WEBVTT

NOTE Fundamentals of Intervention

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We're now at the second half or the second part of this book.

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Originally, when Man Economy and State came out, it was just Man Economy and State, the chapters we have so far covered.

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And this section, the second section was Power and Market and it was a separate book.

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There were various reasons for that I won't go into, but if I had to summarize each of the books, I would do it in this way.

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The first part of the book, or the Man Economy and State, part of Man Economy and State, and Power and Market was positive economics.

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It was an analysis. No, I misstated it. It was an analysis of the free market system.

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It was an analysis of how markets work and what are markets.

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And the assumption there was there was no violence. There was no initiation of aggression.

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There was just cooperation. There was buying and selling. And what are the implications of buying and selling?

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Now in the second section of this additionally bigger book, we now have a new area, again, which Murray is analyzing in a positive, not a normative way, but now he is analyzing in a positive way, violence, where people initiate violence against other people.

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Again, it's not normative. He's not saying that this is bad or wrong or unjust.

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He says that in his other books, but in this book, he is just doing a cold-hearted, calculated analysis,

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a positive analysis of violence.

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And as reasonable, he starts off with the institution of violence, namely the government or the state.

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And what he says is that the difference between the market and the state is that in the market,

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All interaction is voluntary, but when we deal vis-a-vis with the state, it's not, it's coercive.

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One person is the hegemon, or one entity is the hegemon, and the other is the victim.

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One is the invader, the aggressor, the other is the recipient of the aggression.

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Now, the mainstream so-called free enterprise economists, the minarchists,

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I think that's a very good word to describe minimal governmentists,

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These are not socialists. These are people who think we ought to have laissez-faire capitalism for the broad reaches of the economy.

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However, there are certain functions of the economy, namely protection against aggression,

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that can't be left to the economy, have to be given over to this new entity, the government.

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And the main function of this is to protect people against violence.

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And to that end you have armies to protect us from foreign bad guys, not to go out and attack foreign people as an imperialism,

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but to just defend against foreign invaders, police to protect us against local invaders or local bad guys or local criminals,

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and courts to determine who are the good guys and who are the bad guys and to adjudicate honest disputes between honest business people

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who it's unclear as to who is the invader and who is the recipient of the invasion.

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And what Murray says is that what you're really doing is making a category mistake.

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On the one hand, you want to have the free enterprise system.

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On the other hand, you're putting in a very core position in the free enterprise system,

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namely protecting against violence, namely defending the free enterprise system.

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You're putting in an entity which itself is not compatible with, is logically contradictory

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to the free enterprise system.

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And he sees this as a gigantic anomaly, and he's very much in the minority position among

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right-wing or free enterprise economists who are mostly minarchists, namely believe in

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minimal government, Ayn Rand, for example, Milton Friedman, for example.

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Most laissez-faire economists, so-called, would assign a government the crucial task

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of protecting against invasion.

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Murray says this is an insoluble contradiction.

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And he says that there are two things that the government does, that all governments do,

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and one is tax, and the other is demand a monopoly of defensive services within a certain

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geographical area.

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Well, taxes are different than voluntary payments.

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If you want to buy this wristwatch, you pay money and you get the wristwatch.

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If you don't want to buy it, you don't have to pay money and you don't get the wristwatch.

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But with taxes, when the IRS comes to you on an April 15th, they don't say,

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well, would you like our protection? If so, you know, these are the payments.

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On the other hand, if you don't want to, you don't have to.

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You can be a pacifist and not have any protection, or you can get protection services from the

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ACME company. That's okay. We're just an honest businessman.

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If they were saying that, then they would not be a government.

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They would be another honest businessman who is offering a service.

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It's just the US government private services.

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But that's not what they say.

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They say, pay up or we're going to send you a nasty letter and then we'll send you an

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escalating letter and then there'll be people at your door who will escort you to prison.

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And this is very, very different.

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And there are some people who can't see the difference.

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Do you know the difference between a bathroom and a living room?

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And the answer is if you say no, then don't come to my house.

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Well, the question now is, do you know the difference between invasion and voluntary trade?

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And if you say no, the answer is, well, then don't do political economy.

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Because this is the crucial, the essence, the basic premise of all political economy,

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to distinguish between voluntary trade and initiatory violence.

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Slavery and murder are not part of the market.

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They are part of a very different kind of a system.

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And if you can't see the difference, we have problems.

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But it's not only taxes.

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It's also, Ayn Rand has the view that we shouldn't pay taxes.

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There should be voluntary payments for contracts, what have you.

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In fact, there must be a monopoly of defensive services.

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There must be some one ultimate monopoly authority.

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So if somebody else, the Block, Gordon Company, sets themselves up to protect people, this

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would not be allowed.

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Yes, private detective agencies are allowed, but they have to be subservient to the U.S.

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government.

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So it's very different.

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So the essence of government is two things, coercive taxes and a monopoly, a compulsory

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monopoly that you can only apply to this group, not to any other competing group.

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And what we said about the benefits of competition in with regards to pens or shirts apply here

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as well.

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There's no difference for Murray Rothborn.

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Okay, let me consider some objections to this.

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One objection is tut-tut-tut, it's not really compulsory, it's like club dues.

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Look, you join the chess club or you join the golf club and you have to pay your dues.

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Well, you've just joined the US government club and now you don't want to pay your dues?

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Well, you're really stealing from us. We're the government and we're coming to get our club dues and you don't want to pay.

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Well, you know, you're stealing from us. It's not that we're compelling you any more than the golf club is compelling its members to pay their club dues.

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So, we have to ask, well, to what extent and in what regard is the government really like a voluntary club?

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Well, in a voluntary club, you agreed to join the club.

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Here, nobody agreed to join the U.S. government club.

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Consider the following scenario.

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Somebody's living out in Ohio or Western Pennsylvania in the boonies and there's the 13 colonies

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and some revenuer comes out to the western part of Pennsylvania or Ohio or West Virginia,

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wherever it is, on the outskirts of the 13 colonies and said,

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hey, guess what, we started this U.S. club and you're invited to join.

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And the guy says, well, you know, I'm not really a joiner,

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but I wish you guys the best of luck and I'll trade with you and we'll be friends

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and, you know, we'll have commercial interaction.

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And the guy says, you don't understand.

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You've got to join the club, whether you want to or not.

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Well, in what sense is that a club?

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A club that you have to join is not a club.

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It's a coercive institution.

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Another objection is, well, you can't really

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have a market unless you have defense services.

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So we must have defense services.

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Well, that's true.

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You really can't have a market unless you

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have defense services.

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But you really can't have a market

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We have food, or clothing, so by that token, the government should take over food and clothing.

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Namely, there's no difference in principle between these services.

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They're all important services, and looking at it this way really violates the diamond's water paradox,

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the marginal analysis, or the marginal insight.

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You know, all food, all clothing, all defense services,

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we can look at these things in a marginal way much better.

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Do we have a right to secede?

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The point is that if we all have a right to secede, that would be a state of anarchy.

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Well, you know, the only problem with slavery was that you couldn't secede.

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Otherwise, slavery was a pretty good deal.

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Now, people are going to take this out of context and say,

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aha, there's the Mises people, they're saying slavery is good.

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But let me continue and hopefully this will be taken in context.

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Look, slavery was, you know, you pick cotton, you sing songs,

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If you gruel, it's, you know, it's a gig.

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The only problem is you couldn't quit.

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If you could quit, then it would be innocuous.

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You know, the guy, the overseer comes around with a whip

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and says, whoa, what's this whip business?

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I'm not a sadomasochist, I'm out of here.

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And they say, no, you're not out of here, that's slavery.

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Well, the point is that if you can't quit, you're a slave.

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Well, you can't quit the US government.

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Yes, you can leave, not Cuba, but there are many countries which do not have laws against

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emigration.

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East Germany had laws against it, Cuba had laws against it, the U.S. does not.

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But the point is, why should you have to leave?

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The argument is circular.

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Where did they get the right to tell you to leave?

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Why can't you just say, well, you know, you leave?

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Look, suppose I move to a very bad neighborhood, and every day I'm robbed, and I go to the

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police and I say, you know, stop this, and the guy says, well, you know, you can leave.

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Well, the point is, it's my house, why should I have to leave?

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Take this guy in western Pennsylvania, he and his family have been homesteading this

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land for years, and all of a sudden he doesn't want to pay taxes and he's told, well, if

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If he doesn't like it he can leave. Well, where's the justice there? Where is the propriety?

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Where is the proof that the government has the right to tell him to leave?

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You know, this idea, if you don't like it, leave, that implies that the people who are telling you that have some sort of rightful ownership of the thing,

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whereas the way Murray Rothbard and libertarians see it, the people who have the right to the ownership of the land are the people who homesteaded it.

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The US government didn't homestead it.

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By stipulation, this guy out in Ohio or Western Pennsylvania was the first guy on the land.

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Why should he have to leave?

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Another point that Murray makes, I think this is a genius point, is there's an analogy between...

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See, the argument is, look, you people are all uncivilized.

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If we don't have a government ruling over you, you'll be at each other's throats.

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I mean just the other day you spilled water and you know this proves that you need a government.

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Okay well if this is true then we should not have a state of anarchy between countries

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because countries too are composed of human beings and they could be at each other's throat

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whereas right now the relationship between Portugal and China is one of anarchy.

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There's no government over Portugal and China.

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The relationship between Venezuela and England is one of anarchy.

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The relationship between Australia and Canada is one of anarchy.

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Namely, there's no world government.

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So, if you really think we need a local government,

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then, by the laws of logic, you must also buy into world government.

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Namely, world government is to national government,

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as national government is to individuals.

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Very few people favor world government.

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The problem with world government is, you know, where do you run?

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If Hitler takes over the whole world, there's no place to run.

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If George Bush takes over the whole world, there's no place to run.

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So, very few people who oppose anarchy save the world government, which shows that they're being illogical.

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In other words, the word ARCHY, A-R-C-H-Y, ARCHY, some people think it means something to do with arches or architecture

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in the sense of cohesiveness or rule-like behavior or support, and if you're an anarchist, you're against architecture

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against architecture or against archers or against civilization, you know, you're just a weirdo.

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The really, the word archie is not that, the word archie is arbitrary rule.

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So monarchy is rule of one person, oligarchy is rule of a few people,

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demarchie or democracy is rule of a majority.

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Anarchy is no rule of one person over another, arbitrary rule.

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So, don't swallow the idea that, you know, Anarchists unite is a contradiction.

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It's not a contradiction.

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I'm reminded of a story when I was a kid.

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There was the war in Vietnam and the lefties, we libertarians were marching with the lefties

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and lefties had banners, you know, U.S. out of Vietnam, which is all along good.

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We had a banner, U.S. out of the Bronx,

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which I think puts this in a very good way.

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Okay, I have many more objections to consider, but I want to get through some of what Murray says,

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not only on this, but also on the fundamentals of intervention, the autistic, the binary and the triangular.

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But before I get into that, I want to talk a little bit about what Murray says about how it would work.

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Okay, so how would an absence of government and an absence of monopoly work?

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Well, Murray says that it's very hard to predict the market.

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If shoes have been socialized for years and now all of a sudden some maniac was saying we should privatize the shoe industry,

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the questions would come thick and fast.

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Well, where would you buy shoes? How many shoe stores would be on each block?

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Would you have sneakers? And what about slip-ons? And how about the laces?

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How about the laces and who would put the laces and the shoes together and what about

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sneakers and all sorts of problems and, you know, would we have high-heeled shoes or not?

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And it would be hard to answer all these questions in the absence of a market.

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Similarly, we can now only speculate about what it would be like.

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We can't tell because there never has been a pure case, although there have been a few

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examples.

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There have been a few historical examples such as ancient Ireland, ancient Iceland.

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And some people say, well, ancient Ireland and ancient Iceland only lasted for three or four hundred years

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and therefore anarchy is a failure.

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I was talking to Roderick Long who did a beautiful piece, Ten Objections to Anarchism,

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a magnificent piece and I've cribbed some of his arguments that I'll get to later.

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And what he says is, look, if they say, if you had a failed anarchy, that shows anarchy is no good.

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Well, how about a failed state? Does that show that statism is no good?

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And there have been failed states. Nazi Germany was a failed state, the Soviet Union, the US, in different ways.

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So if you're going to say that since ancient Ireland and ancient Iceland are no longer functioning anarchist societies,

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that therefore anarchism is no good, well, then how about all the failed status societies?

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Does that show stadium is no good and we must reject it?

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Okay, how would it work?

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Well, Murray envisions one possible scenario that it would be done,

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and Hans Hoppe has done yeoman work on this as well,

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that there would be courts, police combinations, insurance, insurance courts and police companies

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that would have people as subscribers to their services.

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Services and if you were attacked by somebody they would protect you. Let me

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ask you this, I want to meet people tonight at three in the morning and I

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want to ask you whether you want to meet me in New York Central Park or in

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Disney World, in Disneyland and the right answer is not in Central Park or

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Audubon Park in New Orleans because the murder rate and the rape rate is very

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very high. Whereas in Disneyland, if you look obstreperous, you're immediately surrounded

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by a bunch of ducks and geese and mice, all packing heat, and they come up to you and

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say, sir, please step this way. In other words, the point is that right now, when a rape or

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a murder were to occur in Disneyland, they would lose big. So they have cameras, they

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have policemen disguised as ducks, God knows what they have. All I know is that it's very

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Very, very safe.

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Who loses money when a rape occurs in New York City Central Park?

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Does the mayor of New York City lose money, the parks commissioner?

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No, it's very unsafe.

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And the idea here is that just as the market can bring you a better orange juice or a better

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apple, it can bring you better services of protection.

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Protection services are indistinguishable in this regard of competition and profit and

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and loss from any other thing.

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Okay. So let's suppose that I'm having some difficulties with Mark.

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Mark and I are having a little dispute.

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And Mark and I both go to the Joe Salerno Court. Why?

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Well, Joe is Italian. He's in with the Sopranos.

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You know, he can keep order.

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So we have no problem because Joe is our court insurance protection agency

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and Mark and I will both go to Joe and Joe will give a view

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and Mark and I each agreed to the Joe services and there's no problem.

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Now let's take a more difficult case.

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Mark has Joe as his company and I have David as my company

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and again Mark and I have some dispute, commercial dispute, whatever it is.

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I accuse him of nefarious things, he accuses me of nefarious things,

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So I go to David and I say, David, I'm having a little trouble with Mark, and I invite Mark, I say, Mark, come to me to the David court and we'll settle this, and Mark says, David court, you must be kidding, David is a loon, you know, I don't trust him, and you refuse to come to the court, and you invite me to come to the Joe court, and I say, Joe, he's Italian, he's no good, you know, I'm not going to trust him. So now we each go to our own court. Now it's possible that David is a loon.

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David will say, you know, Walter, I like you, you're a great guy, but in this case, Mark is correct.

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Or Joe might say to Mark, Mark, you're a great guy, but in this case, David is correct, that Walter is right.

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Or we might have an opposite thing. Well, okay, so in that case, there's no problem.

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Both courts have agreed, and if Mark or I get snotty, then the David and the Joe courts both combine

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and come out after the one who will not go along with the the decision of both

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courts. Everyone following me so far on this? Okay, but now let's take a tougher

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case. Let's take a tougher case where the two courts, the David and the Joe court,

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disagree. Now it's possible that David will support Mark and Joe will support

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me, but let's take a more reasonable case where David supports me and Joe supports

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Mark. Now here is where Ayn Rand has written about it and what she says at

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this point is blank out. And all the Randians since then have said blank out.

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The anarchists have no answer to this problem. All that will happen is David

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and Joe will fight and we'll have chaos and anarchy in the bad sense. What these

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people do is they don't reckon with a whole bunch of literature. The main

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The main contributors to which are Roderick Long and Hans Hoppe and a few other people,

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where they go over this in great detail.

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David Friedman also, he's no Austrian, but on this question he's very, very sound.

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And what the answer is emanating from all of these sources is the following.

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There will be two kinds of courts, bandit courts and legitimate courts.

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And how do you distinguish them?

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Well, the bandit courts will even not have anticipated this.

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David and Joe will not have anticipated that once in the future

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they might be on the opposite sides of a decision, and then what?

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Either they won't have anticipated, or if they do anticipate it, they ignore it.

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Whereas the definition of a legitimate court is they have anticipated

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and they've acted in a rational way.

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David and Joe have a contract with each other.

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They say if in the future we ever come on opposite sides of a dispute, we'll go to Tom, or we'll go to Jeff, or we'll go to Bob, or we'll go to Lou, or Peter, or anyone,

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or we'll make a list of all those people that I mentioned and we'll draw straws as to which one we'll come to, namely, we will have some sort of peaceable settlement.

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I mean you have to have a final decision maker and the Joe and the David sub courts will go to these other courts to be their supreme court.

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In another occasion, Peter and Jeff might also be courts and they could pick Joe as their supreme court.

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So in other words, there's nobody who's a supreme court but all these courts could be supreme courts in certain cases and not in other cases.

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Now there are examples of this sort of a thing occurring.

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For example, there is an admiralty law, there is a whole bunches of courts of that sort.

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There's, I have a list somewhere here, of private courts, Sharia, Bet Bin, which is a Jewish court,

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Episcopal courts, Catholic courts, the law merchant, admiralty law, common law.

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For example, one of the things that came about during the medieval period was

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there'd be some farmer in England who would send over a hundred pigs to somebody in the Netherlands

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and the guy in the Netherlands said, well, I only got 90 pigs and half of them were sick.

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And now one is in England and one is in Netherlands and now what do they do?

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Well, they would go to admiralty courts or law merchant courts.

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And the only sanction was that if you didn't abide by that, nobody else would trade with you.

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So, you know, every dog gets one bite, you can have a problem, but this was a very severe sanction.

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Another one was, suppose my boat capsizes and you rescue the boat and now you bring it into the port.

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Well, who does what? Do I tip you? Do you keep part of the boat?

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Well, the admiralty courts decided that the owner of the boat only gets two-thirds of the value of the boat,

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and the salvager get one-third of the boat.

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Well, is that right? Should it have been 30%, 70%, 60%, 40%? I don't know.

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I don't think libertarian praxeological theory can say.

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Rather, what we do is we rely on private courts, and the consensus of the private courts is one-third, two-thirds,

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and I think that's reasonable, but the point that I'm trying to make is that

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This is an example of how private courts have functioned for many years.

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Okay, I think I have said enough about how this would work.

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I think I've addressed the blank out question with the appeals court.

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David Friedman makes the point that those courts that agree to be bound by a Supreme Court

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will have a competitive advantage over those that don't agree.

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The point is that it's much more expensive to fight than to just go to a Supreme Court.

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And every time a bandit court comes on the other side of a dispute, he'll have to fight,

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whereas the legitimate courts will only have to fight the bandit courts.

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So if you believe that fighting is more expensive,

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there will be this weeding out process of bandit courts.

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And also there's this point about legitimacy.

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One of the reasons that the state is so powerful is that it has legitimacy.

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One of the reasons it has legitimacy is because of court intellectuals.

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The point is that these bandit courts wouldn't have much legitimacy.

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They would be dismissed by all in sundry.

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And Jeff Hummel makes the very important point that the pen is mightier than the sword.

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And you think, to look at it, I mean, the pen is this long and the sword is as long as my arm.

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and how could the pen out do the sword?

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His point is, and this is a point made by Rothbard

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and other libertarians, is that the pen determines

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in which direction the sword is pointed.

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So I think this is a very crucial insight.

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Okay, let me move on to fundamentals of interventionism.

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What Murray says is that there are three types,

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autistic, binary and triangular.

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The autistic one is the government or the invader orders somebody to do something or to refrain from doing something.

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So, for example, and the relationship is not binary, which I'll get into in a second.

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For example, don't do drugs.

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I can just see Mr. Mackey from South Park, you know, drugs are bad and K, remember him?

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So, the autistic is sort of like the state saying, drugs are bad and K, this is bad and K,

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That is bad, okay, so that's autistic.

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Binary is where the state tells the person pay taxes, or be my slave, or murder would be a binaristic intervention,

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because it's one person doing something to someone else.

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Triangular would be the government or the invader, and there can be private invaders,

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there are rapists and murderers and criminals, and the way I like to see it,

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The way I like to think of them is they are engaging in state-like activities.

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In other words, there's nothing, what's the word, heavenly, not heavenly,

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there's nothing unique about government.

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Government is just a big robber gang puffed up with legitimacy, false legitimacy.

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There's no difference in principle between a government and a private criminal gang.

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And sometimes you make mistakes in libertarian theory

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when you give them some sort of extra power.

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Murray says that it's interesting that the right is sort of bad on autistic intervention.

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Namely, they want to have laws against all sorts of individual rights

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to consenting adult behavior with regard to sex and drugs and whatever.

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Although the feminists on the left are not so good either,

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But supposedly, the people on the left are more for free speech, whereas the triangular one,

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price controls, rent control, minimum wage laws, things like that,

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the right is somewhat better on that than the left, although it's not very much better.

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I remember listening to one of the debates that Ron Paul was in with McCain,

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and McCain used the word profits, and he sort of sneered at it.

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You know, this is profits. You know, we want something more important than profits.

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So, even people on the right are not as good as they could be on triangular intervention.

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What are the direct effects of intervention, whether binary, autistic or triangular?

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Well, there's more conflict, the welfare goes down, welfare decreases.

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What Murray says is that there is no way you can prove that government can promote welfare.

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Welfare, because all government can do is, remember, autistic, binary or triangular.

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And in each case, well, why does the invader do this?

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Well, presumably he's making the world a better place than it would be had he not done that.

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He's engaging in human action, okay?

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So he's benefiting, okay, but the victim is losing.

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So all you can say is that there's no way to prove that government intervention is beneficial for all concern,

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because there's always one person who was being forced to do it

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and if it was beneficial they wouldn't have been forced to do it in the first place.

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There's this guy, Brian Kaplan, who criticizes Murray Rothbard

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on the grounds that Murray is too moderate here, Murray is not a good anarchist,

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Murray should say you can actually prove that all government intervention is disutility or decreases welfare

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And Murray is taking the moderate view.

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I think Roger Garrison once wrote this paper,

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Why Austrianism is the Golden Mean between...

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Milligram.

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Milligram between...

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Well, Murray Rothbard is a moderate here.

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He's the moderate anarchist.

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He's not saying that government necessarily reduces welfare.

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He's just saying you can't prove that it increases welfare.

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Brian Kaplan is saying, no, no, no, you're a wuss.

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You're a wimp.

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You should be saying that government necessarily reduces welfare.

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But my view is that Brian Kaplan is missing out on interpersonal comparisons of utility.

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Because there's always someone who gains, namely the government, and someone who loses.

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So how can you say that on net balance there's a loss? I think you can't.

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Murray goes into class analysis.

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The Marxists, of course, see the classes of employer versus employee.

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But Murray relies on Calhoun, who sees the classes in terms of net tax gainers

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and Net Tax Losers, I've written a little bit about this, sort of, a little critical,

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one of my favorite characters in Atlas Rugged is Ragnar Danischkold, who takes money from

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the government and gives it to the good guy businessman, well suppose Ragnar came down

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from heaven or from Mars or wherever he came from and never paid a penny of taxes, all

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he did is take money from the government, would he be a good guy or a bad guy? According

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I think he'd be a bad guy, but I think we have to think about that.

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The next thing Murray talks about is democracy, and he says that, you know,

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just because a majority vote for something doesn't make it right.

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Look, suppose five people break into my house and they're walking off with my TV,

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and they're a philosophical gang, so they're willing to dialogue with me,

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and I say, tut-tut, this is staff. He says, oh, no, that's so fair.

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We're democratic, and they say, let's have a vote.

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How many think we should take Walter's TV, and the four of them raise their hand.

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And to be fair, they say, how many think that we shouldn't take Walter's TV, and I raise

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my hand and say, see, it's democracy.

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Well, you know, Hitler came to power through a democratic system, so democracy is not such

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a great thing.

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There is such a thing as totalitarianism, majoritarian totalitarianism.

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Speaking of our previous session where people take a little bit of what Murray says and write whole books about it,

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Hans' book, Democracy, I forget the title of it.

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Democracy, The God That Failed.

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I'm not sure how Hans would see it. I think he would agree with me that what he did in large part is take a little bit of what Murray wrote about democracy

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and wrote a magnificent gigantic book, except for One Foot, Not Where He Attacked Me, but we won't go into that.

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I think it's a magnificent book, and this is just one more example of people taking a sentence or two or three of a Rothbard and just running with the ball.

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Oh, what about the, what about the fact that when we stop the invader, we're reducing his utility?

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or what about the fact that, see we have this claim that the market benefits all participants

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and now Murray deals with the objection, what about the rapist? The market is going to stop him,

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namely the market of defense agents is going to stop him, so how is it helping him? And the

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answer I think is the market protects or the market increases the welfare of all participants,

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but not everybody is a participant in the market. A rapist is not a participant in the market. What

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What he's doing is not a market-like activity, he's doing a violent type of activity.

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Similarly with the horse and buggy people, the horse breakers and the whip makers and

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the bridle makers and the horseshoe blacksmith types.

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You might say, well the market hurt them, didn't it?

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And the answer that I give my students when they come up with this counter example, bless

422
00:34:24.840 --> 00:34:29.820
their little hearts, is, well they're not, they used to be participants in the market,

423
00:34:29.820 --> 00:34:33.700
but they're not now participants in the market, because participants in the market doesn't

424
00:34:33.700 --> 00:34:39.700
And even if you just sort of sit there and occupy space, it means you're making an offer that other people are willing to buy.

425
00:34:39.700 --> 00:34:46.700
So at time T1, they were market participants. At time T2, they're not.

426
00:34:46.700 --> 00:34:51.700
And you can't say that the market is not improving the welfare of all market participants,

427
00:34:51.700 --> 00:34:58.700
even though they're worse off in some ways because they're not market participants anymore.

428
00:34:58.700 --> 00:35:02.700
Then he deals with envy. He says, well, what about envy? Bill Gates get rich.

429
00:35:02.700 --> 00:35:08.200
I don't like it, therefore, you know, government should take money from Bill Gates and give it to me.

430
00:35:08.200 --> 00:35:11.700
And what Murray says is that envy is a thymological thing.

431
00:35:11.700 --> 00:35:14.700
We know what envy is. It's a perfectly good English word.

432
00:35:14.700 --> 00:35:20.700
But praxeologically, you have no way of demonstrating that you're envious and that, therefore, welfare is decreasing.

433
00:35:20.700 --> 00:35:22.700
And I think that's a very good point.

434
00:35:24.700 --> 00:35:29.700
Okay, I now want to turn to some questions that students have asked.

435
00:35:32.700 --> 00:35:42.340
One person says, where is it, state action or economic redistribution can

436
00:35:42.340 --> 00:35:46.740
indeed increase social utility. My argument for this is simply that in a

437
00:35:46.740 --> 00:35:51.180
hypothetical society with completely identical individuals, total equality

438
00:35:51.180 --> 00:35:55.940
would maximize the total utility due to the law of marginal diminishing

439
00:35:55.940 --> 00:36:02.180
marginal utility. Well, I don't really see how that can be because what the

440
00:36:02.180 --> 00:36:06.240
government is doing is taking from Peter and giving to Paul. Obviously the

441
00:36:06.240 --> 00:36:11.300
government is hurting Peter and helping Paul, but how social utility can increase

442
00:36:11.300 --> 00:36:15.700
even if Peter and Paul are otherwise identical, it seems a little difficult

443
00:36:15.700 --> 00:36:20.460
for me to understand. Another one says that government investing in a power

444
00:36:20.460 --> 00:36:25.540
plant in your area and providing with you a job, won't that be a benefit? Well

445
00:36:25.540 --> 00:36:33.140
Well, Hazlitt and, what's that French guy who followed Hazlitt?

446
00:36:33.140 --> 00:36:40.940
Bastiat had the seen and the unseen, look, I'm getting old, you know, you're lucky I'm not drooling.

447
00:36:40.940 --> 00:36:48.940
You see, it's true that one of the disutilities of an old duffer like me speaking is, you know,

448
00:36:48.940 --> 00:36:52.340
I'm just sort of falling apart and I don't know what, I'm just blabbing, but on the other hand,

449
00:36:52.340 --> 00:36:54.340
I'm a link with the past.

450
00:36:54.340 --> 00:36:59.340
For instance, I was a student of Menger, an undergraduate student,

451
00:36:59.340 --> 00:37:03.340
and I was a graduate student of Boehm-Bawerk.

452
00:37:03.340 --> 00:37:06.340
And Mises and I were contemporaries.

453
00:37:06.340 --> 00:37:09.340
I'd co-authored five articles with Mises.

454
00:37:09.340 --> 00:37:13.340
So, you know, there are benefits and costs of everything.

455
00:37:13.340 --> 00:37:17.340
Seriously, there is a link. I once shook the hand of Mises.

456
00:37:17.340 --> 00:37:21.340
So, it's a nickel to shake my hand now.

457
00:37:21.340 --> 00:37:24.500
Murray Rothbard took a bunch of us living room types.

458
00:37:24.500 --> 00:37:27.340
I don't think you were, you were probably too young, Joe.

459
00:37:27.340 --> 00:37:28.340
You just missed that.

460
00:37:28.340 --> 00:37:29.340
Joe is a young pup.

461
00:37:29.340 --> 00:37:31.100
He has no respect.

462
00:37:31.100 --> 00:37:32.620
And I shook the hand of Mises.

463
00:37:32.620 --> 00:37:36.300
And I also have a picture of me playing chess with Hayek at some conference or other.

464
00:37:36.300 --> 00:37:40.500
So you know, if you want to touch my garment, it's a nickel each.

465
00:37:40.500 --> 00:37:44.660
So I do have, you know, one of my functions, even though I'm losing it and I'm senile

466
00:37:44.660 --> 00:37:48.100
and all this, I do have a connection with some of the past.

467
00:37:48.100 --> 00:37:55.100
Okay, what I now want to do is go over how would a mainstream economist look at this.

468
00:37:55.100 --> 00:38:00.100
How would a mainstream economist analyze these sorts of questions?

469
00:38:00.100 --> 00:38:08.100
And the way they would do it is they would have, they would look at it in two ways.

470
00:38:08.100 --> 00:38:13.100
First of all, here is a thing that I already put up on the board.

471
00:38:13.100 --> 00:38:17.100
And this is a thing called external diseconomies.

472
00:38:17.100 --> 00:38:19.100
No, this is external economies.

473
00:38:23.100 --> 00:38:30.100
The idea is you have the private demand and private supply and you have an actual amount of production,

474
00:38:30.100 --> 00:38:34.100
but we have external economies or positive externalities.

475
00:38:36.100 --> 00:38:40.100
So the real demand curve or the real total demand curve is D prime,

476
00:38:40.100 --> 00:38:46.100
and the difference between D prime and D is the externality, the private benefit, the public benefits.

477
00:38:46.100 --> 00:38:50.500
Public benefits, in other words, there are private benefits of education, you get smarter.

478
00:38:50.500 --> 00:38:55.860
The public education, public benefits of education or the external benefits of education is you're

479
00:38:55.860 --> 00:38:59.460
a better citizen, you can vote better, you'll be less of a criminal.

480
00:38:59.460 --> 00:39:03.620
I already dealt with this in a previous thing when I snuck up when it wasn't my time and

481
00:39:03.620 --> 00:39:08.680
I said that, you know, these externalities, it's very subjective as to what the function

482
00:39:08.680 --> 00:39:09.780
of education is.

483
00:39:09.780 --> 00:39:12.380
You know where rent control is most popular?

484
00:39:12.380 --> 00:39:16.740
in the People's Republic of Santa Monica, in the People's Republic of Ann Arbor,

485
00:39:16.740 --> 00:39:18.300
in the People's Republic of Cambridge.

486
00:39:18.300 --> 00:39:19.780
It abolished Cambridge.

487
00:39:19.780 --> 00:39:21.580
Oh, was it? But for many years...

488
00:39:21.580 --> 00:39:22.580
For many years.

489
00:39:22.580 --> 00:39:27.180
Will you stop ruining my example? I'm kidding. Joe is right. It was just abolished very recently,

490
00:39:27.180 --> 00:39:32.980
but for many years... Well, what do Cambridge, Ann Arbor and Berkeley all have in common?

491
00:39:32.980 --> 00:39:38.380
Zillions of college students. They're taught that rent control is great. So, you know,

492
00:39:38.380 --> 00:39:44.700
What we should really do is look upon it not in this way, if any, and I'll get to the

493
00:39:44.700 --> 00:39:49.340
lighthouse and national defense, the topic of my discussion in a bit, with a different

494
00:39:49.340 --> 00:39:50.340
diagram.

495
00:39:50.340 --> 00:39:55.900
The way we should look upon it maybe is that education is an external diseconomy or a negative

496
00:39:55.900 --> 00:39:57.020
externality.

497
00:39:57.020 --> 00:40:01.460
The usual example of that is pollution, namely we should tax education.

498
00:40:01.460 --> 00:40:06.980
I'm not advocating that, but if you go along with this line, there's just as good a case

499
00:40:06.980 --> 00:40:09.480
and maybe even a better case to tax public education.

500
00:40:09.480 --> 00:40:13.180
Look, what they're doing in the sociology and political science and history department

501
00:40:13.180 --> 00:40:16.080
is just Marxist obscurantism.

502
00:40:16.080 --> 00:40:21.780
And economics is a little better, but they're not any better than they should be.

503
00:40:21.780 --> 00:40:23.680
Okay, now here is the pollution case.

504
00:40:23.680 --> 00:40:27.280
The idea is that the market has...

505
00:40:27.280 --> 00:40:33.280
The big three market failures are monopoly, externalities and public goods.

506
00:40:33.280 --> 00:40:34.780
And I'll get to public goods in a second.

507
00:40:34.780 --> 00:40:36.080
We're now doing externalities.

508
00:40:36.080 --> 00:40:38.880
as we did external economies, now we have external diseconomies.

509
00:40:38.880 --> 00:40:40.980
Here, the example is pollution.

510
00:40:40.980 --> 00:40:43.980
And the idea is I make these podiums,

511
00:40:43.980 --> 00:40:47.380
and in order to make these podiums, I have to pay land, I have to pay labor,

512
00:40:47.380 --> 00:40:49.780
I have to pay raw materials, I pay insurance.

513
00:40:49.780 --> 00:40:54.380
There's one thing I don't pay, and that's when I waft over pollutants

514
00:40:54.380 --> 00:40:57.580
onto your lungs and onto your laundry.

515
00:40:57.580 --> 00:40:59.280
And I don't take these costs into account.

516
00:40:59.280 --> 00:41:01.780
So what the government has got to do either with cap and trade,

517
00:41:01.780 --> 00:41:04.080
which Bob Murphy has recently written,

518
00:41:04.080 --> 00:41:10.780
or the Pagovian, A.C. Pagu had this idea where you just have a tax on pollutants.

519
00:41:10.780 --> 00:41:16.880
Murray wrote this magnificent piece, a really magnificent piece that first appeared in the Cato Journal.

520
00:41:16.880 --> 00:41:19.680
It's something called air pollution and a whole bunch of other words.

521
00:41:19.680 --> 00:41:21.180
I don't remember the title.

522
00:41:21.180 --> 00:41:22.580
You must read that.

523
00:41:22.580 --> 00:41:25.680
Look on the Mises Web, Murray Rothbard, air pollution.

524
00:41:25.680 --> 00:41:27.980
It's a magnificent thing.

525
00:41:27.980 --> 00:41:30.780
The first half of it really isn't on environmentalism.

526
00:41:30.780 --> 00:41:32.480
It's sort of on law.

527
00:41:32.480 --> 00:41:40.480
A magnificent treatment of law and the second part he applies legal theory to the environmental issue.

528
00:41:40.480 --> 00:41:46.880
Attacking the watermelons, you know, these are people who are green on the outside and red on the inside.

529
00:41:46.880 --> 00:41:53.680
Okay, so the way Murray analyzes it, it's a little historical thing which he gets from a guy named Horowitz.

530
00:41:53.680 --> 00:41:59.880
Not our Horowitz, but the Harvard guy, the Harvard historian.

531
00:41:59.880 --> 00:42:06.880
Do you know his first name? Robert, not Steve.

532
00:42:06.880 --> 00:42:12.880
And what he says is in the 1830s, things were pretty good.

533
00:42:12.880 --> 00:42:17.880
We had, in the US, I'm not familiar with other countries,

534
00:42:17.880 --> 00:42:20.880
what happened would be some little old lady would come to court

535
00:42:20.880 --> 00:42:23.880
and say that their factory is polluting my laundry.

536
00:42:23.880 --> 00:42:28.880
I hung it out, it was wet and clean, I came back an hour later,

537
00:42:28.880 --> 00:42:36.600
it was dirty and dry and that there manufacturer polluted my laundry and I

538
00:42:36.600 --> 00:42:40.640
want two things, I want an injunction, court order to stop them and I want

539
00:42:40.640 --> 00:42:46.920
damages or a farmer would say that their railroad came by choo-choo-choo and it

540
00:42:46.920 --> 00:42:52.660
had sparks and it got my haystacks all burnt and I again want damages and an

541
00:42:52.660 --> 00:42:58.120
injunction and in the 1830s 40s and 50s not all these environmental plaintiffs

542
00:42:58.120 --> 00:43:08.620
won their case, but the courts were open to it, and this had several salutary effects, namely people would engage in smoke prevention devices,

543
00:43:08.620 --> 00:43:15.620
people would use anthracite coal, even though it was a little bit more expensive than, what do you call it, sulfur coal, which was cheaper,

544
00:43:15.620 --> 00:43:23.620
but dirtier burning, and then you'd get all these little old ladies and farmers on your neck. There was even environmental forensics.

545
00:43:23.620 --> 00:43:29.620
You've seen CSI. They're very interested in blood and hair follicles and semen and stuff like that. Why?

546
00:43:29.620 --> 00:43:34.620
Because we have laws against murder and rape. If we didn't, who would be interested in that stuff?

547
00:43:34.620 --> 00:43:40.620
Well, in the 1850s and 1860s, there was interest in environmental forensics.

548
00:43:40.620 --> 00:43:44.620
Namely, here's a little dust particle. Where did it come from? Let's go throw that guy in jail.

549
00:43:44.620 --> 00:43:48.620
Namely, there were no externalities. Namely, all the costs were taken into account.

550
00:43:48.620 --> 00:43:52.620
Not just the land, labor and other costs, but the costs of pollution.

551
00:43:52.620 --> 00:43:58.120
And they were even putting little catch things in the smokestacks

552
00:43:58.120 --> 00:44:00.820
to catch the pollution before it went elsewhere.

553
00:44:00.820 --> 00:44:04.520
So the market was working pretty well, environmentally speaking.

554
00:44:04.520 --> 00:44:06.620
Then came the progressive period.

555
00:44:06.620 --> 00:44:10.320
When I say progressive period, you're supposed to boo, boo, you know, progressive, no good.

556
00:44:10.320 --> 00:44:15.820
And then the motif that Murray says is the U.S. had to be number one.

557
00:44:15.820 --> 00:44:20.120
You know, like you see that football field out there when their team comes, you know,

558
00:44:20.120 --> 00:44:22.920
Well, Auburn is number one. Well, the U.S. had to be number one.

559
00:44:22.920 --> 00:44:25.320
Who was number one at the time? England.

560
00:44:25.320 --> 00:44:26.920
How do you get to be number one?

561
00:44:26.920 --> 00:44:31.920
By allowing environmental plaintiffs to come in and mess with the railroads and manufacturing?

562
00:44:31.920 --> 00:44:38.720
No. So the next time the farmer or the little old lady came in the court,

563
00:44:38.720 --> 00:44:41.920
the court said, yeah, they're violating your property rights.

564
00:44:41.920 --> 00:44:44.520
You're sticking lousy, selfish private property rights.

565
00:44:44.520 --> 00:44:48.320
We have something more important involved, and that's the public good.

566
00:44:48.320 --> 00:44:50.040
And you have a drum roll when they say public good.

567
00:44:50.040 --> 00:44:52.880
And what the public good consists of is manufacturing.

568
00:44:52.880 --> 00:44:55.800
They did give one little sop to the environmental plaintiffs,

569
00:44:55.800 --> 00:44:58.920
and that was minimum smokestack height regulations.

570
00:44:58.920 --> 00:45:02.320
See, previously, the smokestacks were 30 or 40 feet high.

571
00:45:02.320 --> 00:45:05.040
Now they had to be 100 or 200 feet high.

572
00:45:05.040 --> 00:45:07.240
So now the little old lady and the farmer

573
00:45:07.240 --> 00:45:10.680
weren't getting victimized by the local people,

574
00:45:10.680 --> 00:45:13.560
but instead of hiding it under the rug,

575
00:45:13.560 --> 00:45:16.920
they were hiding it in the clouds.

576
00:45:16.920 --> 00:45:23.320
And then from the 1890s, Murray has this wonderful quote from some case in 1911,

577
00:45:23.320 --> 00:45:26.820
some Athens Empire laundry company, where the court said,

578
00:45:26.820 --> 00:45:29.720
well, pollution is not actionable.

579
00:45:29.720 --> 00:45:33.920
Well, if pollution is not actionable, then any good businessman,

580
00:45:33.920 --> 00:45:39.120
a Christian or an ethical or religious businessman who didn't want to pollute,

581
00:45:39.120 --> 00:45:43.720
and he used the more expensive anthracite coal, he would go broke.

582
00:45:43.720 --> 00:45:48.240
Namely, the invisible hand was choking instead of helping.

583
00:45:48.240 --> 00:45:50.120
Do you see the point?

584
00:45:50.120 --> 00:45:53.640
If you try to act environmentally soundly, you'd go broke.

585
00:45:53.640 --> 00:45:56.560
And if you used the dirty colon, you didn't care about research

586
00:45:56.560 --> 00:45:59.720
and development in smoke prevention devices,

587
00:45:59.720 --> 00:46:02.280
things would be bad for you.

588
00:46:02.280 --> 00:46:06.520
OK, then what happened is the 1950s, 1960s,

589
00:46:06.520 --> 00:46:09.200
for almost 100 years, things were bad.

590
00:46:09.200 --> 00:46:11.280
And then you had the Environmental Protection Act.

591
00:46:11.280 --> 00:46:17.560
But this is the wrong way of looking at it. In other words, what this is, is an invasion.

592
00:46:17.560 --> 00:46:23.040
Look, if I take my orange peels and eggshells and coffee grinds and dump them on your front lawn,

593
00:46:23.040 --> 00:46:25.520
we know what that is, that's trespass.

594
00:46:25.520 --> 00:46:29.720
But suppose I burn them first and then I send them over to your front lawn through the air.

595
00:46:29.720 --> 00:46:33.320
This is somehow according to the... In other words, this is a government failure.

596
00:46:33.320 --> 00:46:36.600
The bloody government is supposed to protect property rights.

597
00:46:36.600 --> 00:46:40.320
They didn't protect property rights in the progressive period and thereafter.

598
00:46:40.320 --> 00:46:41.920
And that's why we have the problem.

599
00:46:41.920 --> 00:46:44.240
Not because there's anything intrinsic in the market,

600
00:46:44.240 --> 00:46:46.320
it's rather intrinsic in government.

601
00:46:46.320 --> 00:46:48.360
Okay, the next way to look at this,

602
00:46:48.360 --> 00:46:52.640
the next objection that would be likely to emanate from the mainstream

603
00:46:52.640 --> 00:46:54.480
is a thing called public goods.

604
00:46:54.480 --> 00:46:57.920
Am I running out of time?

605
00:46:57.920 --> 00:47:05.280
Well, okay, well I...

606
00:47:05.280 --> 00:47:07.960
Somebody asked me a question about this.

607
00:47:07.960 --> 00:47:13.260
No, I, well, let me just take two minutes on, how much more time do I have?

608
00:47:13.260 --> 00:47:17.260
Okay, I'll just take two minutes on this stuff and then I'll open it for questions.

609
00:47:17.260 --> 00:47:20.960
I've already dealt with some written questions, but I'll take verbal questions.

610
00:47:20.960 --> 00:47:26.360
See, the idea here is, what,

611
00:47:26.360 --> 00:47:29.260
excludability and rivalrousness,

612
00:47:29.260 --> 00:47:34.160
the way the mainstream divide up all goods in terms of excludability and rivalrousness.

613
00:47:34.160 --> 00:47:40.260
So, what is excludability? That is, can you exclude non-payers? Or do you get free riders?

614
00:47:40.260 --> 00:47:47.060
Rivalrousness is, if you get the service, does it detract from my service?

615
00:47:47.060 --> 00:47:54.360
For example, if the TV program is blasting off and we add one more viewer, are you taking anything away from me? No.

616
00:47:54.360 --> 00:47:57.860
So, the question is, is it excludable or not?

617
00:47:57.860 --> 00:48:01.380
Wait, let me do a different one.

618
00:48:01.380 --> 00:48:04.500
This is a better example here.

619
00:48:04.500 --> 00:48:08.980
OK, so the hot dog is excludable because if you grab a hot dog

620
00:48:08.980 --> 00:48:10.900
without paying, the cops will get on your case.

621
00:48:10.900 --> 00:48:13.600
So we can exclude non-payers by the police.

622
00:48:13.600 --> 00:48:14.700
Is it rivalrous?

623
00:48:14.700 --> 00:48:15.200
Yes.

624
00:48:15.200 --> 00:48:18.180
If you eat it, I can't eat it.

625
00:48:18.180 --> 00:48:21.180
The radio and TV, is that excludable?

626
00:48:21.180 --> 00:48:23.500
Yes, we can have pay TV and pay radio.

627
00:48:23.500 --> 00:48:27.820
We can blast out the TV program and then

628
00:48:27.820 --> 00:48:33.580
stop it, what do you call it, interfere with it, but then sell you a box or render you a box so you can unscramble it.

629
00:48:33.580 --> 00:48:40.900
So it is excludable, but it's not rivalrous because the marginal cost of adding one additional person or zero.

630
00:48:40.900 --> 00:48:44.380
So what they say is even though you can exclude, you shouldn't exclude.

631
00:48:44.380 --> 00:48:47.740
So this is a private good and this is a public good.

632
00:48:47.740 --> 00:48:49.900
Is this a public good also?

633
00:48:49.900 --> 00:48:54.900
You see, yes, it's also a public good because you can exclude even though it is rivalrous.

634
00:48:54.900 --> 00:48:57.820
If you have a crowded city street and one more person comes,

635
00:48:57.820 --> 00:49:00.820
it's rivalrous because he slows down everyone else.

636
00:49:00.820 --> 00:49:03.580
But can you exclude? No, it's hard. What are you going to do?

637
00:49:03.580 --> 00:49:07.060
Sell a ticket to Broadway and 42nd Street where there are masses of people?

638
00:49:07.060 --> 00:49:08.380
You can't exclude.

639
00:49:08.380 --> 00:49:12.100
And then this is a pure public good because now it's not excludable.

640
00:49:12.100 --> 00:49:13.620
You can't exclude from the lighthouse.

641
00:49:13.620 --> 00:49:15.140
You can't exclude from national defense.

642
00:49:15.140 --> 00:49:17.820
And also you shouldn't exclude because it's not rivalrous

643
00:49:17.820 --> 00:49:20.900
because if one more boat comes out, he can see the lighthouse.

644
00:49:20.900 --> 00:49:23.100
And if one more person comes by,

645
00:49:23.100 --> 00:49:26.820
You can still threaten the law-born into the men's room of the Kremlin

646
00:49:26.820 --> 00:49:29.020
and you can still protect everyone else.

647
00:49:29.020 --> 00:49:30.140
So this is the argument.

648
00:49:30.140 --> 00:49:34.700
Don't think that the mainstream think that there's 25% in each case.

649
00:49:34.700 --> 00:49:36.980
They would concede, at least the right-wing ones would,

650
00:49:36.980 --> 00:49:38.820
that most of the goods are like here.

651
00:49:38.820 --> 00:49:41.940
But this is the market failure of public goods.

652
00:49:41.940 --> 00:49:44.140
The Austrian criticism is,

653
00:49:44.140 --> 00:49:45.580
just means the government can't exclude,

654
00:49:45.580 --> 00:49:48.100
doesn't mean private people can't exclude.

655
00:49:48.100 --> 00:49:52.140
We can give everyone a little repel like this on 42nd Street

656
00:49:52.140 --> 00:49:54.700
And if they don't have it, we might not catch them now,

657
00:49:54.700 --> 00:49:58.540
but we'll catch them eventually, and we'll, you know, give a severe punishment.

658
00:49:58.540 --> 00:50:02.700
Similarly, with the lighthouse, we can threaten to shut off the lighthouse one day,

659
00:50:02.700 --> 00:50:06.300
when only your boat is out there, if it's a sort of a clear night,

660
00:50:06.300 --> 00:50:09.180
and all of your sailors know that, so you're going to have to pay your sailors extra

661
00:50:09.180 --> 00:50:11.660
if you don't subscribe to my lighthouse.

662
00:50:11.660 --> 00:50:13.500
Same thing with national defense.

663
00:50:13.500 --> 00:50:15.500
You can exclude non-payers.

664
00:50:15.500 --> 00:50:19.580
If they don't have this little thing, you send out a message to the Kremlin or to the mafia,

665
00:50:19.580 --> 00:50:24.580
So you're saying, hey, David Gordon is a pacifist, he refuses to pay, he doesn't have that little slip.

666
00:50:24.580 --> 00:50:27.580
He has the slip without paying, he's guilty of fraud.

667
00:50:27.580 --> 00:50:31.580
He doesn't have the little slip, he's free, I'm not going to protect him, go get him.

668
00:50:31.580 --> 00:50:37.580
So you can exclude non-payers, and it is rivalrous because Murray says,

669
00:50:37.580 --> 00:50:41.580
well, if you're defending the East Coast, you have less money to defend the West Coast.

670
00:50:41.580 --> 00:50:48.580
Okay, so this is a very quick rundown of the fallacy, of the market fallacy argument of the mainstream.