WEBVTT NOTE The Tale of Two Invisible Hands 1 00:00:00.000 --> 00:00:05.200 Matt's talk reminded me of a story that happened about eight years ago in Florida, and this 2 00:00:05.200 --> 00:00:10.240 good old boy owned a big piece of land that his family had owned for a couple of generations. 3 00:00:10.240 --> 00:00:15.160 It was all swampy, it wasn't really worth very much, but he could go fishing and gatoring 4 00:00:15.160 --> 00:00:16.880 and stuff like that. 5 00:00:16.880 --> 00:00:24.920 And then he found out that he had some endangered species, a bird that ate insects out of dead 6 00:00:24.920 --> 00:00:27.760 trees on his property. 7 00:00:27.760 --> 00:00:33.660 And so what he did was he started killing trees, and he started cutting down some things 8 00:00:33.660 --> 00:00:37.960 and planting other things to attract other bird species. 9 00:00:37.960 --> 00:00:44.820 And what he would do was then charge people, bird watchers, to get them on a boat and bring 10 00:00:44.820 --> 00:00:49.300 them into his swampy property to see these very rare species. 11 00:00:49.300 --> 00:00:53.720 And then the government found out about it and said, you can't have people going near 12 00:00:53.720 --> 00:00:57.560 those birds because you'll disturb them. 13 00:00:57.560 --> 00:01:03.900 And so he ended up selling the property to some developer a couple of years later. 14 00:01:03.900 --> 00:01:09.620 And a couple of years after that, all the forest mysteriously burned down. 15 00:01:09.620 --> 00:01:16.520 And now there's houses and canals where those endangered birds used to flourish on this 16 00:01:16.520 --> 00:01:18.640 good old boy's property. 17 00:01:18.640 --> 00:01:21.280 Matt was one of the lucky ones. 18 00:01:21.280 --> 00:01:26.400 He's an English major, but he grew up, I know his mother and father. 19 00:01:26.400 --> 00:01:31.640 and he grew up with economics just like learning economics just like you would learn how to 20 00:01:31.640 --> 00:01:38.820 make a sandwich or how learn how to make use the microwave oven or cut the grass or whatever. 21 00:01:38.820 --> 00:01:43.360 So he's one of the lucky ones and of course Bobby Ames' students have been taught some 22 00:01:43.360 --> 00:01:49.900 good economics and hopefully some of you have also been exposed to good economics. 23 00:01:49.900 --> 00:01:54.580 But frankly for the rest of America that's simply not the case. 24 00:01:54.580 --> 00:01:59.300 Most Americans don't know what the source of our prosperity is. 25 00:01:59.300 --> 00:02:04.380 They have no idea why America has become one of the wealthiest countries in the world. 26 00:02:04.380 --> 00:02:09.420 They have no idea what the source of economic problems is. 27 00:02:09.420 --> 00:02:10.860 It's just a mystery. 28 00:02:10.860 --> 00:02:18.100 So they're uninformed about what's the cause of our prosperity, what's the cause of our 29 00:02:18.100 --> 00:02:20.100 problems. 30 00:02:20.100 --> 00:02:23.100 And that's what my lecture is going to be about today. 31 00:02:23.100 --> 00:02:27.620 You can imagine that if you don't know what the source of prosperity is, and you don't 32 00:02:27.620 --> 00:02:32.740 know what the cause of problems like this economic crisis is, that it's kind of a scary 33 00:02:32.740 --> 00:02:38.580 world to live in, and you naturally gravitate towards accepting whatever big brother has 34 00:02:38.580 --> 00:02:39.820 to offer. 35 00:02:39.820 --> 00:02:43.500 So I'm going to talk about the tale of two invisible hands. 36 00:02:43.500 --> 00:02:50.620 The invisible hand is a phrase, it's a metaphor, but basically what it means is the idea that 37 00:02:50.620 --> 00:02:58.100 Self-interest is the force that regulates the market economy and makes it possible to increase 38 00:02:58.100 --> 00:03:00.260 prosperity over time. 39 00:03:00.260 --> 00:03:07.140 In other words, people pursuing their self-interest promote the general interest of society. 40 00:03:07.140 --> 00:03:12.820 No government regulation or involvement is required whatsoever. 41 00:03:12.820 --> 00:03:18.900 The debate about the invisible hand is whether the invisible hand of the marketplace makes 42 00:03:18.900 --> 00:03:26.400 everyone better off, if it truly is an automatic thing, and if it is powerful enough to regulate 43 00:03:26.400 --> 00:03:31.740 the economy as it grows increasingly complex. 44 00:03:31.740 --> 00:03:38.580 Every problem in society, both small and large, has been used to undermine our confidence 45 00:03:38.580 --> 00:03:45.020 and our conviction in the invisible hand, and thus our trust in the free society. 46 00:03:45.020 --> 00:03:47.160 What about poverty and unemployment? 47 00:03:47.160 --> 00:03:49.760 What about pollution and monopoly? 48 00:03:49.760 --> 00:03:53.440 And what about this housing bubble and the economic crisis? 49 00:03:53.440 --> 00:03:56.360 Has the invisible hand forsaken us? 50 00:03:56.360 --> 00:04:01.480 Is it no longer capable of properly regulating the economy? 51 00:04:01.480 --> 00:04:07.920 Don't we really need the hand of government regulation to steady our course? 52 00:04:07.920 --> 00:04:15.960 Just yesterday, in a major British newspaper, an article was published discussing how badly 53 00:04:15.960 --> 00:04:21.120 The Invisible Hand had performed in creating the economic crisis. 54 00:04:21.120 --> 00:04:26.280 And they actually went back and quoted good old Adam Smith who first used that phrase 55 00:04:26.280 --> 00:04:27.280 in economics. 56 00:04:27.280 --> 00:04:34.400 And I'm going to quote from the author, quote, it appears that from time to time, the investors 57 00:04:34.400 --> 00:04:41.680 also behave in what seems an irrational manner, so that the market misallocates resources 58 00:04:41.680 --> 00:04:45.880 rather than allocating them efficiently. 59 00:04:45.880 --> 00:04:48.260 Perhaps on a grand scale. 60 00:04:48.260 --> 00:04:50.980 So this is an issue that is alive and well. 61 00:04:50.980 --> 00:04:59.720 It's a debate that's going on right now, even though Adam Smith used the term centuries ago. 62 00:04:59.720 --> 00:05:05.120 My research here at the Institute has established the source of Adam Smith's conception of the 63 00:05:05.120 --> 00:05:11.880 invisible hand in the economic theories of a 17th century banker named Richard Cantillon. 64 00:05:11.880 --> 00:05:17.160 And this connection allows us to know the precise meaning of what the invisible hand 65 00:05:17.160 --> 00:05:22.640 is and why it is critical as a foundation of the free society. 66 00:05:22.640 --> 00:05:26.500 There's a lot of debate about the invisible hand. 67 00:05:26.500 --> 00:05:30.460 My research and that of other economists from the Austrian School and even economists from 68 00:05:30.460 --> 00:05:37.600 other schools of economic thought have found that the problems in our economy are the result 69 00:05:37.600 --> 00:05:42.600 are the result of government intervention in the economy, and that's the other invisible hand, 70 00:05:42.600 --> 00:05:45.600 the one that we don't see, government intervention. 71 00:05:45.600 --> 00:05:52.600 It turns out that the Austrian economists actually agree with Marxist on this point. 72 00:05:52.600 --> 00:05:59.600 The economy is being rigged to the benefit of some at the expense of others. 73 00:05:59.600 --> 00:06:04.600 Now, Adam Smith first used the phrase the invisible hand, he used it three times, 74 00:06:04.600 --> 00:06:19.600 in 1749 in a book called An Essay on Philosophy, and here he's criticizing people for believing there are religious reasons for naturally occurring events like lightning and thunder. 75 00:06:19.600 --> 00:06:25.960 quote, fire burns and water refreshes. Heavy bodies descend and lighter substances fly 76 00:06:25.960 --> 00:06:33.240 upward by the necessity of their own nature. Nor was the invisible hand of Jupiter ever 77 00:06:33.240 --> 00:06:39.600 apprehended to be employed in these matters. In other words, for Smith, the god Jupiter 78 00:06:39.600 --> 00:06:46.460 does not cause lightning and thunder when he gets angry, as people once thought. Smith 79 00:06:46.460 --> 00:06:53.160 Smith wants us to approach our understanding of the world we live in scientifically. 80 00:06:53.160 --> 00:06:58.140 He next used the phrase the invisible hand in a book called The Theory of Moral Sentiments 81 00:06:58.140 --> 00:07:00.100 in 1759. 82 00:07:00.100 --> 00:07:08.980 Here Smith is explaining that even though wealth is very unevenly distributed in society, 83 00:07:08.980 --> 00:07:13.860 that self-interest in the market forces act in such a way as to distribute consumption 84 00:07:13.860 --> 00:07:23.860 More evenly, the wealthy people are dependent on the poor people, and the poor people, the working classes, are dependent upon the wealthy. 85 00:07:23.860 --> 00:07:29.860 Hence, consumption becomes more and more evenly distributed in the market economy. 86 00:07:29.860 --> 00:07:33.860 And I'll quote from The Theory of Settlements here at length. 87 00:07:33.860 --> 00:07:59.360 The rich consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own convenience, though the sole end which they propose from the labor of all the thousands whom they employ be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. 88 00:07:59.360 --> 00:08:05.600 They are led by an invisible hand to make nearly the same distribution of the necessities of life 89 00:08:05.600 --> 00:08:11.440 which would have been made had the earth been divided into equal portions amongst all its 90 00:08:11.440 --> 00:08:18.000 inhabitants. And thus, without intending it, without knowing it, advance the interests of society 91 00:08:18.000 --> 00:08:24.640 and afford means to the multiplication of the species. When providence divided the earth among 92 00:08:24.640 --> 00:08:31.240 A few lordly masters neither forgot nor abandoned those who seem to have been left out of the 93 00:08:31.240 --> 00:08:32.560 partition. 94 00:08:32.560 --> 00:08:39.840 These last two enjoy their share of all that it produces in what constitutes the real happiness 95 00:08:39.840 --> 00:08:41.600 of human life. 96 00:08:41.600 --> 00:08:49.140 So basically saying, yes, wealth is unevenly divided, but consumption is naturally more 97 00:08:49.140 --> 00:08:52.880 equally divided in a market economy. 98 00:08:52.880 --> 00:08:57.800 In other words, he used this model where one person owned everything in the world. 99 00:08:57.800 --> 00:09:04.680 The entire world was his estate and yet that estate would produce nothing unless he employed 100 00:09:04.680 --> 00:09:07.600 people to work the lands. 101 00:09:07.600 --> 00:09:10.660 And if you employ people, you have to feed them, you have to clothe them, you have to 102 00:09:10.660 --> 00:09:16.880 house them, you have to provide for the multiplication of the species or there will be no next generation 103 00:09:16.880 --> 00:09:18.860 of employees. 104 00:09:18.860 --> 00:09:23.460 In other words, imagine if you owned everything in the world. 105 00:09:23.460 --> 00:09:32.220 You now own the S&P 500, every company, the entire world, every house, every car, every 106 00:09:32.220 --> 00:09:35.580 manufacturing plant, every TV network. 107 00:09:35.580 --> 00:09:36.580 What would you do? 108 00:09:36.580 --> 00:09:42.300 Well, you would have to hire people and pay them to provide you with food, making your 109 00:09:42.300 --> 00:09:45.700 clothing to take care of the repairs of your property. 110 00:09:45.700 --> 00:09:51.580 You would have to pay people to produce gasoline and electricity and movies and candy and deodorant 111 00:09:51.580 --> 00:09:54.860 and toilet paper, underwear, etc. 112 00:09:54.860 --> 00:09:56.740 Would you want to clean your own house? 113 00:09:56.740 --> 00:09:57.740 No. 114 00:09:57.740 --> 00:09:59.220 Would you repair your own car? 115 00:09:59.220 --> 00:10:00.220 No. 116 00:10:00.220 --> 00:10:02.300 Would you like to wash your own laundry? 117 00:10:02.300 --> 00:10:03.660 Probably not. 118 00:10:03.660 --> 00:10:08.780 As a matter of fact, you'd have to hire people to manage your computer companies, your airlines, 119 00:10:08.780 --> 00:10:10.540 your television networks. 120 00:10:10.540 --> 00:10:14.740 You would have to pay them good salaries in order to get good results. 121 00:10:14.740 --> 00:10:20.620 You'd want the hardest working and most talented people running your most valuable assets. 122 00:10:20.620 --> 00:10:25.380 Eventually many of these people that you hired would become rich themselves. 123 00:10:25.380 --> 00:10:29.820 The more you wanted to exploit your wealth, remember you own everything, the more you 124 00:10:29.820 --> 00:10:34.340 want to exploit that, the more everyone else would earn. 125 00:10:34.340 --> 00:10:37.180 And of course that's an unrealistic example. 126 00:10:37.180 --> 00:10:42.640 But it does show that we are all dependent upon everyone else and that self-interest 127 00:10:42.640 --> 00:10:50.400 propels the whole system, moving it forward and spreading prosperity in the market economy. 128 00:10:50.400 --> 00:10:55.940 Now while that's unrealistic, in the real world we know that there are tons of super wealthy people. 129 00:10:55.940 --> 00:11:05.140 Most earn their wealth honestly, although certainly there are probably a few out there who did so through less legitimate means. 130 00:11:05.140 --> 00:11:09.980 Most of the multi-billionaires in the world today are self-made, 131 00:11:09.980 --> 00:11:16.980 or they simply grew their family fortunes up into the tops of the Fortune 500 of the 132 00:11:16.980 --> 00:11:19.220 world's wealthiest people. 133 00:11:19.220 --> 00:11:23.740 Most of these people come from the freest countries in the world. 134 00:11:23.740 --> 00:11:30.840 The United States, Switzerland, Singapore, Hong Kong, Canada, Germany and so on. 135 00:11:30.840 --> 00:11:38.360 As well as some of the BRIC countries, that's Brazil, Russia, India and China, which have 136 00:11:38.360 --> 00:11:46.600 Adopted Free Market Policies and as a result have amassed incredible amounts of new wealth. 137 00:11:46.600 --> 00:11:51.400 Their wealth is based on businesses that they have built and investments they have made. 138 00:11:51.400 --> 00:11:56.320 So Bill Gates is estimated today to be worth $53 billion. 139 00:11:56.320 --> 00:12:02.840 He did that by successfully starting the company Microsoft and making it a very successful 140 00:12:02.840 --> 00:12:03.840 company. 141 00:12:03.840 --> 00:12:12.640 Microsoft sells us $65 billion worth of stuff every year that we like, that we use, that 142 00:12:12.640 --> 00:12:15.360 we enjoy, that makes us productive. 143 00:12:15.360 --> 00:12:18.040 They employ 90,000 people. 144 00:12:18.040 --> 00:12:26.680 A huge percentage of the American population of adults and actually teens and children use 145 00:12:26.680 --> 00:12:34.040 Use the company's products for work, to enhance their productivity, and for leisure and fun. 146 00:12:34.040 --> 00:12:42.080 Bill Gates, a huge percentage of his wealth, $53 billion, is held up in Microsoft stock. 147 00:12:42.080 --> 00:12:47.960 If we were to divide that amongst ourselves in here, we would each have $600 million. 148 00:12:47.960 --> 00:12:53.640 But it would be of Microsoft stock, which represents the buildings and the patents and 149 00:12:53.640 --> 00:12:58.700 and the products that Microsoft is all about. 150 00:12:58.700 --> 00:12:59.700 But look what's going on here. 151 00:12:59.700 --> 00:13:07.320 Bill Gates and his family do not spend and consume $53 billion a year. 152 00:13:07.320 --> 00:13:13.900 As a matter of fact, they're not going to consume and spend $53 billion in their lifetime 153 00:13:13.900 --> 00:13:16.960 or in generations to come. 154 00:13:16.960 --> 00:13:23.720 He earns and consumes a few million dollars every year, setting aside extraordinary purchases 155 00:13:23.720 --> 00:13:29.100 such as art and the billions that he donates to charity. 156 00:13:29.100 --> 00:13:34.360 He has already donated 28 billion dollars to his foundation, which makes 3 billion dollars 157 00:13:34.360 --> 00:13:37.720 of charitable grants each year. 158 00:13:37.720 --> 00:13:40.720 That's expected to continue over time. 159 00:13:40.720 --> 00:13:47.160 So, you know, Adam Smith was saying that there's not as much difference between the wealthy 160 00:13:47.160 --> 00:13:50.880 and the regular working class back in his day. 161 00:13:50.880 --> 00:13:57.480 Obviously, one person is controlling the wealth, but of the normal things in the market economy, 162 00:13:57.480 --> 00:14:02.520 things are pretty much, as far as consumption purposes, very similar. 163 00:14:02.520 --> 00:14:05.300 For example, Bill Gates owns a house. 164 00:14:05.300 --> 00:14:07.080 I own a house. 165 00:14:07.080 --> 00:14:20.560 Bill Gates owns a gym. I have a gym membership. Bill Gates has a swimming pool with an underground 166 00:14:20.560 --> 00:14:29.360 sound system. I have a much smaller swimming pool with an above ground sound system. And 167 00:14:29.360 --> 00:14:35.560 an above ground sound system is obviously better than an underground sound system. We 168 00:14:35.560 --> 00:14:41.000 We both have multiple computers, we eat three meals a day, and have approximately the same 169 00:14:41.000 --> 00:14:42.740 amount of clothing. 170 00:14:42.740 --> 00:14:47.060 So it is important to realize, as Adam Smith points out, that Bill Gates' wealth is either 171 00:14:47.060 --> 00:14:54.560 held as an investment in Microsoft that employs people who make products that we buy, or he 172 00:14:54.560 --> 00:15:00.520 spends a small amount of it, but every amount he spends also is employing people. 173 00:15:00.520 --> 00:15:07.000 So his butler and his maid and the dry cleaner are all making money off of Bill Gates. 174 00:15:07.000 --> 00:15:11.120 These wealthy people like Bill Gates have not exploited other people. 175 00:15:11.120 --> 00:15:14.740 They have created companies and products which have increased the standard of living for 176 00:15:14.740 --> 00:15:17.560 all of us. 177 00:15:17.560 --> 00:15:22.540 Adam Smith also used the phrase invisible hand in the wealth of nations to point out 178 00:15:22.540 --> 00:15:30.620 that self-interest, again, is what keeps the economy well regulated in the traditional 179 00:15:30.620 --> 00:15:31.620 sense. 180 00:15:31.620 --> 00:15:37.660 What Smith was saying that adjusting for risk, investors will place their wealth into projects 181 00:15:37.660 --> 00:15:41.460 that they think will mean the most profit for them. 182 00:15:41.460 --> 00:15:47.020 It is not the intention of investors to make people better off, only to profit themselves. 183 00:15:47.020 --> 00:15:58.020 However, by finding the best investments, they help everyone else out by creating the best jobs and the best products for consumers. 184 00:15:58.020 --> 00:16:04.020 Smith adds that business people do not intentionally directly act for the public good. 185 00:16:04.020 --> 00:16:10.020 And he warns us against people who claim to be acting in the public good. 186 00:16:10.020 --> 00:16:15.020 He goes on to highlight the important role of self-interest in regulating daily life. 187 00:16:15.020 --> 00:16:22.020 Smith's invisible hand is therefore a metaphor for the fact that a totally free society is automatically self-regulating. It explains not just stability, but also the importance of self-reliance. 188 00:16:45.020 --> 00:16:51.020 not just fairness, but it also tells us about the nature and causes of wealth 189 00:16:51.020 --> 00:16:58.020 and how wealth creation raises the standard of living for everyone, not just the wealthy. 190 00:16:58.020 --> 00:17:00.020 Now the other is the invisible hand. 191 00:17:00.020 --> 00:17:03.020 What about all the problems in society that I mentioned before? 192 00:17:03.020 --> 00:17:08.020 Poverty, pollution, monopoly, unemployment, the housing bubble, the economic crisis. 193 00:17:08.020 --> 00:17:11.020 Why wasn't the invisible hand working there? 194 00:17:11.020 --> 00:17:19.020 Well, no society is perfect. Even Adam Smith could not explain some of the problems of his day and called for government intervention. 195 00:17:19.020 --> 00:17:28.020 However, today we've figured out the cause of our problems. The economists of the Austrian School have investigated all of those problems. 196 00:17:28.020 --> 00:17:33.020 And the cause of those problems is the invisible hand of government. 197 00:17:33.020 --> 00:17:40.020 We know that government causes war. We know that government has messed up our educational system and our transportation system. 198 00:17:40.020 --> 00:17:43.100 System, but we also know much more than that. 199 00:17:43.100 --> 00:17:45.340 We know that government creates monopoly. 200 00:17:45.340 --> 00:17:51.500 In healthcare, it's giving monopolies to the drug companies, the doctors and the hospitals. 201 00:17:51.500 --> 00:17:54.520 It also protects insurance companies from competition. 202 00:17:54.520 --> 00:17:57.900 We know that government creates unemployment and discrimination through things like the 203 00:17:57.900 --> 00:17:59.720 minimum wage law. 204 00:17:59.720 --> 00:18:04.740 We know that government creates and permits most of our pollution while taking away our 205 00:18:04.740 --> 00:18:08.460 right to sue for pollution damages. 206 00:18:08.460 --> 00:18:11.060 We know that government caused the housing bubble. 207 00:18:11.060 --> 00:18:15.380 The Federal Reserve caused the housing bubble and the economic crisis. 208 00:18:15.380 --> 00:18:20.660 And we also know all sorts of problems in our daily lives that we are aware of. 209 00:18:20.660 --> 00:18:26.940 As a matter of fact, our next speaker has written a book where he basically has uncovered 210 00:18:26.940 --> 00:18:33.340 both Adam Smith's invisible hand at work as well as the invisible hand at work disrupting 211 00:18:33.340 --> 00:18:36.580 things in our daily lives. 212 00:18:36.580 --> 00:18:40.060 And today, I'm gonna add just one example to that. 213 00:18:40.060 --> 00:18:42.240 Because you can chart the course of human progress 214 00:18:42.240 --> 00:18:45.500 in terms of how clean our clothes are. 215 00:18:45.500 --> 00:18:48.820 In early times, people used animal skins. 216 00:18:48.820 --> 00:18:51.500 They had no change of clothing and no soap. 217 00:18:51.500 --> 00:18:56.100 By Adam Smith Day, they had soap of an improved quality, 218 00:18:56.100 --> 00:18:59.980 was produced industrial and was available to the common man. 219 00:18:59.980 --> 00:19:02.000 In fact, the Industrial Revolution, 220 00:19:02.000 --> 00:19:05.300 which is usually discussed in terms of steel and steam 221 00:19:05.300 --> 00:19:10.980 and Factories was really about bringing things like soap and underwear, previously only available 222 00:19:10.980 --> 00:19:14.940 to the rich, to the common peasants of the day. 223 00:19:14.940 --> 00:19:20.900 Only after World War II did electric automatic clothes washers displace hand-cranked clothes 224 00:19:20.900 --> 00:19:27.500 washing machines, and then detergent replaced soap in the washing process, and competition 225 00:19:27.500 --> 00:19:31.840 resulted in much more effective products. 226 00:19:31.840 --> 00:19:36.240 This isn't going to mean much to you, but maybe the parents and chaperones might remember 227 00:19:36.240 --> 00:19:37.240 this. 228 00:19:37.240 --> 00:19:43.800 This is an example of a commercial that we'll see eventually of competition at work back 229 00:19:43.800 --> 00:19:50.320 in the 1950s, because washing clothes was still kind of a difficult task. 230 00:19:50.320 --> 00:20:00.560 The products weren't perfect, but in this case, this ad was about a product now known 231 00:20:00.560 --> 00:20:15.560 The problem is whisk, which is still in the marketplace, and there was a problem in washing clothes and that the existing soaps after World War II didn't get white clothes clean, or perfectly clean, and led to a problem called ring around the collar. 232 00:20:15.560 --> 00:20:24.560 So you'd have a yellow ring around your collar, but these problems were ironed out, no pun intended. 233 00:20:24.560 --> 00:20:32.200 Between the 1920s and the 1970s, washing clothes had gone from a grueling, full-time task to 234 00:20:32.200 --> 00:20:38.160 something that people did once a week, multitasking with other daily chores, and could be accomplished 235 00:20:38.160 --> 00:20:40.880 even by young children. 236 00:20:40.880 --> 00:20:46.720 Fast forwarding to 1996, Consumer Reports tested 18 models of washing machines. 237 00:20:46.720 --> 00:20:52.960 It found that 13 models were rated as excellent, and five models were rated very good. 238 00:20:52.960 --> 00:20:57.880 They found that with enough warm water and any decent laundry detergent, any machine 239 00:20:57.880 --> 00:21:00.040 would get your clothes clean. 240 00:21:00.040 --> 00:21:08.040 In 2007, Consumer Reports tested 21 models and found that none of those rated as excellent 241 00:21:08.040 --> 00:21:10.980 and seven models were rated as poor. 242 00:21:10.980 --> 00:21:14.340 The rest of the models were rated as mediocre. 243 00:21:14.340 --> 00:21:18.200 The top-loading machines were mediocre or worse. 244 00:21:18.200 --> 00:21:23.000 Some reports found that in most cases, the clothes were nearly as dirty after washing 245 00:21:23.000 --> 00:21:24.240 as they were before. 246 00:21:24.240 --> 00:21:27.120 Are we ready for the 56th? 247 00:21:27.120 --> 00:21:36.360 Speaking of improvements, okay, so basically, as we're moving into 2007, laundry machines 248 00:21:36.360 --> 00:21:39.720 were poorer than they did in the past. 249 00:21:39.720 --> 00:21:45.520 Even the newer front-loading machines were better, but much more expensive, had mold 250 00:21:45.520 --> 00:22:00.520 This would seem to be a case of a broken invisible hand from Adam Smith, but the truth is that it was really the government meddlesome hand. 251 00:22:00.520 --> 00:22:11.520 The government had raised energy efficiency standards so much that the manufacturers had to stop making the machines in the previous way. 252 00:22:11.520 --> 00:22:25.520 They had to make them so that they used less water, and if you use less water in the machine, it's very difficult, it makes it more energy efficient because there's less water to move around, but of course the clothes don't get clean. 253 00:22:25.520 --> 00:22:38.520 So less water in the machines means the machines use less energy to rotate the clothes and the detergent. It also means that less rinsing, which is a vital condition for getting the clothes clean. 254 00:22:38.520 --> 00:22:44.520 Ring around the collar, ring around the collar, those dirty rings. 255 00:22:44.520 --> 00:22:51.520 You try soaking them out and scrubbing them out, and you can still come out with ring around the collar. 256 00:22:51.520 --> 00:22:58.520 Now try Whisk. Whisk out cleans any other laundry product because it sinks in and starts to clean before you start to wash. 257 00:22:58.520 --> 00:23:04.520 Gets even permanent press collars really clean. You won't hear ring around the collar with Whisk. 258 00:23:04.520 --> 00:23:14.240 That was a very popular ad and a very successful company and it actually did make washing clothes 259 00:23:14.240 --> 00:23:15.740 a lot easier. 260 00:23:15.740 --> 00:23:19.780 But today with these new machines with the new energy efficiency standards, they simply 261 00:23:19.780 --> 00:23:21.900 just don't work as well. 262 00:23:21.900 --> 00:23:27.340 Some people with the new machines have tried to get around this by doing things like adding 263 00:23:27.340 --> 00:23:35.700 more soap, which just makes the problem worse, or they use fewer clothes with a larger water 264 00:23:35.700 --> 00:23:41.780 setting so that, you know, that actually does get the clothes clean, but it's very energy 265 00:23:41.780 --> 00:23:42.780 inefficient. 266 00:23:42.780 --> 00:23:51.420 You're running the machine several times more than you normally would, so it's very inefficient. 267 00:23:51.420 --> 00:23:56.980 And also, people are using more soap to actually reduce the durability of the machines, which 268 00:23:56.980 --> 00:24:02.940 which is yet another inefficiency and so basically this invisible hand of government regulation 269 00:24:02.940 --> 00:24:07.980 has really messed up the whole process which had been slowly improving itself over the 270 00:24:07.980 --> 00:24:15.740 progress of human history and we hit the 2007 regulation and we stepped backwards in time 271 00:24:15.740 --> 00:24:18.500 to the 1950s. 272 00:24:18.500 --> 00:24:25.480 As a matter of fact, I recently had an opportunity to wear my tuxedo to an event, so I get my 273 00:24:25.480 --> 00:24:45.520 In conclusion, the invisible hand of the marketplace is the foundation of a free society and the 274 00:24:45.520 --> 00:24:47.760 source of prosperity. 275 00:24:47.760 --> 00:24:54.840 The invisible hand of government is the foundation of plunder and the source of our social problems. 276 00:24:54.840 --> 00:24:55.840 Thank you very much.