WEBVTT NOTE Minimum Price Controls 1 00:00:00.000 --> 00:00:05.000 So now we get to the final kind of government intervention in prices, namely minimum price control. 2 00:00:10.000 --> 00:00:16.000 Price, y-axis, quantity and x-axis, falling demand curve, supply line. 3 00:00:17.000 --> 00:00:23.000 And the minimum price control, the government says thou shalt not sell a certain product or service below a certain price. 4 00:00:23.000 --> 00:00:31.000 And we're keeping it above the market equilibrium. 5 00:00:31.000 --> 00:00:39.000 When the government does that, they set up a situation where much less will be sold than is supplied. 6 00:00:39.000 --> 00:00:50.000 In other words, supply is much and quantity demand is much less because the price is higher, supply is greater than demand, and there's an unsold surplus. 7 00:00:50.000 --> 00:01:07.000 In a free market situation, with an unsold surplus, prices fall, they have to cut their prices because the surplus piles up and you wind up back here with an equating supply and demand at the market clearing price 8 00:01:07.000 --> 00:01:13.000 and you eliminate the surplus, but if the government says no, you can't do that, it's illegal to sell a product for less than this 9 00:01:13.000 --> 00:01:28.000 You then have a permanent surplus, and the surplus piles up and gets worse over time, because if anything, for the higher price, they're tempted to have more, increased production even more than that, and they have to keep buying that up or whatever. 10 00:01:28.000 --> 00:01:37.000 If you wind up with even more surpluses over time, surplus gets worse and worse as time goes on, just like a shortage gets worse and worse, with maximum price control. 11 00:01:37.000 --> 00:01:44.000 Control. There are two big examples of minimum price control, a relevant example. The first 12 00:01:44.760 --> 00:01:48.960 one we'll deal with today is the whole farm question, which has been totally screwed up 13 00:01:48.960 --> 00:01:54.920 now for about almost 60 years, and it shows no signs of improving after probably getting 14 00:01:54.920 --> 00:02:01.920 worse. And the other is minimum wage laws, we'll get to on Thursday. Basically, the way 15 00:02:01.920 --> 00:02:11.160 Basically, the way the farm situation started is that it was back in World War I. Everything 16 00:02:11.160 --> 00:02:17.160 starts with World War I, as a matter of fact. In the case of the farm question, just before 17 00:02:17.160 --> 00:02:25.440 World War I, when Europe was at war and we weren't, we came in 1917, they were blockading 18 00:02:25.440 --> 00:02:27.960 each other. In other words, the warring countries were blockading each other. They couldn't 19 00:02:27.960 --> 00:02:31.640 buy any food from each other. On the other hand, the United States was neutral, so they 20 00:02:31.640 --> 00:02:33.640 They bought a lot of food from the United States. 21 00:02:33.640 --> 00:02:43.640 So what you had was an artificial increase in the man curve for farm products, wheat, cotton, corn, that sort of stuff. 22 00:02:43.640 --> 00:02:52.640 And so, of course, a tremendous increase in farm prices and an expansion of farm production. 23 00:02:52.640 --> 00:02:59.640 And this continued during the war, when we got into the war, because then the United States government was buying stuff and shipping it abroad and so forth and so on. 24 00:02:59.640 --> 00:03:06.640 So you had, in other words, before and during World War I, an unofficial increase in farm prices and in farm production. 25 00:03:06.640 --> 00:03:10.640 The farmers never had it so good before or since, in a relative sense. 26 00:03:10.640 --> 00:03:18.640 So after the war was over, there's a big drop, of course, everybody goes back to normal. 27 00:03:18.640 --> 00:03:24.640 There's a drop in European demand for American farm production. 28 00:03:24.640 --> 00:03:31.400 the man curve goes back to before more or less and the price is full okay and so 29 00:03:31.400 --> 00:03:36.440 and since production is now here it means you have a big agricultural 30 00:03:36.440 --> 00:03:40.600 depression in the United States this happens usually after every war in World 31 00:03:40.600 --> 00:03:47.000 War one this gave rise to the farm block just after the first appearance of the 32 00:03:47.000 --> 00:03:51.520 farm block as an organized force and the farm block ever since then has been 33 00:03:51.520 --> 00:03:57.520 and trying to live the way the farmers would like to have become accustomed back before World War I. 34 00:03:57.520 --> 00:04:05.520 In other words, they wanted the same relative income, relative price structure, now they had a 1910-1914 period. 35 00:04:05.520 --> 00:04:08.520 And what they did is they called this parity. 36 00:04:08.520 --> 00:04:13.520 Half the battle in any kind of political struggle is to find a good name for what you want. 37 00:04:13.520 --> 00:04:20.520 If you want to get a monopoly privilege, you don't call it monopoly, it doesn't sound good, you call it fairness or some other crap. 38 00:04:20.520 --> 00:04:25.520 In this case, you can call it parity. Who can be against parity, right? 39 00:04:25.520 --> 00:04:40.520 So, parity is defined as the same relative price, the farm prices, relative to all other prices as existed in the 1910-1914 period, the peak in American history before and since. 40 00:04:40.520 --> 00:04:46.280 In other words, you take an index of wheat prices or cotton prices relative to other 41 00:04:46.280 --> 00:04:53.480 prices, manufactured products, labor, whatever, wage rates, and they're at peak in this period. 42 00:04:53.480 --> 00:04:57.700 So the farmers ever since then have been insisting on going back to the good old days of parity 43 00:04:57.700 --> 00:05:01.040 and getting, of course, the government to do with four of them. 44 00:05:01.040 --> 00:05:08.280 Now the thing about agriculture is the general trend in life as civilization develops, the 45 00:05:08.280 --> 00:05:16.980 The trend is away from the farm. In other words, say in 1789, when the American Republic was founded, everybody was a farmer. 46 00:05:16.980 --> 00:05:23.780 I'd say 95% of the people were farmers, and the rest of the people essentially were merchants shipping farm products. 47 00:05:23.780 --> 00:05:29.480 In other words, exporting farm products, importing manufactured goods, more or less. This is, you know, roughly true. 48 00:05:29.480 --> 00:05:38.180 So you had, you start off with a world where 95% of the people are farmers, and as civilization develops, as industry grows, services, all that sort of stuff, 49 00:05:38.180 --> 00:05:46.180 People leave the farm and go to cities and suburbs and all sorts of other places and get better jobs in other areas. 50 00:05:46.180 --> 00:05:55.180 So the trend of world history is against the farmers in a sense, not against food, but in a sense that economically you leave the farm, increase agricultural production even as you leave the farm, 51 00:05:55.180 --> 00:06:07.180 because you get better technology, farm machinery and all that sort of stuff, and ways of producing crops. You leave the farm and you do other things. 52 00:06:07.180 --> 00:06:22.180 So if you try to freeze this and say, jeez, it's a terrible thing, people leaving the farm, what you're doing is you're essentially freezing the world, trying to turn back the clock and decrease productivity, decrease technology, go back to the good old days and everybody's a farmer, it's totally nuts. 53 00:06:22.180 --> 00:06:36.180 There's no reason why the taxpayers should subsidize this and the consumer, to subsidize this kind of truly reactionary position, because the fight against modern world, against industrialization, against everything else, but it's still going on, of course. 54 00:06:36.180 --> 00:06:40.180 There's a lot going on, of course, even though right now only 6% of the population are farmers. 55 00:06:40.180 --> 00:06:45.180 6%, and for all the fuss that's made about it, you'd think the whole world is of farmers. 56 00:06:45.180 --> 00:06:47.180 And this is not only true in the United States, by the way. 57 00:06:47.180 --> 00:06:51.180 Almost every country outrageously subsidizes their own farmers, and Europe is a common market. 58 00:06:51.180 --> 00:06:54.180 It's supposed to be free trade between all the European countries. 59 00:06:54.180 --> 00:06:58.180 There's no free trade, because every country protects its own farmers to the hilt, 60 00:06:58.180 --> 00:07:01.180 keeping out cheaper and better farm products from other countries. 61 00:07:01.180 --> 00:07:07.180 Every country has this wall of protection around their own farmers. 62 00:07:07.180 --> 00:07:14.180 So the American farm situation, the farm block begins, interestingly enough, not with the farmers, 63 00:07:14.180 --> 00:07:23.180 didn't know what was going on mostly, it begins with a few people who are, number one, farm equipment manufacturers, 64 00:07:23.180 --> 00:07:34.180 Farm machinery manufacturers, who realize that if the government subsidizes a farmer, they too will be subsidized even more, as we'll see how. 65 00:07:34.180 --> 00:07:41.180 Farm machinery. These are guys who manufacture tractors and combines and all that sort of stuff. 66 00:07:41.180 --> 00:07:46.180 As you might expect, being born and bred in New York, I'm not exactly an expert in agriculture. 67 00:07:46.180 --> 00:07:51.180 So, anyway, these are farm machinery manufacturers who begin the idea of a farm block. 68 00:07:51.180 --> 00:07:59.180 The first two guys, George Peake and Hugh Johnson, wrote a book called Form Equality, Equality for Agriculture, I think in 1921. 69 00:07:59.180 --> 00:08:04.180 These guys were both, they were chairman of the board and president of the Moline Plough Company, 70 00:08:04.180 --> 00:08:09.180 which those days were the second largest farm equipment machinery manufacturers. 71 00:08:09.180 --> 00:08:13.180 They wailed about the poor dirt farmer and a lot of junk. 72 00:08:13.180 --> 00:08:17.180 The other guy, Bernard Barouf, was their mentor, was a big land speculator. 73 00:08:17.180 --> 00:08:21.700 In other words, he bought up a lot of farmland and then 74 00:08:21.700 --> 00:08:24.100 pushed for subsidies to farmers so that his 75 00:08:24.100 --> 00:08:26.620 land, the price of his land would go way up. 76 00:08:26.620 --> 00:08:30.340 This is essentially, these are the guys who begin the agitation for the farm, of course, 77 00:08:30.340 --> 00:08:34.620 as they keep agitating, of course the farmers say, this is great stuff, you know, organized farm block 78 00:08:34.620 --> 00:08:37.780 where I can Farm Bureau, Grange, that sort of thing. 79 00:08:37.780 --> 00:08:41.820 So anyway, during the 1920s, they keep pushing for subsidies to poor, the poor farmers. 80 00:08:41.820 --> 00:08:45.860 Instead of saying, all right, let the farmer get out, in other words, the farmer's producing more than he was before, 81 00:08:45.860 --> 00:08:48.860 cut back and leave the farm and all that sort of stuff. 82 00:08:48.860 --> 00:08:51.860 And by the way, leaving the farm doesn't mean that at the age of 60 you have to leave the farm. 83 00:08:51.860 --> 00:08:55.860 It almost always happens as the sons grow up or daughters grow up. 84 00:08:55.860 --> 00:09:01.860 The sons say, okay, Pop, I'm sorry, I feel better opportunities in New York or in California or something, 85 00:09:01.860 --> 00:09:05.860 and they leave the farm. This is basically what happens, a new generation coming up. 86 00:09:05.860 --> 00:09:09.860 So it's always been that way. They say it's been that way since 1789, 87 00:09:09.860 --> 00:09:12.860 except now in the 1920s we begin an agitation to try to stop it. 88 00:09:12.860 --> 00:09:25.860 1929, Herbert Hoover becomes president. Herbert Hoover was committed to the farm block. He said if he gets to be president, the first thing he'll do with the Institute of Farm Price Support Program, which he did. 89 00:09:25.860 --> 00:09:36.860 In March 1929, the infamous Federal Farm Board was created. This is the first farm block, farm price support program. 90 00:09:36.860 --> 00:09:46.860 March 29, done before the Depression. I don't think this is a response to the 1929 Depression hit in October, and this is before that. 91 00:09:46.860 --> 00:09:51.860 This attempted to be a permanent part of American policy, which of course, unfortunately, it became. 92 00:09:51.860 --> 00:09:56.860 The idea is this, how do you raise the prices? Here's the price of wheat. 93 00:09:56.860 --> 00:10:01.860 They started with wheat, which has always been the biggest politically powerful part of agriculture. 94 00:10:01.860 --> 00:10:07.860 Now, of course, the farm price support program, especially with almost everything, with any crop you can think of, 95 00:10:07.860 --> 00:10:16.860 is supposed to be cartelization, marketing orders, limiting production, and aqueous control, and all that sort of stuff. 96 00:10:16.860 --> 00:10:19.860 But at any rate, it starts with wheat and cotton, especially with wheat. 97 00:10:19.860 --> 00:10:27.860 The idea is you create a federal farm board, which, so this starts the whole policy, 98 00:10:27.860 --> 00:10:42.860 Which is supposed to buy up a lot of wheat, if you buy up wheat you raise the price, otherwise you add to the regular demand by consumers and so forth, you add the federal government which buys up stuff and increases the price to push the price up to whatever the farmers want. 99 00:10:42.860 --> 00:10:54.860 So they did that, they did that from, by the way, the head of the federal farm board, the federal farm board consisted of a bunch of people, representatives of organized agriculture, wheat farmers, apple farmers in New York, things like that. 100 00:10:54.860 --> 00:11:06.860 But the head of it was Alexander Legge, who was the chairman of the board of International Harvester, which of course was the world's foremost farm equipment manufacturing company. 101 00:11:06.860 --> 00:11:09.860 So that's sort of like International Harvester. 102 00:11:09.860 --> 00:11:16.860 Not exactly a dirt farmer, Alexander Legge, probably never saw a farm, at any rate, head of International Harvester. 103 00:11:16.860 --> 00:11:23.860 So they buy up wheat, but see the problem is, here's the wheat, Federal Farm Board's stucco has all this huge accumulation of wheat, what are they going to do with it? 104 00:11:23.860 --> 00:11:30.860 It's hanging over the market like a sword of Damocles, and the market's worried about the fact that if they ever sell this stuff, the price is going to go down again. 105 00:11:30.860 --> 00:11:37.860 And so, as a result, nobody wanted to buy wheat. None of the speculators are worried because they're afraid that the government sells the wheat to be out of luck. 106 00:11:37.860 --> 00:11:47.860 And so the price goes pushed up a little bit and goes down again immediately. They couldn't do it. They couldn't just push up, what are they going to do with all this excess wheat or excess cotton? 107 00:11:47.860 --> 00:11:56.860 And also they found out that by trying to raise the price of wheat, they stimulated further wheat production, which made the problem even worse. 108 00:11:56.860 --> 00:12:10.860 And of course when the Depression hit, it's even more so, because the Depression, the oil prices tend to fall, and they're trying to push up wheat prices in the face of all this general price collapse. 109 00:12:10.860 --> 00:12:17.260 So, finally, by the end of the Hoover administration, by about 1932, they realized the only way 110 00:12:17.260 --> 00:12:23.300 to try to raise farm prices in a quasi-permanent manner is to organize the farmers as a cartel. 111 00:12:23.300 --> 00:12:30.900 In other words, they went, the Secretary of Agriculture went and told the farmers, campaigned 112 00:12:30.900 --> 00:12:33.780 all over the country, even his agents and so forth, and they told the farmers this, 113 00:12:33.780 --> 00:12:38.220 they hold meetings of farmers, tobacco farmers, wheat farmers, cotton farmers, milk farmers 114 00:12:38.220 --> 00:12:42.420 and all that. They said, look, explain to them economics and situation. They said, if 115 00:12:42.420 --> 00:12:48.340 all of you cut production, if you voluntarily cut production, let's say, by 20%, prices 116 00:12:48.340 --> 00:12:53.220 will go up 30% or 40% and you'll all benefit. In other words, he's telling them that the 117 00:12:53.220 --> 00:12:57.980 demand curve for their product is inelastic. It probably was. I mean, there's no proof 118 00:12:57.980 --> 00:13:02.880 for it. He was probably right. So the demand curve for wheat or cotton or oats or whatever 119 00:13:02.880 --> 00:13:07.140 was inelastic. Therefore, if you all band together and cut production by 10%, prices 120 00:13:07.140 --> 00:13:13.140 The prices go up by 30% or whatever. In other words, the total revenue increase, you can all share the benefits. 121 00:13:13.140 --> 00:13:17.140 Now, of course, who loses by this? Who loses? The consumer loses. 122 00:13:17.140 --> 00:13:21.140 The consumer now has to pay a higher price for a lower product. 123 00:13:21.140 --> 00:13:25.140 The suckers, especially during the Depression, everybody was poor. 124 00:13:25.140 --> 00:13:33.140 We now have to pay a much higher price for less wheat, less cotton, fewer pigs, that sort of thing, fewer cattle. 125 00:13:33.140 --> 00:13:43.140 The farmers would benefit, consumers would lose, and taxpayers would lose insofar as they have to buy up and spend a lot of money buying this stuff up, as the Federal Farm Board would say. 126 00:13:43.140 --> 00:13:54.140 So, they told the farmers this. They said, okay, remember, cut production next year by 10% or 15%, whatever this thing is, and prices will go up double, and you'll be much better off. 127 00:13:54.140 --> 00:14:01.140 Each farmer then went back to his own home and talked to himself. Farmers are not stupid, especially about their own pocketbook. 128 00:14:01.140 --> 00:14:09.140 He said, look, if these suckers out there, they're going to cut their prices, cut production, raise prices, I'm going to double my production and take advantage of the higher price, right? Of course. 129 00:14:09.140 --> 00:14:13.140 In other words, each farmer is going down his own main curve, so to speak. 130 00:14:13.140 --> 00:14:16.140 As a result of that, of course, instead of production going up, going down, it went up. 131 00:14:16.140 --> 00:14:19.140 They're worse off than they were before. 132 00:14:19.140 --> 00:14:22.140 Again, demonstrating that cartels don't work. 133 00:14:22.140 --> 00:14:25.140 I'm going to repeat this later on in the course when I get to monopolies and cartels. 134 00:14:25.140 --> 00:14:28.140 Cartels don't work unless the government enforces it. 135 00:14:28.140 --> 00:14:31.140 Voluntary cartels don't work, because everybody will say to themselves, 136 00:14:31.140 --> 00:14:35.140 aha, I'm going to take advantage and increase my production while the other suckers cut theirs. 137 00:14:35.140 --> 00:14:38.140 A good, solid American trait. 138 00:14:38.140 --> 00:14:43.140 So, then they started, the organized farmers started with random violence. 139 00:14:43.140 --> 00:14:46.140 For example, tobacco crops. 140 00:14:46.140 --> 00:14:50.140 The same thing happened with tobacco. They said, well, you cut your production by 10 percent, 141 00:14:50.140 --> 00:14:53.140 tobacco prices go up by 20 percent, each guy increases tobacco production. 142 00:14:53.140 --> 00:14:56.140 Tobacco farmers started some Ku Klux Klan activities. 143 00:14:56.140 --> 00:15:00.140 In fact, they were the Ku Klux Klan, usually, in North Carolina and so forth. 144 00:15:00.140 --> 00:15:04.140 They went and started burning tobacco fields, and they felt the guy increased his production. 145 00:15:04.140 --> 00:15:10.140 There was a lot of that. On the other hand, first it's illegal, and it's random, and it's not systematic, to say the least. 146 00:15:10.140 --> 00:15:18.140 They also did that with milk. They dumped out milk trucks, and they felt it was going beyond their informal milk quota. 147 00:15:18.140 --> 00:15:22.140 They went and dumped the trucks out and dumped the milk out on the road. 148 00:15:22.140 --> 00:15:28.220 These things were random violence and obviously were not systematic and therefore not successful. 149 00:15:28.220 --> 00:15:33.220 So by the end of the Hoover administration, the farm block and the Hoover administration 150 00:15:33.220 --> 00:15:34.220 itself came to inclusion. 151 00:15:34.220 --> 00:15:36.020 The only thing that would work was government coercion. 152 00:15:36.020 --> 00:15:40.140 In other words, the government has to force the farmers, quote, for their own good, unquote, 153 00:15:40.140 --> 00:15:41.940 to cut production. 154 00:15:41.940 --> 00:15:46.460 So it forced them into a cartel, very much like Bismarck in Germany forced the German 155 00:15:46.460 --> 00:15:47.940 industry into a cartel. 156 00:15:47.940 --> 00:16:01.940 So once again, what's happening then is he's forcing the cut production means that individual farmers might do better on their own or forced to go along with this general process of monopoly and chapping the consumer. 157 00:16:01.940 --> 00:16:11.940 So when Roosevelt came in in 1933, this is exactly what he did, he took the farm program and systematically employed government coercion to try to force farmers to grow less. 158 00:16:11.940 --> 00:16:17.940 Setting out the AAA, the American Agricultural Adjustment Administration. 159 00:16:17.940 --> 00:16:21.940 Official name of it. 160 00:16:21.940 --> 00:16:25.940 A vast bureaucracy in the Department of Agriculture that 161 00:16:25.940 --> 00:16:29.940 trying to force farmers to setting maximum quotas 162 00:16:29.940 --> 00:16:33.940 to force farmers to cut production so they can raise price and all benefit by the cartel. 163 00:16:33.940 --> 00:16:36.940 That was the concept. 164 00:16:36.940 --> 00:16:45.940 This is pretty outrageous, for example, a famous example. They try to force the farmers to cut their pig production by one-third, the number of pigs they raise. 165 00:16:45.940 --> 00:16:58.940 In the middle of the Depression, lots of people were starving in the cities. Here they're organizing agriculture in the name of a, quote, welfare state, which is a New Deal alleged contribution of the American economy, to cut production and raise prices while people were starving in the cities. 166 00:16:58.940 --> 00:17:04.940 I don't call that a welfare in any true sense, a welfare system. This is a welfare state in action. 167 00:17:04.940 --> 00:17:12.780 Anyway, so they figured, however, they couldn't, it would be difficult to cut production directly. 168 00:17:12.780 --> 00:17:16.740 To cut production, which they're doing now in a lot of cases, however, tobacco and also 169 00:17:16.740 --> 00:17:21.300 the development of peanuts, the cut production means you have to police everybody's output 170 00:17:21.300 --> 00:17:25.860 after some kind of way of policing marketing to make sure the Zeke Jones farmer doesn't 171 00:17:25.860 --> 00:17:27.300 produce more than his quota. 172 00:17:27.300 --> 00:17:31.740 They figured a way, an easier way to do this is to cut his acreage, because the acreage 173 00:17:31.740 --> 00:17:32.740 is visible. 174 00:17:32.740 --> 00:17:41.240 The Department of Agriculture county agent can drive around the county and find out how many acres Zeke Jones is cultivating wheat. Very easy to see. 175 00:17:41.240 --> 00:17:51.240 So acreage is a visible thing. Instead of having production quotas, cutting production by a certain amount, they can force them to cut acreage because it's more easy to enforce. 176 00:17:51.240 --> 00:17:55.240 So they put on acreage control, maximum acreage. 177 00:17:55.240 --> 00:18:02.240 So in other words, maximum acreage quotas. 178 00:18:02.240 --> 00:18:09.740 So, let's say, here's Zeke Jones, wheat farmer in Kansas, and he's, he's, say, 100 acres devoted to wheat. 179 00:18:09.740 --> 00:18:16.740 They tell him, everybody's got to cut their wheat acreage by 20 percent, so you have to take 20 acres out of production, and only have 80 acres worth of wheat. 180 00:18:16.740 --> 00:18:23.240 By doing that, they thought they would cut production by 20 percent. You cut acreage by 20 percent, you cut production by 20 percent, right? Wrong. 181 00:18:23.240 --> 00:18:30.240 Uh, that's not the way it worked. The farmers, indeed, obeyed the law in most cases to cut their acreage. 182 00:18:30.240 --> 00:18:35.240 However, farmers are smart and so here's what we're going to do. They're forcing us to cut acreage. 183 00:18:35.240 --> 00:18:39.240 What we'll do is we'll take our 20 lousiest acres because acres are not all the same. 184 00:18:39.240 --> 00:18:44.240 One acre is not the same as every other acre. Take your rocky soil, stuff that's no damn good anyway. 185 00:18:44.240 --> 00:18:49.240 Take that out of production and you concentrate all your best efforts on the 80 acres. 186 00:18:49.240 --> 00:18:54.240 You take the 80 best acres and you mechanize and then you use fertilizer and irrigate. 187 00:18:54.240 --> 00:18:57.240 That's exactly what they did. They wound up producing more than they did before. 188 00:18:57.240 --> 00:19:02.080 before more of the 80 acres produced 100 acres so this means here's the 189 00:19:02.080 --> 00:19:15.000 government trying to push farm prices up and a little clearer here and and then 190 00:19:15.000 --> 00:19:19.520 and so they they kind of they have acreage but they wind up a lot with all 191 00:19:19.520 --> 00:19:24.200 the stuff being produced more being produced they're out here now and the 192 00:19:24.200 --> 00:19:29.200 The government's got to buy up all this stuff. The government's committed to pushing prices up to here. 193 00:19:29.200 --> 00:19:33.200 So the government, the Department of Agriculture, buys up its coal loans, but it's really buying up. 194 00:19:33.200 --> 00:19:37.200 It's buying up all the excess amount that drives it to push the prices up to here. 195 00:19:37.200 --> 00:19:42.200 So instead of having the farmers cutting production, they're cutting increase production, 196 00:19:42.200 --> 00:19:45.200 and the Department of Agriculture has to buy up even more. 197 00:19:45.200 --> 00:19:50.200 Storing all sorts of useless wheat that's been producing, cotton and cheese nowadays and all that sort of stuff, 198 00:19:50.200 --> 00:19:57.200 and storing it in bins somewhere and just letting them rot, refrigerating them, just keeping them there for almost forever. 199 00:19:57.200 --> 00:20:03.200 So this is essentially what's happened for the last 50 years, in one form or another, different variations. 200 00:20:03.200 --> 00:20:08.200 It's more than that though, it's even crazier than that. 201 00:20:08.200 --> 00:20:17.200 The Department of Agriculture, one division of the Department of Agriculture, is trying to pay the farmers, in other words, subsidizing them to grow less. 202 00:20:17.200 --> 00:20:23.720 and buying up all this stuff and raising the price and getting it to grow less. 203 00:20:23.720 --> 00:20:27.000 Another division of Department of Agriculture at the same time is subsidizing the farmers 204 00:20:27.000 --> 00:20:34.760 to grow more, subsidizing irrigation, a huge amount of subsidized irrigation now and before, 205 00:20:34.760 --> 00:20:41.680 even more so now, but subsidizing fertilizers, subsidizing all sorts of agricultural techniques 206 00:20:41.680 --> 00:20:45.640 and subsidizing them with rural electrification to electrify every farm. 207 00:20:45.640 --> 00:20:50.080 So on the one hand, you have the Department of Agriculture subsidizing farmers to grow 208 00:20:50.080 --> 00:20:56.600 more, subsidizing with cheap electricity, cheap water, that sort of stuff, on the other 209 00:20:56.600 --> 00:20:58.600 hand, subsidizing them to grow less. 210 00:20:58.600 --> 00:21:03.880 Now economists would call this an irrational policy, the standard economic discussion was 211 00:21:03.880 --> 00:21:04.880 irrational because it's contradictory. 212 00:21:04.880 --> 00:21:08.320 If you're looking at it from a realistic point of view, it's not irrational from the point 213 00:21:08.320 --> 00:21:10.160 of view of two people, two sets of people. 214 00:21:10.160 --> 00:21:13.360 From the point of view of farmers, they're in great shape, they're getting paid to grow 215 00:21:13.360 --> 00:21:15.360 less and they're also getting paid to grow more. 216 00:21:15.360 --> 00:21:18.800 What better shape you'd be in than if you were a farmer? 217 00:21:18.800 --> 00:21:21.760 And also from the point of view of the Department of Agriculture, they're in great shape. 218 00:21:21.760 --> 00:21:27.120 Their bureaucracy is expanding like mad, with two huge bureaucratic empires, one wing down 219 00:21:27.120 --> 00:21:29.600 the hall subsidizing farmers to grow less, the other wing to grow more. 220 00:21:29.600 --> 00:21:31.680 They're in great shape, too. 221 00:21:31.680 --> 00:21:32.680 Who's getting screwed by this? 222 00:21:32.680 --> 00:21:36.280 The taxpayers and the consumers, plus the economy as a whole, of course, looking at 223 00:21:36.280 --> 00:21:38.920 it from the point of view of a kind of rational system. 224 00:21:38.920 --> 00:21:42.120 But it's not irrational from the point of view of the farmers and the Department of Agriculture 225 00:21:42.120 --> 00:21:47.920 But those two groups benefit at the expense of the rest of us, is really what this is. 226 00:21:47.920 --> 00:21:51.640 Right now, for example, with the water, I think I might mention with the so-called water shortage, 227 00:21:51.640 --> 00:21:57.680 the water system in the West, where there's very little amount of water to begin with, 228 00:21:57.680 --> 00:22:03.080 the government's growing huge dams, building huge dams, subsidizing farmers with cheap 229 00:22:03.080 --> 00:22:04.080 water. 230 00:22:04.080 --> 00:22:05.920 It's a very high cost to the taxpayer. 231 00:22:05.920 --> 00:22:10.200 The latest Central Arizona project, I think it's costing the taxpayers three times as 232 00:22:10.200 --> 00:22:13.760 as much as they charge the farmers for water, and it was very, very cheap water, wasting 233 00:22:13.760 --> 00:22:18.280 a huge amount of water, and then, because water is scarce there, artificially making 234 00:22:18.280 --> 00:22:22.840 the price of water low, and forcing the farmers to use it as fast as possible, the farmers 235 00:22:22.840 --> 00:22:28.000 then grow a lot of crops, cotton, wheat, etc., which then the government buys up because 236 00:22:28.000 --> 00:22:30.840 they want to raise the price, in other words, they subsidize the farmers to grow more so 237 00:22:30.840 --> 00:22:35.720 the government can buy them up because they want them to grow less, and you're totally 238 00:22:35.720 --> 00:22:42.180 Any nuts from any point of view except that of a farmer and a farmer of agriculture. 239 00:22:42.180 --> 00:22:48.180 So that's the basic policy, you know, there have been certain variations over the years. 240 00:22:48.180 --> 00:22:58.720 For one thing, as with the energy question, as with oil, as the farm price went up, permanently, 241 00:22:58.720 --> 00:23:02.480 it means that people started importing more farm products from the Bruin, obviously. 242 00:23:02.480 --> 00:23:06.920 It means that now American wheat or cotton or peanuts is much more expensive than European 243 00:23:06.920 --> 00:23:07.920 or South American. 244 00:23:07.920 --> 00:23:13.920 And then they start moving to prohibit exports or tariffs, high tariffs or quotas on imports 245 00:23:13.920 --> 00:23:15.640 or saying Argentinian meat is diseased. 246 00:23:15.640 --> 00:23:18.760 That's a big thing, by the way, is importing meat. 247 00:23:18.760 --> 00:23:27.040 First you artificially jack up meat prices by farm price allocations and controls, prices 248 00:23:27.040 --> 00:23:31.040 of pork and beef, et cetera, and then people start importing more beef, let's say, from 249 00:23:31.040 --> 00:23:37.040 And then you say, oh, it's diseased. Create a phony disease scare and ban the imports of foreign meat. 250 00:23:37.040 --> 00:23:45.040 So all these things then are a way of forcing the cartel for foreign products as well as American. 251 00:23:45.040 --> 00:24:00.040 And sometimes when the world price goes up, in other words, sometimes during the 60-year period, agriculture prices are high and then we unload the surplus. 252 00:24:00.040 --> 00:24:09.040 And in most cases, most of the time, the American price has been way above the world market price, and so we're stuck with these piling up. 253 00:24:09.040 --> 00:24:17.040 What do we do with the surplus? Well, who knows? They get very embarrassing as they pile up. They cost money to the taxpayer and to the consumer. 254 00:24:17.040 --> 00:24:25.040 Sometimes they're dumped abroad. One of the reasons for the food stamp program is that they're able to get rid of the surplus is through the food stamp program. 255 00:24:25.040 --> 00:24:29.040 The major lobbyists for food stamps are not the welfare people. 256 00:24:29.040 --> 00:24:34.040 They're the farm block. The farm block wants another kind of guaranteed income for the farmers, 257 00:24:34.040 --> 00:24:38.040 a guaranteed way of siphoning the stuff, where they can build out more surpluses. 258 00:24:38.040 --> 00:24:45.040 The major lobbyists for the farm program are, one, as I mentioned, the farm equipment manufacturers, 259 00:24:45.040 --> 00:24:47.040 farm machinery manufacturers. 260 00:24:47.040 --> 00:24:53.040 The big farmers, the small farmers, don't really care that, many of the small farmers are hurt by the program because 261 00:24:53.040 --> 00:24:59.040 The subsidy is per bushel of wheat or per pound of cotton. The subsidy is per pound rather than an income subsidy. 262 00:24:59.040 --> 00:25:04.040 The small farmers usually lose out because they have to cut their acreage. They can't mechanize that much. 263 00:25:04.040 --> 00:25:12.040 And the wheat, and the big farmers, in the wheat field, wheat situation, there's a so-called wheat democracy. 264 00:25:12.040 --> 00:25:17.040 Every three years, I think it is, the farmers can get together and vote on whether they should continue the farm price support program. 265 00:25:17.040 --> 00:25:20.040 That's great. We can't vote. We're not allowed to vote on this. 266 00:25:20.040 --> 00:25:27.040 I'm not allowed to vote on this, there's a referendum for wheat farmers, should they continue this outrageous subsidy of wheat farmers, and actually they always vote for it. 267 00:25:27.040 --> 00:25:36.040 Except the small farmers are not allowed to vote, those who have less than a hundred acres, or less than a thousand acres, whatever they say, I think it's a hundred acres, can't vote, because they probably will vote against the program. 268 00:25:36.040 --> 00:25:43.040 In other words, only large farmers can vote, and so then actually the large farmers and middle-sized farmers always vote to continue this thing. 269 00:25:43.040 --> 00:25:56.040 Another thing that happens is this, that when they pour in fertilizer and irrigation, et cetera, and a mechanization of the extra 80 acres, they mechanize more than they would have with 100 acres. 270 00:25:56.040 --> 00:26:01.040 When they mechanize more than they would have, it especially helps the farm equipment manufacturers, to see how this works. 271 00:26:01.040 --> 00:26:10.040 In other words, you're forced to cut out 20 acres, so you take the other 80 acres, you mechanize it, so you maximize it, intensively produce on the 80 acres that are left. 272 00:26:10.040 --> 00:26:15.040 This tremendously helps the farm equipment, where farmers can buy a lot of farm machinery. 273 00:26:15.040 --> 00:26:20.040 This is one of the big reasons, which is only discovered recently by historians. 274 00:26:20.040 --> 00:26:26.040 One of the big reasons for the big migration of blacks from the south to the north in the early 1930s. 275 00:26:26.040 --> 00:26:32.040 Namely, most of the blacks in the rural areas and the cotton areas in the south were sharecroppers. 276 00:26:32.040 --> 00:26:38.040 In other words, they were sort of tenants on large wheat farms. 277 00:26:38.040 --> 00:26:42.840 and they would get, they would pay a certain amount of the production to the wheat farmer 278 00:26:42.840 --> 00:26:46.840 in other words, they pay in sort of proportion of the wheat that they produce 279 00:26:46.840 --> 00:26:49.840 so the first thing they did when the farmers decided they had to mechanize 280 00:26:49.840 --> 00:26:51.840 their acreage was cut 281 00:26:51.840 --> 00:26:53.840 to kick out the sharecroppers and then mechanize 282 00:26:53.840 --> 00:26:55.840 the other 80 acres 283 00:26:55.840 --> 00:27:01.840 so all of a sudden, a lot of these black cotton farmers in the south were suddenly unemployed 284 00:27:01.840 --> 00:27:04.840 suddenly tossed into a labor market and they migrated to the north 285 00:27:04.840 --> 00:27:20.840 And so, a lot of them, of course, were in very desperate straits, and this starts a lot of the whole welfare problem, the migration of Northland welfare problem, created, in other words, by the New Deal Agricultural Program, which was supposed to bring us a welfare state and help all mankind. 286 00:27:20.840 --> 00:27:37.840 The other big lobbyist for this program, a high-tech heating system here, the other big lobbyist for this program are the warehouse owners. 287 00:27:37.840 --> 00:27:49.840 The government stores all the surplus stuff in warehouses, almost all of them private warehouses, they're not government-owned warehouses, they contract in private warehouses. 288 00:27:49.840 --> 00:27:57.840 If you own a private grain elevator, which is the term used for wheat warehouse, you're in great shape. You have like a steady contract forever. You always always be government surpluses. 289 00:27:57.840 --> 00:28:01.840 If your brother-in-law happens to be a big shot in the power of agriculture, you have it made for life. 290 00:28:01.840 --> 00:28:06.840 You have like a permanent contract with two million bushels of wheat to be stored in your damn warehouse. 291 00:28:06.840 --> 00:28:11.840 They're called grain elevators by the way because they're very tall for various reasons. 292 00:28:11.840 --> 00:28:25.920 So the warehouse owners lobby intensively in their areas for the farm program, the big 293 00:28:25.920 --> 00:28:30.080 farmers and the farm machinery manufacturers, these are the three major groups. 294 00:28:30.080 --> 00:28:34.720 First of all, when they want to testify for Congress, they always trot out the poor dirt 295 00:28:34.720 --> 00:28:35.720 farmer. 296 00:28:35.720 --> 00:28:41.360 They don't talk about the warehouse owners and large farmers. 297 00:28:41.360 --> 00:28:46.760 So what's happened, oh, the next big innovation, this thing came in the Eisenhower administration, 298 00:28:46.760 --> 00:28:50.520 next big step forward or backward, the farm program. 299 00:28:50.520 --> 00:28:54.360 What happened was, the question is, see, what happens to the 20 acres? 300 00:28:54.360 --> 00:28:58.200 If they can't grow wheat or cotton on it, they grow something else, soybeans, let's say, 301 00:28:58.200 --> 00:29:00.120 or turnips, whatever it is. 302 00:29:00.120 --> 00:29:09.120 And so, eventually, this means, this is our substitutability here, you have a, here's 303 00:29:09.120 --> 00:29:17.120 Here's the wheat, let's say. So wheat is forced up and the acreage is forced out or whatever. 304 00:29:17.120 --> 00:29:23.120 So the acreage control is imposed. The 20 acres are then devoted, let's say, to soybeans. 305 00:29:23.120 --> 00:29:29.120 That means there's an increase in soybean production. Supply of soybeans increases. 306 00:29:29.120 --> 00:29:37.120 So it means wheat prices are riven up, although it's only acreage that's full, really, not production. 307 00:29:37.120 --> 00:29:42.120 and Supply of Soybeans drugs up, the price of soybeans full, so the farmers started a bellyache. 308 00:29:42.120 --> 00:29:49.120 This is a terrible thing because I think there's a fall in the price of soybeans and turnips and all these things which they're using these 20 acres for. 309 00:29:49.120 --> 00:29:59.120 So the Eisenhower administration has another big advance in this whole nonsense, creating a new concept called the Soil Bank. 310 00:29:59.120 --> 00:30:03.120 Again, a great term, Soil Bank, sounds terrific, right? 311 00:30:03.120 --> 00:30:10.860 The Soil Bank is this, in order to prevent these red soybeans or turnips from being produced, 312 00:30:10.860 --> 00:30:14.540 you pay the farmers more if they keep this whole lot of production, if they just keep 313 00:30:14.540 --> 00:30:16.880 the land idle, if they don't grow anything on it. 314 00:30:16.880 --> 00:30:21.320 It's called a Soil Bank, keep the soil with nothing on it and nothing growing in it. 315 00:30:21.320 --> 00:30:26.040 In other words, you pay the farmers, the great innovation of the Eisenhower administration, 316 00:30:26.040 --> 00:30:29.560 you pay the farmers not to do anything at all, not to grow anything. 317 00:30:29.560 --> 00:30:35.560 And they still do that, of course. Anytime they have an innovation, it's a permanent part of the American soil heritage. 318 00:30:35.560 --> 00:30:42.560 So this, of course, is a great deal if you can swing it. It would be great if I could be paid a lot of money not to teach economics. 319 00:30:42.560 --> 00:30:45.560 If you guys would be paid a lot of money not to be engineers. 320 00:30:45.560 --> 00:30:51.560 And you can see how the world economy would progress with this. 321 00:30:51.560 --> 00:30:58.560 And so this is still there. I mean, they're still taking land out of production and just making it sit there 322 00:30:58.560 --> 00:31:07.440 because to make sure that all prices could be pushed up instead of just some prices. 323 00:31:07.440 --> 00:31:10.120 During the Nixon administration, it was talked about eliminating the thing of farm price 324 00:31:10.120 --> 00:31:11.120 support all together. 325 00:31:11.120 --> 00:31:15.360 They actually passed a law, sort of a three-tier law or something, a stopgap, but that's also 326 00:31:15.360 --> 00:31:16.360 still in... 327 00:31:16.360 --> 00:31:19.920 It's got to be a very complex legal structure, where all these things get lardered on top 328 00:31:19.920 --> 00:31:21.360 of each other. 329 00:31:21.360 --> 00:31:27.000 But anyway, for a while there, when world agriculture prices were fairly high, they 330 00:31:27.000 --> 00:31:34.000 They were talking about eliminating the farm price support program. That's an hour out the window, of course, and they're back worse than ever. 331 00:31:34.000 --> 00:31:46.000 What the Reagan administration did to their innovation, making things even worse, was called PIC, Payments in Kind Program, P-I-K, 332 00:31:46.000 --> 00:31:54.000 where they pay the farmers still more if they agree to cut production by half or something. 333 00:31:54.000 --> 00:31:59.000 In other words, they'll pay them back. It goes like this. 334 00:31:59.000 --> 00:32:01.000 Let's say the government stored up a lot of wheat. 335 00:32:01.000 --> 00:32:08.000 So they tell the farmers, if you cut your production from here to here, we will pay you back in the wheat we've stored up. 336 00:32:08.000 --> 00:32:10.000 We'll pay you the wheat and you can then sell it. 337 00:32:10.000 --> 00:32:13.000 So this way you try to unload your surpluses. 338 00:32:13.000 --> 00:32:20.000 And if you cut your production in half, we will then supply you with wheat from our storage, free, for payments and time for it. 339 00:32:20.000 --> 00:32:26.000 Another form of subsidy. It hasn't worked at all. As a matter of fact, generally in the state of collapse in a couple of years, the farmers are worse off. 340 00:32:26.000 --> 00:32:30.000 What's happening now is the farmers are now belly-aching about being in the state of depression. 341 00:32:30.000 --> 00:32:36.000 And the reason is, it's very similar to why the railroads are in a state of permanent collapse after 80, 100 years of government regulation, 342 00:32:36.000 --> 00:32:42.640 Regulation and the airlines almost collapsed before deregulation because after a long time 343 00:32:42.640 --> 00:32:48.760 of this sort of stuff the whole industry gets inefficient and monopolistic and falls apart. 344 00:32:48.760 --> 00:32:54.000 The farmers in particular have a sort of a penchant when they're in a good shape but 345 00:32:54.000 --> 00:32:57.560 things are going well and prices are going up, means their land values are going up, 346 00:32:57.560 --> 00:33:03.000 they borrow heavily, speculating an increase in their land values. They mortgage their 347 00:33:03.000 --> 00:33:07.000 the mortgage of the farm, the hilt, the mortgage of the houses, the hilt, because things are going up 348 00:33:07.000 --> 00:33:11.000 well, of course, prices rise and fall, just like anything else 349 00:33:11.000 --> 00:33:15.000 and when the farm prices go up, they plunge heavily and borrow the hilt 350 00:33:15.000 --> 00:33:19.000 when the farm prices go down, they get court short, because now they have to pay up 351 00:33:19.000 --> 00:33:23.000 and the prices are lower, they can't afford their mortgage payments, and they're losing at 352 00:33:23.000 --> 00:33:27.000 then, of course, they turn to the federal government for aid 353 00:33:27.000 --> 00:33:31.000 for some reason, they are the darlings of American life 354 00:33:31.000 --> 00:33:38.000 They've got the soil, they've got the pitchfork and all that nonsense, actually, probably none of them have seen a pitchfork, they're all mechanized anyway. 355 00:33:38.000 --> 00:33:47.000 And then they come running to the government, no, no, we're the farmers, we have to preserve American soil, American character and all that crap, and so they usually get bailout. 356 00:33:47.000 --> 00:33:53.000 And it's an amazing thing, because as I say, there are very few farmers left, only 6% of the population are farmers. 357 00:33:53.000 --> 00:33:59.560 Yeah, somehow we still think of it as this mystique of a farm, and so, almost invariably, 358 00:33:59.560 --> 00:34:01.880 they get bailed out. 359 00:34:01.880 --> 00:34:06.080 But the result is in the long run, after many years, decades of this, they're worse off 360 00:34:06.080 --> 00:34:09.640 in the sense worse off than before, they're heavily in debt, they can't pay the debt, 361 00:34:09.640 --> 00:34:15.320 and of course the government says, okay, we'll bail you out, give you a long-term loan, we'll 362 00:34:15.320 --> 00:34:19.600 have to pay out your mortgage or whatever, but there's a big campaign of crying about 363 00:34:19.600 --> 00:34:31.600 the farm problem now. So this happens in the last 60 years, but now it's sort of institutionalized, it's almost part of the American heritage. 364 00:34:31.600 --> 00:34:38.600 In the case of tobacco, there's now marketing orders, there's specific orders for different products. 365 00:34:38.600 --> 00:34:43.600 In the case of tobacco, it's even weirder. It's very much like the taxi medallion, which we'll get to later on in the course, 366 00:34:43.600 --> 00:34:55.600 where, or like the oil import program, in case of tobacco, not only are there these farm price support programs and acreage controls and all that, 367 00:34:55.600 --> 00:35:06.600 there's also tremendous cut in supply or restriction in land, and you have to own the right to produce tobacco. 368 00:35:06.600 --> 00:35:12.600 In other words, suppose I buy a farm and I can grow tobacco on it. For example, Pennsylvania, lots of farms can grow tobacco. 369 00:35:12.600 --> 00:35:16.600 Let's say I haven't been growing it recently. I buy the farm, I start growing tobacco. I can't do that, it's illegal. 370 00:35:16.600 --> 00:35:21.600 I have to buy the right to produce tobacco, and the right is carefully restricted. 371 00:35:21.600 --> 00:35:30.600 So, in other words, I have to buy a farm which now produces tobacco, and can only produce a certain amount, so it's already restricted. 372 00:35:30.600 --> 00:35:35.600 The price, of course, becomes a monopoly price, which carries with it the right to produce tobacco. 373 00:35:35.600 --> 00:35:39.600 In other words, you have a certain amount of land here. 374 00:35:39.600 --> 00:35:46.600 Let's say the value of the land, tobacco land is, I don't know, let's say a thousand dollars an acre, something like that. 375 00:35:46.600 --> 00:35:59.600 The price is a thousand dollars an acre, but land is so plighted that you can't grow tobacco on land which doesn't have the federal right to grow tobacco stamped on it, so to speak, like a taxing medallion. 376 00:35:59.600 --> 00:36:07.600 Then the price goes way up, it's maybe five thousand dollars an acre, whatever the price is to give you the monopoly right to produce tobacco, 377 00:36:07.600 --> 00:36:10.360 tobacco, which is referred upon by the federal government. 378 00:36:10.360 --> 00:36:15.200 So the result is you have a huge increase in land prices for tobacco lands, but tobacco 379 00:36:15.200 --> 00:36:16.200 farmers are cleaning up. 380 00:36:16.200 --> 00:36:22.240 In other words, they get not only the farm price support increase, they get the land monopoly. 381 00:36:22.240 --> 00:36:28.360 It was very tightly restricting the amount of land that could be used for tobacco. 382 00:36:28.360 --> 00:36:33.520 It's like medallions, I forget to lay it out later on, there's 11,747 taxis in New York 383 00:36:33.520 --> 00:36:37.520 with medallions on it, and it's been the same way since 1937, 50 years. 384 00:36:37.520 --> 00:36:43.720 was an absolutely fixed amount amount of taxis so at any rate this is so the 385 00:36:43.720 --> 00:36:46.520 result in order to buy a license well I'll get into that later on but to buy a 386 00:36:46.520 --> 00:36:51.200 license for a cab it used to be $10 when you go down you can prove you can 387 00:36:51.200 --> 00:36:55.240 drive a cab you buy your cab whatever the price is plus the $10 for a license 388 00:36:55.240 --> 00:37:01.520 that was it that was from till 1937 1937 to help out the cab industry the 389 00:37:01.520 --> 00:37:05.240 depression they decided to issue no further licenses there have been no 390 00:37:05.240 --> 00:37:12.400 for Licenses, 50 years of no license. In order to buy a license or drive a cab, you 391 00:37:12.400 --> 00:37:16.040 have to buy it from somebody else, because the total is restricted. It's very much the 392 00:37:16.040 --> 00:37:23.600 same in tobacco, agriculture, tobacco land. So that means there's a market price for the 393 00:37:23.600 --> 00:37:26.800 license, for the medallion, because you can't get it from the New York City government, 394 00:37:26.800 --> 00:37:31.360 you have to get it from a guy who's willing to sell his taxi. And the result is, it's 395 00:37:31.360 --> 00:37:41.360 Now, a little over $100,000. Note that. In other words, the price of a taxi license was $10.37. Now, $100,000 under the $5,000. 396 00:37:41.360 --> 00:37:49.360 So, this means in order to own a taxi, you have to go deeply into the hawk or whatever. You have to make a huge capital investment. 397 00:37:49.360 --> 00:38:00.360 And there was... Mayor Koch, a few years ago, had a pretty good idea. His idea was in order to break this thing, 398 00:38:00.360 --> 00:38:09.360 He would give each taxi owner right now another medallion, another license, free, provided he or somebody else uses it within a year or something. 399 00:38:09.360 --> 00:38:11.360 In other words, the guy would have to then sell it to somebody else. 400 00:38:11.360 --> 00:38:14.360 And they still refused to do it to taxi people. 401 00:38:14.360 --> 00:38:18.360 They thought they were afraid of any increase in supply. 402 00:38:18.360 --> 00:38:19.360 They wanted to keep their monopoly price. 403 00:38:19.360 --> 00:38:21.360 They were worried about even getting a free license. 404 00:38:21.360 --> 00:38:24.360 They were worried about the demand curve, basically. 405 00:38:24.360 --> 00:38:26.360 They were worried that they might have a loss in total revenue. 406 00:38:26.360 --> 00:38:28.360 So they hung onto it. 407 00:38:28.360 --> 00:38:34.360 And since the Taxi Association lawyer for the Taxi Association of New York, the famous 408 00:38:34.360 --> 00:38:41.360 or infamous boss, absolute boss of the Bronx democracy, Stanley Friedman, who virtually 409 00:38:41.360 --> 00:38:46.040 controls the city council, any attempt by any mayor to sort of break the monopolies 410 00:38:46.040 --> 00:38:51.040 and go under the feet, Stanley Friedman was involved in this famous license, parking license 411 00:38:51.040 --> 00:38:56.400 scandal. He's an elegant looking guy with a goatee. 412 00:38:56.400 --> 00:39:00.520 At any rate, I'll go into this further when we get to Monopoly, 413 00:39:00.520 --> 00:39:03.320 because it shows you various ramifications of this, 414 00:39:03.320 --> 00:39:06.880 but these are various methods to tighten up the whole system, 415 00:39:06.880 --> 00:39:11.440 to try to make sure that there's no increase in supply of product. 416 00:39:11.440 --> 00:39:15.160 To cut, in other words, not only cut acreage, but also cut production, 417 00:39:15.160 --> 00:39:20.080 to make the thing even tighter. 418 00:39:20.080 --> 00:39:30.080 There was a peanut shortage about, I meant to bring this in, I have an old clipping from Newsweek, about six, seven years ago, there was a big peanut shortage, a peanut failure, a peanut crop failure in Georgia. 419 00:39:30.080 --> 00:39:43.080 And so there was a big peanut butter shortage. Not only is there a price support program for peanuts, there's also big acreage restrictions and marketing restrictions, production restrictions, everything else, you can think of. 420 00:39:43.080 --> 00:39:49.080 Very tight control on the peanut situation, which of course more or less triples the price of peanut butter, by the way. 421 00:39:49.080 --> 00:39:57.080 So they try to, since there's a big peanut butter shortage, a big drop in production, they try to import it. 422 00:39:57.080 --> 00:40:03.080 Of course there's also big import quotas because peanut butter from, I forget who makes it, there's other countries that make peanut butter. 423 00:40:03.080 --> 00:40:08.080 Big, huge difference in price. They have big restrictions on peanut butter imports. 424 00:40:08.080 --> 00:40:15.080 So, poor Skippy, which... Skippy and the other peanut butter makers, of course, were petitioning the government, 425 00:40:15.080 --> 00:40:18.080 please let us import some cheap peanuts, because we can't get any peanuts here. 426 00:40:18.080 --> 00:40:22.080 So, they're very reluctant to do it. They allowed a little bit of import for one year. 427 00:40:22.080 --> 00:40:26.080 Very temporary, of course, so Skippy can produce some peanut butter. 428 00:40:26.080 --> 00:40:30.080 And they very grudgingly allowed them to do it. It's a very temporary basic. 429 00:40:30.080 --> 00:40:33.080 You can only do this for six months and then we crack down again. 430 00:40:33.080 --> 00:40:38.080 So this way the consumer is being shafted across the board for all these special interest groups. 431 00:40:38.080 --> 00:40:47.080 The New York Times, by the way, which is usually in favor of all these subsidy programs, is pretty sound on a farm question. 432 00:40:47.080 --> 00:40:51.080 There are not too many farmers reading the New York Times here. 433 00:40:51.080 --> 00:40:57.080 They're much more urban-oriented, and at least they can see the craziness of this program. 434 00:40:57.080 --> 00:41:27.080 So this is, there's no attempt, even though most of the Reagan economists are against the program, it's almost impossible politically to break the hold of this, for example, Senator Jesse Helms, a very powerful senator from North Carolina, is the big, even though allegedly in favor of the free market, is the big proponent, of course, of tobacco monopoly, tobacco price control, bigger, bigger, higher, higher. By the way, another thing about tobacco, another little bit 435 00:41:27.080 --> 00:41:34.080 The reason for the nuttiness here is that one wing of the government and the Department of Agriculture is constantly subsidizing more and more higher subsidies to tobacco farmers 436 00:41:34.080 --> 00:41:42.080 and the other wing is assisting in putting warnings on every package of cigarettes. Warnings that it's dangerous for your health, it will produce cancer, and so on and so on. 437 00:41:42.080 --> 00:41:47.080 So one wing of the government is warning you against tobacco, the other wing is subsidizing it for the health. 438 00:41:47.080 --> 00:41:52.080 Again, it's only irrational from the point of view of the consumer and the taxpayer and the economy as a whole. 439 00:41:52.080 --> 00:42:12.080 So again, what we have here is a giant cartel organized in agriculture, organized by the 440 00:42:12.080 --> 00:42:15.920 federal government, enforced by the federal government, so as to prevent any individual 441 00:42:15.920 --> 00:42:21.080 farmer, producer, from breaking in the cartel, from increasing its production, and various 442 00:42:21.080 --> 00:42:37.160 production control, production control, plus further subsidies, subsidies never end, they're 443 00:42:37.160 --> 00:42:38.160 added onto. 444 00:42:38.160 --> 00:42:44.760 As I say, even though there are very few farmers left, even in the midwest, even in places 445 00:42:44.760 --> 00:42:50.360 that are supposed to be farm areas, there seems to be no way to get rid of this thing. 446 00:42:50.360 --> 00:42:53.400 Well, one thing is there's log rolling in Congress. 447 00:42:53.400 --> 00:42:57.920 Each group wants to have their own schtick, wants to have their own subsidy, so the foreign 448 00:42:57.920 --> 00:43:01.400 people say, okay, I'll vote for your thing, I'll vote for New York's subsidy if you vote 449 00:43:01.400 --> 00:43:07.400 for our subsidies, and there's a general agreement then to carry the whole thing with them, increase 450 00:43:07.400 --> 00:43:08.400 the whole pressure. 451 00:43:08.400 --> 00:43:16.600 I'll bring in, next time, I'll bring in some examples, I'll probably get that peanut butter 452 00:43:16.600 --> 00:43:23.040 Okay, see you Thursday.