WEBVTT NOTE Consumer Protection: An Interview with Robert Murphy 1 00:00:00.000 --> 00:00:16.000 For the purposes of the Mises Home Study course, today we'll be discussing consumer protection with Robert Murphy, professor at Hillsdale College, who's going to be discussing economics, politics, and historical aspects of consumer protection. 2 00:00:16.000 --> 00:00:20.000 And I'm Jeff Tucker, general editor at the Mises Institute. 3 00:00:20.000 --> 00:00:36.000 I'm going to start by asking Professor Murphy what – is there a generally accepted definition or understanding of what constitutes consumer protection so that when we talk about consumer protection, what are we talking about? 4 00:00:36.000 --> 00:01:00.000 I'm not sure that I would say there's a generally accepted definition that you would see in a textbook per se, but the sort of thing that we're going to be talking about today is measures that the government takes, if it's in terms of government efforts at consumer protection, to ensure the safety or quality of goods and services that consumers get. 5 00:01:00.000 --> 00:01:30.000 and so just you need to distinguish it so it's not the same thing for example as workplace safety all right so those are different fields and we have in mind things so when you go to the store and buy a product that you have some degree of assurance that it's not poisonous or that if it is it's clearly labeled so examples of things would be government measures that require firms to label their products and that if you buy something you go to a restaurant and you get food poisoning that the government has 6 00:01:30.000 --> 00:01:53.000 Laws in place, so that you can go sue the relevant firm, because the idea is the standard idea that, oh, if it weren't for these measures, then the free market would just have businesses out there, you'd have adulterated products, and people would be dying in the streets after they come out of the restaurant, and there'd be no recourse, were it not for these consumer protection measures. 7 00:01:53.000 --> 00:01:57.000 So we are talking about the retail sector. 8 00:01:57.000 --> 00:02:02.000 Yeah, I would think so. Well, retail, yeah, that's what I have in mind by that. 9 00:02:02.000 --> 00:02:03.000 Wow. 10 00:02:03.000 --> 00:02:14.000 Yes. There's several aspects to this, and so let me just start out initially just to 11 00:02:14.000 --> 00:02:20.280 give some idea of what the free marketeer could say in terms of mechanisms that the 12 00:02:20.280 --> 00:02:26.600 free market has to ensure consumer protection. And so here, of course, we mean in the generic 13 00:02:26.600 --> 00:02:56.600 in the sense of things provided by the government to show that the government doesn't need to provide so-called consumer protection measures and I'll try to rank them in order of things that a greater number of people would agree with and then as I get further in the list they'll get things that are perhaps more subtle but that I think if we think about them that really the free market could provide these things so first and foremost that I think everyone can understand is if the primary mechanism is that if you 14 00:03:26.600 --> 00:03:31.560 a value jet crash in the Everglades and so there are all these calls for you 15 00:03:31.560 --> 00:03:35.960 know we need to beef up funding for the FAA and look at this is what the what the 16 00:03:35.960 --> 00:03:39.840 free market gets you and I remember it was in response to my letter to the 17 00:03:39.840 --> 00:03:44.520 editor which they actually allowed me to write a bigger piece was in response to 18 00:03:44.520 --> 00:03:49.520 there were claims people saying op-ed writers things like you know libertarians 19 00:03:49.520 --> 00:03:53.280 clamor for the free market but after the this crash in the Everglades you know 20 00:03:53.280 --> 00:04:23.280 and the rest of us are want the government inspectors to work overtime and so that's the the popular idea here that whenever anything bad happens that it just shows look at that's what the market gives you and anything good is of course because the government regulations that are in place but anyway just to I'll come back to that later but to just finish out the train of thought so the in response to that particular letter that I wrote or that piece that I wrote from my paper someone wrote a letter to the editor in response to that and 21 00:04:23.280 --> 00:04:30.280 in one sense, Mr. Murphy is right that if Value Jet keeps killing its customers, it's eventually going to go out of business. 22 00:04:30.280 --> 00:04:43.280 And that was supposed to be the ultimate put down, but that's, I think, a very valid argument that, of course, businesses aren't going to continually sell products that are going to endanger the lives of their customers. 23 00:04:43.280 --> 00:04:49.280 And what goes along with that, the way businesses try to capture the benefits of that is, of course, name brands. 24 00:04:49.280 --> 00:05:19.280 And so, it's true that fly-by-night organizations or companies, it's possible you could come up with scenarios where if there's no other ramifications, they might make more money by selling some type of product that, you know, promises to cure cancer, but really it's snake oil, and that, you know, oh, the free market alone, what sort of incentives are in place to punish that sort of activity, and perhaps so, and later on we'll talk about more subtle mechanisms that might address that sort of concern. But of course, clearly these huge corporations 25 00:05:19.280 --> 00:05:39.280 And so that's in the same thing with child safety caps and things like that that people think, oh, if it weren't for the government, you know, all these toddlers would be choking to death because there'd be no child safety caps. And again, that's, that's not necessarily true to the extent that that stuff really is justified and is good for consumers. 26 00:05:39.280 --> 00:05:42.800 And all these toddlers would be choking to death because there would be no child safety 27 00:05:42.800 --> 00:05:43.800 caps. 28 00:05:43.800 --> 00:05:46.040 And again, that's not necessarily true. 29 00:05:46.040 --> 00:05:50.760 To the extent that that stuff really is justified and is good for consumers, why would we think 30 00:05:50.760 --> 00:05:52.280 that companies would overlook that? 31 00:05:52.280 --> 00:05:56.440 And again, particularly huge companies with name brand recognition. 32 00:05:56.440 --> 00:06:01.840 And there are examples where companies do have massive recalls of products that have 33 00:06:01.840 --> 00:06:06.000 been found to be unsafe, where they take them off the market and try to contact people who 34 00:06:06.000 --> 00:06:08.480 have registered and get them back. 35 00:06:08.480 --> 00:06:24.480 And of course, the critics are going to say, oh, that's only because of the government measures, but again, to the extent that you want to have continuing business with particular customers, I think that those sorts of things are in place, and that would happen even if it weren't out of fear of government-sponsored lawsuits. 36 00:06:24.480 --> 00:06:31.480 I should just mention here, in the few cases I know about, it's usually the industry that alerts the government, not vice versa. 37 00:06:31.480 --> 00:07:01.480 Yeah, so, I mean, to people like you and me, where we have a general, you know, we're friendly towards voluntary activities, that just seems like, yeah, that's the free market in action, but of course, the critics are going to say, oh, it's only because the government's got that club, and that if they didn't do that, but, so as I say, as we move on, we'll try to see why I think our response to that is the right one, our interpretation of how to look at those. The other, another major category, I think, is the function of intermediaries, or what's commonly called middlemen, and this is something, too, it's just 38 00:07:31.480 --> 00:07:35.120 If you buy pork chops from Walmart and you go home and your family's thrown up all night, 39 00:07:35.120 --> 00:07:36.760 you go and you complain to Walmart. 40 00:07:36.760 --> 00:07:42.240 And whether or not there's a legal right that they have or that you have a legal action 41 00:07:42.240 --> 00:07:45.680 against them, certainly to keep you happy, they're going to want to minimize that sort 42 00:07:45.680 --> 00:07:46.800 of activity. 43 00:07:46.800 --> 00:07:53.600 And so when they go out and buy meat from the butchers and whoever the meatpacking plants, 44 00:07:53.600 --> 00:07:58.360 they're going to have their own experts analyzing it and they're going to, you know, send inspectors 45 00:07:58.360 --> 00:08:04.000 to these places and say are you using processes that would ensure that your 46 00:08:04.000 --> 00:08:08.440 product is a good one. Alright, so it's this idea that that some people have, 47 00:08:08.440 --> 00:08:11.120 depending on how naive they are, that it's really the consumers against 48 00:08:11.120 --> 00:08:15.760 everybody else, is of course, well in that case Walmart in a sense is the one 49 00:08:15.760 --> 00:08:18.760 buying it. And this gets back to what you were talking about in the beginning, that 50 00:08:18.760 --> 00:08:23.560 yes, consumer protection I think in the popular usage refers just to the 51 00:08:23.560 --> 00:08:27.560 retailer, but of course there are huge businesses that are in the chain of 52 00:08:27.560 --> 00:08:57.560 of Purchasing. And it's in their interest too to make sure the product is safe. And just some other examples, a legal firm, you know, a big law firm. And of course, that's also not something that the average person thinks is on their side. But you're not, the average person, of course, doesn't need to be an expert in law to hire an attorney. And again, what one of the major mechanisms for ensuring that sort of name brand recognition is you go to a big law firm, and you don't need to know the particular attorney that you get assigned, what was his track record, 53 00:08:57.560 --> 00:09:27.560 Let me go see where he got his degree from. How'd he do on the bar? You don't need to do that. All you need to do is if you have the money, and it's that important to you, that you go to a reputable law firm. And then they're the ones who, when they hire somebody, go and say, okay, how did this guy do on the bar exam, and so forth. And so they're the intermediary where their experts ensure that the services you're getting as the final customer are more likely than not to be good ones. And of course, if they do have somebody who's a drunk, he shows up to court and is terrible, and, you know, his clients are awful, 54 00:09:57.560 --> 00:10:27.560 and the biologist. That would be crazy. And so the naive person would think, oh, so we need to have government involvement in picking curricula and setting standards for education because otherwise, you know, these schools would be hoodwinking parents and how could they possibly know? But again, parents are competent enough to know, to do enough research to say, well, this school's graduates, they get placed much more than this other schools and so there must be something to it. And again, it's there. Ultimately, it's the businesses that hire graduates from 55 00:10:27.560 --> 00:10:32.600 from that school. They know what they need to have for success in the marketplace. And 56 00:10:32.600 --> 00:10:41.000 so it's again just this intermediary function that ultimately, so when I want to apply to 57 00:10:41.000 --> 00:10:45.160 teach economics somewhere, it's not really the parents of the students that I'm teaching 58 00:10:45.160 --> 00:10:49.040 classes to who are determining whether I'm good or not. It's the peers and the other 59 00:10:49.040 --> 00:10:53.880 people in the economics department that interview me and I give a presentation and they see 60 00:10:53.880 --> 00:10:55.880 The Theory of Money and Credit 61 00:11:53.880 --> 00:12:23.880 Well, probably no matter what the government or anyone else tries to do, you're going to be taken in if you're that naive and so they, again, that what would be required of someone in a free society is nothing more than for things where you're really not an expert and you personally can't distinguish frauds from legitimate experts, then get somebody else involved, go through an intermediary. And the last one that I hadn't even thought of until recently, there was an article in the Freeman and then actually on Mises.org I think, 62 00:12:23.880 --> 00:12:53.880 about credit cards and how in modern society, at least capitalist society, that when you buy something on a credit card, there's actually, in a sense, the whole credit card company is on your side, and that if there's a dispute, if you buy something over the internet and it doesn't get shipped to you, that you can complain to the credit card company, and often they will just remove those charges from you, and then they know, okay, we've gotten a lot of complaints about this particular website from our customers, so let's alert somebody else, or let's warn our customers, 63 00:12:53.880 --> 00:13:23.880 So, again, this is another example of intermediaries coming into play. Another aspect is trade associations. And here, the analysis is a bit tricky, because if we're talking about the completely free society, it's not clear whether these things would exist or what form they would take, things like guilds and trade unions, because of course they wouldn't be allowed to go on strike and form a picket line and prevent so-called scabs from coming in. 64 00:13:23.880 --> 00:13:53.880 The extent that there are voluntary associations of professionals, that those also would be a signaling mechanism and so, for example, doctors or other sorts of professionals could join this voluntary union and then advertise that to customers to say, oh, I'm a member of, you know, the excellent surgeons of Cincinnati Association and that those, so their record would speak for itself and so people would know it's true, they wouldn't know 65 00:13:53.880 --> 00:14:23.880 I've never heard a bad thing about anyone in that group and that if he does screw up, then that group is always quick to pay compensation and to keep their customers happy and they wouldn't let quacks into their midst because that wouldn't be good for them and so that's another mechanism by which experts could sort of coalesce and signal to the rest of society that we really know we're talking about as judged by our peers. Mises Institute adjunct scholar. 66 00:14:23.880 --> 00:14:53.880 And then the last one that I think most free marketeers would agree with, and then we'll get into the more esoteric mechanisms I think in a free society, but the second last one would be just these organizations that give independent ratings, so thus far I've mostly talked about why the people providing the goods or the ones who are somehow involved in the chain of delivery have incentives to provide quality for customers, but we've also got things like 67 00:14:53.880 --> 00:15:01.880 Consumer Reports magazines that provide supposedly objective ratings and I say supposedly because 68 00:15:01.880 --> 00:15:06.600 even there the critic depending on how hostile you are to a market setting you could say 69 00:15:06.600 --> 00:15:13.080 oh well the big businesses would just pay Consumer Reports to give biased reports on 70 00:15:13.080 --> 00:15:18.760 a particular product and yeah in principle that could happen but again once that sort 71 00:15:18.760 --> 00:15:23.200 of thing gets out then Consumer Reports loses its whole function and so it's really not 72 00:15:23.200 --> 00:15:29.600 in its interest. And so if you do have a huge magazine like that or what other the 73 00:15:29.600 --> 00:15:35.000 rating is, what is it the Underwriters Association if you've bought electrical 74 00:15:35.000 --> 00:15:41.040 products and they have on the back the little UA and that's to signify that this 75 00:15:41.040 --> 00:15:45.040 has been inspected by this association and so on and that it meets our standards 76 00:15:45.040 --> 00:15:50.400 of excellence. So in order to be to gain that sort of widespread trust you would 77 00:15:50.400 --> 00:15:54.440 have to have a record of objectivity and that's again something customers can go 78 00:15:54.440 --> 00:15:59.280 to and then another example with the internet it's it's even easier there's 79 00:15:59.280 --> 00:16:04.240 this site called ePinions that my wife goes to a lot when she wants to buy 80 00:16:04.240 --> 00:16:09.000 something before she buys something online and recently she she ran into this 81 00:16:09.000 --> 00:16:15.240 cooking club club scam where there was just a quickly boil down the story there 82 00:16:15.240 --> 00:16:20.980 There was this, it was $12 a year, and they would send you these recipes and things like 83 00:16:20.980 --> 00:16:26.040 that in the mail, and you would just try new products, so they would send you new products 84 00:16:26.040 --> 00:16:29.740 that they wanted to write up and use in their recipes, and so that was the point of you 85 00:16:29.740 --> 00:16:34.260 being a member, is you'd get this free stuff in the mail, and again, it was $12 a month, 86 00:16:34.260 --> 00:16:38.640 but for some reason, just before she sent in the money, she went to this ePinions and 87 00:16:38.640 --> 00:16:42.340 typed in the name of this club to search for it, and there was all this negative reaction 88 00:16:42.340 --> 00:16:44.340 The Theory of Money and Credit 89 00:17:12.340 --> 00:17:18.340 So at that point she did that. She sent the book back saying, I don't want this. Just cancel them and give me back my membership dues. 90 00:17:18.340 --> 00:17:22.340 And they sent her a check, apparently, as she tells the story, for whatever the balance was. 91 00:17:22.340 --> 00:17:32.340 But before she cashed it, she happened to read the fine print and there was an agreement that if you deposit this check in the bank, you are agreeing to a lifetime membership for $300 with our club. 92 00:17:32.340 --> 00:17:40.340 And so, I mean, it's just the nightmare that everyone's worried about. And I don't know if that is a legally enforceable thing that they had on there, but that's not the point. 93 00:17:40.340 --> 00:17:50.340 The point is my wife was smart enough to go to this ePinions and check it, so of course she didn't send them $12 in the first place and didn't get sucked into dealing with that disreputable company. 94 00:17:50.340 --> 00:17:58.340 And so that's just the point. And of course, yeah, there's use as possible, but there are these mechanisms in place to try to minimize it. 95 00:17:58.340 --> 00:18:04.340 So then the last issue, and as I said up till now, these are all things that I think any free marketeer would agree with. 96 00:18:04.340 --> 00:18:09.540 The last one now that has really only been stressed to my knowledge in the 97 00:18:09.540 --> 00:18:14.960 anarcho-capitalist literature, the literature focusing on the economics of 98 00:18:14.960 --> 00:18:22.860 a completely privatized society, is the role of insurance companies. And just to 99 00:18:22.860 --> 00:18:25.500 show that this isn't completely theoretical, just the other day there was 100 00:18:25.500 --> 00:18:29.980 an article in Slate, the online Slate magazine, talking about insurance in the 101 00:18:29.980 --> 00:18:34.540 the movie industry and how apparently the way it works is you're gonna make a 102 00:18:34.540 --> 00:18:39.420 major motion picture in order to get investors to go in and put the hundreds 103 00:18:39.420 --> 00:18:42.580 of millions of dollars in some cases into the film that they want to be 104 00:18:42.580 --> 00:18:45.820 assured well what happens if if it doesn't actually come to the big screen 105 00:18:45.820 --> 00:18:49.540 something could happen in the meantime and they want to have someone assurance 106 00:18:49.540 --> 00:18:55.340 and so there's a type of insurance that says if the film doesn't get 107 00:18:55.340 --> 00:18:59.580 completed and go to the theaters we pay off all the big investors and that's 108 00:18:59.580 --> 00:19:04.020 the that's what the policy is and it's the premiums are in the you know seven 109 00:19:04.020 --> 00:19:07.300 eight million dollars sometimes depending on how big the film is and one 110 00:19:07.300 --> 00:19:12.980 of the provisions for this type of insurance one of the the critical events 111 00:19:12.980 --> 00:19:18.960 that can trigger the insurance payoff is if there's a major actor or actress for 112 00:19:18.960 --> 00:19:21.460 some reason can't finish the film because that can just kill a project 113 00:19:21.460 --> 00:19:27.100 dead in the water and apparently Nicole Kidman in two of her projects I think it 114 00:19:27.100 --> 00:19:29.100 The Theory of Money and Credit 115 00:19:57.100 --> 00:20:27.100 According to this article, the insurance company was the one in there making sure that it was actually as safe as possible, given what they wanted the film to look like, and that they were doing things like, you know, putting on an extra harness, insisting, so it wasn't her agent that was in there working on her behalf, it wasn't Angelina Jolie herself saying, wait, this looks kind of dangerous, it was the insurance company, because they stood to lose tens of millions of dollars if she broke her leg, and they couldn't finish the film, and so, again, it's not altruism, it's just, of course you're going to do that, 116 00:20:27.100 --> 00:20:29.100 If there's millions of dollars on the line. 117 00:20:29.100 --> 00:20:30.100 So that's one instance. 118 00:20:30.100 --> 00:20:34.060 And then the last example I can give you 119 00:20:34.060 --> 00:20:35.660 is with the airline industry. 120 00:20:35.660 --> 00:20:37.460 And this was what I was alluding to earlier 121 00:20:37.460 --> 00:20:39.780 when I wrote that letter to the editor. 122 00:20:39.780 --> 00:20:43.260 You think, well, without the FAA, 123 00:20:43.260 --> 00:20:45.540 how could there possibly be safety in air travel? 124 00:20:45.540 --> 00:20:49.240 Because would consumers have to just monitor the plane crash 125 00:20:49.240 --> 00:20:51.100 record of every single airline? 126 00:20:51.100 --> 00:20:52.220 And that's crazy. 127 00:20:52.220 --> 00:20:54.980 These free market apostles are just naive and unrealistic 128 00:20:54.980 --> 00:20:56.380 if they think consumers are going 129 00:20:56.380 --> 00:20:59.940 to keep that kind of information and big business would cut corners, they wouldn't 130 00:20:59.940 --> 00:21:03.460 you know have an adequate maintenance record on their airlines and so forth 131 00:21:03.460 --> 00:21:07.500 and they wouldn't have pilot screening and then you would have drug addicts 132 00:21:07.500 --> 00:21:11.700 trying to fly planes around were it not for the FAA and every time there's a 133 00:21:11.700 --> 00:21:15.140 plane crash people point to that say see that's the free market and we need to 134 00:21:15.140 --> 00:21:19.460 have more government regulation so the so what would the completely free market 135 00:21:19.460 --> 00:21:24.500 do it in response to that and I think an insurance would be the major mechanism 136 00:21:24.500 --> 00:21:54.500 So your only responsibility as a potential flyer, it would not be to do, I mean you could if you wanted to, if that was your hobby you could go ahead and keep like Rain Man, if you remember that part of the movie where Dustin Hoffman doesn't want to fly because he knows the complete statistics of air crashes in the last 50 years, you could be like that if you wanted to and pick your carrier that way, but all you would really need to do was make sure that whenever you bought a ticket, part of what you were buying was a pledge that if the plane goes down and you're dead as a result, 137 00:21:54.500 --> 00:22:00.340 we will pay your estate whatever it is a million dollars compensation and so then just as with the 138 00:22:00.340 --> 00:22:04.900 the movie industry there would be these huge liabilities potential liabilities the insurers 139 00:22:04.900 --> 00:22:11.460 would then make sure before they underwrote an airline that it was a safe airline and they 140 00:22:11.460 --> 00:22:16.820 could even have surprise inspections you know they could say to the airline yeah we will guarantee 141 00:22:17.620 --> 00:22:22.420 your flights so that if there is a crash we'll be the ones paying your customers or their estates 142 00:22:22.420 --> 00:22:26.300 not you guys directly but in return for that of course you're gonna pay us 143 00:22:26.300 --> 00:22:30.140 premiums and also if you want to have lower premiums you have to agree that 144 00:22:30.140 --> 00:22:34.260 whenever we want we can send inspectors over there unannounced and show up we 145 00:22:34.260 --> 00:22:37.780 can go look and look at your you know maintenance logs and we can check your 146 00:22:37.780 --> 00:22:42.380 your screening processes for how do you how do you pick your pilots and things 147 00:22:42.380 --> 00:22:46.180 like that and so in principle it's possible they could have drug tests and 148 00:22:46.180 --> 00:22:48.700 things like that we don't we don't know exactly what would happen but in 149 00:22:48.700 --> 00:22:55.700 In principle, as long as it was all voluntarily agreed to before anyone worked with the company, that they could do that. 150 00:22:55.700 --> 00:23:04.700 So all of these measures that the government allegedly needs to implement in order to rein in unscrupulous airlines could be done by the free market. 151 00:23:04.700 --> 00:23:09.700 And, of course, we would have every reason to expect that it would be more efficient in that respect. 152 00:23:09.700 --> 00:23:15.700 How would you apply that to a case of something like smoking? 153 00:23:15.700 --> 00:23:30.700 My understanding is that insurers charge a lot more for life insurance for smokers, and that works to some extent to discourage smoking, so that you're perfectly free to smoke, but if you want to be insured, you have to pay a premium. 154 00:23:30.700 --> 00:23:42.700 Right, exactly. And there's that, and there's also just even to get car insurance, that you've been in more accidents and you have to pay higher premiums. 155 00:23:42.700 --> 00:23:52.700 And so you're right, the effects of insurance in getting people to internalize externalities, to use the jargon of mainstream economics, it's all over the place. 156 00:23:52.700 --> 00:23:56.700 Any sort of interaction you've ever had with your own insurance company just shows you that. 157 00:23:56.700 --> 00:24:04.700 Or just recently to get, I've just moved to Auburn for the summer and we had to get, we were looking at a renter's insurance and the guy asked me, 158 00:24:04.700 --> 00:24:34.700 He asked me, he said, do you have a fire extinguisher in the building? Do you have a deadbolt? And I forget what the third one was, but there were three things. And he said, oh, you need, you know, if you have those three things, then I can lower your premium for you. And so, you know, right there, there was incentives for me, and depending, it turned out we did have a fire extinguisher. Oh, a smoke alarm was the other one. And so, right there, of course, in order to get whatever the rate reduction was, I would have gone out, even though I'm renting, and bought a fire extinguisher, if it meant that I was gonna have that lower premium. So, yes, the very nice 159 00:24:34.700 --> 00:24:42.700 The naive person would have thought, oh, the government clearly has to pass a law requiring buildings of a certain size to have so many fire extinguishers per square footage. 160 00:24:42.700 --> 00:24:48.700 But no, I mean, the insurance company, if it's going to pay when the place burns down, it's in their interest as well. 161 00:24:48.700 --> 00:24:52.700 So yeah, I agree with you on all those aspects. 162 00:24:52.700 --> 00:25:13.700 I don't know if you want to get into this just now but let's say that you make the case that 99% of the time the market is capable of providing this consumer protection in a way in which is satisfactory for everybody, which you haven't addressed is the potential, the cost of regulation. 163 00:25:13.700 --> 00:25:20.700 But if somebody says, yeah, all that's true, but it's fine just to have, nonetheless, a kind of a legal apparatus, just in case. 164 00:25:20.700 --> 00:25:50.700 Right. Yes. What's the downside of that? Okay, yeah, that's, let me, I'll try to be a little bit systematic in how I go through that. So you're right. All I've really talked about thus far is what mechanisms are there so that the market wouldn't be completely helpless in the face of dangers posed to consumers. But you're right. It's, I think the common attitude is, okay, sure, the market could do some things, but it's not going to hurt to have the government help. And so why don't we have 165 00:25:50.700 --> 00:25:53.700 have the government do all this stuff and then you know on the margins if the 166 00:25:53.700 --> 00:25:57.060 market wants to fill in the gaps that's great and there's there's several 167 00:25:57.060 --> 00:26:01.780 objections we could raise and again I'll try to start with some of the the more 168 00:26:01.780 --> 00:26:04.780 obvious ones that I think most people would agree with and then as we get on 169 00:26:04.780 --> 00:26:08.020 I'll get into more refined ones that maybe only Austrians would really 170 00:26:08.020 --> 00:26:13.340 understand so the thing Milton Friedman points I think it was in free to choose 171 00:26:13.340 --> 00:26:17.740 is that the if you just look at the incentives facing for example the FDA 172 00:26:17.740 --> 00:26:24.740 The FDA, Food and Drug Administration, they actually have the incentive to be very conservative in what products they allow on the market. 173 00:26:24.740 --> 00:26:31.740 So if there's a new drug that has the potential to, just to exaggerate, to cure a certain type of cancer, for example, 174 00:26:31.740 --> 00:26:40.740 but the downside is every thousand people who use it, one of them is going to die from some side effect, 175 00:26:40.740 --> 00:26:42.740 that the FDA might not approve it. 176 00:26:42.740 --> 00:26:51.740 Because, of course, what's going to happen is if they do approve it and too many people die because of this drug, they're going to take the heat for it that, oh, why did you approve that unsafe product? 177 00:26:51.740 --> 00:27:00.740 Whereas if they don't approve it and keep it off the market, 999 people are dying from cancer who otherwise would have been cured, but that's not the FDA's fault. Oh, cancer killed them. 178 00:27:00.740 --> 00:27:22.740 And so the incentives facing the FDA in terms of avoiding political heat, that they don't really, it's not as if the people who benefit from a new drug pay some compensation to the FDA and say thank you for allowing me to use it, the FDA actually doesn't benefit except in the sense of feeling good for helping someone live, but they certainly do lose if they approve an unsafe product. 179 00:27:22.740 --> 00:27:28.300 and so there's the incentives facing FDA, it's their keep things off the market 180 00:27:28.300 --> 00:27:31.900 that and we see that all the time with arguments about why are certain drugs 181 00:27:31.900 --> 00:27:34.980 allowed in Europe but they're not allowed here and people complain about 182 00:27:34.980 --> 00:27:40.100 that. Another I think then this perhaps directly answers your question what's 183 00:27:40.100 --> 00:27:44.380 the harm of the government at least doing what it can is that it gives a 184 00:27:44.380 --> 00:27:49.540 false sense of security to the population that in other words given that 185 00:27:49.540 --> 00:28:06.540 If there is this regulatory framework in place where the government is allegedly ensuring your safety, then consumers, their guard is down and they don't bother being as vigilant as they would be if they really thought it's up to me to be sure that what I'm buying for my family is safe. 186 00:28:06.540 --> 00:28:12.380 Just one example would be the value jet situation, and that's part of what 187 00:28:12.380 --> 00:28:16.300 prompted me to write my original letter to the editor when I was a teenager on 188 00:28:16.300 --> 00:28:20.900 that, is that the person in that article in the op-ed piece who was complaining 189 00:28:20.900 --> 00:28:24.060 about the value jet crash in the Everglades and sarcastically saying, you 190 00:28:24.060 --> 00:28:27.140 know, the libertarians think that the market's capable of doing it, but we all 191 00:28:27.140 --> 00:28:31.620 want the government working overtime with their inspectors, she had an 192 00:28:31.620 --> 00:28:44.620 An offhand remark about how the only reason customers are continuing to fly value jet is because the government is there, you know, ensuring that now its operations are safe. 193 00:28:44.620 --> 00:28:48.620 The government's on the job and we went in there and now value jet's got its house in order. 194 00:28:48.620 --> 00:28:59.620 And so the writer didn't realize the irony of saying that, you know, here's this company that was obviously in her mind unsafe and the plane crashed when apparently it didn't need to. 195 00:28:59.620 --> 00:29:29.620 and that she was saying, instead of saying, look at the government was in charge from before this plane crash happened, it still is in charge, the government assures us, oh, the reason we're involved with the airline industry is to keep it safe and not in the dangers of the free market, there's a plane crash, and rather than saying, huh, the government's doing a bad job, she was saying, yep, see, the government is doing a great job, that's the market causing the crash, and you free marketeers are so silly for not realizing it's the government that encourages people to fly value jet in the first place, whereas that's an argument against it. Another example 196 00:29:29.620 --> 00:29:34.180 would be I remember there was an amusement park ride that had to be shut 197 00:29:34.180 --> 00:29:37.860 down temporarily it one of the I don't remember which one was Six Flags or one 198 00:29:37.860 --> 00:29:42.740 of those big amusement parks because I don't know if there was a death or not 199 00:29:42.740 --> 00:29:46.420 but so I think yeah I think there was I think a kid fell off the I think it was 200 00:29:46.420 --> 00:29:49.140 a Ferris wheel or something like that and then somebody fell off and so they 201 00:29:49.140 --> 00:29:52.900 they shut it down and they the inspectors come in and check it out and it 202 00:29:52.900 --> 00:29:56.620 was funny that there were there were lines is the day it reopened by which 203 00:29:56.620 --> 00:29:59.580 that meant the government finally said okay yep this is now safe there were 204 00:29:59.580 --> 00:30:03.120 huge lines of people waiting to pile on of this thing and of course none of 205 00:30:03.120 --> 00:30:06.820 those people went in and checked the safety log and said okay I see how by 206 00:30:06.820 --> 00:30:10.860 that kid two weeks ago died but now I'm convinced no the government checked it 207 00:30:10.860 --> 00:30:15.180 out it's okay and so there's this idea that or you know if you're walking down 208 00:30:15.180 --> 00:30:18.820 the street in a big city and there's a hot dog vendor I think a lot of people 209 00:30:18.820 --> 00:30:22.340 have the idea that well gee it smells bad and it doesn't look like this guy's 210 00:30:22.340 --> 00:30:24.980 washing his hands but come on the government wouldn't let him sell those 211 00:30:24.980 --> 00:30:32.980 The difference would be, that's a good possible objection someone could raise, the difference would be, first of all, 212 00:31:02.980 --> 00:31:32.980 where even people had this distrust of insurance companies and so and and even if you don't have that that bias against them just that for whatever reason people understand when things are done between private individuals that okay they have their interests we have ours and we're gonna have a voluntary agreement and we both benefit and just realizing that they're not there to help me but they're you know benefiting themselves and let's just make sure it's all voluntary and it's mutually beneficial and even beyond that just the fact that if there is an insurance company it doesn't 213 00:31:32.980 --> 00:32:02.980 Another example, and again I don't know in the grand scheme how important this is, but it's just something I noticed, is I think some of these 214 00:32:02.980 --> 00:32:08.340 government measures, although they sound good in the abstract, I think they really have 215 00:32:08.340 --> 00:32:13.260 a counterproductive effect, and so what I have in mind is, I don't know when it happened, 216 00:32:13.260 --> 00:32:18.580 but within the last, let's say, five years, I noticed these products on television, there'd 217 00:32:18.580 --> 00:32:24.300 be these ads for Claritin or whatever, and then at the end, they would have these disclaimers. 218 00:32:24.300 --> 00:32:27.780 I'm sure you've heard them, that the announcer's voice changes and he says things like, use 219 00:32:27.780 --> 00:32:32.340 of this product may encourage drowsiness, nausea, explosive diarrhea, da-da-da-da, 220 00:32:32.340 --> 00:32:36.540 and I remember the first time I heard a commercial I was stunned and I actually 221 00:32:36.540 --> 00:32:40.700 thought you know who would possibly you know it must be because of some silly 222 00:32:40.700 --> 00:32:44.900 government regulation forcing them to give these disclaimers and so I 223 00:32:44.900 --> 00:32:47.780 thought that was dumb because of you know just the principle involved that 224 00:32:47.780 --> 00:32:51.900 why you forcing these people you know if consumers don't have the you know the 225 00:32:51.900 --> 00:32:56.420 foresight to check up on these things and that's their own fault but but I also I 226 00:32:56.420 --> 00:33:01.740 was puzzled as to why would you pay to rent out advertising on television if 227 00:33:01.740 --> 00:33:09.740 If you were forced to admit at the end that this product may cause you to have sexual problems or whatever, some of these things that they're forced to say are ridiculous. 228 00:33:09.740 --> 00:33:23.740 And it just shows that I don't understand the way the world works fully because, of course, what happened was within a few months you had heard so many different products with all these outlandish warnings at the end that people just don't even care anymore. 229 00:33:23.740 --> 00:33:53.740 and that, you know, now it's just standard when you hear these allergy medications or whatever the medication is that's being advertised, they always have these ridiculous, horrible things at the end that the announcer's voice changes and he says may cause, blah, blah, blah, blah, but nobody cares because it's, oh yeah, the government makes them say that and it's probably, you know, they injected a thousand times a dose in the lab rat and it became sterile, but who cares? I mean, the government wouldn't let them sell it if it were really dangerous, right? And so that's, so it's ironic that because the government, and again, I don't know the specifics, 230 00:33:53.740 --> 00:33:56.940 in the Pacific, but I'm sure there must be some regulatory change that why there 231 00:33:56.940 --> 00:34:00.100 all of a sudden this flood of commercials on TV like this, whereas before there 232 00:34:00.100 --> 00:34:05.980 weren't. It must, depending on, of course, we can't be naive that who knows 233 00:34:05.980 --> 00:34:10.780 what the actual reasons for the legislation were, but assuming people 234 00:34:10.780 --> 00:34:13.780 really did think this is gonna make products safer and we don't want people 235 00:34:13.780 --> 00:34:18.500 to advertise unsafe products, it's had the opposite effect that now people I 236 00:34:18.500 --> 00:34:22.780 think tune out those warnings altogether because they hear it so much and it 237 00:34:22.780 --> 00:34:52.780 just you know it's not as if that the commercial has to give the details of the specific peer-reviewed studies and what actually happened and what was the sample size and how many people got sick and they just give the you know may cause and people just tune that out so it's it's ironic then that if anyone were concerned about their safety that I think the fact they have those disclosures they would it gives them the sense okay well look the government's on the job they're doing you know they're looking into these companies and they're keeping them honest and so now I'm gonna go buy this product when if it weren't for that people they're 238 00:34:52.780 --> 00:34:55.740 natural suspicion they might do their own research or they might look at consumer 239 00:34:55.740 --> 00:35:00.220 reports and see what the what the real distinguishing features were of the 240 00:35:00.220 --> 00:35:04.740 various products there's a couple other things that economists bring up a lot 241 00:35:04.740 --> 00:35:12.860 for example when you have licensing restrictions and there the idea is you 242 00:35:12.860 --> 00:35:15.820 don't want to have quacks going into medicine and so the government has to 243 00:35:15.820 --> 00:35:20.220 get involved you have the AMA to restrict services to those who are truly 244 00:35:20.220 --> 00:35:34.220 And it's not surprising given the nature of government is that it ends up being a measure to just restrict the number of practitioners so they can raise their salaries. 245 00:35:34.220 --> 00:35:44.220 And so that there's all sorts of ridiculous qualifications, hurdles you need to jump over in order to get the license from the state in order to practice this. 246 00:35:44.220 --> 00:35:49.460 and the silliest one there was and so I forget the state but there was some 247 00:35:49.460 --> 00:35:54.140 state where they had in order to become a florist you needed a certain you need 248 00:35:54.140 --> 00:35:58.800 to pass this licensing exam and you had to do things like arrange flowers in 249 00:35:58.800 --> 00:36:02.860 certain ways and on the test you had to study for techniques that apparently 250 00:36:02.860 --> 00:36:06.900 were no longer used just consumer demand had changed and it was just some obsolete 251 00:36:06.900 --> 00:36:11.100 when the test was designed it was a floral arrangement that people purchased 252 00:36:11.100 --> 00:36:17.100 The State of the State is the largest but fifty years had gone by and nobody ever wanted that sort of arrangement anymore but yet it was still on the test. 253 00:36:17.100 --> 00:36:21.100 And, of course, the reason was that it was weaning out potential competitors. 254 00:36:21.100 --> 00:36:30.100 And of course, the people who have the largest input to the state to design these licensing tests and requirements are the current practitioners. 255 00:36:30.100 --> 00:36:37.100 I mean it stands to reason. Who else would the state turn to to say, what does someone need to do to receive a license to be a brain surgeon? 256 00:36:37.100 --> 00:36:46.100 and Brain Surgeons, who else are you going to ask? But of course, they're the ones who have every reason to restrict the number of future brain surgeons because they're their direct competitors. 257 00:36:46.100 --> 00:37:03.100 So it's a cynical view, of course, but I think anyone who's seen this in practice knows that it does happen, and it may even be largely subconscious, and maybe most of the people putting the input in for these licensing exams and so forth think that they're acting in the public interest. 258 00:37:03.100 --> 00:37:16.100 So you might say in this case, consumer protection becomes a form of producer protection. 259 00:37:33.100 --> 00:37:38.740 that if you if you see that what you need to actually do to get the approval often 260 00:37:38.740 --> 00:37:43.620 cases it's it's not something directly tied to the how much knowledge you've 261 00:37:43.620 --> 00:37:51.260 imparted to your customers then so we we can sort of break up the the objections 262 00:37:51.260 --> 00:37:55.700 against the government into I've talked mostly about the incentive problem that 263 00:37:55.700 --> 00:38:00.400 there's monopoly and that the government you know a public choice analysis if you 264 00:38:00.400 --> 00:38:06.480 will that why would the government do things to act in the common welfare if 265 00:38:06.480 --> 00:38:10.640 given that they're human beings and they're and in fact people who go into 266 00:38:10.640 --> 00:38:16.920 the government service or government rule in order to lord it over subjects 267 00:38:16.920 --> 00:38:20.840 that why do we there's this idea that people who go into government are there 268 00:38:20.840 --> 00:38:25.060 they do that to selflessly serve others whereas the public choice school has been 269 00:38:25.060 --> 00:38:30.040 big on analyzing government actions assuming the politicians are just like 270 00:38:30.040 --> 00:38:35.240 other actors in the marketplace and that given that it's easy to see why these 271 00:38:35.240 --> 00:38:39.680 things would be suboptimal from a narrow efficiency viewpoint and then there's 272 00:38:39.680 --> 00:38:43.520 also what you might call the Hayekian knowledge problem that okay let's just 273 00:38:43.520 --> 00:38:49.400 assume that the people in the FDA and the FAA they really are out to help 274 00:38:49.400 --> 00:38:53.400 consumers and they really do want to do the best thing again there's this 275 00:38:53.400 --> 00:38:58.720 knowledge problem that Hayek is is linked to and that how is the government 276 00:38:58.720 --> 00:39:28.720 The people actually setting the rules, how are they going to get all of the dispersed knowledge that, how do they know, for example, just to give you an example of the trade-off, when it comes to those safety caps, those child-resistant safety caps, one of the biggest problems with them, apparently, is that elderly people can't open their medication, because those caps, you know, if you have arthritis, you can't get those caps off, and so what they do is they just keep all the caps off in their medicine cabinet, or they dump them out into different containers, but that defeats part of the purpose of, you know, keeping things in the container, 277 00:39:58.720 --> 00:40:28.720 The Four-Year-Old Tommy from getting into his dad's medication and so that's what you could call the Hayekian problem of when the government sets up a monopoly and has a one-size-fits-all approach that all the little feedback from different people who see various aspects of the problem and have insight that can't possibly in the real world be communicated into the people-setting policy. Airbags come to mind in that case. Here's a case where there's an attempt to protect adults. Right. Exactly. Exactly. And then you have the issue of, you know, 278 00:40:28.720 --> 00:40:58.720 People are they legally allowed to disable the airbag and it's it's just a nightmare in terms of that and then but I think more fundamentally and this would is something that the Austrian School is I would say has a monopoly on but I think that they're the ones who have had the most insight into this is what's called the calculation problem that goes back to Ludwig von Mises arguments against socialism and so this takes it even one step further so we'll give them the incentives we'll just assume that the the people setting the policy are benevolent and they want 279 00:40:58.720 --> 00:41:02.720 to help consumers and they're not just out for you know for winning elections 280 00:41:02.720 --> 00:41:06.720 okay so we can concede that we can even concede the Hayekian knowledge problem 281 00:41:06.720 --> 00:41:10.420 and assume the planners have all the relevant technical information that they 282 00:41:10.420 --> 00:41:16.120 know that okay if we you know make the child cap a little bit harder to get off 283 00:41:16.120 --> 00:41:19.120 and this many old people are going to be affected and if we make it a little 284 00:41:19.120 --> 00:41:22.520 easier than this many toddlers are going to now be able to pry those things off 285 00:41:22.520 --> 00:41:27.320 and they have all sorts of the medical and technological information even so 286 00:41:27.320 --> 00:41:34.320 So there's a calculation problem that's still not enough to know what's the so-called correct thing to do, what's the correct regulation. 287 00:41:34.320 --> 00:41:41.320 Just to give you some examples, if it comes to the roads, that in a sense a road can be viewed as a consumer good, 288 00:41:41.320 --> 00:41:46.320 and at least insofar as you are just a motorist and that's the final good for you, 289 00:41:46.320 --> 00:41:52.320 and so how do we know how many stop signs to put, or should there be a stop sign at a given intersection, 290 00:41:52.320 --> 00:41:54.320 The Theory of Money and Credit 291 00:42:22.320 --> 00:42:28.920 and the decisions that the bureaucrats have to make when it comes to road management that have definite effects on safety. 292 00:42:28.920 --> 00:42:36.320 I remember I was a low-level grunt when I just graduated in an engineering firm in Chicago, 293 00:42:36.320 --> 00:42:40.320 and that was part of what they worked on, were roads, and that was one of the things they did, 294 00:42:40.320 --> 00:42:45.920 and they would go and look and rank intersections in terms of fatalities, and then, you know, if there was one where, 295 00:42:45.920 --> 00:42:48.920 gee, a lot of people have been dying on this place, they'd look at it and say, what can we do? 296 00:42:48.920 --> 00:42:54.600 okay so they do have measures but the point is that alone is not enough you 297 00:42:54.600 --> 00:42:58.040 might think oh well it's it's the intersection that has the most fatalities 298 00:42:58.040 --> 00:43:01.720 they clearly need to have a stop sign there or something like that but maybe 299 00:43:01.720 --> 00:43:05.320 not maybe that would cause so many people if it's a really busy intersection 300 00:43:05.320 --> 00:43:08.640 maybe that would cause so many people to be late to work you know just a slow 301 00:43:08.640 --> 00:43:13.320 commute times or maybe that people knowing that they just put a stop sign 302 00:43:13.320 --> 00:43:16.520 there let's go to this other place you know in terms change our route to work 303 00:43:16.520 --> 00:43:46.520 and maybe then there'd be even more fatalities because maybe originally people were using the safe road in terms of its conditions but now because of that stop sign there that the government thinks it's trying to help us well now I'm gonna you know get to work a different way where it's really dangerous so there's all these things that that need to come into play and the point is there's no way the government even if we can see that they had all that information even if we can see they really did want to help people there's all these trade-offs involved and there's no way to know what's the correct answer whereas if it were all privatized then you would 304 00:43:46.520 --> 00:43:51.320 at least have the market test of profit and loss and that there would be some 305 00:43:51.320 --> 00:43:55.280 criterion of success it wouldn't be perfect as Mises himself concedes it's 306 00:43:55.280 --> 00:44:00.080 not that the monetary test of profit and loss is the end of the story and that 307 00:44:00.080 --> 00:44:02.800 there aren't other values to be weighed against it but at least you would have 308 00:44:02.800 --> 00:44:08.320 some benchmark to reduce all of these different values to some common 309 00:44:08.320 --> 00:44:13.000 denominator and so it would be the same thing with with safety in general that 310 00:44:13.000 --> 00:44:35.000 If you had, just to give you a different example, right now when the government, one of the major forms or manifestations of consumer protection is the amount of fines that people have to pay if they harm consumers, so that if a company is convicted of selling an adulterated product, what do they do? 311 00:44:35.000 --> 00:44:45.000 So they have to pay fines to the government and also generally huge compensations to the aggrieved party, but the level of the fine, that's something the government determines. 312 00:44:45.000 --> 00:44:58.000 And so it's certainly not an objective fact of medicine, you know, how much should a company be charged or be fined if one out of every thousand people that goes to their restaurant dies of food poisoning that you don't know. 313 00:44:58.000 --> 00:45:28.000 And again, that's not a number that just drops out of the analysis. That's an economic question and maybe in a third world country, their standards would have to be lower, that they couldn't insist that every employee has, you know, proper gloves and that the grill is cleaned methodically every six hours and things like that. Maybe that if they did that, the place wouldn't be able to operate profitably. And then maybe people would go to the river to drink water and they would get sick that way or something. So these questions are 314 00:45:28.000 --> 00:45:35.000 Related to economics, it's not merely a matter of what do the doctors say or what do the health experts say. 315 00:45:35.000 --> 00:45:44.000 And so that's why you need it to be intertwined in a private property framework or else there's no way to come up with an objective answer to these things. 316 00:45:44.000 --> 00:45:57.000 The point is that regulators would tend to concentrate on engineering questions and on certain absolutes. Is it safe? Is it not? 317 00:45:57.000 --> 00:46:05.000 Whereas in the market, you're always considering trade-offs, relative benefits. 318 00:46:05.000 --> 00:46:15.000 Right, exactly. And it just occurs to me that I'm focusing on these real particular areas just to sort of show how the economic theory relates to it. 319 00:46:15.000 --> 00:46:28.000 But in the real world, if you just step back and think about it, in what sense, it's just crazy to think that the government is providing safety that in terms of the product of education, for example, if you go to government schools, you might get shot. 320 00:46:28.000 --> 00:46:30.000 The Theory of Money and Credit 321 00:46:58.000 --> 00:47:01.680 do I'm sure many people do that that wouldn't happen nearly as much if 322 00:47:01.680 --> 00:47:06.360 education were in the private sector and particularly if people weren't forced to 323 00:47:06.360 --> 00:47:08.560 go to school who didn't want to be going to school in the first place I don't 324 00:47:08.560 --> 00:47:12.520 think there'd be nearly as many school shootings or bullying in general so in 325 00:47:12.520 --> 00:47:18.280 that trivial sense that of course education would be safer in terms of the 326 00:47:18.280 --> 00:47:21.720 you know the good being provided to consumers if the government didn't get 327 00:47:21.720 --> 00:47:28.960 involved or just you know the drug war and the way that that causes you know 328 00:47:28.960 --> 00:47:32.560 going to your local market in the inner city could be hazardous to your health 329 00:47:32.560 --> 00:47:37.120 you know so there's so we can certainly argue and I think it's true just thinking 330 00:47:37.120 --> 00:47:41.800 of consumer protection laws per se why they make things less safe but in terms 331 00:47:41.800 --> 00:47:45.440 of why is the world such a dangerous place in the first place you know if 332 00:47:45.440 --> 00:47:48.280 you're if you're in Iraq one of the dangers is you might get hit by US 333 00:47:48.280 --> 00:48:00.280 The idea that the government is out there to make the world safe, I think just on the face of it, if you consider the government in its totality, is not nearly as obvious as it is to some people. 334 00:48:00.280 --> 00:48:08.280 And the presumption, too, that somehow the government is the best institution for assuring our, for protecting our interests. 335 00:48:08.280 --> 00:48:19.280 We might then look at the consumers of government services as in general better off than the consumers of private services, but that's just manifestly untrue. 336 00:48:19.280 --> 00:48:33.280 Right. And I don't know. It's just this attitude. I guess I'm used to it. But just to point it out, again, whenever something bad happens, oh, that's because that's human nature or that's the market. 337 00:48:33.280 --> 00:48:38.480 and then when the government needs to take measures just this this example I brought along 338 00:48:38.480 --> 00:48:44.880 this excerpt from Paulina Berserk who had that that book cyber selfish now this this excerpt I 339 00:48:44.880 --> 00:48:50.080 think came in a column she wrote after that and so she's she was going on a tirade about you know 340 00:48:50.080 --> 00:48:55.680 these these moronic libertarians and so she says here I will instead mention a recent nasty epidemic 341 00:48:55.680 --> 00:49:00.720 of food poisoning that just erupted at a Mexican restaurant in San Mateo County turns out the 342 00:49:00.720 --> 00:49:04.520 But the restaurant hadn't been inspected in more than a year because, surprise, it turns 343 00:49:04.520 --> 00:49:07.520 out budget cuts made it impossible to hire enough health inspectors. 344 00:49:07.520 --> 00:49:10.560 But hey, government is the great Satan, and we all believe in self-regulation, and who 345 00:49:10.560 --> 00:49:11.560 needs taxes? 346 00:49:11.560 --> 00:49:16.640 Okay, so she's, you know, she's being very sarcastic there, and she's pointing out this 347 00:49:16.640 --> 00:49:20.880 example of a Mexican restaurant that there was food poisoning because, you know, the 348 00:49:20.880 --> 00:49:25.000 government had to cut its budget, and so in her mind, this just shows you these moronic 349 00:49:25.000 --> 00:49:28.200 libertarians, they want to cut taxes and leave it to the market, but there's an example, 350 00:49:28.200 --> 00:49:29.880 you know, where it failed. 351 00:49:29.880 --> 00:49:35.680 But again, the government never said to anybody, we're going to take over regulating food, 352 00:49:35.680 --> 00:49:39.680 and don't worry, in 20 years, we'll finally ensure safety, but just give us some time. 353 00:49:39.680 --> 00:49:43.000 No, the government says right now, you are safe because of us. 354 00:49:43.000 --> 00:49:45.740 And yet, here's an example of where the government obviously failed. 355 00:49:45.740 --> 00:49:51.320 And so it's, again, it happened with September 11th, nobody, well, very few people said, 356 00:49:51.320 --> 00:49:54.760 oh, yep, see, that's what happens when the government provides safety for you, that, 357 00:49:54.760 --> 00:49:55.760 you know, the planes get hijacked. 358 00:49:55.760 --> 00:50:15.720 No, everyone said, oh, we need to have the government step in and nationalize the the searching process. So it's, again, I don't, I don't know why that is, but I can just point out the fact that for whatever reason, whenever anything bad happens, it's the fault of the market, even if it was something that was totally regulated by the government, initially. 359 00:50:15.720 --> 00:50:28.720 Yeah, actually, let me mention something that strikes me as ironic. In all the work of Mises, you get again and again this constant focus on the great merit of capitalism is that it serves the consumer. 360 00:50:28.720 --> 00:50:43.720 This is his continuing theme. I mean, it seemed like in his own mind, this was a decisive argument for the market. How did it come to be that we associate consumer welfare, consumer interests, consumer protection with the public sector? 361 00:50:43.720 --> 00:50:53.120 I don't know enough to give a definitive answer. I imagine part of the, or perhaps the main thrust 362 00:50:53.120 --> 00:50:58.280 occurred during the progressive era, and I don't know the specific dates of various government 363 00:50:58.280 --> 00:51:03.520 regulations, but I'm sure a lot of the, you know, the foundation of what we now look at as the 364 00:51:03.520 --> 00:51:12.520 government's mechanisms for consumer protection probably originated back then. And I think part 365 00:51:12.520 --> 00:51:19.520 Part of it is, at least from interacting with members of my family who are certainly inclined towards government paternalism. 366 00:51:19.520 --> 00:51:27.520 I think some of it at least is that they're very suspicious of people in general. 367 00:51:27.520 --> 00:51:35.520 And so they rightly, when someone, you know, a laissez-faire economist extols the virtue of capitalism, the free market, they're very suspicious. 368 00:51:35.520 --> 00:51:38.520 And they think, no, no, I've dealt with credit card companies and I've dealt with insurance companies. 369 00:51:38.520 --> 00:52:08.520 with Insurance Companies. I know those guys are shady and you know that you shouldn't trust them and that in and of itself is fine and I think that's that's good and you should be you know I've had bad dealings with some credit card companies as well and I just try to not do business with them again but for whatever reason then they just leave themselves wide open to and therefore let's turn to the government to protect us from these people and so it's I don't know why it's just I guess an inconsistency or failure to apply their cynicism across the board where a lot of people just they perhaps they've been 370 00:52:08.520 --> 00:52:12.000 had a bad dealing with a particular business and it just sours them but they 371 00:52:12.000 --> 00:52:17.600 don't realize that yes it is possible no one at least no responsible advocate of 372 00:52:17.600 --> 00:52:20.640 the free market is ever going to maintain it's impossible for there to 373 00:52:20.640 --> 00:52:25.160 be an unscrupulous business person but there's mechanisms in place to limit 374 00:52:25.160 --> 00:52:27.600 that person and eventually drive them out of business whereas with the 375 00:52:27.600 --> 00:52:31.960 government there's yeah you could try to vote them out of office but I don't 376 00:52:31.960 --> 00:52:36.080 think any politician ever got voted out because of some regulatory practice of 377 00:52:36.080 --> 00:52:55.600 You've given a great theoretical apparatus and many practical examples for understanding 378 00:52:55.600 --> 00:53:00.680 the consumer protection through the market and consumer protection through the public 379 00:53:00.680 --> 00:53:06.640 and yet still you will have people that will respond to everything you've said 380 00:53:06.640 --> 00:53:12.520 with a line something like a private enterprise just has a tendency to put 381 00:53:12.520 --> 00:53:18.920 profits before people. Well I think there's there's two ways to answer that 382 00:53:18.920 --> 00:53:23.520 so the one way is just to take it head-on and say yeah it will but it just 383 00:53:23.520 --> 00:53:28.360 so happens that in a free market the way you earn profits is by catering to your 384 00:53:28.360 --> 00:53:32.640 Customers and that this alleged dichotomy between well on the one hand I 385 00:53:32.640 --> 00:53:36.000 want to earn profits by the other hand you know I may have qualms about killing 386 00:53:36.000 --> 00:53:39.480 my customers well no they're in practice it's not gonna come up you're never gonna 387 00:53:39.480 --> 00:53:43.560 have to make that choice at least as a as a business person who's catering to 388 00:53:43.560 --> 00:53:49.960 you know a wide market as I said of course if you have some real shady scheme 389 00:53:49.960 --> 00:53:52.920 and you're just trying to bilk a few people out of somewhere and skip town 390 00:53:52.920 --> 00:53:56.560 then maybe you can come up with scenarios where it would be in your 391 00:53:56.560 --> 00:54:01.000 interest to skimp on costs and safety and try to get out of out of town before 392 00:54:01.000 --> 00:54:06.040 people catch on but that's not really going to characterize a large fraction of 393 00:54:06.040 --> 00:54:09.160 what would happen in everyday commercial transactions and precisely 394 00:54:09.160 --> 00:54:13.720 because it's not a very profitable living to be doing that that it if you 395 00:54:13.720 --> 00:54:16.520 really want to make money what you do is you set up a big factory and you 396 00:54:16.520 --> 00:54:22.220 establish a customer base and then the other response to that again is just to 397 00:54:22.220 --> 00:54:29.180 say it's true what that's pointing out is there are people who would rather earn 398 00:54:29.180 --> 00:54:32.900 money than you look out for their well-being other fellow men or to put 399 00:54:32.900 --> 00:54:37.500 another way if they had a choice between having an extra thousand dollars and and 400 00:54:37.500 --> 00:54:40.860 doing something that might prevent someone from from getting sick or 401 00:54:40.860 --> 00:54:44.220 injured that a lot of people would just take the money and that's true but by 402 00:54:44.220 --> 00:54:46.880 the same token there are plenty of people who would do something that would 403 00:54:46.880 --> 00:54:51.100 allow them to win an election or to you know gain favor with their superior in 404 00:54:51.100 --> 00:54:54.460 in Government, even if it meant putting people's lives at risk. 405 00:54:54.460 --> 00:54:58.620 And so, again, it doesn't clinch the argument just to say, 406 00:54:58.620 --> 00:55:04.100 no, no, there are unscrupulous people out there who would put profits above safety. 407 00:55:04.100 --> 00:55:08.180 By the same token, there would be people out there who would put political power above safety. 408 00:55:08.180 --> 00:55:14.060 And so the question is, which mechanism do we think is going to limit those people 409 00:55:14.060 --> 00:55:19.140 and sort of eject them from positions of influence in the first place? 410 00:55:19.140 --> 00:55:42.140 I have one final question, unless you have some other things. It relates to fraud. Now, most market economists say that, you know, fraud is not part of the market. And yet, there do seem to be, it can get ambiguous what constitutes fraud or not, right? Like, for example, ingredients in food packages. 411 00:55:42.140 --> 00:55:57.140 Yeah, so it's true, for example, Rothbard and Man Economy and State, the first 11 chapters he devotes to an analysis of the pure unhampered market economy, and then only in Chapter 12 does he get into the economics of violent intervention. 412 00:55:57.140 --> 00:56:27.140 And there, and I like the way he explains that, motivates it, he says, look, it's not that we're assuming, as many people allege, that the market doesn't have violence in it, the real world market, that's just, it is a definition that, first of all, let's understand the way the pure market works, and then once you learn those mechanisms, then it's easier to look at the real world where there are unscrupulous individuals who have no problem initiating aggression when they think they can get away with it in order to understand the effects in that situation. 413 00:56:27.140 --> 00:56:32.020 You raise an interesting point about fraud because I've often wondered that just in terms of applying 414 00:56:32.980 --> 00:56:38.020 libertarian or Austrian economics to certain issues because some of the definitions of fraud 415 00:56:38.580 --> 00:56:44.340 I think people need to be careful about. For example, something like a fortune teller, 416 00:56:45.140 --> 00:56:50.740 you know, from a certain point of view, what the person is claiming, that's false advertising, 417 00:56:50.740 --> 00:56:55.700 you know, that clearly they're not reading the future or at least in my metaphysical view, 418 00:56:55.700 --> 00:56:57.700 The Theory of Money and Credit 419 00:57:25.700 --> 00:57:55.700 The first principles spin out an entire theory of it because there's all these little borderline cases where it's really not clear and so I think again a lot of this stuff it's we can certainly argue on the margins about piecemeal reform and that wouldn't it be better if the government just got rid of the FAA and let the airline industry be self-regulated or regulated by insurance companies if you want to use that terminology but I think ultimately you would have to have a complete private legal system where these penalties and you know what what's the penalty for killing 420 00:57:55.700 --> 00:58:25.700 and the customer and that where that's set not by government edict but rather by the competing agencies in a private legal setting so so yeah it in the same thing with fraud that what would be the definition of fraud I'm certainly not a legal expert and no individual I think could spin out an entire theory of it that you would need to have competing scholars offering legal tracks in a private contractual legal framework and that would what we mean by fraud in certain cases would just arise 421 00:58:25.700 --> 00:58:32.700 The whole hysteria about peanut dust in food, which apparently appears in strange places you don't expect, is it fraud to not disclose the fact that there may, there's a tiny, tiny chance, there's just peanut dust in it. 422 00:58:55.700 --> 00:59:01.960 dust and this bag of corn chips, you know? Right, yeah, because the language now, it 423 00:59:01.960 --> 00:59:06.820 says things like, this product was made on equipment that has been used to produce peanuts 424 00:59:06.820 --> 00:59:10.940 or something. So it's not even that your food has peanuts in it, but it was touched by equipment. 425 00:59:10.940 --> 00:59:15.260 So yeah, at some point, you could just push that stuff back indefinitely and everything's 426 00:59:15.260 --> 00:59:21.140 got peanut dust on it. So yeah, so it's, you know, that's the whole point. It strikes 427 00:59:21.140 --> 00:59:24.860 us as absurd and clearly there are examples where we can just objectively, if you will, 428 00:59:24.860 --> 00:59:51.860 I think I'm going to assign the first half of the chaos theory book because that's where I'm getting into the insurance companies and their interactions. 429 00:59:51.860 --> 00:59:58.860 I might also look to see what Rothbard says in For a New Liberty, though. I haven't refreshed my memory of that, but I'm sure he's got good stuff there. 430 00:59:58.860 --> 01:00:04.860 The definitive account, the Austrian account of consumer protection is yet to be written. 431 01:00:04.860 --> 01:00:10.860 Oh, right. I don't think anybody has set out to do that topic in and of itself. 432 01:00:10.860 --> 01:00:13.860 You've got your next job. 433 01:00:13.860 --> 01:00:14.860 Thanks. 434 01:00:14.860 --> 01:00:15.860 Thanks for having me.