of feminists that are opposed to pornography.

475
00:44:28.580 --> 00:44:36.580
We have people that are, religious people that are opposed to it, that are third party.

476
00:44:36.580 --> 00:44:41.580
So I don't want you to think that in these kinds of areas there are no third parties. There are.

477
00:44:41.580 --> 00:44:46.580
The question is, is their interest relevant? I would think not.

478
00:44:46.580 --> 00:44:49.580
Now in the case of pollution, I'm really appalled that you would mention that

479
00:44:49.580 --> 00:44:56.080
Because I consider that a primary example for the very exact opposite of what you're trying to say.

480
00:44:56.080 --> 00:45:03.580
Namely here, the reason that there are effects on other parties is because the government has been remiss in its job, in its duty.

481
00:45:03.580 --> 00:45:05.080
So I really think I've answered it.

482
00:45:05.080 --> 00:45:07.080
Well, this hasn't been tough enough, that's...

483
00:45:07.080 --> 00:45:09.580
Well, that's... we're agreeing on that. Yes?

484
00:45:09.580 --> 00:45:13.580
You're saying that in the healthy economy, you're waiting on successful businessmen.

485
00:45:13.580 --> 00:45:18.080
So we even know to end up on the welfare line, the government ends up handing them out money.

486
00:45:18.080 --> 00:45:20.080
way down the line.

487
00:45:20.080 --> 00:45:22.080
It's exaggerated, but if you're aligned,

488
00:45:22.080 --> 00:45:24.080
it's kind of weeding out after you've sort of made

489
00:45:24.080 --> 00:45:26.080
more of an intervention and a different model?

490
00:45:26.080 --> 00:45:28.080
Well, that's a new point.

491
00:45:28.080 --> 00:45:30.080
I've been going around the lecture circuit

492
00:45:30.080 --> 00:45:32.080
and I confess that I've never heard that point

493
00:45:32.080 --> 00:45:34.080
and I thank you for it. Next time I hear it,

494
00:45:34.080 --> 00:45:36.080
I'll be more prepared for it.

495
00:45:36.080 --> 00:45:38.080
But my immediate reaction to it

496
00:45:38.080 --> 00:45:40.080
is that usually the multi-millionaire

497
00:45:40.080 --> 00:45:42.080
businessman that takes a bath,

498
00:45:42.080 --> 00:45:44.080
you know, like there was this guy in silver,

499
00:45:44.080 --> 00:45:46.080
I forget his name,

500
00:45:46.080 --> 00:46:14.080
The guy is weeded out of a hardware store in a shopping center, what it indicates is that the consumers, in their wisdom, have decided that they value that land or that capital or that whatever, more highly in the form of money than in the form of money.

501
00:46:14.080 --> 00:46:18.520
more highly in the form of a fish and chips place or whatever.

502
00:46:18.520 --> 00:46:20.600
Now, it doesn't mean that he has to go into welfare.

503
00:46:20.600 --> 00:46:22.360
It could mean that he'll go into fish and chips.

504
00:46:22.360 --> 00:46:25.680
Or it could mean that he'll go elsewhere where hardware is needed.

505
00:46:25.680 --> 00:46:27.080
See, that's the way...

506
00:46:27.080 --> 00:46:30.080
See, profits are like a leash

507
00:46:30.080 --> 00:46:32.960
that the consumer has over the business man.

508
00:46:32.960 --> 00:46:38.040
It's a leash, it's a traffic light, it's the directional signals,

509
00:46:38.040 --> 00:46:39.800
it's whatever you want to say.

510
00:46:39.800 --> 00:46:42.400
The way consumers can direct

511
00:46:42.400 --> 00:47:06.400
production, the course of production is not by writing to their MP, not by writing to their LA and saying we want fish and chips, we don't want hardware here, but rather by buying fish and chips and not by buying hardware, and this encourages people to get out of the one and into the other, and I don't think that it creates poverty, rather it organizes resources in a way.

512
00:47:06.400 --> 00:47:14.400
But if somebody is made to go bankrupt and they do end up in the bottom of the skin and government ending up handing them out money, where do you stop if government doesn't mention them?

513
00:47:14.400 --> 00:47:20.400
Do you say, no, don't hand out money? Or do you say, hand out money, we're going to get self-help programs?

514
00:47:20.400 --> 00:47:24.400
I see. What you're really asking, what is my view on welfare?

515
00:47:24.400 --> 00:47:34.400
And I would say that the view on welfare that I have is that many years ago, before our time, we used to have private welfare.

516
00:47:34.400 --> 00:47:41.400
We used to have church groups, religious groups, elementary institutions, and they would give out welfare of the sort.

517
00:47:41.400 --> 00:47:47.400
And the philosophy of welfare in those days was that welfare was a temporary help to a person who was down and out,

518
00:47:47.400 --> 00:47:52.400
and it was for the sole purpose of getting them back on its feet.

519
00:47:52.400 --> 00:47:57.400
And I think that was a very good thing, and I don't see any problems with that.

520
00:47:57.400 --> 00:48:01.400
We don't want to have a society where you don't have something.

521
00:48:01.400 --> 00:48:07.400
On the other hand, the way welfare is run now, people consider it to be theirs by right.

522
00:48:07.400 --> 00:48:12.400
Their children are brought up in a situation where the parents aren't the parents,

523
00:48:12.400 --> 00:48:18.400
rather the parents are kids and big brother of the state or big mommy or daddy or mom or whoever it is,

524
00:48:18.400 --> 00:48:21.400
is in a sense the parental role.

525
00:48:21.400 --> 00:48:27.400
And you have this intolerable situation of people on welfare for five, six generations.

526
00:48:27.400 --> 00:48:40.400
I think that many of the leaders of the black community and the native people's community are coming to realize now that if you wanted to come up with a real good way of committing genocide of the spirit

527
00:48:40.400 --> 00:48:47.400
without ever lifting a fist in anger, the best way to do it is to incorporate some sort of welfare system of the sort that we've got now

528
00:48:47.400 --> 00:48:52.400
to emasculate it and just take away the ambition and the spirit of a people

529
00:48:52.400 --> 00:48:58.400
To put them on the dole and say, look, we'll give you a TV set and a car and shut up and take the money.

530
00:48:58.400 --> 00:48:59.400
And don't work.

531
00:48:59.400 --> 00:49:02.400
And I think that's a horrible situation I'd be against.

532
00:49:02.400 --> 00:49:07.400
And I really don't feel that the small, entrepreneurial hardware store is in danger of that.

533
00:49:07.400 --> 00:49:13.400
I think he'll just go into a hardware store somewhere else or he'll switch into ladies' shoes or whatever else.

534
00:49:13.400 --> 00:49:25.400
So you call up the welter and take those people in and allow the American forces to operate and put them back in the factories for 14 or 16 hours a day with free America?

535
00:49:25.400 --> 00:49:32.400
Well, I'm happy to say I've heard that one before. What you're asking is if I may...

536
00:49:32.400 --> 00:49:39.400
What I'm saying is that if you want a totally free America to operate in terms of zoning,

537
00:49:39.400 --> 00:49:47.400
You disregard what I term to be the public interest, no matter how misguided it may be.

538
00:49:47.400 --> 00:49:54.400
Your Stanley Park, your Chinatown is going to wind up with a huge steel mill there.

539
00:49:54.400 --> 00:49:57.400
It's going to wind up with a chemical factory.

540
00:49:57.400 --> 00:50:04.400
It's a good piece of the real estate, a good economic piece of the real estate, and they can give a good return.

541
00:50:04.400 --> 00:50:14.400
Okay, you've made two points and I want to answer both because I think they're both very important to explaining the differences between us or my views.

542
00:50:14.400 --> 00:50:22.400
First on the wages. The idea is that if not for the glorious and wonderful minimum wage law and other progressive, marvelous legislation...

543
00:50:22.400 --> 00:50:24.400
I don't think it's a terrible minimum wage law.

544
00:50:24.400 --> 00:50:27.400
Oh, you do. Well, happy to agree, but then I must interpret you.

545
00:50:27.400 --> 00:50:38.400
I thought you were saying that in a free market setting, people would be working 72 hours a week in depraved conditions for very low wages. You were not saying that?

546
00:50:38.400 --> 00:50:39.400
I was.

547
00:50:39.400 --> 00:50:42.400
Oh, well then let me try and answer it.

548
00:50:42.400 --> 00:50:49.400
We're sitting too close to him, I see a certain resemblance there.

549
00:50:49.400 --> 00:50:53.400
But they're sitting on the right.

550
00:50:53.400 --> 00:50:57.400
I think that's another myth, but I'll get to that after I get to these two.

551
00:50:57.400 --> 00:51:03.400
Let me do that one first. I think that the left-right thing is a gigantic red herring.

552
00:51:03.400 --> 00:51:07.400
Pink herring? I don't know what color herring. Bad color herring.

553
00:51:07.400 --> 00:51:14.400
The way I see the political spectrum, the usual political spectrum has gotten the right here and the left here,

554
00:51:14.400 --> 00:51:18.400
and according to the political spectrum, if it's to make any sense,

555
00:51:18.400 --> 00:51:22.400
people who are close on the spectrum are supposed to be close to each other,

556
00:51:22.400 --> 00:51:27.400
And people who are far away on the spectrum are supposed to be far away from each other in some relevant respect.

557
00:51:27.400 --> 00:51:32.400
Now let me show you counter examples which just annihilate this right away.

558
00:51:32.400 --> 00:51:42.400
Who do we have? Well, what I want to do is think of people that everyone would think of as saintly, on the left and on the right.

559
00:51:42.400 --> 00:51:48.400
And then I want to think of people that everyone would admit with me are evil, but both on the left and the right.

560
00:51:48.400 --> 00:51:59.400
In the right, and my candidates, and maybe you can help me out, on the left the bad guy would be Stalin, and on the right it would be Hitler.

561
00:51:59.400 --> 00:52:10.400
Now right away we see a little difficulty with this spectrum, because they're very similar as far as I can see, and I'm sure you would agree with me that they are very similar, and yet if they're at opposite ends of the spectrum...

562
00:52:10.400 --> 00:52:12.800
The same names, they're both totalitarians.

563
00:52:12.800 --> 00:52:14.720
Yes, but not on the left-right spectrum.

564
00:52:14.720 --> 00:52:18.720
Hitler, look, the neo-Nazi groups nowadays,

565
00:52:18.720 --> 00:52:20.640
they are considered extreme right-wingers.

566
00:52:20.640 --> 00:52:22.860
I'm just reporting what I see in the paper.

567
00:52:22.860 --> 00:52:24.200
I'll later draw another spectrum

568
00:52:24.200 --> 00:52:26.040
that I think is much more sensible,

569
00:52:26.040 --> 00:52:27.840
in which these guys will be buddy-buddy

570
00:52:27.840 --> 00:52:29.560
because they really are buddy-buddy.

571
00:52:29.560 --> 00:52:30.520
We're from 39 and 40.

572
00:52:30.520 --> 00:52:33.280
Now, a heroic person that I consider on the left

573
00:52:33.280 --> 00:52:38.280
is Mother Teresa, who just won one of the,

574
00:52:40.400 --> 00:52:43.400
Nobel Prizes for Peace

575
00:52:43.400 --> 00:52:46.400
And a person that I would consider heroic

576
00:52:46.400 --> 00:52:51.400
Do you know, when Malcolm X was in his most racist days, he was asked

577
00:52:51.400 --> 00:52:56.400
Would there be any person who could join the black Muslims, any white person?

578
00:52:56.400 --> 00:52:59.400
Do you know who he said?

579
00:53:04.400 --> 00:53:09.400
John Brown was a minister in the 1850s in southern US

580
00:53:09.400 --> 00:53:13.400
and he was against slavery and he deduced as follows

581
00:53:13.400 --> 00:53:17.400
that the US government was supporting slavery, he was against it

582
00:53:17.400 --> 00:53:20.400
so he sort of declared war on the US government

583
00:53:20.400 --> 00:53:26.400
and he and his parishioners would take off after the various forts with guns ablazing and try to knock them off

584
00:53:26.400 --> 00:53:31.400
very heroic, I think, and also the people that ran the Underground Railway

585
00:53:31.400 --> 00:53:34.400
were extreme right wing businessmen

586
00:53:34.400 --> 00:53:39.400
by the abolitionists of the type of John Brown.

587
00:53:39.680 --> 00:53:42.080
So here I pose to you four people,

588
00:53:43.000 --> 00:53:46.800
two of whom I think are heroic on opposite ends

589
00:53:46.800 --> 00:53:50.360
and two who I think are not heroic, also on opposite ends.

590
00:53:50.360 --> 00:53:53.000
I think these two have very little in common,

591
00:53:53.000 --> 00:53:54.920
as do these two.

592
00:53:54.920 --> 00:53:57.720
The alternative political spectrum I would pose to you

593
00:53:58.560 --> 00:53:59.700
is as follows.

594
00:53:59.700 --> 00:54:18.700
Let's call this bad or totalitarian and let's call this the good axis or the good bad axis or voluntarist, voluntarist.

595
00:54:18.700 --> 00:54:26.700
And now I want to say that Mother Teresa and John Brown should be up there together where they belong,

596
00:54:26.700 --> 00:54:34.700
High on the good axis. Maybe one on the left and one on the right to indicate certain rhetorical and unimportant differences.

597
00:54:34.700 --> 00:54:43.700
And Joe Stalin and Adolf Hitler should be down here, to the depths that they so well deserve.

598
00:54:43.700 --> 00:54:47.700
Again, there are slight rhetorical differences that aren't important.

599
00:54:47.700 --> 00:54:53.700
So I don't see the views that I've been expressing as particularly left or right.

600
00:54:53.700 --> 00:55:08.700
I see them as up here, you might see them as down here, but at least I think we can agree to a way of looking at political reality which I hope to be neutral, i.e. descriptive.

601
00:55:08.700 --> 00:55:12.700
Now let me try to answer the points that I understand you to have made.

602
00:55:12.700 --> 00:55:25.700
One about Stanley Park and a steel mill in Stanley Park, and the other about wages in the absence of the market, or rather low wages because of the market.

603
00:55:25.700 --> 00:55:31.700
Are there economists in the group here? Mostly law people?

604
00:55:31.700 --> 00:55:40.700
Okay, well, we economists have a theory of wages. It's called the marginal revenue product theory of wages.

605
00:55:40.700 --> 00:55:52.700
Boiled down, what it says in effect is that the thing that determines wages, the most important determinant of wages is productivity.

606
00:55:52.700 --> 00:56:00.700
And that if there is competition, wages will tend to be driven up to the level of productivity.

607
00:56:00.700 --> 00:56:04.700
Now let me try to convince you of this by an example.

608
00:56:04.700 --> 00:56:12.700
Suppose that the productivity level of a person is $5.

609
00:56:14.700 --> 00:56:17.700
What are we going to do in this situation?

610
00:56:17.700 --> 00:56:20.700
We're going to move in on it.

611
00:56:20.700 --> 00:56:23.700
How are we going to move in on this guy?

612
00:56:23.700 --> 00:56:24.700
What are we going to do?

613
00:56:24.700 --> 00:56:26.700
We're going to raise our wages to 7 cents.

614
00:56:26.700 --> 00:56:27.700
That's it, precisely.

615
00:56:27.700 --> 00:56:30.700
We'll offer a wage rate of 7 cents

616
00:56:30.700 --> 00:56:36.700
Because we figured better that we make $4.93 an hour than he makes $4.95.

617
00:56:36.700 --> 00:56:41.700
And the next guy will offer $0.09 and maybe even $0.10.

618
00:56:41.700 --> 00:56:44.700
Maybe someone will go to $0.15.

619
00:56:44.700 --> 00:56:50.700
You wouldn't want to jump to a dollar right away because the workers will get uppity and they won't have any respect and all that.

620
00:56:50.700 --> 00:56:53.700
But that's the inexorable force of the market.

621
00:56:53.700 --> 00:57:08.700
It will drive the wage up to a point, in the absence of any cartel, that will diverge from $5 an hour to the extent of the cost of finding such workers.

622
00:57:08.700 --> 00:57:10.700
It's assuming a scarce labor supply.

623
00:57:10.700 --> 00:57:12.700
No, it's assuming that they have a positive productivity.

624
00:57:12.700 --> 00:57:14.700
They have an abundant labor supply.

625
00:57:14.700 --> 00:57:19.700
It assumes that they have some productivity.

626
00:57:19.700 --> 00:57:36.700
The reason we have abundant labor supplies, I'll later argue in another question, which is really not relevant to this exactly, is because of various government laws like the minimum wage law.

627
00:57:36.700 --> 00:57:46.700
That's the reason, and monetary policy and other governmentally created sources of reserve armies of the unemployed, to use the Marxist term.

628
00:57:46.700 --> 00:57:53.180
But to just come back to this, let's assume that the guy really can't produce $5 an hour.

629
00:57:53.180 --> 00:58:04.780
This means that if you've got him in your factory, your total product for the hour, instead of being $1,000, will be $1,005.

630
00:58:04.780 --> 00:58:09.380
That's what a marginal revenue product or productivity of $5 an hour means.

631
00:58:09.380 --> 00:58:14.820
It means that if you have him, you'll net this much, if you don't, you'll net that much.

632
00:58:14.820 --> 00:58:17.860
So you can make $5 off of him.

633
00:58:17.860 --> 00:58:19.520
And if this is the situation,

634
00:58:19.520 --> 00:58:24.520
I strongly suggest the well-received economic doctrine

635
00:58:25.400 --> 00:58:27.340
that the wage will rise to a level

636
00:58:27.340 --> 00:58:29.980
that diverges from $5 out an hour

637
00:58:29.980 --> 00:58:33.220
by no more than the cost of finding such people.

638
00:58:34.100 --> 00:58:35.100
And if you look around you,

639
00:58:35.100 --> 00:58:37.140
you'll see a lot of evidence for this.

640
00:58:37.140 --> 00:58:41.660
For example, take the Mexican wetbacks,

641
00:58:41.660 --> 00:58:44.340
the people that are trying to struggle across northward.

642
00:58:44.340 --> 00:58:47.460
take the farmers in the California valleys

643
00:58:47.460 --> 00:58:50.340
and in Vancouver who go down with trucks

644
00:58:50.340 --> 00:58:54.060
to those Mexican workers who are say worth $5 an hour

645
00:58:54.060 --> 00:58:59.060
but only earning five cents or 25 cents or 75 cents an hour.

646
00:58:59.500 --> 00:59:02.940
And they don't kidnap, there's no Iranian deal going on.

647
00:59:02.940 --> 00:59:06.380
Those Mexican workers come up here to Canada

648
00:59:06.380 --> 00:59:09.060
and to the US year after year because the amount of money

649
00:59:09.060 --> 00:59:10.780
that they're being offered is higher

650
00:59:10.780 --> 00:59:12.180
than they can get in Mexico.

651
00:59:12.180 --> 00:59:21.180
And the reason that the capitalists go down there, of course, is not, you know, to help the Mexican workers or anything nonsensical like that.

652
00:59:21.180 --> 00:59:25.180
It's in order to steal the workers away from the Mexican employers.

653
00:59:25.180 --> 00:59:29.180
And the only way you can steal them away is by offering them a higher wage.

654
00:59:29.180 --> 00:59:36.180
And I venture to say, okay, so now what is the effect of the minimum wage law?

655
00:59:36.180 --> 01:00:02.180
The minimum wage law. Suppose, suppose instead of a productivity level of $5 an hour, this person, it'll be a native person or a teenager or a black teenager, let's say is worth $2 an hour and let's say that the minimum wage law is, what, $3.35 now?

656
01:00:02.180 --> 01:00:11.180
This means that if you hire this person, he will net you $2 an hour, but you'll have to pay him $3.35.

657
01:00:11.180 --> 01:00:14.180
It's a losing proposition. You won't hire him.

658
01:00:14.180 --> 01:00:20.180
And I think that that's one of the great explanations of why we have such great unemployment right now

659
01:00:20.180 --> 01:00:27.180
for people with low productivities like teenagers, blacks, native persons, etc.

660
01:00:27.180 --> 01:00:33.700
Now to answer your question about Stanley Park and a factory in Stanley Park, Stanley Park

661
01:00:33.700 --> 01:00:41.300
is a beautiful park in Vancouver and the fear is that if we had privatized parks, if we

662
01:00:41.300 --> 01:00:45.900
didn't have public parks but we had private parks, there'd be no parks.

663
01:00:45.900 --> 01:00:52.060
Well, now I assume that people really benefit from parks, that they like parks, that the

664
01:00:52.060 --> 01:00:56.740
reason they show up on Sundays is because they really get some benefit from it.

665
01:00:56.740 --> 01:01:02.600
In order to make this process work, the free enterprise process, whereby profits can be

666
01:01:02.600 --> 01:01:09.340
a leash upon the producers, there has to be some way that the consumers can register their

667
01:01:09.340 --> 01:01:10.340
desires.

668
01:01:10.340 --> 01:01:14.980
There has to be some way in which they can move into the profit nexus.

669
01:01:14.980 --> 01:01:20.140
The only way for that to happen is for them to pay a price for park use.

670
01:01:20.140 --> 01:01:23.740
And this shouldn't shock you, I mean we do have private parks, do we not?

671
01:01:23.740 --> 01:01:25.540
Do we not have Disney World?

672
01:01:25.540 --> 01:01:27.540
Yes, we have Disney World.

673
01:01:27.540 --> 01:01:29.540
We're going to turn Stanley Crick into Disney World.

674
01:01:31.540 --> 01:01:33.540
Before you jump right over.

675
01:01:33.540 --> 01:01:35.540
No, I didn't say that.

676
01:01:35.540 --> 01:01:37.540
I think that this is...

677
01:01:37.540 --> 01:01:39.540
I think this is putting words in right now.

678
01:01:41.540 --> 01:01:43.540
I didn't say it.

679
01:01:43.540 --> 01:01:45.540
I think it was putting your foot in.

680
01:01:45.540 --> 01:01:47.540
Well, it's kind of you to say.

681
01:01:47.540 --> 01:01:49.540
Let me finish my point.

682
01:01:49.540 --> 01:01:54.540
I'm merely pointing to Disneyland as a case of private parks.

683
01:01:54.540 --> 01:02:09.540
See, if you really think that there would be no private parks in a free market situation, not like Disney World, but like Stanley Park, what you're really saying, in effect, is that people don't really enjoy them enough to pay for them.

684
01:02:09.540 --> 01:02:22.540
Mainly people, when asked to register their demand for it, they're willing to pay demands for chalk, they're willing to pay for this, for ties, for books, but for some reason they're not willing to demand private parks.

685
01:02:22.540 --> 01:02:23.180
of Parks.

686
01:02:23.180 --> 01:02:25.300
I would say that if that were true,

687
01:02:25.300 --> 01:02:28.500
it indicates to me that they really don't want them.

688
01:02:28.500 --> 01:02:30.740
And if that's true, well, maybe we

689
01:02:30.740 --> 01:02:32.700
do have an over-optimal investment

690
01:02:32.700 --> 01:02:35.820
in the number of parks we have in the urban area.

691
01:02:35.820 --> 01:02:36.660
I don't know.

692
01:02:36.660 --> 01:02:38.220
This is a prediction.

693
01:02:38.220 --> 01:02:44.660
I say if there were a private park market,

694
01:02:44.660 --> 01:02:47.620
people would be able to register their dollar votes.

695
01:02:47.620 --> 01:02:50.620
And in that way, we'd be able to have an optimal allocation

696
01:02:50.620 --> 01:02:52.620
of land for all sorts of uses.

697
01:02:52.620 --> 01:02:57.340
For housing, for agriculture, for parks, for what have you.

698
01:02:57.340 --> 01:02:59.820
Right now, the only way we can determine

699
01:02:59.820 --> 01:03:02.420
how many parks to have is through the political process.

700
01:03:02.420 --> 01:03:06.580
People vote for mayors, and mayors decide pretty arbitrarily

701
01:03:06.580 --> 01:03:09.280
how many parks there shall be, and we never know.

702
01:03:09.280 --> 01:03:11.940
Maybe we need more parks, maybe we need fewer ones.

703
01:03:11.940 --> 01:03:14.260
We can't know through the price system

704
01:03:14.260 --> 01:03:16.680
because the parks have been nationalized,

705
01:03:16.680 --> 01:03:18.620
they've been taken out of the price system.

706
01:03:18.620 --> 01:03:20.620
Why should you have to pay for milk?

707
01:03:20.620 --> 01:03:22.620
What is the rationale?

708
01:03:22.620 --> 01:03:24.620
Don't think that when you have to pay for them

709
01:03:24.620 --> 01:03:26.620
that society is a loser.

710
01:03:26.620 --> 01:03:28.620
The reason we have to pay for milk

711
01:03:28.620 --> 01:03:30.620
is to have some rational way

712
01:03:30.620 --> 01:03:32.620
for the farmers to know

713
01:03:32.620 --> 01:03:34.620
whether they should

714
01:03:34.620 --> 01:03:36.620
use the cow for their milk.

715
01:03:36.620 --> 01:03:38.620
And the only way they can tell

716
01:03:38.620 --> 01:03:40.620
is based on milk and meat prices.

717
01:03:40.620 --> 01:03:42.620
If milk prices go up

718
01:03:42.620 --> 01:03:44.620
relative to meat prices,

719
01:03:44.620 --> 01:03:46.620
we'll have more cows save for milk.

720
01:03:46.620 --> 01:03:51.500
If meat prices go up to milk prices, we'll have more cows slaughtered for meat.

721
01:03:51.500 --> 01:04:02.700
I mean, the only way you can tell whether to use a particular piece of metal for a paper clip or for a stethoscope is to have stethoscope prices and paper clip prices.

722
01:04:02.700 --> 01:04:10.900
You see, there are really two ways to know how to allocate steel between stethoscopes and some other use of steel, say automobiles.

723
01:04:10.900 --> 01:04:14.100
Now, we want cars and we want stethoscopes, right?

724
01:04:14.100 --> 01:04:18.100
Yeah, but I don't think you've answered my question, I've asked you why should people pay if they're current.

725
01:04:18.100 --> 01:04:26.100
I've answered it, and my answer was the reason that they should pay is that in that way is the only way they can register their demand.

726
01:04:26.100 --> 01:04:34.100
The only alternative to consumers registering their demands for automobiles versus stethoscopes,

727
01:04:34.100 --> 01:04:39.100
the alternative to the market way in which you pay for everything,

728
01:04:39.100 --> 01:04:44.100
is to have a bureaucrat decide how the allocation shall take place.

729
01:04:44.100 --> 01:04:49.100
As in many of the centralized dictatorships on the other side of the Iron Curtain,

730
01:04:49.100 --> 01:04:56.100
where they have amazing bottlenecks of all sorts of things due to impossibly difficult choices of plan.

731
01:04:56.100 --> 01:05:06.100
They have situations, well look, one very simple situation that water can lead to is take the land collectivization.

732
01:05:06.100 --> 01:05:14.100
Ninety-five percent of the land, the farmland in Russia, is collectibles.

733
01:05:14.100 --> 01:05:17.100
It produces seventy-five percent of the crops.

734
01:05:17.100 --> 01:05:21.100
Five percent of the land is non-collectibles.

735
01:05:21.100 --> 01:05:25.100
It's in the form of little plots that the farm workers have in their backyards.

736
01:05:25.100 --> 01:05:27.100
That produces twenty-five percent of the crops.

737
01:05:27.100 --> 01:05:30.100
I say it's no accident, it's no coincidence.

738
01:05:30.100 --> 01:05:33.100
It's an indication of the health of the system.

739
01:05:33.100 --> 01:05:49.100
And also, when you have a market, remember when we used to have price controls in the middle 70s, all of a sudden you'd have a shortage of the most odd things, like toilet paper would be in short supply, and paper clips would be in great supply, and there was no market balancing effect.

740
01:05:49.100 --> 01:06:05.100
You see, if we didn't have this market, if we didn't have consumers indicating, through a price system, the allocations that they wanted made of steel to paper clips, to stethoscopes or automobiles, we'd have to have central planners decide that.

741
01:06:05.100 --> 01:06:11.100
And it's a very difficult situation. It's an impossible decision to make as well as the market makes it.

742
01:06:11.100 --> 01:06:15.100
That's why I'm saying that it would be much better for people to pay for parks,

743
01:06:15.100 --> 01:06:17.100
The Theory of Money and Credit

744
01:06:45.100 --> 01:06:49.600
And in his view, and he's willing to risk his own capital on this decision, people want

745
01:06:49.600 --> 01:06:53.140
that park more for housing than for parks.

746
01:06:53.140 --> 01:06:58.780
There's no stone tablet that's on Stanley Park anywhere that says, thou shalt never use

747
01:06:58.780 --> 01:07:01.260
this land for anything but a park.

748
01:07:01.260 --> 01:07:04.620
God didn't say that that land should always be a park.

749
01:07:04.620 --> 01:07:10.580
It's up for individual human beings to decide the best allocation of various lands.

750
01:07:10.580 --> 01:07:14.020
And it's through the prices that we can determine.

751
01:07:14.020 --> 01:07:19.020
And another point I would say is don't forget to be poor because we have to pay for parks.

752
01:07:19.020 --> 01:07:32.020
And as a society, all that will happen is that the money will wash out and we'll now have a better way of determining the allocation of farmland, parkland, housingland, etc.

753
01:07:32.020 --> 01:07:40.020
Just as we now have a good way of allocating the use of styrofoam. Should it be put in cups or boats or what?

754
01:07:40.020 --> 01:08:03.020
How can you say that in terms of knowing what people want, their willingness to pay, how much power plan they want, if you take a situation like Harlem, how do people in Harlem know whether they want power plan or not because they've never seen a park?

755
01:08:03.020 --> 01:08:04.460
See where I'm getting it?

756
01:08:04.460 --> 01:08:09.260
Well, I mean, you're just wrong factually.

757
01:08:09.260 --> 01:08:13.140
Central Park is in Harlem.

758
01:08:13.140 --> 01:08:16.700
I mean, Harlem is littered with parks, public parks.

759
01:08:16.700 --> 01:08:20.380
There are public parks and public schools all through Harlem.

760
01:08:20.380 --> 01:08:22.140
I mean, you're just wrong.

761
01:08:22.140 --> 01:08:24.100
But forget about the factual point.

762
01:08:24.100 --> 01:08:26.540
Let's make the theoretical point that the poor wouldn't

763
01:08:26.540 --> 01:08:28.020
be able to afford parks.

764
01:08:28.020 --> 01:08:29.340
Well, just anything.

765
01:08:29.340 --> 01:08:32.180
I guess the point I'm trying to make is that can you really

766
01:08:32.180 --> 01:08:38.180
Do you ever want something that you don't understand what it's all about or that you've never been exposed to?

767
01:08:38.180 --> 01:08:41.180
No, you can, and that's the function of advertising.

768
01:08:41.180 --> 01:08:45.180
Another favorite of some of the people here.

769
01:08:45.180 --> 01:08:52.180
I think the function of advertising is to acquaint people with things that they've never heard of.

770
01:08:52.180 --> 01:08:56.180
I mean, Galbraith had this thing about advertising, it contrives wants.

771
01:08:56.180 --> 01:08:59.180
And he's right, it does contrive wants.

772
01:08:59.180 --> 01:09:02.460
I mean, I'm a sort of an addict of Mozart and Bach.

773
01:09:02.460 --> 01:09:05.180
I confess, I love them.

774
01:09:05.180 --> 01:09:08.100
But had they not been advertised in various ways,

775
01:09:08.100 --> 01:09:09.340
I might not have known them.

776
01:09:09.340 --> 01:09:11.580
There are many people that are cut off from this

777
01:09:11.580 --> 01:09:16.060
because the advertising isn't as general as it might be.

778
01:09:16.060 --> 01:09:17.940
We don't get born into this world,

779
01:09:17.940 --> 01:09:22.860
naked, kicking, and screaming with a love for whatever,

780
01:09:22.860 --> 01:09:25.380
for whatever the things that we now have come to love.

781
01:09:25.380 --> 01:09:27.780
Most of those things that we've come to love

782
01:09:27.780 --> 01:09:29.620
are through advertising.

783
01:09:29.620 --> 01:09:31.820
Well, I guess, if you finish now,

784
01:09:31.820 --> 01:09:35.700
because I don't want to be accused of mopping on you.

785
01:09:35.700 --> 01:09:39.700
If you have a certain income distribution,

786
01:09:39.700 --> 01:09:43.780
and that income distribution is sort of skewed in one direction,

787
01:09:43.780 --> 01:09:48.100
a lot of people have plenty of it, and a few people have a lot of it,

788
01:09:48.100 --> 01:09:51.220
and a lot of people don't have that much of it, all right?

789
01:09:51.220 --> 01:09:53.340
They're going to want certain things,

790
01:09:53.340 --> 01:09:58.340
and advertising and industry is going to respond to those wants.

791
01:10:00.820 --> 01:10:03.300
I guess what I'm saying is that their wants

792
01:10:03.300 --> 01:10:05.900
are shaping the preferences of people

793
01:10:05.900 --> 01:10:09.260
who can't really make wants known in the marketplace

794
01:10:09.260 --> 01:10:11.460
because they don't have the income.

795
01:10:11.460 --> 01:10:14.260
You know, it's not willingness to pay, it's ability to pay.

796
01:10:17.260 --> 01:10:19.020
Okay, that's a very interesting point.

797
01:10:19.020 --> 01:10:20.940
Let me answer it in two ways.

798
01:10:20.940 --> 01:10:26.100
One with regard to zoning, and the other just in general.

799
01:10:26.100 --> 01:10:31.820
Now, take zoning and the poor.

800
01:10:31.820 --> 01:10:33.980
The analysis of the various writings,

801
01:10:33.980 --> 01:10:35.500
I think I mentioned this in my talk,

802
01:10:35.500 --> 01:10:37.380
shows that the poorer the neighborhood,

803
01:10:37.380 --> 01:10:39.740
the more likely they are to vote against zoning.

804
01:10:39.740 --> 01:10:42.100
Why is that?

805
01:10:42.100 --> 01:10:45.620
The reason for that is that when you have public zoning,

806
01:10:45.620 --> 01:10:48.060
and they have a zoning law that requires, say,

807
01:10:48.060 --> 01:10:51.500
that you put two acres in each house.

808
01:10:51.500 --> 01:10:54.300
Well, we know who gets frozen out of that sort of a scheme.

809
01:10:54.300 --> 01:10:57.100
We know that it's impossible for a poor person,

810
01:10:57.100 --> 01:10:59.300
let alone even a middle class person,

811
01:10:59.300 --> 01:11:02.820
be able to afford two whole acres for his home,

812
01:11:02.820 --> 01:11:07.180
whereas the very rich can't afford it.

813
01:11:07.180 --> 01:11:11.660
So we see that zoning, paradoxically, government zoning,

814
01:11:11.660 --> 01:11:14.540
is hurting the poor, not helping.

815
01:11:14.540 --> 01:11:16.340
And let me mention another point to you.

816
01:11:16.340 --> 01:11:20.600
You see, you might think, well, the richer are rich than the poor.

817
01:11:20.600 --> 01:11:21.820
That's why they're rich.

818
01:11:21.820 --> 01:11:23.420
OK, we agree.

819
01:11:23.420 --> 01:11:25.180
That's a basic postulate.

820
01:11:25.180 --> 01:11:29.020
But from that, you then go on, I think, to a wrong deduction.

821
01:11:29.020 --> 01:11:30.740
And you say, therefore, they can always

822
01:11:30.740 --> 01:11:32.740
outbid the poor for anything.

823
01:11:32.740 --> 01:11:35.780
And that's where you're wrong, I think.

824
01:11:35.780 --> 01:11:39.460
See, the way the poor can outbid the rich for land

825
01:11:39.460 --> 01:11:41.100
is by using it more intensively.

826
01:11:41.100 --> 01:11:42.700
It's true that if a poor person had

827
01:11:42.700 --> 01:11:48.700
If you had to outbid a rich person for a house with two acres on it, he'd never make it, and that would be the end of it.

828
01:11:48.700 --> 01:11:58.700
There would be no contest. However, if the poor person can gather other poor people with him, or through the efforts of an entrepreneur do this,

829
01:11:58.700 --> 01:12:07.700
and instead of putting one house on two acres, put 300 units on two acres in a high-rise or in some other way, more intensive use of the land,

830
01:12:07.700 --> 01:12:14.700
Then, 300 poor people might well easily be able to outbid one rich person for that particular blend.

831
01:12:14.700 --> 01:12:18.700
I mean, you have to realize that the poor can outbid the rich for some things,

832
01:12:18.700 --> 01:12:24.700
otherwise the poor wouldn't have any clothes, wouldn't have any cars, wouldn't have any TV sets, wouldn't have any food.

833
01:12:24.700 --> 01:12:30.700
I mean, they obviously do have these things, so we have to account as social scientists for the way that they get them.

834
01:12:30.700 --> 01:12:36.700
And the way that they get these things is by ganging up with sheer weight of numbers and outbidding richer people.

835
01:12:36.700 --> 01:12:38.700
As in this case of zoning.

836
01:12:38.700 --> 01:12:43.700
I mean, if we don't have zoning, as the poor people don't want us to have it,

837
01:12:43.700 --> 01:12:48.700
then people are free to put up two or three hundred units in an acre or two acres or what have you,

838
01:12:48.700 --> 01:12:50.700
and then the poor can afford it.

839
01:12:50.700 --> 01:12:57.700
If we have zoning, we get exclusionary zoning where the law insists that you put an acre or two up of the house and the poor are frozen.

840
01:12:57.700 --> 01:13:00.700
So that sort of goes against what you're saying.

841
01:13:00.700 --> 01:13:02.700
Another point I want to make.

842
01:13:02.700 --> 01:13:15.700
This is a constant refrain. Whenever I or my colleagues have advocated privatizing something, the first question that comes up is how would the poor afford it?

843
01:13:15.700 --> 01:13:24.700
I venture to say that had the government been in the business of making sneakers for the last hundred years, since the invention of sneakers,

844
01:13:24.700 --> 01:13:30.140
and someone crazed maniacs such as I came and said well you know really the

845
01:13:30.140 --> 01:13:33.660
government doesn't have to make sneakers it's not really a crucial national

846
01:13:33.660 --> 01:13:37.820
interest the government would be better off paying more attention to crime and

847
01:13:37.820 --> 01:13:42.460
judicial things than the sneakers people would start saying well how could

848
01:13:42.460 --> 01:13:45.980
private enterprise do it I mean who would decide how many holes to put in the

849
01:13:45.980 --> 01:13:50.020
sneakers you know who would decide on the length of the laces or the canvas or

850
01:13:50.020 --> 01:13:54.540
of the Rubber, and then the final death blow to this idea.

851
01:13:54.540 --> 01:13:57.460
How would the poor afford sneakers?

852
01:13:57.460 --> 01:13:59.100
I mean, you could use this argument

853
01:13:59.100 --> 01:14:01.180
against any privatization of anything.

854
01:14:01.180 --> 01:14:04.340
And if you take this argument to its logical conclusion,

855
01:14:04.340 --> 01:14:07.500
you would advocate nationalizing everything,

856
01:14:07.500 --> 01:14:09.700
as they do in certain other countries where there's

857
01:14:09.700 --> 01:14:12.700
a lot less freedom and where the poor have a lot less.

858
01:14:12.700 --> 01:14:16.020
So I don't think that you're making a very good case.

859
01:14:16.020 --> 01:14:17.740
I don't mean you personally, but I

860
01:14:17.740 --> 01:14:26.740
I don't think a good case can be made for saying that an argument against having private parks is that the poor couldn't afford to go to parks.

861
01:14:27.740 --> 01:14:34.740
I guess just, if you could give me an example, you said that 300 poor people got together and outbid a rich person for a piece of land.

862
01:14:34.740 --> 01:14:38.740
You used the word an entrepreneur to get them together.

863
01:14:38.740 --> 01:14:45.740
And I guess my question would be, where are you going to get these entrepreneurs, because where's the money going to come from for their profit?

864
01:14:45.740 --> 01:14:53.740
Oh, well, 300 poor or lower middle class people have got a lot of money.

865
01:14:53.740 --> 01:14:59.740
I mean, even the Harlem numbers rackets where they bet a penny on a number is a very, very lucrative thing.

866
01:14:59.740 --> 01:15:07.740
And by the way, the private betting pays off double what the public, what you might call it,

867
01:15:07.740 --> 01:15:13.740
off-track betting pays on these numbers and gambling. So even in that case, they do twice as well.

868
01:15:13.740 --> 01:15:15.940
Now, I'm talking about the mafia and the underground.

869
01:15:15.940 --> 01:15:19.380
So I assume that there's just go to any neighborhood where

870
01:15:19.380 --> 01:15:23.180
there are high rises and where there's an intensive use of land.

871
01:15:23.180 --> 01:15:25.100
And you'll see an example of the poor

872
01:15:25.100 --> 01:15:28.540
having outbid the rich for that particular land that they have.

873
01:15:28.540 --> 01:15:30.060
If we had zoning there, they would have

874
01:15:30.060 --> 01:15:31.940
had a much more difficult time.

875
01:15:31.940 --> 01:15:34.700
So contrary to the expectation, I

876
01:15:34.700 --> 01:15:39.420
don't think it can be maintained that these laws and regulations

877
01:15:39.420 --> 01:15:40.540
are in the benefit of the poor.

878
01:15:40.540 --> 01:15:42.340
I think just the very opposite is true.

879
01:15:43.740 --> 01:15:51.740
Dr. Block, perhaps I ought to interject at this point, since this class was scheduled to finish about 6.15,

880
01:15:51.740 --> 01:15:54.740
I imagine there are people who want to get rides.

881
01:15:54.740 --> 01:16:00.740
Perhaps I'll take the prerogative of giving you the last question on a subject,

882
01:16:00.740 --> 01:16:05.740
and it's one that follows me, but I'm sure you have a ready answer to it.

883
01:16:05.740 --> 01:16:07.740
I'll pick up one.

884
01:16:07.740 --> 01:16:11.740
Economists often tell us, when they talk about willingness to pay,

885
01:16:11.740 --> 01:16:21.740
that willing to pay is also a factor of the distribution of wealth in the first instance.

886
01:16:21.740 --> 01:16:31.740
So my question to you is, if that is in fact the case, is it possible to get back to a market economy

887
01:16:31.740 --> 01:16:37.740
unless we redistribute wealth on an equitable basis as a starting point?

888
01:16:37.740 --> 01:16:43.740
Okay, if you'll permit me, I forgot to answer one question, namely the cartel of employers.

889
01:16:43.740 --> 01:16:46.740
And I'll have nightmares tonight if I don't answer that.

890
01:16:46.740 --> 01:16:49.740
I'll have fears that, you know, it will be thought that I couldn't.

891
01:16:49.740 --> 01:16:54.740
Let me just answer that one, and then I'll talk about redistributing wealth.

892
01:16:54.740 --> 01:16:58.740
I'll do it as quickly as I can, or am I going to lose everybody?

893
01:16:58.740 --> 01:16:59.740
Well...

894
01:16:59.740 --> 01:17:03.740
Perhaps those people who do have arrangements for lives will air my stuff out.

895
01:17:03.740 --> 01:17:10.740
Yeah, and the others can gather closer to me, but not too close and we can talk about it.

896
01:17:33.740 --> 01:17:41.540
Okay, well, with regard to the cartel, first, of employers, let's suppose that the employers

897
01:17:41.540 --> 01:17:47.860
band together and let's say the guy is worth $2 an hour and the wage has already been bid

898
01:17:47.860 --> 01:17:53.940
up from 5 cents and now it's 50 cents and a group of businessmen gets together, a chamber

899
01:17:53.940 --> 01:17:58.020
of commerce or what have you, and they say, hey look, you know, this can't last, this

900
01:17:58.020 --> 01:18:02.460
is horrible, this is obscene, look at this, the workers are making 50 cents an hour, where

901
01:18:02.460 --> 01:18:08.140
Where will it all end? It's a horrible situation. We've got to band together a promise that

902
01:18:08.140 --> 01:18:14.860
will never pay a person more than $0.50 an hour. I think that first, if you read the

903
01:18:14.860 --> 01:18:19.940
legal history of cartels, you'll find one interesting point, that no cartel unprotected

904
01:18:19.940 --> 01:18:24.620
by the government has ever lasted more than a few weeks. I mean literally weeks, not even

905
01:18:24.620 --> 01:18:31.620
months. Just look at the history of cartels in any industry. Now let me explain why cartels

906
01:18:31.620 --> 01:18:37.620
The reason they're inherently unstable is they create a target for other people to aim at.

907
01:18:37.620 --> 01:18:48.620
Because at 50 cents wages, and at $2 an hour productivity, this cartel is still making a killing of $1.50 an hour, triple the actual wage.

908
01:18:48.620 --> 01:18:54.620
The breaking of the cartel will come from two sources, from within and from without.

909
01:18:54.620 --> 01:19:05.620
Now, from within, each guy, well let's suppose that we people in the room, there are about 20 of us, are all the cartel members, okay?

910
01:19:05.620 --> 01:19:18.620
And let's say we each have 100 workers at 50 cents. What are you going to think? You've got 50 workers, are you happy paying 50 workers 50 cents and making $2 an hour off of them?

911
01:19:18.620 --> 01:19:22.620
You've got 100 workers. Are you happy paying them 50 cents each?

912
01:19:22.620 --> 01:19:26.620
You're not. You'd like to have 101 workers, wouldn't you?

913
01:19:26.620 --> 01:19:30.620
I mean, again, you're a fat capitalist pig now.

914
01:19:30.620 --> 01:19:34.620
You're not a nice, normal person, right?

915
01:19:34.620 --> 01:19:38.620
You want to make more money. And the only way to make more money...

916
01:19:38.620 --> 01:19:42.620
I mean, each worker on the hoof is worth $1.50 an hour.

917
01:19:42.620 --> 01:19:46.620
The thing to do is to get more of them. And one way to get more of them is to break your cartel

918
01:19:46.620 --> 01:19:51.620
Cartel and say, yes, yes, and I'm an upright upholder of the cartel, and then you go to

919
01:19:51.620 --> 01:19:56.340
the worker on this line and say, psst, I'll pay you 51 cents, come work for me, but don't

920
01:19:56.340 --> 01:19:58.460
tell anyone else.

921
01:19:58.460 --> 01:20:03.380
That's one way that cartels break up from internal dissension.

922
01:20:03.380 --> 01:20:09.180
There's one case that this argument doesn't apply and that's the oil cartel, but that's

923
01:20:09.180 --> 01:20:14.380
not a cartel, the OPEC, but that's not a cartel of private interest, that's a cartel of government

924
01:20:14.380 --> 01:20:16.980
and it works very differently.

925
01:20:16.980 --> 01:20:23.060
So one source of the breakup of the cartel is internal dissension, backslashing, etc.

926
01:20:23.060 --> 01:20:27.940
The other source of the cartel is are there businessmen in the next town or in the next

927
01:20:27.940 --> 01:20:28.940
country?

928
01:20:28.940 --> 01:20:32.740
And remember, we have evidence that people will go a country away, they'll go thousands

929
01:20:32.740 --> 01:20:36.260
of miles away to get these workers.

930
01:20:36.260 --> 01:20:40.220
That's why the people in the Fraser Valley and in the California valleys are going to

931
01:20:40.220 --> 01:20:43.580
Mexico to get them.

932
01:20:43.580 --> 01:20:47.080
So that's the second source of a break up of the cartel.

933
01:20:47.080 --> 01:20:52.820
Thirdly, there are always people sort of on the verge of being employees and employers.

934
01:20:52.820 --> 01:20:54.020
They're in the middle ground.

935
01:20:54.020 --> 01:20:55.540
They could swing either way.

936
01:20:55.540 --> 01:20:59.060
They're say self-employed or they've got one worker or something.

937
01:20:59.060 --> 01:21:04.100
They too will now, if they were on the margin between employee and employer, they'll switch

938
01:21:04.100 --> 01:21:07.500
into employer and try to get these workers away.

939
01:21:07.500 --> 01:21:10.640
You see.

940
01:21:10.640 --> 01:21:16.560
So that's why cartels are inherently unstable and will break up their own way.

941
01:21:16.560 --> 01:21:30.320
Now with regard to redistributing income, I think that there's a book by Robert Nozick,

942
01:21:30.320 --> 01:21:55.320
What Nozick says, and I agree with him, is that redistributing money is basically incompatible with freedom, and this is how he arrives at that.

943
01:21:55.320 --> 01:22:00.600
Suppose we have any income distribution that you want, initially, okay?

944
01:22:00.600 --> 01:22:03.160
First of all, there are problems even with income distribution,

945
01:22:03.160 --> 01:22:07.320
because why have equal income distribution?

946
01:22:07.320 --> 01:22:09.320
I mean, this guy is much handsomer than I am,

947
01:22:09.320 --> 01:22:12.120
he's got three times as much hair as I do, is that fair?

948
01:22:12.120 --> 01:22:14.040
Hey, I'm in law, huh? I'm in law too.

949
01:22:14.040 --> 01:22:19.480
And he's in law too, I mean, you have to, you know, kick me when I'm down and all.

950
01:22:19.480 --> 01:22:22.280
Look at that, he's a marvelous specimen of the human race,

951
01:22:22.280 --> 01:22:24.360
and I'm sort of a wretched little sniveling person.

952
01:22:25.320 --> 01:22:32.320
I'm not talking about the end product, though. I'm talking about the basis from which you start your system towards.

953
01:22:55.320 --> 01:23:00.260
My first attempt to show the difficulties of it is that it's all too easy to think in terms

954
01:23:00.260 --> 01:23:07.280
of money income, just equalizing money income, or money wealth.

955
01:23:07.280 --> 01:23:08.280
And there are problems.

956
01:23:08.280 --> 01:23:13.160
I mean, there are people that are handicapped, blind, lame, best, what have you.

957
01:23:13.160 --> 01:23:14.480
And these are serious problems.

958
01:23:14.480 --> 01:23:16.680
Shouldn't they have more?

959
01:23:16.680 --> 01:23:20.800
Then there are other people that are of naturally happy dispositions.

960
01:23:20.800 --> 01:23:25.800
And they have less, to compensate the sourpusses for their miserable situation.

961
01:23:25.800 --> 01:23:28.800
Only the potential of those things are already worked into your market system.

962
01:23:28.800 --> 01:23:30.800
Well, those things aren't worked in any market system.

963
01:23:30.800 --> 01:23:32.800
Then why take them as a basis for distribution?

964
01:23:32.800 --> 01:23:37.800
Well, because we have in our minds a yearning for equality, or at least some of us do.

965
01:23:37.800 --> 01:23:48.800
Well, we're only talking about economic efficiency and achieving it, and the effect that unequal distribution as a starting point disturbs the achievement at the end point.

966
01:23:48.800 --> 01:23:56.800
I don't see that at all. I mean, it seems to me that economic efficiency has got nothing to do with the distribution.

967
01:23:56.800 --> 01:24:01.800
Suppose one person had all the money and everyone else starved to death.

968
01:24:01.800 --> 01:24:07.800
This would be neither more nor less economically efficient than any other income distribution.

969
01:24:07.800 --> 01:24:14.800
I think it's sort of a category mistake. I mean, you've got efficiency on the one hand and you've got income distribution on the other.

970
01:24:14.800 --> 01:24:20.800
But aren't economists these days saying that you can't isolate the two in the way that you want to do?

971
01:24:20.800 --> 01:24:24.800
And that once you, when you're trying to determine somebody's willingness to pay,

972
01:24:24.800 --> 01:24:34.800
his initial distribution of wealth is a factor that he takes into account when he decides on his willingness to pay.

973
01:24:34.800 --> 01:24:40.800
I'm afraid we're all going to get cross purposes. I really don't understand the point.

974
01:24:40.800 --> 01:24:49.800
You want to take all non-efficiency arguments and put them off to one side.

975
01:24:49.800 --> 01:24:57.800
Well, not put them off to one side and not discuss them. I want to distinguish them from efficiency arguments and I want to discuss moral arguments as well.

976
01:24:57.800 --> 01:25:04.800
Namely, distributional things apart from efficiency. And that's what I was trying to do when you said I was off the topic.

977
01:25:04.800 --> 01:25:12.800
What I'm trying to suggest, and again, I'm not an economist, so you can press me if I'm wrong,

978
01:25:12.800 --> 01:25:22.800
my limited reading on the subject seems to suggest that your distribution of wealth affects your willingness to pay,

979
01:25:22.800 --> 01:25:26.800
which affects the ultimate allocation of resources,

980
01:25:26.800 --> 01:25:42.800
So that the traditional dichotomy between achieving an optimum allocation, i.e. efficiency, and other things that economists call distribution, breaks down at some point, and that is one point at which it does.

981
01:25:42.800 --> 01:25:49.800
Could you be referring to the Keynesian, what do they call it, marginal propensity to consume, or something like that?

982
01:25:49.800 --> 01:25:52.800
Well, I'm not so scared enough to know what that is.

983
01:25:52.800 --> 01:26:06.800
This is some old nonsense that Keynes came up with that the idea was that what you do is you redistribute money from, actually from poor to rich would work, no, from rich to poor.

984
01:26:06.800 --> 01:26:13.800
And the view is that the poor would spend a higher proportion of their money than the rich, the rich would save it.

985
01:26:13.800 --> 01:26:21.800
And he had this view also which is completely crazy that saving is evil and somehow consumption is the only thing that makes the economy go.

986
01:26:21.800 --> 01:26:36.800
So if you take $100 from a rich person who would only have spent $50 of it, and you give it to a poor person who spends $100 of it, you double the aggregate demand and this is the way to spend your way out of a recession or a depression.

987
01:26:36.800 --> 01:26:48.800
Now this I could see as a way of mixing redistribution with economic efficiency. I mean if it were correct it would certainly be relevant.

988
01:26:48.800 --> 01:27:05.800
I think it's all incorrect. I don't think that what creates a viable society or a rich society is spending. I think just the opposite. It's saving and investing in capital, which keeps us different from the beasts of the field.

989
01:27:05.800 --> 01:27:14.800
So I would say Keynes was just about dead wrong that on his view what you ought to do if you're going to do any income redistribution is to redistribute it from the poor to the rich.

990
01:27:14.800 --> 01:27:21.600
because they'll save more. But this is a very different question. You see, what I

991
01:27:21.600 --> 01:27:24.840
was trying to answer was not the question of the interlinkage between

992
01:27:24.840 --> 01:27:30.720
efficiency and income distribution, but to just talk about the problems of

993
01:27:30.720 --> 01:27:35.600
redistributing income. And if I could return to that just for a second, one of

994
01:27:35.600 --> 01:27:39.100
the problems is that if you just talk about redistributing income and you

995
01:27:39.100 --> 01:27:43.840
leave out all these personal things, you get into problems because it's sort of

996
01:27:43.840 --> 01:27:53.840
The same motive that wants you to redistribute money from rich to poor will start warning you to redistribute handsomeness from rich to poor.

997
01:27:53.840 --> 01:28:02.840
I mean, suppose that there was a machine, and I'm giving you a cross section of this machine, and here's a little switch.

998
01:28:02.840 --> 01:28:05.840
And you put, what's your name in it? What's your name?

999
01:28:05.840 --> 01:28:06.840
Me?

1000
01:28:06.840 --> 01:28:09.840
No, this handsome fellow here. What's your name?

1001
01:28:09.840 --> 01:28:10.840
Oh, Rob.

1002
01:28:10.840 --> 01:28:25.840
You put Rob and Walter, I'm Walter, he's Rob, you put us both in this machine, and you press the button, and you transfer 10 units of handsomeness from him to me, who need it more.

1003
01:28:25.840 --> 01:28:33.840
Or 10 units of intelligence, or 10 units of happiness, or whatever of these kinds of things.

1004
01:28:33.840 --> 01:28:38.840
You see, what I'm trying to do is to indicate what the slippery slope is of income redistribution.

1005
01:28:38.840 --> 01:28:47.840
If you're in favor of income redistribution, not from the victim, not from the thief to the victim,

1006
01:28:47.840 --> 01:28:51.840
but just from one person to the other on the grounds that one is richer than the other,

1007
01:28:51.840 --> 01:28:58.840
that motivation will lead you to transfer not only wealth and income, but also all these intangibles,

1008
01:28:58.840 --> 01:29:02.840
intelligence, happiness, musical ability, what have you.

1009
01:29:02.840 --> 01:29:14.360
What I'm saying is that the motivation behind those people that want to redistribute money

1010
01:29:14.360 --> 01:29:21.320
from rich to poor seems to me that the logical conclusion of that is to not just redistribute

1011
01:29:21.320 --> 01:29:24.080
money but to redistribute other things.

1012
01:29:24.080 --> 01:29:25.080
Why is it so insolent?

1013
01:29:25.080 --> 01:29:26.080
Because I think it's not logical.

1014
01:29:26.080 --> 01:29:27.080
I think that's illogical, bringing those extraneous things which are irrelevant.

1015
01:29:27.080 --> 01:29:28.080
But why?

1016
01:29:28.080 --> 01:29:44.080
My answer to the question why is because it seems to me that the people that want to redistribute money from rich to poor want to help the poor.

1017
01:29:44.080 --> 01:29:57.080
Well, people can be poor in lots of ways beside lack of money. They can be poor in intelligence, they can be poor in happiness, they can be poor in musical ability, and for many people these poverty things are much more important than mere poverty and money.

1018
01:29:57.080 --> 01:30:02.080
But those poverty things do not affect their ability to pay in the marketplace, do they?

1019
01:30:02.080 --> 01:30:03.080
No.

1020
01:30:03.080 --> 01:30:04.080
Well, then how can you...

1021
01:30:04.080 --> 01:30:07.080
Oh, well, you're getting back to his point of some relation.

1022
01:30:07.080 --> 01:30:11.080
Just to my satisfaction, denying that there was any, and I'm trying to talk just about

1023
01:30:11.080 --> 01:30:13.080
the moral issue itself.

1024
01:30:13.080 --> 01:30:19.080
But I agree with you, if I were sticking to his original point, what I'm saying is irrelevant.

1025
01:30:19.080 --> 01:30:23.080
But I thought I answered that by saying that there was no connection.

1026
01:30:23.080 --> 01:30:29.080
Probably the best strategy at this point is to accept your explanation of my question.

1027
01:30:29.080 --> 01:30:33.080
I think we've run well over our time.

1028
01:30:33.080 --> 01:30:40.080
And I would like to thank you for coming today, even though our audience has anticipated

1029
01:30:40.080 --> 01:30:47.080
one of the objectives of sessions like this is to stir up some interest in both our banking

1030
01:30:47.080 --> 01:30:51.080
and I think from that account this is going to be a success.