WEBVTT NOTE Triangular Intervention 1 00:00:00.000 --> 00:00:05.440 I wanted to clear up a few things that have come up in the conference so far. 2 00:00:05.440 --> 00:00:14.560 When Dr. Salerno was talking about fear of deflation or deflation phobia, 3 00:00:14.560 --> 00:00:19.400 he mentioned that I had coined this term. 4 00:00:19.400 --> 00:00:24.520 That's supposed to be an A there, but it's more authentic. 5 00:00:24.520 --> 00:00:29.280 In order to coin a fear, an official psychological fear, 6 00:00:29.280 --> 00:00:40.080 I learned that you use the name of whatever the person is afraid of in Greek, and then you add phobia. 7 00:00:40.080 --> 00:00:48.680 And so I knew this person who had helped me out in the past, who was a Greek translator, an academic, and so forth, 8 00:00:48.680 --> 00:00:57.280 and he had helped me out in the past, and so I emailed him and asked him to give me the translation for deflation phobia. 9 00:00:57.280 --> 00:01:01.280 A couple of days later, I figured, you know, you could get it right off the tip of your tongue, 10 00:01:01.280 --> 00:01:05.780 but it turns out there's really not a word in Greek for deflation. 11 00:01:05.780 --> 00:01:13.380 Apparently, in the Greek society, they either had stable money or inflation. 12 00:01:13.380 --> 00:01:17.980 And he sends me back this, apoplit horosmos phobia. 13 00:01:17.980 --> 00:01:20.180 And so I tried to start breaking that down. 14 00:01:20.180 --> 00:01:22.980 Obviously, phobia is the fear of. 15 00:01:22.980 --> 00:01:29.380 And so I figured it was a pop in the price level. 16 00:01:29.380 --> 00:01:43.060 And so I sent him back my sort of retranslation and he said, no, that's not quite it. 17 00:01:43.060 --> 00:01:50.820 There was no term for deflation, so he had to sort of make something up, which didn't mean anything. 18 00:01:50.820 --> 00:01:55.820 So he wrote me back and said, no, it really means this, which was just a series of Greek symbols, 19 00:01:55.820 --> 00:01:59.820 which again didn't help me very much. 20 00:01:59.820 --> 00:02:02.820 And this guy had been helpful in the past. 21 00:02:02.820 --> 00:02:08.820 A friend of mine who is Greek had put me onto him a number of years before, 22 00:02:08.820 --> 00:02:13.820 when I had sort of been pushed into politics, into running for office. 23 00:02:13.820 --> 00:02:19.820 And I was a little intimidated by that being a Yankee New Yorker coming down to Alabama 24 00:02:19.820 --> 00:02:25.040 in Alabama and being sort of pushed into the political realm and so I've been 25 00:02:25.040 --> 00:02:31.120 asking my friends for advice and my Greek friend recommended I contact his 26 00:02:31.120 --> 00:02:36.140 cousin, the Greek translator, to get to the very basics of what politics was and 27 00:02:36.140 --> 00:02:46.880 so I asked him to to translate that for me and this time he came back and he 28 00:02:46.880 --> 00:02:55.880 He said, well, you know what, in Greek, what poly means, it means many or several, and I said, yeah, polynumerals and all that kind of stuff. 29 00:02:55.880 --> 00:02:58.880 He says, you know what ticks are, and I said, well, I don't know what that means. 30 00:02:58.880 --> 00:03:03.880 He said, well, they're a bunch of infectious, blood-sucking parasites. 31 00:03:03.880 --> 00:03:15.880 And so politics at that point became very clear to me. 32 00:03:15.880 --> 00:03:45.880 Another thing I wanted to clear up my really brilliant point that I was going to make the other day doesn't seem quite as momentous as at this point but it was on Nick's good question about the lack of development in Africa where you know it's put forward that there was just an absence of capital rather than the rule of law as Nick pointed out and I'm sure Murray would would agree with him at that point 33 00:03:45.880 --> 00:03:51.640 on that point, but you have to remember, and this is again a good lesson about 34 00:03:51.640 --> 00:03:55.880 Man Economy and State and how it's actually structured. 35 00:03:55.880 --> 00:04:00.600 First of all, there's lots of reasons, possible reasons for the lack of capital, 36 00:04:00.600 --> 00:04:07.160 including the rule of law, but there's also simply that people don't have a preference 37 00:04:07.160 --> 00:04:12.120 for putting, for savings and building up capital. 38 00:04:12.120 --> 00:04:27.120 They might have a particular ideological bias against accumulating capital and they prefer to live, you know, in thatch huts and very little clothing. 39 00:04:27.120 --> 00:04:40.420 You can think of the survivor, you know, TV shows, people like that, or just some sort of religious bias against accumulating capital, such as we might find in Tibet. 40 00:04:40.420 --> 00:04:49.820 So there are lots of natural reasons for the absence of capital, but of course at this part in Man Economy and State, 41 00:04:49.820 --> 00:05:00.940 Rothbard is assuming that we have a free society with the rule of law, based on libertarian property rights based systems, 42 00:05:00.940 --> 00:05:10.380 so that he naturally wouldn't bring into focus the absence of the rule of law at that particular point. 43 00:05:10.380 --> 00:05:19.020 Okay, with respect to triangular intervention, Rothbard first of course lays out autistic 44 00:05:19.020 --> 00:05:25.220 intervention where the state is coming to you as an individual and intervening in your 45 00:05:25.220 --> 00:05:32.820 lives in some way, and then what is to follow this lecture on binary intervention where 46 00:05:32.820 --> 00:05:41.820 where the state again intervenes in your life in the form of taking away your property, 47 00:05:41.820 --> 00:05:46.540 taxing you, requiring that you provide the state with certain gifts. 48 00:05:46.540 --> 00:05:53.360 And then there's triangular intervention where the state intervenes between transactions 49 00:05:53.360 --> 00:05:59.720 and exchanges between various individuals and business forms out there in the economy. 50 00:05:59.720 --> 00:06:05.360 So that's going to be the focus of this lecture. 51 00:06:05.360 --> 00:06:11.960 One of the questions that was raised with respect to this chapter was, you know, what 52 00:06:11.960 --> 00:06:18.120 is Rothbard's contributions here, because a lot of the actual interventions that he 53 00:06:18.120 --> 00:06:26.380 goes over are familiar to some economists, or some of them are familiar to many economists. 54 00:06:26.380 --> 00:06:33.060 But the overall basic topology of interventions that Rothbard provides in Man Economy and 55 00:06:33.060 --> 00:06:35.820 State is a contribution. 56 00:06:35.820 --> 00:06:42.300 It's a contribution that he lays out the whole extent, not comprehensive, but gives 57 00:06:42.300 --> 00:06:50.960 you the full extent of the types of government interventions that do exist and then breaks 58 00:06:50.960 --> 00:06:52.540 them down into categories. 59 00:06:52.540 --> 00:07:03.660 So that's a contribution and also it gives you a good flavor for single triangular interventions 60 00:07:03.660 --> 00:07:08.300 and then when you look at the whole broad base of triangular interventions it gives 61 00:07:08.300 --> 00:07:15.300 you an understanding of how chaotic a market economy can become when you have each and 62 00:07:15.300 --> 00:07:20.820 every one of these interventions as well as many others. 63 00:07:20.820 --> 00:07:28.700 And then, of course, as Walter pointed out, it also gives you, looking back, it gives 64 00:07:28.700 --> 00:07:32.540 you a good picture of what the free society really is. 65 00:07:32.540 --> 00:07:37.560 Because in the absence of all these interventions, including things like defense, you get a good 66 00:07:37.560 --> 00:07:39.600 picture of what society is. 67 00:07:39.600 --> 00:07:46.220 So he is laying out an understanding of society to begin with in Man Economy and State, and 68 00:07:46.220 --> 00:07:53.380 and then bringing in all of these interventions and of course what he's pointing out is that 69 00:07:53.380 --> 00:08:02.380 these interventions reduce social welfare. They cannot increase social welfare, they 70 00:08:02.380 --> 00:08:12.740 only decrease it. Triangular intervention is what most economists think of when they 71 00:08:12.740 --> 00:08:17.740 when I think of intervention, regulations, price controls, things of that nature. 72 00:08:17.740 --> 00:08:26.740 And so these are a lot of the most common types of interventions that we see in the real world. 73 00:08:26.740 --> 00:08:34.740 With respect to autistic and binary, autistic and binary types of interventions, people generally understand. 74 00:08:34.740 --> 00:08:36.740 They see them and they understand them. 75 00:08:36.740 --> 00:08:45.580 You know, if you were forced to salute to the flag or you're forced to salute to the ruler or to the fuhrer, 76 00:08:45.580 --> 00:08:49.380 you know, you would have a good idea of how that made you feel personally. 77 00:08:49.380 --> 00:08:55.220 If you are forced to pay taxes or somebody repossesses your home because you failed to pay taxes, 78 00:08:55.220 --> 00:08:59.700 you get a pretty good idea of how that impacts you. 79 00:08:59.700 --> 00:09:05.660 But triangular intervention is where there's a veil of ignorance, 80 00:09:05.660 --> 00:09:16.300 where we don't really see and feel the impact of intervention in our daily lives. 81 00:09:16.300 --> 00:09:23.420 And so this is the area where economists can be most enlightening to the general public. 82 00:09:23.420 --> 00:09:29.460 It's only people who can see the unseen, in other words, that actually can enlighten their 83 00:09:29.460 --> 00:09:36.360 and their fellow citizens with respect to what is the impact of this price control or 84 00:09:36.360 --> 00:09:42.020 conversely what is causing a shortage of a particular good or service or what is causing 85 00:09:42.020 --> 00:09:47.580 the price of a particular product going up. 86 00:09:47.580 --> 00:09:48.580 Where are those causes? 87 00:09:48.580 --> 00:09:54.640 Well, the normal, average, ordinary, everyday, common person doesn't have any way of figuring 88 00:09:54.640 --> 00:10:01.640 to bring those things out and if you listen to the major media, they really don't have much of a clue either. 89 00:10:01.640 --> 00:10:09.640 It's up to each and every one of us to be able to provide that kind of insight to our fellow citizens. 90 00:10:09.640 --> 00:10:20.640 The first type of intervention is price controls, where you have, where the government sets either a minimum price, 91 00:10:20.640 --> 00:10:28.400 such as a minimum wage or a maximum price such as a usury law setting an 92 00:10:28.400 --> 00:10:36.060 upper limit on the interest rate and you can also have a fixed price of a 93 00:10:36.060 --> 00:10:41.960 particular good you can have the state coming in and fixing all prices across 94 00:10:41.960 --> 00:10:48.080 the board and so there's a variety of different types of price controls that 95 00:10:48.080 --> 00:11:10.480 that the state imposes. Rothbard focuses on effective price controls, those where the price setting, minimums, maximums, or fixed prices are at odds with reality, with economic reality, and these cause distortions in the economy, 96 00:11:10.480 --> 00:11:19.200 surpluses and shortages, they cause businesses to lose money, entrepreneurs to lose money, 97 00:11:19.200 --> 00:11:24.120 and they lower welfare in the economy. 98 00:11:24.120 --> 00:11:31.480 And of course, there's the general price control, which we see imposed by states in highly inflationary 99 00:11:31.480 --> 00:11:40.080 economies and hyperinflationary economies with the idea to prevent inflation from impacting 100 00:11:40.080 --> 00:11:46.520 economic performance and to prop up the purchasing power of money. 101 00:11:46.520 --> 00:11:52.800 Of course this, the general price control actually causes a lot more chaos, a lot more 102 00:11:52.800 --> 00:11:58.520 distortions and losses in the economy. 103 00:11:58.520 --> 00:12:07.000 Money seems to lose an anchor to value, businesses lose money and entrepreneurs have a very difficult 104 00:12:07.000 --> 00:12:19.000 One interesting thing that Rothbard does here with respect to price controls is that he brings in price controls on money. 105 00:12:19.000 --> 00:12:30.000 So where normally you would find things like Gresham's Law, legal tender laws, and chapters on monetary economics and monetary policy, 106 00:12:30.000 --> 00:12:39.720 Policy, Rothbard introduces them here in terms of price controls, so that he explains bimetalism 107 00:12:39.720 --> 00:12:49.240 in Gresham's law where good money supposedly drives out bad money by categorizing bimetalism 108 00:12:49.240 --> 00:12:58.540 where the state fixes the ratio of gold to silver as a form of price control. 109 00:12:58.540 --> 00:13:06.320 Legal tender laws have a lot of different effects, but Rothbard focuses in on the impact 110 00:13:06.320 --> 00:13:15.420 of legal tender laws on brand new coins versus worn out coins. 111 00:13:15.420 --> 00:13:21.860 And finally, usury laws, which are often looked at in terms of price controls, where the state 112 00:13:21.860 --> 00:13:31.040 imposes maximum interest rates in order to keep rates low, of course this prevents loans, 113 00:13:31.040 --> 00:13:39.260 it prevents discourages savings and investment and ultimately leads to extra market activity 114 00:13:39.260 --> 00:13:47.620 such as loan sharking, where individuals work outside of the normal market channels, they 115 00:13:47.620 --> 00:13:54.580 They charge extremely high rates of interest because the normal rules of law in the marketplace 116 00:13:54.580 --> 00:14:01.860 aren't in place with illegal activity, it introduces yet another form of violence. 117 00:14:01.860 --> 00:14:06.460 So the violence of the state coming in and imposing its rule with respect to interest 118 00:14:06.460 --> 00:14:17.180 rates also can result in violence from market participants rather than from the state itself. 119 00:14:17.180 --> 00:14:22.780 So with respect to price controls, you have a situation where some people in the economy 120 00:14:22.780 --> 00:14:36.820 are harmed and where very often some people can benefit. 121 00:14:36.820 --> 00:14:46.580 Others are surprisingly harmed, so people who expect to benefit from certain price controls, 122 00:14:46.580 --> 00:14:51.180 Say, for example, low-income people, there's a price control on milk. 123 00:14:51.180 --> 00:14:58.360 Milk is in short supply, and the result being that people don't have access to milk at all. 124 00:14:58.360 --> 00:15:03.460 So rather than helping them, it unintentionally or surprisingly hurts them. 125 00:15:03.460 --> 00:15:09.460 Of course, there's all sorts of distortions caused by price controls, and this also leads 126 00:15:09.460 --> 00:15:13.620 to taxes and bureaucracy as well. 127 00:15:13.620 --> 00:15:29.600 So that also is going to fit in with the binary intervention, excuse me. 128 00:15:29.600 --> 00:15:36.860 And also it's important to note that price controls can have effects on the product, 129 00:15:36.860 --> 00:15:41.760 and product controls, which we're going to look at next, obviously can have impacts 130 00:15:41.760 --> 00:16:11.760 The first kind of product control is prohibition. Here both the suppliers and the demanders are hurt by the prohibition, whereas in price controls you can have nominal winners either on the supply side or the demand side. With prohibition, you basically have all parties in the market harmed as a result of prohibition. The only people that are benefited are the bureaucrats and the interest groups. 131 00:16:11.760 --> 00:16:15.240 groups that want to promote certain types of prohibition. 132 00:16:15.240 --> 00:16:24.640 So an alcohol prohibition, for example, will help establish and fund an alcohol bureaucracy, 133 00:16:24.640 --> 00:16:31.400 but it will also help politicians who are conveying favors to people who believe in 134 00:16:31.400 --> 00:16:35.160 alcohol temperance and not drinking alcohol. 135 00:16:35.160 --> 00:16:42.200 Of course, prohibition, it's the most important impact is in creating a black market where 136 00:16:42.200 --> 00:16:47.800 there are more risks, there are higher prices and a lot of inefficiency. 137 00:16:47.800 --> 00:16:54.160 And then Rothbard goes through and looks at all of the other impacts that prohibition 138 00:16:54.160 --> 00:16:56.040 brings about. 139 00:16:56.040 --> 00:17:01.440 It distorts the type of firm, it distorts and detracts the type of information that's 140 00:17:01.440 --> 00:17:11.940 available to consumers. In fact, prohibition is an interesting contrast between neoclassical 141 00:17:11.940 --> 00:17:17.940 economists and Austrian economists. Neoclassical economists are generally what they call price 142 00:17:17.940 --> 00:17:23.720 theorists, so that everything they do with respect to modeling and markets and supply 143 00:17:23.720 --> 00:17:28.720 and Supply and Demand has to do with the price of the product. 144 00:17:30.720 --> 00:17:39.720 Austrians have a more general view of how government intervention affects marketplaces, businesses and consumers. 145 00:17:40.720 --> 00:17:47.720 And when we look at prohibition, where you have the state imposing its will and enforcing it with criminal penalties, 146 00:17:47.720 --> 00:18:02.720 What we find is that the changes in the market that result from a prohibition, the price changes are actually the least important in the overall scope of things. 147 00:18:02.720 --> 00:18:09.720 So when neoclassicals look at the problem of prohibition, they try to model it in terms of price. 148 00:18:09.720 --> 00:18:17.720 It raises the price for them, it decreases the quantity, and so therefore it in some sense achieves its desired result. 149 00:18:17.720 --> 00:18:22.720 It doesn't achieve complete prohibition, but at least it reduces consumption. 150 00:18:22.720 --> 00:18:29.720 Now the Austrians are going to look at that and say, well, you know, look at what other changes are happening. 151 00:18:29.720 --> 00:18:34.720 The product is produced in an entirely different way. 152 00:18:34.720 --> 00:18:40.720 It's transported under completely different conditions. 153 00:18:40.720 --> 00:18:43.720 It's sold under completely different conditions. 154 00:18:43.720 --> 00:18:47.720 And it's consumed under completely different conditions. 155 00:18:47.720 --> 00:18:52.720 People don't have access to the rule of law. 156 00:18:52.720 --> 00:18:57.720 People aren't protected by laws against fraud. 157 00:18:57.720 --> 00:19:03.720 They aren't protected by the normal channels of competition. 158 00:19:03.720 --> 00:19:14.720 One of the things that I've shown is that prohibition results in much higher potent drugs being sold into the marketplace. 159 00:19:14.720 --> 00:19:24.720 So that the neoclassicals can say, well, we've decreased the quantity of drugs sold by prohibition. 160 00:19:24.720 --> 00:19:34.720 The problem is, is that the quantity that's been sold is many times more potent than that which would have been sold in the marketplace. 161 00:19:34.720 --> 00:19:47.360 So before prohibition, things like cocaine and heroin, morphine were relatively safe, and very few people died from those products. 162 00:19:47.360 --> 00:20:17.360 they very few people overdosed from those products because they were produced and distributed and consumed under market conditions but now we have a completely different situation where the products are being produced, they're being distributed and they're being consumed under completely different conditions and a lot of people die a lot of people experience overdoses and all of that is directly 163 00:20:17.360 --> 00:20:24.280 attributable to the prohibition itself. There was just a little news item on CNN on my way 164 00:20:24.280 --> 00:20:32.440 over here which showed that the potency of marijuana is higher now than it ever has been 165 00:20:32.440 --> 00:20:38.000 in the history of man, basically. And it's been consistently higher over the last 30 166 00:20:38.000 --> 00:20:45.880 years that the government has been testing the potency of marijuana, which might be some 167 00:20:45.880 --> 00:20:55.080 some kind of explanation for their behavior over recent years as well. 168 00:20:55.080 --> 00:21:03.220 Now there's a whole long list of different types of product controls that grant monopoly 169 00:21:03.220 --> 00:21:13.520 privileges in the economy and again Rothbard shows here that consumers and would-be or 170 00:21:13.520 --> 00:21:18.720 where potential producers are harmed as a result of these product controls and that 171 00:21:18.720 --> 00:21:25.360 very often these product controls and grants of monopoly privilege result in higher prices 172 00:21:25.360 --> 00:21:33.240 for consumers and he also points out, which is very important, that many of these monopoly 173 00:21:33.240 --> 00:21:42.900 privileges are sugar-coated with grants of appearing to serve the public interest in 174 00:21:42.900 --> 00:21:48.220 in order to make them more palatable to consumers, and again, these are areas where it's very 175 00:21:48.220 --> 00:21:53.840 difficult for consumers to understand what's happening to them, especially given this sugar 176 00:21:53.840 --> 00:22:02.740 coating that the monopoly privileges are meant to improve the public image. 177 00:22:02.740 --> 00:22:09.300 He starts out with compulsory cartels. 178 00:22:09.300 --> 00:22:12.140 Next is licenses and certificates of needs. 179 00:22:12.140 --> 00:22:19.740 Of course, there's many, many different professions such as doctors who are given licenses. 180 00:22:19.740 --> 00:22:24.620 Certificates of needs apply to things like establishing new hospitals, new nursing homes, 181 00:22:24.620 --> 00:22:26.460 things of that nature. 182 00:22:26.460 --> 00:22:31.700 These all serve to increase the price of the product. 183 00:22:31.700 --> 00:22:39.380 Standards of Quality, this obviously is cloaked in the public interest. 184 00:22:39.380 --> 00:22:44.460 The medical profession is important with this regard. 185 00:22:44.460 --> 00:22:52.060 The imposition of product definitions and ingredient labeling are all done to establish 186 00:22:52.060 --> 00:22:57.940 so-called standards of quality. 187 00:22:57.940 --> 00:23:05.460 including one that just came about recently where the government required food products 188 00:23:05.460 --> 00:23:18.980 to label the amount of a certain type of fat, trans fats, well it turns out that at the 189 00:23:18.980 --> 00:23:26.820 same time they required anybody who had trans fats in their food to label it, they also 190 00:23:26.820 --> 00:23:35.620 also allowed producers to include up to one gram per serving of trans fats and declare 191 00:23:35.620 --> 00:23:45.040 that there was no trans fats in the food, while at the same time allowing the producers 192 00:23:45.040 --> 00:23:53.480 to change the amount that fit with a unit of consumption. 193 00:23:53.480 --> 00:23:58.960 So a product will, you know, a bag of potato chips will say this has four servings of potato 194 00:23:58.960 --> 00:24:04.120 chips and it's, you know, so many chips and so many calories and all that. 195 00:24:04.120 --> 00:24:11.320 They allowed them to change that so that producers would reduce the amount in a serving, increase 196 00:24:11.320 --> 00:24:17.720 the number of servings so that on the product labeling the calories per serving went down 197 00:24:17.720 --> 00:24:25.840 and the amount of trans fats would fall below the one gram per serving. 198 00:24:25.840 --> 00:24:31.720 So instead of sending out the message that we're going to get tough on trans fats, what 199 00:24:31.720 --> 00:24:37.880 they effectively did was give a avenue for producers, and I'm all for trans fats, by 200 00:24:37.880 --> 00:24:45.160 the way, I'm not, you know, being anti-trans fat here, to declare on their product that 201 00:24:45.160 --> 00:24:47.640 This product is trans-fat free. 202 00:24:47.640 --> 00:24:52.200 So you've seen a plethora of these new labeling techniques 203 00:24:52.200 --> 00:24:55.440 when in fact, the product is the same old thing 204 00:24:55.440 --> 00:24:58.160 that it's always been, the labeling has been changed. 205 00:24:58.160 --> 00:25:01.760 And so, you know, this is not a fraud, 206 00:25:01.760 --> 00:25:06.220 it's just a way in which industry has captured the state 207 00:25:06.220 --> 00:25:09.320 to its own advantage in order to hurt consumers. 208 00:25:09.320 --> 00:25:18.760 And, of course, so much for building construction regulations with the construction towers in 209 00:25:18.760 --> 00:25:23.960 New York, you know, falling on a regular basis and killing people, as Walter would point 210 00:25:23.960 --> 00:25:32.420 out, you know, that type of activity is severely restricted in a true free market economy. 211 00:25:32.420 --> 00:25:39.900 Because these construction companies have complied with regulations and inspections, 212 00:25:39.900 --> 00:25:44.900 they're able to get off with lower penalties. 213 00:25:44.900 --> 00:25:50.180 Tariffs obviously is an important one where it's a battle basically between mercantilist 214 00:25:50.180 --> 00:25:54.680 arguments and free market arguments. 215 00:25:54.680 --> 00:26:02.300 Immigration restrictions, Rothbard shows how the free society works in terms of immigration 216 00:26:02.300 --> 00:26:12.740 and Wage Rate Compensation Differentials, where capital moves from high wage to low wage countries 217 00:26:12.740 --> 00:26:21.100 and where low wage workers move to high wage countries or high capital countries, which 218 00:26:21.100 --> 00:26:28.020 basically, if we didn't have the national borders and have the distortions that we currently 219 00:26:28.020 --> 00:26:34.500 have, things like population problems, labor shortages, and the like, would not emerge 220 00:26:34.500 --> 00:26:47.860 at all. Child labor laws cause unemployment, less production. Conscription is another big 221 00:26:47.860 --> 00:26:54.500 one, especially at the time that Rothbard was writing this, during the Vietnam or pre-Vietnam 222 00:26:54.500 --> 00:27:05.180 era, post-World War II, the minimum wage law is a good example where the minimum wage 223 00:27:05.180 --> 00:27:11.480 law actually hurts those that it is designed to help, subsidies to unemployment, penalties 224 00:27:11.480 --> 00:27:13.700 to market forms. 225 00:27:13.700 --> 00:27:22.380 That was a bigger issue in the 1950s and the 1960s than it is today, but we still see things 226 00:27:22.380 --> 00:27:43.380 State of Maryland passed a law with regard to how firms would handle health insurance for the employees and it turned out that that law only applied to one Super Walmart in the state of Maryland. 227 00:27:43.380 --> 00:27:52.160 Anti-trust laws fit into this, again, where it's seemingly designed to help competition, 228 00:27:52.160 --> 00:27:59.280 it actually hurts competition. 229 00:27:59.280 --> 00:28:05.080 Conservation laws, Murray goes into great depth with conservation laws, of course we 230 00:28:05.080 --> 00:28:09.180 refer to them as environmental laws today. 231 00:28:09.180 --> 00:28:22.760 The greatest pie in the sky type of legislation that is in the market today. 232 00:28:22.760 --> 00:28:28.700 Environmental laws or conservation laws, Rothbard shows, is a misuse of resources in an economic 233 00:28:28.700 --> 00:28:30.700 sense. 234 00:28:30.700 --> 00:28:38.380 He shows that owners of private property create the maximum present value of their resources 235 00:28:38.380 --> 00:28:43.380 is an earn the best place to conserve those resources. 236 00:28:44.060 --> 00:28:46.740 And one thing that I find very enlightening 237 00:28:46.740 --> 00:28:49.540 in terms of teaching classes about conservation 238 00:28:49.540 --> 00:28:52.540 or environmental laws is to ask students 239 00:28:52.540 --> 00:28:56.100 the difference between renewable resources 240 00:28:56.100 --> 00:28:58.700 and non-renewable resources. 241 00:28:58.700 --> 00:29:02.180 In other words, resources which the world has the ability 242 00:29:02.180 --> 00:29:04.900 to produce over and over, we can change, 243 00:29:04.900 --> 00:29:07.740 we can get less of them, we can get more of them, 244 00:29:07.740 --> 00:29:17.180 But all we have to do is continue the production process of providing enough ground or enough food or enough air or whatever 245 00:29:17.180 --> 00:29:23.540 and we'll be able to constantly reproduce those particular resources forever. 246 00:29:23.540 --> 00:29:30.620 And then there's the non-renewable resources where there's a fixed finite amount of those particular products on Earth 247 00:29:30.620 --> 00:29:35.460 and once we use them up, they're going to be gone forever. 248 00:29:35.460 --> 00:29:46.260 And then I asked the students, which one of these sets of resources, the renewable or the non-renewable, do we face the most problem with? 249 00:29:46.260 --> 00:29:52.980 And they inevitably pick the non-renewable resources, those which are finite, they're fixed. 250 00:29:52.980 --> 00:29:55.900 If we use them up, it's all gone. 251 00:29:55.900 --> 00:29:59.020 But the renewable ones, we shouldn't have much problem with. 252 00:29:59.020 --> 00:30:10.020 But in fact, it's the renewable resources which we're having the most problems with according to the environmentalist groups themselves. 253 00:30:10.020 --> 00:30:18.020 A particular plant species, particular animal species, particular fish species. 254 00:30:18.020 --> 00:30:26.020 Whereas things like gold, for example, doesn't look like we're having much of a problem with that. 255 00:30:26.020 --> 00:30:37.020 Even things like uranium, which has a sort of a shelf life to it, you know, that stuff is stored and then reprocessed into other products. 256 00:30:37.020 --> 00:30:50.020 And so we're actually having very little problems with these exhaustible resources and we're having all of the problems with the inexhaustible resources that are renewable. 257 00:30:50.020 --> 00:30:51.020 And why is that? 258 00:30:51.020 --> 00:30:58.660 Well, with the non-renewable resources, they tend to be in private hands. 259 00:30:58.660 --> 00:31:08.860 They tend to be owned by individuals, people who own land, people who own mines and mine resources. 260 00:31:08.860 --> 00:31:16.740 Whereas with the renewable resources, those are things that are not subject to property rights very often, 261 00:31:16.740 --> 00:31:22.660 or where the government actually gets in the way of establishing property rights like in 262 00:31:22.660 --> 00:31:27.580 the sea or in bodies of water. 263 00:31:27.580 --> 00:31:32.620 And so that's a great example of how the market with property rights actually takes 264 00:31:32.620 --> 00:31:38.340 very good care of resources whereas where the government either has gotten in the way 265 00:31:38.340 --> 00:31:45.900 of or has stymied the establishment of property rights. 266 00:31:45.900 --> 00:31:56.460 Now patents are an important invasion of property rights by the state. 267 00:31:56.460 --> 00:32:02.940 It's an invasion of the property rights of the would-be inventors, people who come along 268 00:32:02.940 --> 00:32:10.660 and discover, are the second discoverers of various techniques. 269 00:32:10.660 --> 00:32:17.980 I think the group basically understands a lot about the impact of patents, although I know 270 00:32:17.980 --> 00:32:19.740 there are questions about it. 271 00:32:19.740 --> 00:32:26.780 I want to give you a couple of personal experiences with inventions. 272 00:32:26.780 --> 00:32:34.660 I suffer from allergies, pollen allergies, and one weekend this spring I woke up and 273 00:32:34.660 --> 00:32:40.980 Now I thought I had this great idea that if I could only come up with a nose filter where 274 00:32:40.980 --> 00:32:45.700 I could stick it in my nose and have a, you know, one of those high quality filters put 275 00:32:45.700 --> 00:32:51.300 in there, that I could go outside instead of wearing one of those big Michael Jackson 276 00:32:51.300 --> 00:32:59.020 masks, which, you know, it makes people afraid of you. But, you know, just a little nose 277 00:32:59.020 --> 00:33:04.860 This plug, I figured, well, they'll just think I'm a geek. 278 00:33:04.860 --> 00:33:09.940 And so I designed this thing and got, you know, what I would need to have, you know, 279 00:33:09.940 --> 00:33:13.780 little plastic pieces and filters and so on. 280 00:33:13.780 --> 00:33:18.260 And I thought, well, the filters would have to be replaceable given that it's in your 281 00:33:18.260 --> 00:33:20.580 nose all the time. 282 00:33:20.580 --> 00:33:25.400 And so I laid all this out and then I went on the Internet to see if anybody else had 283 00:33:25.400 --> 00:33:26.400 discovered this. 284 00:33:26.400 --> 00:33:31.800 What is he trying to do? Why would he be coming up with this kind of invention? 285 00:33:31.800 --> 00:33:37.760 Well, it turns out that three other people already have patents on this, and then there's 286 00:33:37.760 --> 00:33:43.880 a couple more who have patents pending, but none of them are in the marketplace. Those 287 00:33:43.880 --> 00:33:50.660 people came up with this idea and they're just in the way, sort of, of other people 288 00:33:50.660 --> 00:33:55.840 trying to bring it to market, because if I brought it to market, they would sue to recoup 289 00:33:55.840 --> 00:34:12.840 And because there's multiple patents already existing, if anybody did try to bring it to market with permission, they probably have to get permission and give fees to all of the patent owners. 290 00:34:12.840 --> 00:34:23.960 I also came up with another invention, again, for the allergies, where I took a 3M filtrate 291 00:34:23.960 --> 00:34:30.880 filter. If you have an air conditioning unit in your home or in your apartment, there's 292 00:34:30.880 --> 00:34:36.400 a filter attached to it. And if you don't have one, I'll show it to you. They're all 293 00:34:36.400 --> 00:34:44.480 all around the institute, and so I took the 3M filter and duct taped it to a 20 inch box 294 00:34:44.480 --> 00:34:53.020 fan and then you just run the fan and it brings the air through and it takes all the pollen 295 00:34:53.020 --> 00:34:55.800 out of the air. 296 00:34:55.800 --> 00:35:01.560 And so not wanting to profit from this myself, I sent the idea to the 3M company who also 297 00:35:01.560 --> 00:35:07.560 also makes the masks and the filtrate filters, so that was the natural company to send it to. 298 00:35:07.560 --> 00:35:16.560 And sure enough, about 18 months later, they came out with a very fancy version of my Thornton Air machine. 299 00:35:16.560 --> 00:35:24.560 And I was kind of indignant that the first time I found out about this was when they sent me an advertisement 300 00:35:24.560 --> 00:35:32.000 to buy one of these things costing two hundred dollars and you know I was going 301 00:35:32.000 --> 00:35:35.240 to write this company and call them up and give them a piece of my mind but 302 00:35:35.240 --> 00:35:39.240 somebody said somebody told me they said if they had even sent you a letter of 303 00:35:39.240 --> 00:35:44.120 thanks that would have been evidence that I could have presented in a court 304 00:35:44.120 --> 00:35:51.560 lawsuit against them in order to you know make my patent claim on that 305 00:35:51.560 --> 00:36:02.920 and Product. So patents really affect, distort and reduce overall product research and in 306 00:36:02.920 --> 00:36:10.240 particular they prevent the bringing of that basic research, that primary introductory 307 00:36:10.240 --> 00:36:18.280 type research into the market in terms of products actually reaching the market. And 308 00:36:18.280 --> 00:36:25.760 There's a whole host of other such interventions that Rothbard covers, and that's another 309 00:36:25.760 --> 00:36:34.880 good benefit of power and market, or the final sections of Man Economy and State, is that 310 00:36:34.880 --> 00:36:40.160 you get a shorthand introduction to all of the really important aspects of the problem. 311 00:36:40.160 --> 00:36:44.000 You might not go into a lot of the details, but it'll say the consumers are hurt, would-be 312 00:36:44.000 --> 00:36:51.480 Producers are hurt, special interest groups are helped, and so there's government franchises 313 00:36:51.480 --> 00:36:57.280 like the post office and the state lottery, the problem of eminent domain, which really 314 00:36:57.280 --> 00:37:03.120 probably cries out for an Austrian treatment, sort of a law and economics dissertation or 315 00:37:03.120 --> 00:37:13.460 thesis on that subject, bribery, anti-monopoly policy, which of course Rothbard shows anti-monopoly 316 00:37:13.460 --> 00:37:21.220 Policy is actually helps create monopoly and restrictive prices. 317 00:37:21.220 --> 00:37:26.820 And then the appendix look at private coinage and coercion. 318 00:37:26.820 --> 00:37:31.700 Again some very interesting topics. 319 00:37:31.700 --> 00:37:36.740 And before opening it up I want to try to address or at least introduce some of the 320 00:37:36.740 --> 00:37:41.220 written questions here. 321 00:37:41.220 --> 00:37:47.340 By the way, when I started getting into Austrian economics, I had a couple of books. 322 00:37:47.340 --> 00:37:53.980 I know I had Kirzner's book on competition, but one of the first books I ever got was 323 00:37:53.980 --> 00:37:56.620 Power and Market. 324 00:37:56.620 --> 00:38:03.220 And that was one I most completely read and digested of the early books on Austrian economics, 325 00:38:03.220 --> 00:38:10.740 but I had no idea that there was this whole huge prelude of Man, Economy, and State for 326 00:38:10.740 --> 00:38:20.500 So I read, I had some economic courses, some introductory economic courses, but I was basically 327 00:38:20.500 --> 00:38:26.220 taking a lot of what Rothbard said either on tuition or faith, but it was a great eye-opener 328 00:38:26.220 --> 00:38:29.220 for me. 329 00:38:29.220 --> 00:38:34.320 I know that the classification of types of intervention and complex analysis is great 330 00:38:34.320 --> 00:38:42.200 and Rothbard, but just a short question, what is his original contribution in this area? 331 00:38:42.200 --> 00:38:52.200 Well, I think one is the topology itself, is laying out the system, the classifications, 332 00:38:52.200 --> 00:39:00.640 and giving you the full feel of the entire scope of intervention and the vast different 333 00:39:00.640 --> 00:39:04.200 and the varieties of intervention that the state makes in economy. 334 00:39:04.200 --> 00:39:09.840 So I'd say that was the primary contribution, but a lot of these specific interventions 335 00:39:09.840 --> 00:39:22.240 are not treated anywhere else in the literature as of the time that it was first published. 336 00:39:22.240 --> 00:39:26.840 Second question, I'm not convinced by Rothbard's argument that the major purpose of standard 337 00:39:26.840 --> 00:39:34.660 of Quality and Safety Regulations is to restrict competition and of course that's exactly 338 00:39:34.660 --> 00:39:41.920 what the state wants people to think and that's the specific aspect of quality and safety 339 00:39:41.920 --> 00:39:48.320 regulations that are most promoted by the state. 340 00:39:48.320 --> 00:39:54.840 But we should note that in the market economy that there are a lot of very reasonable and 341 00:39:54.840 --> 00:40:02.280 and in fact, more effective forms of safety and quality regulations. 342 00:40:02.280 --> 00:40:08.320 There's some specific ones like the certification process. 343 00:40:08.320 --> 00:40:14.580 Doctors need to be licensed, but other medical professions and other professions, other services 344 00:40:14.580 --> 00:40:16.840 can be certified. 345 00:40:16.840 --> 00:40:21.840 so that you're a certified whatever. 346 00:40:21.840 --> 00:40:28.920 And that just says that you've been specifically trained in a service, that you've met all 347 00:40:28.920 --> 00:40:36.440 the qualifications, you've had all the teaching, all the hands-on experience. 348 00:40:36.440 --> 00:40:42.920 And so that's a very legitimate alternative to the licensing process. 349 00:40:42.920 --> 00:40:51.760 And actually, licensing is somewhat suspect with respect to standards of quality. 350 00:40:51.760 --> 00:41:00.360 For example, in terms of beauticians and people who cut hair and that sort of thing, the actual 351 00:41:00.360 --> 00:41:06.720 requirements to get a license are not really heavily slated towards the cutting of hair 352 00:41:06.720 --> 00:41:08.240 and those sorts of things. 353 00:41:08.240 --> 00:41:13.960 are actually related to things that are not directly related to the business of cutting 354 00:41:13.960 --> 00:41:15.800 and styling hair. 355 00:41:15.800 --> 00:41:22.360 But they do form a barrier to entry because they keep people out of the profession. 356 00:41:22.360 --> 00:41:28.080 People for example who don't have a great proficiency with the English language won't 357 00:41:28.080 --> 00:41:30.040 pass the licensing test. 358 00:41:30.040 --> 00:41:37.800 There are various seals of approval, the good housekeeping seal of approval, the National 359 00:41:37.800 --> 00:41:45.660 National Association of Retired People, passed their seal of approval over a variety of products 360 00:41:45.660 --> 00:41:53.860 specifically designed for their members. There's groups like Underwriters Laboratory. You very 361 00:41:53.860 --> 00:42:01.200 often see electronic products in your apartments with a U and an L with a circle around it. 362 00:42:01.200 --> 00:42:09.120 That means that the electronic components of this product have been inspected and certified 363 00:42:09.120 --> 00:42:11.200 by the underwriters laboratory. 364 00:42:11.200 --> 00:42:17.080 And then, of course, there's a whole bunch of market competitive forces which keep businesses 365 00:42:17.080 --> 00:42:23.280 providing safe and high-quality products. 366 00:42:23.280 --> 00:42:28.920 I also do not agree with Rothbard's dismissal of national borders as something warranting 367 00:42:28.920 --> 00:42:30.960 special attention. 368 00:42:30.960 --> 00:42:36.280 For instance, to name one difference, domestic borders and national borders usually differ 369 00:42:36.280 --> 00:42:41.760 in that the latter involves language barriers. Furthermore, I believe that if people believe 370 00:42:41.760 --> 00:42:46.440 that there is such a thing as a nation, then this will affect their actions and thus it 371 00:42:46.440 --> 00:42:53.760 is worthy of attention. I find that Rothbard tends to oversimplify this matter too much. 372 00:42:53.760 --> 00:43:02.640 Well, I would say that in this chapter, with respect to this chapter, he's downplaying 373 00:43:02.640 --> 00:43:11.000 the role of national borders to explain some theoretical elements of these issues, such 374 00:43:11.000 --> 00:43:17.880 as the immigration problem, such as the tariff, the problems with tariffs. 375 00:43:17.880 --> 00:43:25.880 But I don't think that Rothbard would dismiss the issue of national borders in general at all. 376 00:43:29.880 --> 00:43:38.880 On page 1098, do quality standards actually prohibit change or merely make it more costly? 377 00:43:38.880 --> 00:43:43.880 If the government prohibits the sale of computers with less than two gigs of RAM, 378 00:43:43.880 --> 00:43:53.880 Any new technology for computer memory would have to be in addition to the old RAM technology, but it would still be possible, correct? 379 00:43:53.880 --> 00:44:08.880 Well, it certainly would be possible, but there also could be various types of drawbacks to such a quality standard, in this case, setting a minimum of 2 gigs of RAM. 380 00:44:08.880 --> 00:44:16.080 For example, there are a lot of people who are interested in buying very low-priced computers. 381 00:44:16.080 --> 00:44:21.080 As a matter of fact, there's a whole movement to provide every child in the world with the low-priced computers. 382 00:44:21.080 --> 00:44:29.080 Whether or not they have access to the internet or electricity or anything like that is beside the point. 383 00:44:29.080 --> 00:44:32.380 They just want low-cost computers in everybody's hands. 384 00:44:32.380 --> 00:44:40.620 But this type of requirement would actually hinder that potential, greatly hinder it. 385 00:44:40.620 --> 00:44:48.880 For example, two gig memory chips are already in high demand, but the smaller chips are 386 00:44:48.880 --> 00:44:55.780 in less demand and so you can actually acquire them and construct lower price computers. 387 00:44:55.780 --> 00:45:04.580 It might also, such technological regulation might also curtail the ability of the computer 388 00:45:04.580 --> 00:45:13.540 making industry to switch from one technology to another. 389 00:45:13.540 --> 00:45:19.460 If Rothbard would have had, excuse me, if Rothbard would have land to be free for the 390 00:45:19.460 --> 00:45:24.940 taking by those who mix their labor with the land, how was it that the subsidy to grant 391 00:45:24.940 --> 00:45:30.420 Right-of-Ways to Railroads isn't the policy of reserving timberlands from the market more 392 00:45:30.420 --> 00:45:38.660 of a burden on others who must pay the restrictivist price than a subsidy to railroads, at least 393 00:45:38.660 --> 00:45:43.420 with respect to the right-of-way as opposed to the lands reserved on the sides of the 394 00:45:43.420 --> 00:45:44.420 way. 395 00:45:44.420 --> 00:45:54.780 Well, I think Rothbard in particular would be against the subsidy, the giveaway of rights 396 00:45:54.780 --> 00:46:02.880 on both sides of the 15 miles, on both sides of the right-of-way, the intercontinental 397 00:46:02.880 --> 00:46:12.180 railroads were a giant scam, a big waste of resources, and that other ways, homesteading 398 00:46:12.180 --> 00:46:18.500 ways could have very easily sufficed. I mean, if a railroad sent out a survey crew and put 399 00:46:18.500 --> 00:46:24.560 down survey markers along a particular route, that would have established their property 400 00:46:24.560 --> 00:46:33.560 Rights to the entire route from the Midwest over to the West Coast. 401 00:46:33.560 --> 00:46:42.640 So I think that homesteading would have fulfilled that need with good ease and that the way 402 00:46:42.640 --> 00:46:49.840 we did it ended up causing a very inefficient building of the railroads and a fairly big 403 00:46:49.840 --> 00:46:52.080 waste of resources. 404 00:46:52.080 --> 00:46:58.280 And we can come back to all these questions if you want. 405 00:46:58.280 --> 00:47:02.480 To what extent are graphical representation, in this case the price controls, logically 406 00:47:02.480 --> 00:47:03.480 sound? 407 00:47:03.480 --> 00:47:07.240 The reasoning underlying them certainly is, but can a supply and demand curve be said 408 00:47:07.240 --> 00:47:09.440 to prove anything about price controls? 409 00:47:09.440 --> 00:47:14.720 That is, prove anything in the sense that logical argumentation does. 410 00:47:14.720 --> 00:47:20.840 In other words, are graphical representations ectodictically or only tautologically true? 411 00:47:20.840 --> 00:47:30.120 Well, in my own view, graphs with supply and demand curves are simply a way of conveying 412 00:47:30.120 --> 00:47:37.840 information, a pedagogy, a pedagogical device, rather than anything that's predictably certain 413 00:47:37.840 --> 00:47:42.840 or tautologically true. 414 00:47:42.840 --> 00:47:49.240 They're just an easier way than trying to actually draw out individual supply and demand 415 00:47:49.240 --> 00:47:53.400 Curves, and adding up the entire market and coming up with something less than a smooth 416 00:47:53.400 --> 00:47:54.400 line. 417 00:47:54.400 --> 00:47:58.680 You may have some disagreements on that one. 418 00:47:58.680 --> 00:48:08.280 And then finally, what are some examples of more recent, in the past 10 years or 20 years, 419 00:48:08.280 --> 00:48:11.280 of triangular intervention? 420 00:48:11.280 --> 00:48:22.120 Well, you know, a lot of the triangular interventions are things that already exist, but if we go 421 00:48:22.120 --> 00:48:28.280 back to 20 or 30 years, we have a variety of different things. 422 00:48:28.280 --> 00:48:36.040 I imagine we could pass around some paper and pen here and come up with 100 or so. 423 00:48:36.040 --> 00:48:44.120 There's the No Child Left Behind legislation within the last five or six years, the ethanol 424 00:48:44.120 --> 00:48:54.120 subsidy program, the American with Disability Act, which is about 20 years old, the Prescription 425 00:48:54.120 --> 00:49:01.600 Drug Act, major legislation increasing the power of the Federal Emergency Management 426 00:49:01.600 --> 00:49:31.600 Association, there's the Patriot Act, there's cap and trade, the Kyoto Protocol, which the United States hasn't signed, but certainly could be studied, and just a large variety of environmental and business regulation type of interventions that have been introduced, and then of course, Austrians also like to focus in on aspects of deregulation and privatization. 427 00:49:31.600 --> 00:49:37.240 which also would come under the rubric of triangular intervention. So there's a 428 00:49:37.240 --> 00:49:42.640 there's really a whole host of different types of triangular intervention and 429 00:49:42.640 --> 00:49:49.200 many new ones. The second part of this question is why can't sound economic 430 00:49:49.200 --> 00:49:52.680 analysis prevail in showing the contradictory and harmful effects of 431 00:49:52.680 --> 00:50:00.220 government intervention into the marketplace? Well I think it can and I 432 00:50:00.220 --> 00:50:07.220 And I think it does. The real problem is in conveying that to the general population at large.