WEBVTT

NOTE Government Cartels

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We've already talked about different forms of cartels, as the term is going along, with farm price supports and all the rest of it, we'll now go again to various types of cartels that government enforces.

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So, internal pressure and external pressure have broken up every cartel, without exception.

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The only cartels which have lasted have been government cartels, like OPEC, which is of course a cartel of different governments.

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Even OPEC has finally busted after 13 years, 12-13 years.

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Even they couldn't hack the fact that new countries were coming in with new production.

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Britain and Mexico and so forth are not part of OPEC, which tended to bust the whole thing.

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So economic law works even with governments and certainly with private firms it works much faster.

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Now one of the successful cartels is the diamond cartel.

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Even that has not been that successful recently. What happens in diamonds is

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all wholesale diamonds are routed through South Africa, the Beers

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company in South Africa, which then

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sells wholesale diamonds to the diamond markets in Amsterdam, etc.

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Amsterdam, yeah.

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And they sell, I think Amsterdam too was a big diamond center,

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and they sell, they regulate the flow, and they keep the supply

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are drastically limited through the beers cartel.

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Now what's happened to, several things happened in that cartel, first place a few years ago

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the whole diamond market busted and the man curve collapsed and the price of diamonds

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went way down.

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So even the cartel, a world diamond cartel is not all powerful because it has to face

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consumer fluctuating consumer desires, etc.

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Other jewelry, you know, all sorts of jewels in a sense are competing with diamonds.

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Another thing is this, the reason why the Beers is able to do this, because South Africa

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has most of the diamonds that are found in South Africa, I was going to say grown, anyway,

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discovered in South Africa, the way the South African government enforces this, it's not

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by the South African government, not by the Beers, the Beers is a beneficiary, the way

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they do it is this, in South Africa all diamonds, all diamond land is nationalized, in other

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In other words, if you're a farmer, you're Joe Jones or Yop Schroeder or whoever it is in South Africa,

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and you find diamonds in your land, those diamonds are now government-owned. They immediately become part of the government.

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The whole diamond mine or ore or whatever is nationalized.

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So first, South African government nationalizes all the diamonds.

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Then they lease the diamonds to favored laissez.

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They lease the mines to the beers, basically.

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In other words, the beers have to get some monopoly, let's see, plus a few other large

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diamond firms are in with the cartel, which is essentially an ally to the beers.

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Nobody else can get a license to mine diamonds.

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So if you're a farmer, you're absolutely in a hell of a government monopoly, I'm going

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to sell these diamonds.

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You're shot, I mean, literally shot, because they patrol the coast of South Africa, they

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patrol the coast guard, very rigorous patrol, they catch so-called diamond smugglers.

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diamond smuggling people trying to get their own diamonds out, basically, and to sell them,

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to break the cartel, their coast is patrolled and they're shot. There was a good British

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film a few years ago, some big star in it, about the diamond, South African diamond business,

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and it talks about this. Of course, it doesn't go into the cartel part very much. It talks

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about being shot by the Coast Guard and all that. So, diamond smuggling, quote-unquote,

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is really people trying to gauge your free trade, is what it really amounts to. Try to

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and Buster Cartel.

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So in other words, the successful cartel, first of all it's not super successful because

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the consumers can lower the price and have done it, second of all it's only successful

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because the South African government enforces it through this kind of arrangement where

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the beers are leasing the diamond mines from, they don't own the mine, they lease it from

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the South African government, which automatically owns it.

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So about 10, 20 years ago Russia discovered, Soviet Russia discovered diamonds, so it was

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There's a big panic in the international diamond cartel. What are they going to do? Russia might bust the market, bust the price, you say.

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Russia, however, being monopolists themselves, in this case state monopolists, were very happy to get cut in as part of the quota.

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In other words, they were happy to get cut. So Russia sells their diamonds to the South African government cartel,

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even though they allegedly are opposed to the South African government politically.

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When it comes to business, they're all happy combination monopolists.

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They got a chunk of the quota, so to speak.

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So that's the mystery of it. Whenever you see a successful cartel, look to government enforcement and sure enough, there's where it was.

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Another thing that's come into the news yesterday was the fact that heroic, one of my heroes in the movies, Clint Eastwood became mayor of Carmel, California.

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He was elected by two and a half to one, 70%, kicking out the previous mayor.

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Now, the issue which he fought the race on was very simple. It was anti-government cartelism.

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In other words, if you've ever been to Carmel, it's a beautiful little town in the Pacific.

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It's been a tight stranglehold of a bunch of upper-class liberals who essentially are residing in the town of Monnet, keeping down all growth.

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In other words, they're trying to prevent any kind of expansion, any kind of business growth or whatever.

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In other words, the whole thing is sort of a big zoning cartel, and zoning laws are used

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as a way of restricting production, keeping supply of almost everything to the left. Supply

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of houses, supply of trade, merchants, stores, whatever. So Clint Eastwood owned a restaurant

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in a cartel in Carmel, but he wanted to expand it, he wanted to get permission to expand

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it a little bit. They refused to do it because they had a very severe anti-growth policy

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in Carmel. If you've ever been to Carmel, you'll see why. A free market ticket, in other words,

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to Bust the Anti-Growth Zoning Cartel is what it really amounts to.

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He doesn't use the word cartel, but that's what it is.

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So he mobilized the masses and ran a campaign and won by two to one.

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So at any rate, this is what you have all throughout the United States, on a local level

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and on a federal level, is this kind of compulsory cartel in various areas.

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In this case, it's compulsory housing and zoning cartel is what it amounts to.

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California, by the way, is shot with that, is shot through with housing cartels, we try

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to keep out people you don't like by zoning them out of existence, zoning them, preventing

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them from coming in when I'm asked to.

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The, okay, another case of a luxury cartel is, well, a whole bunch of cases, licensing

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Licensing in general, there's an example of every business, almost every business is now

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licensed and everything you can think of and the licensing is always the excuse for life,

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what's the excuse?

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The excuse of course is the public welfare, common good.

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The excuse is we have to protect the public by licensing this profession.

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Well, the medical profession, it sounds more plausible than other professions, it's not

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The only, it's not the real reason for medical licensing either, but in some cases it's obviously

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idiotic. Like, photographer is a license. Why do you have to have only licensed photographers?

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My brother-in-law, for example, is an excellent photographer. He doesn't, he doesn't have

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a license because the license is very expensive. He's in the state of Virginia. The licenses

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are very expensive. So you have an expensive license. This, of course, pushes the supply

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curve of photographers to the left and raises the price of the consumer. He would like to

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He needs to be a part-time photographer, he's really a printer, a photographer is a sideline, he's a very good one, but he doesn't have enough money to be alive, it's not worth his while to get a full license.

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So, they don't have a Gestapo in Virginia searching every town for photographers, so he can be an illegal photographer, except he can't take out an ad, he can't be on the yellow pages, he can't say photographer, etc. etc. because then the state licensing bureau will crack down on him.

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His business is restricted by the fact that he can't advertise and he can't make it public.

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So this is what happens. The purpose of licenses is to keep out, to push the supply curve to the left, keep out new inference.

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And one of the things about licenses, we'll see time and again here, and Miller mentions this, is the so-called grandfather clause, grandfathering.

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Grandfather cause means that you say this profession, whatever it is, whose occupation needs to be licensed because we have to serve the public and have to make sure, for example, photographers are a good moral character, or they're heavily educated, whatever the heck it is, okay?

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They've taken three years of courses in some photography school. Well, these restrictions are coming and they're not applied to existing people. Existing people are grandfathered out.

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In other words, let's say you pass a law in Virginia, that in order to be a photographer, you have to go to a two-year old photography school, a licensed photography school, which is very expensive, this pushes the apply card to the left.

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And then you say, existing photographers are exempt from this regulation. So this is a blatant, monopolistic, cartelistic claim.

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Obviously, it has nothing to do with the public welfare, because if you want to serve the public welfare, you have to apply to everybody, including existing photographers.

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And it's really important that photographers get a university education where they get to learn about physics or something like that.

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Then you make it apply to everybody. No, it only applies to new people coming in. That's the tip-off. The whole thing is a racket.

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The grandfather causes a tip-off for the racketeering nature of licensing.

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Now, for example, in the barbering profession, what they do is, you see, every 20 years or so they increase the requirements,

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because the new generation comes in, they want to be grandfathered too.

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So every 20 years or every 15 years there's a big increase in tightening of requirements in almost every profession.

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Barbering is a marvelous, I unfortunately lost the clipping, there's a great little story about barbering, a history of barbering.

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Initially, of course, barbers were not licensed, you become a barber, you cut hair and that's it.

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If you're a lousy haircutter you go out of business, if you're a good haircutter you stay in business.

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At any rate, the barbers got together in a guild and they began to mobby for licensing.

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And every ten years they raise the restrictions. In other words, initially you have to go for six months to a barbering school.

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And then ten years later you have to go a year to a barbering school. I think now it's like three and a half years to a barbering school.

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You have to pass courses in the history of barbering.

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Like, you have to take 104 here, right?

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History of barbering, the barbering technology in the 1600s.

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You have to pass courses in the ethics of barbering, as if barbering has its own ethics.

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Don't cut the guy's neck, I guess, let's say.

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Anyway.

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That's right.

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It's like tightening requirements.

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And in each case, the existing people are exempt.

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In each case, you say, well, from now on, everybody's got to pass a course in history of barbering,

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but the existing barbers don't have to do it.

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Again, it's a tip-off, it's a racket.

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And so every five or ten years, they keep increasing requirements.

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You have to be a citizen.

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The minimum age keeps going up.

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16 or 17, now it's about 21 or something like that, to keep raising the age, increase the

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education requirements, you have to be a citizen, and God knows what, there's all sorts of ways

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to restrict entry into the profession.

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In Chicago, Chicago is a very heavy unionized town, much more than New York, much more guild

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operated.

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In Chicago, technically, if the law really followed, it would be illegal to shave yourself

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without a license. Because it says, in order to shave anybody, that's anybody, you have

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to have a license. And so, only licensed barber can shave people. So technically, it's illegal

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to shave yourself in Chicago. And you can see the Gestapo in Chicago breaking into everybody's

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home, you're shaving yourself, you're under arrest. You're not a licensed barber. So fortunately,

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of course, these are not enforced, these insane requirements, but they're part of the law.

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You know, a lot of people think, if it's part of the law, it should be enforced under the

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Law of the Hill, that's part of the law in Chicago, it's not being enforced of the Hill.

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There's a lot of laws like that by the way, crazy laws, some of you have died out even though they're still in the books.

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But this shows you how far the licensing situation goes.

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For example, photography, or most of these, you have to be certified as a good moral character, what does that mean?

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Some board of photographers in Virginia is certifying everybody as good, what do they know about moral character anyway?

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Why are they experts in morality?

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So all of this is part of this whole gimmick.

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Yeah?

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Does that mean that everybody wants a lot of people, say, for hot dog business?

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Does that mean that you have to spend or...?

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No, it depends on each occupation.

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For example, in New York, they're constantly trying to crack down on peddlers.

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I might have mentioned this before.

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That's part of the whole thing.

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See, one of the things I want to tell you about competition,

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it's not necessarily true that small businesses can be outcompeted by big businesses.

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In many areas, small businesses are more efficient and are better able to compete than big businesses.

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For example, retail in general. Peddlers can often out-compete retail stores because peddlers

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can come in when they're not there on the corner when it's raining, they have a lower

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capital requirement, they don't have to pay rent, they don't have to pay fixed equipment,

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right? They can nip in with one day supply of purses or scarves and sell it and if it's

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raining they don't show up. So they're mobile, highly mobile, and they can often out-compete

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retail stores, to the extent that retail stores are always trying to outlaw them

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and putting, insisting on special licenses on peddlers, outdoor stands, whatever

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so many of these guys are constantly

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every once in a while the mayor, whoever the mayor is

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announces a crackdown on peddlers. Peddlers are great, I think peddlers are fantastic, they're cheaper

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stuff is of course much cheaper

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we have in our neighborhood, for example, a magnificent florist

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an illegal florist who's been selling flowers in St. Corners for many years

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and then you go to an official licensed florist

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A bouquet of something costs ten bucks, with him it's a dollar and a half. It's magnificent.

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Plus he's got better, fresher stuff. The organized florists are trying to always put him out

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of business. They get the cops on. Of course he pays off the cops. So there's a contest

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between who gets the official pressure. And every once in a while the mayor says, we've

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got a crackdown on the peddlers. What's wrong with the peddlers? Well, he says they spoil

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the beauty of the New York City streets. It's great. I mean, New York City has many advantages.

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So the whole thing is obviously absurd argument, to use any sort of argument, because of the

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pressure of inefficient retail stores who can't compete with these guys.

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And peddlers are the smallest possible business, they have one day's supply of capital.

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In some cases what they have is like a suitcase, they spread out the stuff and that's it, they

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don't even have a pushcart.

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A pushcart is already a high status symbol in the peddling profession, it means you have

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enough money to buy a pushcart.

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And yet they're magnificent, it's a great way for immigrants to rise up in the world,

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hadn't been in the past before licensing, and also a great way to compete with the consumer

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and for those who want opportunity.

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But of course organized retailing, organized retail by the way has always been trying to

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outlaw their competition, it's been going on for over a hundred years.

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Every innovation in the retail industry, every successful technological innovation has been

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combated legally by the organized interest in the retail field.

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For example, in the mid-19th century, when railroads first came in, the first time we

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had cheap transportation over land, so when railroads came in, the institution of traveling

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salesmen came in, where stores, wholesalers in New York, let's say Chicago, would send

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traveling salesmen out with sample cases to show to the various retailers.

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Well, the organized wholesalers, let's say in Dayton, Ohio, didn't like the fact that

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Traveling salesmen suddenly popping up, competing with them. In other words, New York stores

201
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can now compete with, or wholesales can now compete with Dayton. So they had taxes to

202
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put them out of business, special license fees. They said they were evil, it was terrible

203
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things, unfair competition to have traveling salesmen. This, by the way, is the reason,

204
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the origin of traveling salesmen, dirty traveling salesman jokes, because traveling salesmen

205
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are usually in a state of illegality, because they're trying to evade $1,000. For example,

206
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They would have to pay like $1,000 a year license fees to operate in each town and it

207
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would only make you about $3,000 a year so obviously they couldn't pay it so they tried

208
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to slip in and out of town unseen, you see, before the retail wholesalers can get after

209
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them, the wholesale competitors.

210
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So for about 20 or 30 years the family salesmen were basically illegal and finally the Supreme

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Court said it was unconstitutional and they were finally relieved of the special taxes

212
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and license fees.

213
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Then after they were finally absorbed and the wholesalers, and they started employing traveling salesmen in C2, so the whole thing began to finally get accepted.

214
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Then after they were accepted, around 1890 or so a new institution comes in, a department store, and that was a stereo directing a terrible, unfair competition of more than one floor,

215
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a terrible thing that's selling more than one product and blah blah blah, outlaw them, tax them.

216
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So about 20 or 30 years there were special taxes placed on department stores and attempts

217
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to outlaw them and then the same thing happened with mail order, oh my god, mail order, they

218
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can buy stuff by mail, Sears Roebuck and Montgomery Ward, they don't even have to hire salesmen,

219
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that's unfair, because they can just send catalogs out, they can sit there in Chicago

220
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and sell you stuff, terrible thing because consumers loved it, but all over the United

221
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States there were bonfires, parties to burn Sears Roebuck catalogs, unfair competition

222
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organized by the rotten retailers in each area who claimed they could be put out of

223
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business by evil Montgomery Ward and evil Sears Roebuck.

224
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Finally they were accepted.

225
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Then comes the chain store.

226
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The same damn thing happened to them in the 1920s.

227
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The first chain store started, A&P was the major chain.

228
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Liberals were calling for breaking up A&P, A&P is a monopoly, they're evil, break them

229
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up because they can sell stuff cheaper because they're getting discounted, volume discounts,

230
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they can buy stuff cheaper.

231
00:18:07.700 --> 00:18:13.140
When I was growing up, liberals in the United States were calling for the break-up of AMP.

232
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Well, that was finally rendered obsolete by the supermarkets which came in. AMP, of course,

233
00:18:18.820 --> 00:18:21.820
the last people to understand the importance of the supermarket, the last people to clue

234
00:18:21.820 --> 00:18:28.820
in on it, they were still mired in the old chain store technology and so they fell behind.

235
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They were outcompeted by newcomers like Safeway and Grand Union and so forth. Even now, even

236
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And right now, A&P stores are usually the worst in the city. They still have the crummy

237
00:18:37.760 --> 00:18:43.240
wooden floors and all the rest of it. It's dirtier. And so, they almost went out of business.

238
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They almost went bankrupt, so-called monopolists. They didn't have to be broken up. They fell

239
00:18:47.400 --> 00:18:51.760
behind in the competitive race because, like many big businesses, they didn't understand

240
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the new, they weren't alive for new developments.

241
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The chain was a, well, supermarkets can also be a chain, but the chain was, you had mom

242
00:19:00.680 --> 00:19:05.680
There's some in pop stores. You go to the counter and you ask for two pounds of butter or something.

243
00:19:05.680 --> 00:19:09.680
There's very few of them left. There's some in neighborhood stores like that, still.

244
00:19:09.680 --> 00:19:16.680
In chain stores, you still have to go to the counter and ask them, but there were branches all over the place.

245
00:19:16.680 --> 00:19:21.680
Each one was more impersonal. You couldn't get credit as well. They were cheaper.

246
00:19:21.680 --> 00:19:24.680
On the other hand, you couldn't get credit. They didn't know you and that sort of stuff.

247
00:19:24.680 --> 00:19:28.680
Deliveries weren't as... They were trade-offs. A lot of people still prefer to the mom and pop stores

248
00:19:28.680 --> 00:19:33.080
was going to get cheaper credit, they can deliver it at night or whatever it is.

249
00:19:33.080 --> 00:19:37.960
But then when supermarkets came in, it was really self-service, which was a great, tremendous

250
00:19:37.960 --> 00:19:41.920
new concept after World War II, we had heard of it, you didn't have to go and ask the

251
00:19:41.920 --> 00:19:48.440
guy to get the stuff, it was a great development, and A&P fell behind on that, yeah they finally

252
00:19:48.440 --> 00:19:52.560
did it, sure, but they almost went bankrupt, in fact they reduced a lot of their stores

253
00:19:52.560 --> 00:19:55.240
because of that.

254
00:19:55.240 --> 00:20:03.240
So at any rate, so after that, after the chain stores were finally accepted and the supermarkets

255
00:20:03.240 --> 00:20:08.360
were accepted, then they started belly-aching about discount houses in the 50s and 60s.

256
00:20:08.360 --> 00:20:14.000
They used to have, they had, this is by the way, put in by the retailer associations,

257
00:20:14.000 --> 00:20:20.560
trade associations, resale price maintenance laws came in in the 1930s as an alleged anti-depression

258
00:20:20.560 --> 00:20:27.560
of Money, The Theory of Money and State, The Theory of Money and State, The Theory of Money

259
00:20:50.560 --> 00:20:55.680
This is the so-called resale price maintenance law.

260
00:20:55.680 --> 00:20:59.520
So when a manufacturer doesn't care, why should a manufacturer, if you're a sunbeam company

261
00:20:59.520 --> 00:21:02.440
selling shavers, why should you care what the retail price is as long as you get your

262
00:21:02.440 --> 00:21:05.680
price that you want from the wholesaler or the jobber?

263
00:21:05.680 --> 00:21:09.440
And so they didn't care, what happened was the organized retail associations went to

264
00:21:09.440 --> 00:21:12.920
sunbeams and said, look, we'll boycott you, we won't buy sunbeams unless you impose a

265
00:21:12.920 --> 00:21:16.160
minimum price of whatever it was, $30 or whatever.

266
00:21:16.160 --> 00:21:20.960
So in other words, the whole idea was to restrict production and raise price.

267
00:21:20.960 --> 00:21:27.960
And inefficient retailers wanted to screw the consumer by organizing a cartel and getting

268
00:21:27.960 --> 00:21:32.440
the federal government and state governments along with them to impose the cartel through

269
00:21:32.440 --> 00:21:36.640
resale price maintenance laws, which said once the manufacturer announces a price, everybody

270
00:21:36.640 --> 00:21:37.640
is committed to it.

271
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Retailers can't cut it.

272
00:21:39.520 --> 00:21:46.360
So finally what happened was that two heroic so-called discount houses in New York, Masters

273
00:21:46.360 --> 00:21:50.920
and Corvette, simply started cutting prices.

274
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They said, hell with it, we defy the law, we challenge the constitutionality of it.

275
00:21:55.240 --> 00:21:58.240
They started selling stuff way below, much cheaper, and the way they were able to do

276
00:21:58.240 --> 00:22:03.520
it was by no-frill salesmanship, of course, in other words, instead of having a salesman

277
00:22:03.520 --> 00:22:07.840
at your beck and call, whatever you want, you had to line up like you do now with, you

278
00:22:07.840 --> 00:22:37.840
you know, 47-3 photo and stuff, you just, you know what, you have to know what you want ahead of time, you're going and line up and pay for it, and so, that was, enabled them to cut the cost, to cut the price, and so they, they started undercutting, it was magnificent, everybody flocked across the Master's in Corvette, and went out to the Supreme Court, the retailers, the organized retailers fought it bitterly, they hated this thing, it was horrible, it was unfair, and blah blah blah, it's monopolistic, here's another favorite argument of these guys, they say, well look, if you allow free competition, and cartelists

279
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As I always say, if you're allowed free competition, eventually some firms will get very big and

280
00:22:41.920 --> 00:22:44.360
will put the other firms out of business and then they'll raise the price.

281
00:22:44.360 --> 00:22:51.720
In other words, their argument is to preclude the possibility of an efficient monopoly 20

282
00:22:51.720 --> 00:22:55.320
years from now, which will eventually raise price, let's enforce an inefficient monopoly

283
00:22:55.320 --> 00:22:56.320
right now.

284
00:22:56.320 --> 00:23:01.400
Let's have a government cartel forcing you to raise the price, an obviously idiotic argument

285
00:23:01.400 --> 00:23:06.880
which can only be held by somebody who's doing this to pose an inefficient cartel on their

286
00:23:06.880 --> 00:23:11.800
on their own behalf. I mean, if you look at it logically, the whole thing is idiotic.

287
00:23:11.800 --> 00:23:18.360
So it's only pushed on people who are special pleaders for this thing. So, this is their

288
00:23:18.360 --> 00:23:23.120
argument if you will. If you can't do terrible things, larger retailers will take over and

289
00:23:23.120 --> 00:23:25.880
they'll be efficient and they'll eventually raise the price. Of course, they eventually

290
00:23:25.880 --> 00:23:31.400
never come. Prices get lowered by competition. So, at any rate, this kind of masters and

291
00:23:31.400 --> 00:23:35.720
co-op that were hated by everybody, attacked by all the retailers, and finally the Supreme

292
00:23:35.720 --> 00:24:03.920
New York, by the way, are very fortunate. Most places in the country don't have these

293
00:24:03.920 --> 00:24:10.640
Discount, electronic discount places and things like that.

294
00:24:10.640 --> 00:24:14.880
So this is again an example of innovation, of retail, in this case the retail industry,

295
00:24:14.880 --> 00:24:19.360
fighting against, battling against compulsory cartels, they have to be compulsory in order

296
00:24:19.360 --> 00:24:27.280
to work at all, and breaking through this whole crust of cartellism.

297
00:24:27.280 --> 00:24:30.520
There still is, I think, I don't know how it is with vitamins now, but there used to

298
00:24:30.520 --> 00:24:34.520
There used to be a very tight anti-discounting for vitamins in the name of health.

299
00:24:34.520 --> 00:24:40.520
I remember when I was, I used to get Theragran vitamins, which were just Sqibs Theragran,

300
00:24:40.520 --> 00:24:44.520
which is multiple vitamins, of course, the list price those days might still be about 10 bucks,

301
00:24:44.520 --> 00:24:49.520
which is totally insane, so they were selling it for about $6, the market price was about $6.

302
00:24:49.520 --> 00:24:52.520
So I went into this drug store, a neighborhood drug store, and I said, I like Theragran,

303
00:24:52.520 --> 00:24:54.520
and he got a look at me and said, you live in the neighborhood.

304
00:24:54.520 --> 00:24:57.520
Strange question, I think, to ask.

305
00:24:57.520 --> 00:25:03.520
He says, yes, yes, I've seen you around. He then sold me the vitamins for $6 instead of $10.

306
00:25:03.520 --> 00:25:07.520
In other words, what he was worried about, I might be a Gestapo member, in other words,

307
00:25:07.520 --> 00:25:13.520
member of a secret police of whatever they call them for the federal food and drug,

308
00:25:13.520 --> 00:25:17.520
whatever bureau in New York regulates the retail industry, to go around and make sure

309
00:25:17.520 --> 00:25:23.520
the vitamins are no less than this price. In other words, minimum price control espionage

310
00:25:23.520 --> 00:25:30.520
and the organized agents, and the behest, of course, of the retailer, the organized retailer, the cartel, which doesn't want any given retail store to bust the price.

311
00:25:30.520 --> 00:25:38.520
So, of course, this is now busted. Nobody sells for $9. I've never seen any tariff of $9, $10. It's all about $5 or $6, so that, too, is busted.

312
00:25:38.520 --> 00:25:47.520
But it's intriguing that even in New York here we have a situation where you have to make sure the guy is safe, that I'm a neighborhood person, not some floating spy for the local bureau.

313
00:25:47.520 --> 00:25:54.480
So, anyway, this is, now of course it discounts all over in vitamins, but this is still going

314
00:25:54.480 --> 00:25:57.320
off of the liquor business, the liquor trust.

315
00:25:57.320 --> 00:26:02.520
It's been loosened a little bit recently, but basically what you have is the liquor

316
00:26:02.520 --> 00:26:11.160
industry, retail liquor store, the supply is tightly controlled.

317
00:26:11.160 --> 00:26:14.640
You have to get a license, first of all, there are no new liquor licenses, so it's very much

318
00:26:14.640 --> 00:26:22.640
There's only a fixed amount of liquor store licenses, because they don't issue any more.

319
00:26:22.640 --> 00:26:28.640
Suppose you want to open up a liquor store. You can only do it by buying some other existing liquor store's license.

320
00:26:28.640 --> 00:26:34.640
Some liquor store owner wants to retire, go out of business, or sell out. You have to buy his liquor license.

321
00:26:34.640 --> 00:26:41.640
It'll cost you many thousands of dollars, whatever it is. It's an enormous amount of money to be able to have the right to open up a liquor store.

322
00:26:41.640 --> 00:26:46.640
So, in other words, the supply of liquor stores is originally fixed. This, of course, raises the price, obviously.

323
00:26:46.640 --> 00:26:51.640
In addition to that, there's minimum distance requirements. In other words, you can't open a liquor store

324
00:26:51.640 --> 00:26:56.640
less than 100 yards or 200 yards or whatever from some other liquor store, giving this existing liquor store some

325
00:26:56.640 --> 00:27:01.640
coming geographical monopoly of three blocks or whatever. It was important in New York, three blocks is a lot.

326
00:27:01.640 --> 00:27:08.640
So, in other words, you can't invade his turf. It's a pure cartel. It's not true of any other business, of course.

327
00:27:08.640 --> 00:27:17.640
You know about the grocery store right across the street from another one, but in the case of a clothing store or whatever, in the case of liquor, however, it's specially regulated by the New York State Liquor Authority.

328
00:27:17.640 --> 00:27:31.640
And, see, you've got geographical monopoly. When I first moved into my neighborhood on the west side, there was one big liquor store here, there's another fairly large one there, and there's a teeny, lovable teeny one right here, right next door to me.

329
00:27:31.640 --> 00:27:35.280
And the teeny one was put out of business by these two guys who got together, a complainant

330
00:27:35.280 --> 00:27:37.840
of the liquor authority, they were listed on a hundred yards, whatever it is, from the

331
00:27:37.840 --> 00:27:42.240
other two, and they were put out of business, they were just, they were expelled from, ejected

332
00:27:42.240 --> 00:27:47.200
from business by the state, by the state government, at the, at the, under the lobbying of these

333
00:27:47.200 --> 00:27:48.200
two competitors.

334
00:27:48.200 --> 00:27:51.240
This is the way, this is the way, this is the welfare state in action.

335
00:27:51.240 --> 00:27:55.280
This is, this is the welfare state, this is government regulation for the common good,

336
00:27:55.280 --> 00:27:56.280
quote unquote.

337
00:27:56.280 --> 00:27:59.160
It's the government being used by these two competitors to screw their own, their third

338
00:27:59.160 --> 00:28:04.700
to your competitor, to cartelize the system, keep out competition.

339
00:28:04.700 --> 00:28:08.560
So that's the real monopoly problem, the real monopoly problem is not a falling demand curve.

340
00:28:08.560 --> 00:28:12.640
The real monopoly problem, which everybody has, the real monopoly problem is the government

341
00:28:12.640 --> 00:28:17.640
being used to restrict or eliminate competition.

342
00:28:17.640 --> 00:28:27.980
In the liquor field, by the way, you also have, of course, very high liquor taxes plus

343
00:28:27.980 --> 00:28:33.180
Liquor Import Controls, and the result of which is the price of liquor is enormously

344
00:28:33.180 --> 00:28:39.020
higher than it would be in the free market. It's incredible. The price of liquor before

345
00:28:39.020 --> 00:28:44.700
the Civil War, when extra liquor taxes came in because of the prohibitionists, a gallon

346
00:28:44.700 --> 00:28:48.500
of top scotch you can get for about a buck. And that's, of course, let's say the price

347
00:28:48.500 --> 00:28:54.100
is now eight times higher than that. You probably get a gallon of top Chivas Regal or something

348
00:28:54.100 --> 00:29:24.100
I've been talking about it for about $8, I would think, on the free market, without the taxes, I would think it would be something like that, yeah, on the free market, I'm not talking about now, I'm talking about without taxes, without import tariffs, yeah, yeah, that's it, okay, so I'll leave you with that happy thought, okay, let's take a 10-minute break, please, sir, a liquor store, liquor license is in the same status as a liquor store license,

349
00:29:24.100 --> 00:29:33.100
Same status as a tobacco farm license and also a taxi license. We got to one of my favorite examples, a great taxi caper, which is now in the news.

350
00:29:33.100 --> 00:29:45.100
If I've said this before, I'll repeat it on the taxi question. In the 1920s, there were 25,000 taxis on the streets of New York.

351
00:29:45.100 --> 00:30:08.100
And in order to get a taxi, in order to get a taxi license, you had to be licensed for this, all you needed to do was be able to show you could drive a car, so you needed a driver's license plus a car, you had to have access to a car, and then you went downtown and got a ten buck license, and then you're in business and you operate a taxi.

352
00:30:08.100 --> 00:30:19.100
In the 1930s, the number of taxis went down from 25,000 during the boom of the 20s to 11,787.

353
00:30:19.100 --> 00:30:26.100
In 1937, taxi owners in New York, the Associated Taxi Association, went to New York City and said,

354
00:30:26.100 --> 00:30:29.100
we need some help on the Great Depression, we need to be bailed out.

355
00:30:29.100 --> 00:30:34.100
And the help was that the New York City government said,

356
00:30:34.100 --> 00:30:38.500
Okay, from now on we issue no further taxi licenses.

357
00:30:38.500 --> 00:30:45.140
From that day, from 1937 until 1986, that's 39 years, no more taxi licenses have been

358
00:30:45.140 --> 00:30:46.140
issued in the city of New York.

359
00:30:46.140 --> 00:30:47.140
That's it.

360
00:30:47.140 --> 00:30:52.420
The number of taxi licenses has been frozen by divine edict in 1937 and has never increased

361
00:30:52.420 --> 00:30:53.420
since.

362
00:30:53.420 --> 00:30:54.420
There we sit.

363
00:30:54.420 --> 00:30:58.500
Greatest boom in American history, tremendous boom in income and employment, whatever.

364
00:30:58.500 --> 00:31:03.460
We still have the same number of cabs on the street now that we had in 1937, even though

365
00:31:03.460 --> 00:31:07.260
So, of course, income is going up, population in New York City is not going up, but population

366
00:31:07.260 --> 00:31:11.740
in the suburbs is going way up, there are a lot more people trying to get cabs, so you

367
00:31:11.740 --> 00:31:16.740
have then a freezing of supply at the old level and therefore can't, would have ordinarily

368
00:31:16.740 --> 00:31:20.700
of course have gone up, and so what you're really doing is you're restricting the supply

369
00:31:20.700 --> 00:31:26.100
and raising the price, keeping the supply at the 1937 level, the thing is, it's just

370
00:31:26.100 --> 00:31:29.860
saying well the supply of cars is now, or the supply of bread is now at the 1937 level

371
00:31:29.860 --> 00:31:31.180
and that's it.

372
00:31:31.180 --> 00:31:36.220
So in order to get a taxi license now, if you want to own a taxi in New York, you have

373
00:31:36.220 --> 00:31:41.360
not only to buy a car and be able to drive, you also have to buy a taxi license from some

374
00:31:41.360 --> 00:31:45.860
existing taxi owner who wants to leave the business, because you can't get any more from

375
00:31:45.860 --> 00:31:50.040
the city, that's it, frozen, 11,787.

376
00:31:50.040 --> 00:31:55.980
So there's a market, I hesitate to say free market, there's a market in taxi licenses,

377
00:31:55.980 --> 00:32:00.060
so-called medallion, which is a shield on the hood of the car.

378
00:32:00.060 --> 00:32:04.700
So if you want to own a taxi, you have to buy a license for some guys willing to retire

379
00:32:04.700 --> 00:32:07.500
and want to go into some other business, and the price has been fluctuating.

380
00:32:07.500 --> 00:32:11.940
Of course, in the 1930s, the price was somewhere near $10, there wasn't a big demand to be

381
00:32:11.940 --> 00:32:12.940
in the taxi business.

382
00:32:12.940 --> 00:32:18.780
But after World War II and the boom began, people wanted to enter it, and so the price

383
00:32:18.780 --> 00:32:27.980
– demand curve for – this is taxi licenses – supply, as Miller says, is frozen 11,787,

384
00:32:27.980 --> 00:32:28.980
so the demand fluctuates.

385
00:32:28.980 --> 00:32:33.940
It's like the art market, like the demand for Rembrandts, you know, the supply of Rembrandts

386
00:32:33.940 --> 00:32:38.260
is fixed because Rembrandt is dead, and supply of taxis is fixed because the goddamn city

387
00:32:38.260 --> 00:32:40.660
government won't issue any more licenses.

388
00:32:40.660 --> 00:32:44.860
And so we have a fluctuating demand in accordance with all sorts of things, booms and recessions

389
00:32:44.860 --> 00:32:45.860
and whatever.

390
00:32:45.860 --> 00:32:51.100
Well, the price of a taxi light, well Miller says the price of a taxi license in the mid-1980s

391
00:32:51.100 --> 00:32:52.100
is $60,000.

392
00:32:52.100 --> 00:32:53.580
He's way out of date already.

393
00:32:53.580 --> 00:32:57.100
The price of a taxi license right now on the market is $105,000.

394
00:32:57.100 --> 00:33:01.740
It means if you want to own a cab, and many people are cab drivers, there's also a good

395
00:33:01.740 --> 00:33:06.220
immigrant, a way for immigrants to start making a living here.

396
00:33:06.220 --> 00:33:10.420
As you well know, if you've seen, if you've ridden in taxis in New York, most people don't

397
00:33:10.420 --> 00:33:11.420
know English anymore.

398
00:33:11.420 --> 00:33:15.300
Most of the taxi drivers, they, huh?

399
00:33:15.300 --> 00:33:24.820
Can't drive either very well, but you have to, you have to, you have to get, the most

400
00:33:24.820 --> 00:33:28.420
The most important thing is to be able to cough up the $105,000 to buy the taxi.

401
00:33:28.420 --> 00:33:32.540
Many of these drivers, of course, are employees of fleets, but many of them, most of them

402
00:33:32.540 --> 00:33:34.420
are taxi owners.

403
00:33:34.420 --> 00:33:35.420
And so there we sit.

404
00:33:35.420 --> 00:33:41.780
You have to, the market price of a taxi license in Medan is now $105,000.

405
00:33:41.780 --> 00:33:45.620
And of course, the result of this is the tremendous shortage of cabs, in other words, the tremendous

406
00:33:45.620 --> 00:33:47.820
scarcity of cabs.

407
00:33:47.820 --> 00:33:52.340
Rates are up, the price is higher than it would have been, and the supply is way down.

408
00:33:52.340 --> 00:33:55.940
This means, of course, the taxi drivers in the saddle, just like the rent control landlord

409
00:33:55.940 --> 00:34:01.340
is or the butcher under price control, namely, that if it's raining, if it's rush hour,

410
00:34:01.340 --> 00:34:07.180
the cabs put their off-duty signs on, there's a thrust on the gut of every consumer, right?

411
00:34:07.180 --> 00:34:08.180
So-called off-duty signs.

412
00:34:08.180 --> 00:34:11.540
And that's it, you can't find a cab anyplace.

413
00:34:11.540 --> 00:34:14.380
The cab drivers don't want to go to Brooklyn, they won't go to the Bronx, they won't go

414
00:34:14.380 --> 00:34:18.880
to Harlem, they want to hang around Midtown Manhattan, where they maximize their income

415
00:34:18.880 --> 00:34:20.380
because there's no competition.

416
00:34:20.380 --> 00:34:25.060
The result of all of this was the growth of the so-called gypsy cab movement, the unlicensed

417
00:34:25.060 --> 00:34:28.980
cab, illegal cab market.

418
00:34:28.980 --> 00:34:32.700
And then the gypsy cabs became quasi-legals, and I think there's three tiers now, there's

419
00:34:32.700 --> 00:34:36.500
the gypsy cabs which are sort of legal now, there's the illegal illegals, and there's

420
00:34:36.500 --> 00:34:42.980
the legal illegals, and there's the medallion cabs, the medallion taxis are the only ones

421
00:34:42.980 --> 00:34:47.800
that can officially cruise and pick up customers.

422
00:34:47.800 --> 00:34:55.000
Other cabs have been allocated at Brooklyn and the Bronx and whatever, aside from Manhattan.

423
00:34:55.000 --> 00:35:00.840
They're basically allowed to cruise in Brooklyn and the Bronx.

424
00:35:00.840 --> 00:35:04.400
And still others can, you can call them up, you know, the radio cabs, you can call them

425
00:35:04.400 --> 00:35:06.200
up and that's okay, but they can't cruise.

426
00:35:06.200 --> 00:35:10.760
Of course in real life they do cruise, it's not illegal, like, this whole structure, this

427
00:35:10.760 --> 00:35:15.160
crazy structure of the taxi industry, all due to the fact that the licenses, no new

428
00:35:15.160 --> 00:35:39.160
The new license has been issued since 1937, for 39 years, yeah, 39 years, yeah, 49 years with no new caps factorized, every few years Mayor Koch has tried to increase the number, like let's have a hundred more, and the taxi drivers are going on strike, big hysteria, yeah, I'm not sure, what was the thing yesterday, tied up?

429
00:35:39.160 --> 00:36:02.160
What happens to taxi businesses, this happens to old monopolists in many ways, I said old monopolies are inefficient, in the case of a license, the market, and I'll go into this more when we get a little bit later on, next week or two, we get into what determines the actual market price of this kind of license.

430
00:36:02.160 --> 00:36:11.020
When you have a monopoly license of this sort, the price on the market tends to absorb a

431
00:36:11.020 --> 00:36:12.020
monopoly profit.

432
00:36:12.020 --> 00:36:17.860
In other words, if you get a big profit from owning a cab and getting a license, the price

433
00:36:17.860 --> 00:36:20.740
of the license goes up to absorb the profit.

434
00:36:20.740 --> 00:36:25.160
So that means that the current guy, a guy who spends $105,000 on a cab, he spends so

435
00:36:25.160 --> 00:36:27.480
much on a cab, he doesn't feel he's exploiting the public.

436
00:36:27.480 --> 00:36:32.360
his profit margin is pretty low because he has to, it's true he's getting monopoly profits

437
00:36:32.360 --> 00:36:35.120
because he's keeping out other cash, on the other hand he has to pay so much for the damn

438
00:36:35.120 --> 00:36:40.000
license that it absorbs his monopoly profits, so the taxi owners don't think they're exploiting

439
00:36:40.000 --> 00:36:43.640
us because they say our profits are low, we're struggling to keep alive, which is true because

440
00:36:43.640 --> 00:36:47.400
they have to pay so much for their monopoly license, the result of all this is the only

441
00:36:47.400 --> 00:36:52.560
people who really benefit from the taxi monopoly is the original guys, the guys in 1937 who

442
00:36:52.560 --> 00:36:56.760
who bought a license for $10 and sold it for $105,000.

443
00:36:56.760 --> 00:37:02.040
They are the so-called windfall gainers, the guys who hung on to that license for 30 years.

444
00:37:02.040 --> 00:37:03.120
They're in great shape.

445
00:37:03.120 --> 00:37:06.840
The guys, the newcomers, however, are no better off than anybody else.

446
00:37:06.840 --> 00:37:10.640
The result, this kind of system benefits no one and screws up a lot of people.

447
00:37:10.640 --> 00:37:11.960
In other words, the consumers are screwed.

448
00:37:11.960 --> 00:37:15.800
The people who like to enter the taxi industry and can't because they have to call for $105,000

449
00:37:15.800 --> 00:37:21.520
or borrow $105,000 to get the scratch and to get the license are hurt.

450
00:37:21.520 --> 00:37:25.280
And even the beneficiaries don't really benefit anymore. In the long run, in other words,

451
00:37:25.280 --> 00:37:28.920
even the monopolists don't benefit because their profits were absorbed in the prices

452
00:37:28.920 --> 00:37:33.000
of the license they had to buy. And yet they'll fight like hell to keep it because they have

453
00:37:33.000 --> 00:37:39.200
$105,000 tied up. In other words, they will fight like tigers to keep any more medallions

454
00:37:39.200 --> 00:37:43.000
from being issued because they're afraid a whole $105,000 will go back to $10 where it

455
00:37:43.000 --> 00:37:46.720
should be in the first place. And it's the same argument. I don't know if I mentioned

456
00:37:46.720 --> 00:37:50.280
this in this class or not, but the same argument, same thing happened under slavery before the

457
00:37:50.280 --> 00:37:56.760
Civil War. In the economics of slavery, the slave was a capital equipment. The slave master

458
00:37:56.760 --> 00:38:01.200
was getting monopoly profits. In other words, essentially, as we'll see in a week or so,

459
00:38:01.200 --> 00:38:06.120
in the free market, everybody gets a marginal productivity. Everybody gets more or less

460
00:38:06.120 --> 00:38:11.280
the wage rate is equal to marginal productivity. In the case of slavery, the slave master picked

461
00:38:11.280 --> 00:38:15.840
up all the subsistence. In other words, he collected, so to speak, the productivity and

462
00:38:15.840 --> 00:38:20.240
In other words, they pay the slave only subsistence, just enough to keep going and reproduce.

463
00:38:20.240 --> 00:38:25.240
The difference was the surplus profit, in other words, the surplus value of the exploitation

464
00:38:25.240 --> 00:38:26.240
value, so to speak.

465
00:38:26.240 --> 00:38:29.720
While the slave master, you think the slave master would be making a lot of money because

466
00:38:29.720 --> 00:38:33.720
they'd be getting these extra profits from exploiting the slaves, however, after a few

467
00:38:33.720 --> 00:38:39.160
decades what happened was the slaves were bought and sold, and so the price of the slave

468
00:38:39.160 --> 00:38:42.920
absorbed the monopoly, the slavery profits.

469
00:38:42.920 --> 00:38:50.920
The slave master had to pay so much for the slave, had so much capital tied up in the slave that he wasn't getting any extra profit. He was struggling like everybody else.

470
00:38:50.920 --> 00:38:58.920
The result of all this is that the slavery system did not benefit anybody, even the slave master, but the slave masters fought like hella-keeps because they had all this money tied up in slavery.

471
00:38:58.920 --> 00:39:07.920
It's very much like the taxi industry, of course, much more important economic consequences and political consequences under slavery, but the same economic aspect to it.

472
00:39:07.920 --> 00:39:12.440
In other words, you have an exploitative system, a monopoly type system, where you're screwing

473
00:39:12.440 --> 00:39:16.420
a whole bunch of people to get monopoly profits, and yet the monopoly profits are discounted

474
00:39:16.420 --> 00:39:20.960
away by the market, so you wind up with no extra benefits.

475
00:39:20.960 --> 00:39:24.280
So the people who benefit are the initial slave, the guys like the slave traders who

476
00:39:24.280 --> 00:39:27.160
bought the slaves over and possibly reaped a big profit.

477
00:39:27.160 --> 00:39:32.400
But after a while, the slave profits were absorbed in the price of the slave.

478
00:39:32.400 --> 00:39:37.720
So yet, of course, they fought like hella keepin', a very similar kind of system.

479
00:39:37.720 --> 00:39:41.840
Well, so every once in a while the mayor, whichever may have been saying, let's increase

480
00:39:41.840 --> 00:39:47.920
the number of, the number of licenses by 100, and a big hysteria goes up, it means you're

481
00:39:47.920 --> 00:39:49.880
loosening up this monopoly system.

482
00:39:49.880 --> 00:39:53.920
But last year, about two years ago, Koch had a pretty interesting idea, he said, well,

483
00:39:53.920 --> 00:40:00.320
here's what he proposed to do, in order to quiet down the hysterical taxi owners, give

484
00:40:00.320 --> 00:40:05.880
them a free license, in other words, a double of the amount, a double of the amount, 23,000

485
00:40:05.880 --> 00:40:06.880
and so on.

486
00:40:06.880 --> 00:40:11.560
But you give each existing license owner one more license free, and the proviso has to

487
00:40:11.560 --> 00:40:14.800
be used either by him or by somebody else within a year or two years, so in other words,

488
00:40:14.800 --> 00:40:17.800
he'll have to sell it.

489
00:40:17.800 --> 00:40:20.480
Probably these guys would have benefited, because they're getting a free $105,000 thing.

490
00:40:20.480 --> 00:40:24.800
It's true the price would have gone down from $105,000, but still and all, they probably

491
00:40:24.800 --> 00:40:25.800
would have benefited.

492
00:40:25.800 --> 00:40:31.440
They were so scared about loosening up this tight monopoly and reducing the value of the

493
00:40:31.440 --> 00:40:35.640
$105,000 value that they fought hysterically against it and finally caught trying to withdraw

494
00:40:35.640 --> 00:40:41.120
and all the suggestions, the idea of giving every existing owner a free medallion which

495
00:40:41.120 --> 00:40:42.960
has to be used.

496
00:40:42.960 --> 00:40:50.720
So this is the current situation, the current cookery thing came about, they decided a few

497
00:40:50.720 --> 00:40:58.160
years ago to issue a hundred, just a hundred, a hundred extra medallions to use experimentally

498
00:40:58.160 --> 00:41:01.680
in diesel cabs, to see how diesel cabs work, well of course what happened was these crooks

499
00:41:01.680 --> 00:41:08.120
The crooks took the hundred and each one in those days worth $60,000, $6 million and somehow

500
00:41:08.120 --> 00:41:09.760
nobody knows what happened to it.

501
00:41:09.760 --> 00:41:13.760
They got dissipated away in various crooks in the Taxi Commission.

502
00:41:13.760 --> 00:41:19.680
But anyway, this is an enormous amount of money here, $11,000 a day is $105,000 each

503
00:41:19.680 --> 00:41:22.280
with a lot of dough.

504
00:41:22.280 --> 00:41:29.040
So there's where we sit and it's interesting how the market discounts these extra profits.

505
00:41:29.040 --> 00:41:32.680
So the prices have been going way up, and of course they're all very happy about this.

506
00:41:32.680 --> 00:41:39.680
They're clinging to every buck they can in this situation.

507
00:41:39.680 --> 00:41:42.960
Most cities have one taxi monopoly or the other.

508
00:41:42.960 --> 00:41:45.040
Los Angeles, you have to be a yellow cab company.

509
00:41:45.040 --> 00:41:47.040
They have a literal monopoly.

510
00:41:47.040 --> 00:41:51.060
Only the yellow cab companies are allowed to have cabs on the street, and that's it.

511
00:41:51.060 --> 00:41:55.040
The only really free market or semi-free market taxi situation is in Washington.

512
00:41:55.040 --> 00:41:57.800
If you've ever been to Washington, it's a magnificent taxi cab.

513
00:41:57.800 --> 00:42:02.200
In a rush hour you can get a cab everywhere, it's magnificent, it's great, because there's

514
00:42:02.200 --> 00:42:05.320
free entry into the taxi business, no medallions, no nuts.

515
00:42:05.320 --> 00:42:11.400
It's true that the rates are regulated, but even so, there's a big difference.

516
00:42:11.400 --> 00:42:14.960
One of the things about the races, by the way, one of the reasons why the gypsy cabs

517
00:42:14.960 --> 00:42:21.720
are now quasi-legal, is because they don't cut the fare, in other words, they're finally

518
00:42:21.720 --> 00:42:26.520
grudgingly accepted by the medallion taxi people because they don't undercut the fare.

519
00:42:26.520 --> 00:42:30.520
If they undercut the fare, they'll probably be beaten up and there'll be war on the streets.

520
00:42:30.520 --> 00:42:36.060
But since they don't undercut the fare, they're allowed to continue under these restrictions.

521
00:42:36.060 --> 00:42:42.700
So that's the, we'll never get a really decent cab service in New York until a taxi monopoly

522
00:42:42.700 --> 00:42:43.700
is broken.

523
00:42:43.700 --> 00:42:46.780
So we get free entry in a taxi, but I doubt whatever will ever happen, we'll have to really

524
00:42:46.780 --> 00:42:47.780
buy these guys off.

525
00:42:47.780 --> 00:42:52.300
And you refuse to be bought off, even as I say, even one free medallion didn't do it.

526
00:42:52.300 --> 00:42:59.700
So, that's the current set up.

527
00:42:59.700 --> 00:43:07.300
The, by the way, buying them off, most economists say they should be bought off, it's cheaper

528
00:43:07.300 --> 00:43:10.660
for the consumer to buy them off, but in many cases, in the case of taxi people, they don't

529
00:43:10.660 --> 00:43:12.860
want to be bought off, they're afraid to be bought off.

530
00:43:12.860 --> 00:43:13.860
Yeah.

531
00:43:13.860 --> 00:43:17.860
I think I've heard a suggestion that they want to be mauled to have to be really, really

532
00:43:17.860 --> 00:43:18.860
busy.

533
00:43:18.860 --> 00:43:21.940
Yeah, because it's filled with crooks, but they'll replace it with something else, but

534
00:43:21.940 --> 00:43:30.940
The magic number of 11,787 is remaining. They're not talking about doing away with that, unfortunately.

535
00:43:30.940 --> 00:43:33.940
I'd love to see it. Maybe someday I'll be able to do it.

536
00:43:33.940 --> 00:43:41.940
But the taxi business, a vocal minority, vocal pressure group, highly politicized,

537
00:43:41.940 --> 00:43:45.940
because their whole livelihood is wrapped up in the government here and keeping their monopoly.

538
00:43:45.940 --> 00:43:50.940
That's the real problem with monopoly, once again. It's not a falling demand curve. It's this sort of stuff.

539
00:43:50.940 --> 00:43:56.940
You can't get into a taxi business unless you shell out $105,000 and somebody is already in it.

540
00:44:00.940 --> 00:44:04.940
A similar situation with medical licensing is more complicated.

541
00:44:04.940 --> 00:44:15.940
Medical and hospital licensing where the real sticking point happened, the real difference occurred in hospital licensing.

542
00:44:15.940 --> 00:44:21.940
where medical schools and hospitals were brought under severe regulation around 1910

543
00:44:21.940 --> 00:44:30.940
Abraham Flexner wrote a report on medical education in 1910

544
00:44:30.940 --> 00:44:35.940
it was sponsored by the Carnegie Foundation and the Rockefeller Foundation

545
00:44:35.940 --> 00:44:39.940
and his report was of too many doctors

546
00:44:39.940 --> 00:44:41.940
and it's true he talked a little bit about the quality of education

547
00:44:41.940 --> 00:44:42.940
Education.

548
00:44:42.940 --> 00:44:47.300
But basically he's saying that the income of each doctor is too low and should be higher

549
00:44:47.300 --> 00:44:49.460
and a way to make it higher is to restrict the entry.

550
00:44:49.460 --> 00:44:56.260
And once again, so we have a systematic situation where the supply curve is shifting to the

551
00:44:56.260 --> 00:44:57.260
left.

552
00:44:57.260 --> 00:45:01.380
There were literally half the medical schools in the country were put out of business.

553
00:45:01.380 --> 00:45:05.060
And licenses were not renewed or not issued by the state governments.

554
00:45:05.060 --> 00:45:07.700
Each state set up a medical board.

555
00:45:07.700 --> 00:45:12.460
The American Medical Association, the trade union of doctors, so to speak, was given the

556
00:45:12.460 --> 00:45:13.860
right to appoint the people.

557
00:45:13.860 --> 00:45:17.540
In other words, if you have a state photography board, who's running it?

558
00:45:17.540 --> 00:45:21.380
It's an organized photographer, and they run it in a cartelizing manner, of course.

559
00:45:21.380 --> 00:45:23.820
Why else run it?

560
00:45:23.820 --> 00:45:29.260
So each state, the hospitals and medical schools are licensed by the state, the AMA had its

561
00:45:29.260 --> 00:45:34.260
right to appoint the people, and they of course put half of the schools out of business, period.

562
00:45:34.260 --> 00:45:37.260
By doing it, in other words, they shifted the supply drastically to the left.

563
00:45:37.260 --> 00:45:41.260
The number of doctors per person is much lower in the United States than it is in most other countries.

564
00:45:41.260 --> 00:45:44.260
Much lower than it was before 1910.

565
00:45:44.260 --> 00:45:50.260
And so you push the supply curve to the left and you increase, tremendously increase, of course, the income of a physician.

566
00:45:50.260 --> 00:45:56.260
And one of the things that was done, we have a cartel.

567
00:45:56.260 --> 00:46:01.260
In other words, a medical field is an organized cartel, a compulsory cartel.

568
00:46:01.260 --> 00:46:07.260
Each state running it, a collaboration with the American Medical Association.

569
00:46:07.260 --> 00:46:11.740
What happens with the cartel is that, again, when you have a cartellist, discrimination

570
00:46:11.740 --> 00:46:12.740
comes in.

571
00:46:12.740 --> 00:46:15.260
It's very much like the butcher or the landlord.

572
00:46:15.260 --> 00:46:19.860
If you have the right to decide who should be in your apartment, you have 50 people for

573
00:46:19.860 --> 00:46:21.980
every apartment, well, then you pick the guys you like.

574
00:46:21.980 --> 00:46:25.380
You pick the race you're interested in, in favor of, or whatever.

575
00:46:25.380 --> 00:46:26.380
Same way with the medical profession.

576
00:46:26.380 --> 00:46:30.940
When the medical schools were pushed to the left and half of them were put out of business

577
00:46:30.940 --> 00:46:34.780
Business by the Government, the doctors then decided, well, we're going to keep out people

578
00:46:34.780 --> 00:46:35.780
we don't like.

579
00:46:35.780 --> 00:46:36.780
Who do they keep out?

580
00:46:36.780 --> 00:46:37.780
Blacks, women and Jews.

581
00:46:37.780 --> 00:46:41.580
These were the three major groups that were forced out of medicine.

582
00:46:41.580 --> 00:46:46.500
Before 1910, there were a lot of black medical schools, a lot of female doctors.

583
00:46:46.500 --> 00:46:50.380
They were systematically put out of business by the government, the state governments.

584
00:46:50.380 --> 00:46:54.900
All the black medical schools were put out of business being, quote, unqualified, unquote.

585
00:46:54.900 --> 00:46:59.220
Female schools, those that had female medical students were put out of business, and so

586
00:46:59.220 --> 00:47:07.980
So the whole thing shifted, and Ross basically took over the medical profession for decades.

587
00:47:07.980 --> 00:47:11.900
Interestingly enough, the people who took over, and this has been, economists have engaged

588
00:47:11.900 --> 00:47:17.780
in a study of this, in the medical profession, the most monopolistic part of the profession

589
00:47:17.780 --> 00:47:20.700
are those which are most connected with the hospitals, because the hospital is the key

590
00:47:20.700 --> 00:47:25.820
to this thing, key to the monopoly control, hospital and medical school.

591
00:47:25.820 --> 00:47:31.980
So the more hospital-oriented a physician is, the more monopolistic his occupation is.

592
00:47:31.980 --> 00:47:35.940
Surgeons, for example, are totally hospital-oriented, and surgeons are the most monopolistic.

593
00:47:35.940 --> 00:47:43.340
In other words, they charge the highest fees per income of the customer.

594
00:47:43.340 --> 00:47:48.180
For example, a dentist, dentists are not monopolistic, basically, because they're not connected with

595
00:47:48.180 --> 00:47:49.180
hospitals.

596
00:47:49.180 --> 00:47:52.020
A dentist will charge more or less the same amount than anybody for pulling a tooth.

597
00:47:52.020 --> 00:47:57.700
Surgeons, however, take a Dun & Bradstreet report on the income of a patient, and they

598
00:47:57.700 --> 00:48:00.300
charge a proportion of what they think they can get away with.

599
00:48:00.300 --> 00:48:05.220
In other words, if a person is wealthy, it's just sock him a higher fee for the same appendectomy

600
00:48:05.220 --> 00:48:06.220
or whatever.

601
00:48:06.220 --> 00:48:10.380
They can only do that because they're associated with a hospital which is basically a monopolistic

602
00:48:10.380 --> 00:48:12.220
license institution.

603
00:48:12.220 --> 00:48:20.260
So on the other hand, shrinks, mostly on hospital, more or less charge the same fee, within limits.

604
00:48:20.260 --> 00:48:23.100
Banks are basically non-monopolistic in that sense.

605
00:48:23.100 --> 00:48:25.960
They charge more or less the same fee for everybody, because they couldn't get away

606
00:48:25.960 --> 00:48:31.160
with charging more for which the wealthy personally just go to another shrink, and with inter-shrink

607
00:48:31.160 --> 00:48:35.900
competition will then do the job of making the price more or less uniform, but not with

608
00:48:35.900 --> 00:48:38.700
surgeons, because they're locked into a hospital situation.

609
00:48:38.700 --> 00:48:43.740
AMA, for example, you look at the power elite of the American Medical Association, invariably

610
00:48:43.740 --> 00:48:48.540
those who are running the association are surgeons, not internal medicine, not eye doctors

611
00:48:48.540 --> 00:48:52.580
or whatever, surgeons. The editors in the Journal of the American Medical Association

612
00:48:52.580 --> 00:48:57.020
of Surgeons, the heads of it. Why is that? It's not God ordained and it has to be surgeon.

613
00:48:57.020 --> 00:49:00.500
Surgeons are the most monopolistic. They're in with the key of the monopoly, which is

614
00:49:00.500 --> 00:49:07.340
the hospital. And one of the things that are done with the shrinkage is you're getting

615
00:49:07.340 --> 00:49:12.420
blacks, women and Jews out. You also get out competing therapies, those which don't fit

616
00:49:12.420 --> 00:49:16.100
in with orthodoxy. I'm not taking it to the stand one way or the other. I'm not a physician.

617
00:49:16.100 --> 00:49:22.100
I'm not taking a stand on therapy one way or the other. What I'm saying is, there are competing therapies. Orthodox therapy is not the only therapy.

618
00:49:22.100 --> 00:49:31.100
In recent years, there's been a lot more of this, by the way. The last 10-15 years are cropping up of unorthodox therapy because there's been more competition in the medical field.

619
00:49:31.100 --> 00:49:36.100
You notice doctors are even advertising now. It's a magnificent step. They're forced to compete a little bit.

620
00:49:36.100 --> 00:49:41.100
She was unheard of 10 years ago, 20 years ago. It's considered unethical to advertise.

621
00:49:41.100 --> 00:49:44.780
In other words, the ethics of medicine is you should never compete.

622
00:49:44.780 --> 00:49:48.700
Don't take a client away, a patient away from another doctor, because that's competition.

623
00:49:48.700 --> 00:49:51.740
In other words, it's been a forced cartel.

624
00:49:51.740 --> 00:49:54.920
It's been breaking up the last few years.

625
00:49:54.920 --> 00:49:58.420
So they put out of business competing therapies.

626
00:49:58.420 --> 00:50:06.020
In other words, there was in those days, before 1910, there were two basic, two respectable

627
00:50:06.020 --> 00:50:08.260
forms of therapy.

628
00:50:08.260 --> 00:50:14.940
What's now called medicine, which then was called allopathy, allopaths, the theory being

629
00:50:14.940 --> 00:50:20.980
that you cure diseases by massive doses of synthetic drugs to kill the germs, and other

630
00:50:20.980 --> 00:50:25.980
fields, homeopathy was considered just as respectable, I would say about one third or

631
00:50:25.980 --> 00:50:30.340
more physicians were homeopaths, homeopaths had a very different theory, their theory

632
00:50:30.340 --> 00:50:35.980
was synthetic drugs are no good, you use natural herbs and minute doses, I don't know, who

633
00:50:35.980 --> 00:50:39.980
Who knows? The thing is they had a good success rate too. Their success rate was probably

634
00:50:39.980 --> 00:50:44.460
at least as good as the allopaths. They were put out of business. Every homeopathic medical

635
00:50:44.460 --> 00:50:50.140
school was destroyed by the state government regulation after 1910. The American Medical

636
00:50:50.140 --> 00:50:56.140
Association, which were allopaths, therefore put the homeopaths out of business. In Europe,

637
00:50:56.140 --> 00:51:00.540
they still have a lot of homeopaths, a very respectable occupation. In the United States,

638
00:51:00.540 --> 00:51:04.340
however, they're put out of business by the government. There was allopathy using the

639
00:51:04.340 --> 00:51:11.460
government, the crush homeopathy, also there are other forms of PATH, natural PATH, osteopaths

640
00:51:11.460 --> 00:51:15.900
used to be illegal and now in chiropractors finally made it, but it's a long struggle

641
00:51:15.900 --> 00:51:24.580
to get legalized, also of course a lot of cancer, alleged cancer cures have been outlawed

642
00:51:24.580 --> 00:51:27.940
by the government, not on the basis that they do any harm, but on the basis that they're

643
00:51:27.940 --> 00:51:32.220
not effective, how do you know they're not effective? Well, it should be up to the patient

644
00:51:32.220 --> 00:51:41.980
There's a case on television a couple of weeks ago of Dr. Riccio Rubici, a lovable Romanian

645
00:51:41.980 --> 00:51:45.780
doctor about 85 years old, had a lot of cancer patients, doing a lot of good apparently,

646
00:51:45.780 --> 00:51:48.340
at least the patients testified to that.

647
00:51:48.340 --> 00:51:52.340
His license was taken away from him by the state government, and they said his therapy

648
00:51:52.340 --> 00:51:56.140
was not effective, quote unquote.

649
00:51:56.140 --> 00:51:59.420
The other hand, you have a lot of butchery going on by orthodox medicine, and they say,

650
00:51:59.420 --> 00:52:06.020
Sorry, that's our mistake. It was the way it is. That's even though it's not considered

651
00:52:06.020 --> 00:52:09.580
ineffective because that's the state of the art. That's the state of right, you can get

652
00:52:09.580 --> 00:52:15.300
away with it. So it seems to be a pretty run deal to outlaw a cure just because it's quote

653
00:52:15.300 --> 00:52:20.180
not effective unquote, according to the government, not according to the patient. That's a layer

654
00:52:20.180 --> 00:52:25.980
trail of an outlaw, the use of the hoxie cure, whatever these, however good or bad they are,

655
00:52:25.980 --> 00:52:27.820
should be able to take to buy them.

656
00:52:27.820 --> 00:52:32.100
Incidentally, look at the basic argument of orthodox medicine, look at the argument, they

657
00:52:32.100 --> 00:52:36.180
don't say that these cures are harmful, what they say is they're not effective and therefore

658
00:52:36.180 --> 00:52:40.120
they're wasting the patient's money, can you imagine these god damn doctors having the

659
00:52:40.120 --> 00:52:44.240
goal, the claim that other cures are wasting the patient's money, they're much cheaper

660
00:52:44.240 --> 00:52:50.420
than orthodox medicine, much cheaper, which is the big reason why they're being declared

661
00:52:50.420 --> 00:52:55.760
illegal, they're very cheap, natural herbs are cheap, the Rovitchi method is cheap,

662
00:52:55.760 --> 00:53:25.760
Laetrile is cheap, it's basically orange pits, almond pits, peach pits, apricot pits, anyway, they're fairly cheap, apricot pits are not that difficult to come by, at any rate, they're cheap, and most people, 90% of the people go to so-called quack cures, they've already gone through orthodox medicine, declared incurable, and they turn to these quack cures only as a last resort, in most cases, so there's a tremendous amount of

663
00:53:25.760 --> 00:53:37.880
So there we have it. A lot of these people, a friend of mine claims he was cured of diabetes

664
00:53:37.880 --> 00:53:44.160
by taking a homeopathic herb. And the herb of this much, like $3.50 of an herb, five

665
00:53:44.160 --> 00:53:48.080
years supply of an herb, that's it. He threw away his insulin and that was it. So it's

666
00:53:48.080 --> 00:53:53.080
much cheaper and less side effects, the boot. So at any rate, homeopathy should definitely

667
00:53:53.080 --> 00:53:59.080
should be legal, whether it's good or bad, it should be, consumers should have a right to patronize it.

668
00:53:59.080 --> 00:54:06.080
Now one, it's interesting enough, a method of the madness here, the alipass, remember,

669
00:54:06.080 --> 00:54:12.080
expressed synthetic drugs. Synthetic drugs are expensive. Synthetic drugs also have to be discovered by,

670
00:54:12.080 --> 00:54:18.080
research has to be done into them by drug companies, and were therefore particularly

671
00:54:18.080 --> 00:54:25.280
has been putting the natural herbs out of business. Remember I said the Flexner report, Abraham

672
00:54:25.280 --> 00:54:30.080
Flexner who wrote the report to change medical education in this country, was not a doctor

673
00:54:30.080 --> 00:54:35.220
and he was not an educator, oddly enough. So why did he get this big plum in signing

674
00:54:35.220 --> 00:54:40.200
on who should be out of business? His brother was Simon Flexner and was a doctor, was also

675
00:54:40.200 --> 00:54:43.960
head of the Rockefeller Institute for Medical Research. The Rockefeller Institute for Medical

676
00:54:43.960 --> 00:54:47.960
Synthetic research has been pushing ever since synthetic drug research.

677
00:54:47.960 --> 00:54:50.960
Most of their money goes into synthetic drug research.

678
00:54:50.960 --> 00:54:55.960
Synthetic drug companies are heavily invested in by the Rockefeller family.

679
00:54:55.960 --> 00:55:00.960
We have the Rockefeller drug interests making a lot of money out of synthetic drugs.

680
00:55:00.960 --> 00:55:05.960
We have the Rockefeller Foundation, allegedly impartial, objective, scientific outfit,

681
00:55:05.960 --> 00:55:10.960
pushing for outlawing of competitors to synthetic drugs.

682
00:55:10.960 --> 00:55:17.560
Rockefeller leaps the profits along with the medical cartelists at the expense of the consumer

683
00:55:17.560 --> 00:55:18.560
population.

684
00:55:18.560 --> 00:55:22.340
I'm not saying that these, this is the economics of the situation, I'm not taking a stand

685
00:55:22.340 --> 00:55:24.720
for or against any of these therapies, what I'm saying is that the consumer should be

686
00:55:24.720 --> 00:55:32.240
allowed to choose, that's the, at any rate.

687
00:55:32.240 --> 00:55:38.120
The last few years the medical monopoly has been loosened a lot, there's been a big increase

688
00:55:38.120 --> 00:55:44.640
The increase of people going to medical school, they've had to advertise, it's been loosening

689
00:55:44.640 --> 00:55:45.880
up.

690
00:55:45.880 --> 00:55:50.920
One of the reasons was the medical prices of drugs and medicine and hospitals have been

691
00:55:50.920 --> 00:55:55.880
so high that competition has been coming in, paramedics and people like that, holistic

692
00:55:55.880 --> 00:56:00.800
medicine, things are much cheaper, and finally pushed back the monopoly, stranglehold on

693
00:56:00.800 --> 00:56:05.520
medicine to some extent, not completely, but it's been a lot better than it used to be.

694
00:56:05.520 --> 00:56:11.080
I remember when I first went out to California many years ago and the dentists were advertising on the radio. It was really a culture shock, you know.

695
00:56:11.080 --> 00:56:17.160
Go to, turn the radio on, go to Dr. So-and-so, give cheap filling for ten bucks or whatever it is.

696
00:56:17.160 --> 00:56:21.980
And now, of course, there's a lot more of it. You've got a leaflet saying, go to this hospital, go to this clinic.

697
00:56:21.980 --> 00:56:30.480
But it's a good thing. It shows there's some competition at last in the medical field.

698
00:56:30.480 --> 00:56:34.360
So anyway, the monopoly problem is not

699
00:56:34.360 --> 00:56:41.240
Following a man curve, it's compulsory cartellism. I just want to say a footnote on a farm question.

700
00:56:41.240 --> 00:56:50.240
Farm price supports, which again are cartellized agriculture. You have the milk cartel, compulsory

701
00:56:50.240 --> 00:56:56.560
milk cartel, with a restriction in supply and a rise in price. While the milk people

702
00:56:56.560 --> 00:57:01.480
are still belly-aching about the price isn't high enough and it's overproduction, quote

703
00:57:01.480 --> 00:57:08.200
In order to crush the milk industry, in order to cartelize the milk industry further, the

704
00:57:08.200 --> 00:57:12.600
Federal Government has just issued a ruling, compulsory killing of a million dairy cows,

705
00:57:12.600 --> 00:57:13.600
slaughter them.

706
00:57:13.600 --> 00:57:19.360
It sounds like the early 1930s was being done right now, in the name of quote, free market,

707
00:57:19.360 --> 00:57:20.360
unquote.

708
00:57:20.360 --> 00:57:26.760
Compulsory slaughter of dairy cows is to decrease the supply of milk and push up the price.

709
00:57:26.760 --> 00:57:30.040
This is a welfare state in action, people, right?

710
00:57:30.040 --> 00:57:34.040
So the welfare of the god damn dairy interests is the expense of the rest of us.

711
00:57:34.040 --> 00:57:37.040
So interestingly enough, what's happening is, is they're killing the dairy cows.

712
00:57:37.040 --> 00:57:41.040
Usually, there are two kinds of cows, the dairy cows and the beef cattle.

713
00:57:41.040 --> 00:57:45.040
The dairy cows are milked and the beef cattle are killed for meat.

714
00:57:45.040 --> 00:57:48.040
As they're killing the dairy cows, they're selling them for meat.

715
00:57:48.040 --> 00:57:55.040
So the beef cattle industry is going crazy. They're saying, hey, hay is the biggest overproduction of cattle because there's now too much meat coming on the market.

716
00:57:55.040 --> 00:57:59.040
Meat prices are falling because there's too much cattle coming on the market.

717
00:57:59.040 --> 00:58:02.300
Stalling for stopping the slaughter of dairy cows. They don't care what they do with them.

718
00:58:02.300 --> 00:58:06.400
They're going to disappear somewhere. They don't want to compete with a beef cow on the meat market.

719
00:58:06.400 --> 00:58:12.200
Such is the situation. This is the latest development. I'll keep you apprised as the term goes on.

720
00:58:12.200 --> 00:58:13.640
Okay, enough for today.