WEBVTT NOTE Question and Answer Period 1 00:00:00.000 --> 00:00:02.920 We have a question and answer period here. 2 00:00:02.920 --> 00:00:06.520 You can ask questions about the lectures themselves, 3 00:00:06.520 --> 00:00:11.480 or you can just ask questions about Austrian economics 4 00:00:11.480 --> 00:00:14.800 in general, or you can ask questions 5 00:00:14.800 --> 00:00:18.600 about general economic questions about the economy. 6 00:00:18.600 --> 00:00:20.600 Kevin, I'm from France. 7 00:00:20.600 --> 00:00:21.480 Thank you very much. 8 00:00:21.480 --> 00:00:24.080 I'm going to end up with a fascinating presentation. 9 00:00:24.080 --> 00:00:27.480 I have actually a two-fold question. 10 00:00:27.480 --> 00:00:36.480 We've heard all about the basics of Austrian economics, and how it opposes other systems, even classically, in the historical market. 11 00:00:36.480 --> 00:00:46.480 My question would be, how does it co-exist with other systems, or the relations between them? 12 00:00:46.480 --> 00:00:54.480 Can they co-exist, actually, in the global economical, or globalisation, globalised world? 13 00:00:54.480 --> 00:01:15.480 And the second part of my question is, how do you view another form of economy that includes statism and capitalism, such as China, that has proved 30, more than 30 years of growth, is it viable or not? Have you seen this as Austrian confidence these years? 14 00:01:16.480 --> 00:01:18.480 I could take the second part. 15 00:01:18.480 --> 00:01:43.480 We actually, the Austrian School was sort of the foundation of economics and were sort of an extension of the classical school, but we're very much at odds with mainstream economics and Keynesian economics in particular, and we see the trend in the economics profession and economics education as dangerously negative. 16 00:01:43.480 --> 00:01:48.600 In other words, things have gotten worse, and they're continuing to get even worse from that. 17 00:01:48.600 --> 00:01:56.480 I mean, there's some good stuff in mainstream economics, but the direction of change is actually, 18 00:01:56.480 --> 00:02:04.120 they're becoming more and more unrealistic and have a looser foundation with the real world 19 00:02:04.120 --> 00:02:06.280 that they're supposed to be discussing. 20 00:02:06.280 --> 00:02:12.080 So it's, I think it's a bad trend, except for the fact that Austrian economics is growing 21 00:02:12.080 --> 00:02:18.080 as fast or faster than any school of economics ever has. 22 00:02:18.080 --> 00:02:23.020 And to speak to the second question, Mises is famous for making the claim that really 23 00:02:23.020 --> 00:02:26.000 there are only two choices that you have. 24 00:02:26.000 --> 00:02:30.440 Basically you have a choice between capitalism and socialism. 25 00:02:30.440 --> 00:02:39.760 In terms of a social division of labor, so in terms of a coordinated mass division of 26 00:02:39.760 --> 00:02:47.000 of Labor with a really complicated structure of production that the only two even conceivable 27 00:02:47.000 --> 00:02:53.640 alternatives is the capitalist way of coordinating all those resources or the socialist way of 28 00:02:53.640 --> 00:02:56.520 coordinating all those resources. 29 00:02:56.520 --> 00:03:03.600 And then he showed that socialism cannot calculate, so socialism is ultimately not going to work. 30 00:03:03.600 --> 00:03:10.520 And so what you have is that you have capitalism, but then you have hampered capitalism. 31 00:03:10.520 --> 00:03:19.160 So there are state elements, there are state controls and regulations and bureaucracies, 32 00:03:19.160 --> 00:03:26.160 but what Mises pointed out is that they are operating within a capitalist milieu, and 33 00:03:26.160 --> 00:03:32.560 that it is the property rights, it is the property allocation and the capitalism that 34 00:03:32.560 --> 00:03:39.360 is actually rationalizing production and that the bureaucracies are just sort of like consumptive 35 00:03:39.360 --> 00:03:47.720 centers within that production, but the bureaucracies aren't rationalizing the social production 36 00:03:47.720 --> 00:03:56.240 at all. He says that what you end up having is that if you regulate the economy and if 37 00:03:56.240 --> 00:04:03.840 If you set up all these price controls and other kinds of regulations, that what happens 38 00:04:03.840 --> 00:04:10.240 is that those regulations never accomplish the goals which they were meant to accomplish. 39 00:04:10.240 --> 00:04:14.560 For example, when you do a price control, you're trying to make things cheaper, you're 40 00:04:14.560 --> 00:04:18.560 trying to make things more abundant to people, but then you actually create a shortage and 41 00:04:18.560 --> 00:04:23.640 then it's actually less abundant to people. And then there's what he calls a cycle of 42 00:04:23.640 --> 00:04:29.120 of Interventionism, that it leads to a problem that then the state tries to solve with another 43 00:04:29.120 --> 00:04:34.400 regulation, but that just creates more problems and it just spirals out of control until you 44 00:04:34.400 --> 00:04:43.080 end up with full-blown socialism, which actually doesn't actually work and what will happen 45 00:04:43.080 --> 00:04:47.140 is that the social division of labor will actually collapse and you'll actually just 46 00:04:47.140 --> 00:04:52.660 have autarky, where you don't have a division of labor that you just have, like when the 47 00:04:52.660 --> 00:04:58.140 social system collapsed after the Roman Empire, there wasn't a social division of labor. 48 00:04:58.140 --> 00:05:03.220 There was just autarky, feudal autarky, just different little people separate from each 49 00:05:03.220 --> 00:05:07.820 other economically. 50 00:05:07.820 --> 00:05:12.980 In China, for example, you might say that, oh, well, maybe that's a combination between 51 00:05:12.980 --> 00:05:14.780 Socialism and Capitalism. 52 00:05:14.780 --> 00:05:23.840 But know that what has led to the plummeting of infant mortality in China and the rise of 53 00:05:23.840 --> 00:05:30.700 prosperity is the extent to which they have reigned in the state and opened up their markets 54 00:05:30.700 --> 00:05:33.320 ever since the 70s. 55 00:05:33.320 --> 00:05:37.660 And so it's not a combination of socialism and capitalism. 56 00:05:37.660 --> 00:05:44.900 Another social productive rationalization there is, is capitalism, but it still is hampered 57 00:05:44.900 --> 00:05:51.340 to a large degree and if they reduce their regulations and reduce the bureaucracy it 58 00:05:51.340 --> 00:05:54.140 would hamper it even less. 59 00:05:54.140 --> 00:05:57.140 I think that's something you can see in the empirical facts too. 60 00:05:57.140 --> 00:06:02.260 I mean the United States has gotten more government oriented and its economy has declined, its 61 00:06:02.260 --> 00:06:04.020 middle class has declined. 62 00:06:04.020 --> 00:06:09.540 The other economies like Sweden have reduced the amount of government in their society 63 00:06:09.540 --> 00:06:15.020 and since the malaise in Sweden in the 1990s, their economy has gotten much better. 64 00:06:15.020 --> 00:06:19.020 So, whenever we look at those indicators, they're all going in the Austrian direction. 65 00:06:19.020 --> 00:06:20.020 Yes, sir? 66 00:06:20.020 --> 00:06:44.020 So, the temperature is sharp from Germany. So how do you envision how we can go from here where we are having very strong state-side controlled banking kind of deals with flow of money going back and forth, interest rates being set, where states actually borrow money from big banks and then end up having to pay their interest and everything. 67 00:06:44.020 --> 00:06:54.020 How do you go from there to an Austrian more liberal way for the money to flow more freely on the economic basis that you propose? 68 00:06:54.020 --> 00:07:00.020 Like how do you go from today into that era without the market being actually exploding? 69 00:07:14.020 --> 00:07:25.020 Loans tend to be made to good and stable investors rather than to things that need to be subsidized or to the government itself. 70 00:07:25.020 --> 00:07:38.020 And the other is the nature of money, whether it's fiat paper money, which has no intrinsic value to the type of system that we envision where money has a commodity basis of gold, silver and copper, for example. 71 00:07:38.020 --> 00:07:45.340 People, both of those things need to be achieved and we're very far away ideologically and 72 00:07:45.340 --> 00:07:52.260 scientifically from getting the basic social support because we believe that people actually 73 00:07:52.260 --> 00:07:58.260 have to know and believe what sound money is and the dangers of fiat money. 74 00:07:58.260 --> 00:08:04.860 So ultimately it's a spreading of ideas and a spreading of knowledge and science that 75 00:08:04.860 --> 00:08:11.220 is going to be necessary and unfortunately, very often, that takes hard life experience. 76 00:08:11.220 --> 00:08:20.020 Like for example, in your country, in Germany, they went down the wrong path in the late 77 00:08:20.020 --> 00:08:33.500 19th century and after World War I, they ended up imposing harsh reparations on Germany. 78 00:08:33.500 --> 00:08:38.460 went through a hyperinflation which broke down society entirely. 79 00:08:38.460 --> 00:08:44.460 And for generations after that, Germans have been ideologically sound on money. 80 00:08:44.460 --> 00:08:45.460 Yes, sir. 81 00:08:45.460 --> 00:08:46.460 Jason Crawford from the UK. 82 00:08:46.460 --> 00:08:47.460 It's mainly for Danny initially, I think. 83 00:08:47.460 --> 00:08:48.460 Just a quote from you. 84 00:08:48.460 --> 00:08:49.460 You said, consumer wants increasingly moves towards public good. 85 00:08:49.460 --> 00:08:50.460 Now, of course, consumer wants more money. 86 00:08:50.460 --> 00:09:00.460 It's mainly for Danny initially, I think. Just a quote from you, you said, consumer wants increasingly move towards public good. 87 00:09:00.460 --> 00:09:09.460 Now, of course, consumer wants, you've spoken about iPods and all those, the kind of goods, glossies and so on, 88 00:09:09.460 --> 00:09:17.460 but of course there's a consumer demand around the world for narcotics, for prostitution, people trafficking, pornography, 89 00:09:17.460 --> 00:09:27.460 all of which involve entrepreneurs, exchange of money, goods, value, and all the things you've spoken about in terms of economics. 90 00:09:27.460 --> 00:09:35.460 So the question is, how under the Mises economy would that illicit economy be kept under control? 91 00:09:35.460 --> 00:09:39.460 Which I don't think most of us in the public get. 92 00:09:39.460 --> 00:09:42.460 Well, that's very true. 93 00:09:42.460 --> 00:09:47.460 What we've found by studying these markets, and I actually wrote my dissertation on the subject, 94 00:09:47.460 --> 00:09:55.460 is that most of the public bads that arise out of the markets for prostitution, gambling, narcotics, and so forth, 95 00:09:55.460 --> 00:10:00.460 arise not because of the products themselves, but because they are prohibited. 96 00:10:00.460 --> 00:10:05.460 And so when we look at the types of problems that are generated in these illicit black markets, 97 00:10:05.460 --> 00:10:08.460 what we find is that there's a lot of violence associated with it, 98 00:10:08.460 --> 00:10:11.860 that the products are very poor and very dangerous 99 00:10:11.860 --> 00:10:15.420 and that there's a lot of political corruption associated with it, 100 00:10:15.420 --> 00:10:19.900 overcrowding of prisons, the list of problems goes 101 00:10:19.900 --> 00:10:22.900 on and on and on and actually gets bigger over time. 102 00:10:22.900 --> 00:10:26.420 But those problems are almost entirely the result 103 00:10:26.420 --> 00:10:29.740 of the fact that the products are prohibited 104 00:10:29.740 --> 00:10:33.340 in the first place. That's what creates these black market profits. 105 00:10:33.340 --> 00:10:37.820 The lack of property rights in these markets means that people have to 106 00:10:37.820 --> 00:10:42.940 and defend their products, they have to defend their sales and their sales territories with 107 00:10:42.940 --> 00:10:48.200 guns basically, and so street gangs in the United States are a problem, they're the ones 108 00:10:48.200 --> 00:10:52.700 that are distributing drugs and they're the ones that are killing people on the streets. 109 00:10:52.700 --> 00:10:57.340 If Walmart was selling these products and they had to be liable for any damages that 110 00:10:57.340 --> 00:11:06.660 those products caused, all those social problems would be eliminated and all you would have 111 00:11:06.660 --> 00:11:16.660 So what we have to deal with is individual problems such as addiction or other problems that might result from the consumption of those goods. 112 00:11:16.660 --> 00:11:21.660 So you can prohibit them, but that's when you get the negative effects. 113 00:11:21.660 --> 00:11:31.660 And Mises said that the idea of prohibition, where do you stop if you say, you can't consume this, you can't consume that. 114 00:11:31.660 --> 00:11:36.660 In the next thing you know, the government has the power to restrict the things that you think are perfectly normal, 115 00:11:36.660 --> 00:11:40.660 or they have the power of censorship of books and information and ideas. 116 00:11:40.660 --> 00:11:51.660 So in our view, I think generally speaking, the prohibition way of dealing with those type of goods is very counterproductive. 117 00:11:51.660 --> 00:11:54.660 In the back? 118 00:11:54.660 --> 00:12:03.660 I am from India. I fully understand that the liberal is the ideal way of going to the rest of the world by this. 119 00:12:03.660 --> 00:12:08.660 How they have received the past, most of the wars have been caused by the economy. 120 00:12:08.660 --> 00:12:18.660 And that is the real world. Today, hair, I see, when we talk about China, they are doing good for themselves, they are setting their house right, trying to become the superpower. 121 00:12:18.660 --> 00:12:28.660 So considering this from a realistic point of view, what are your views on this method of liberalism in common because I don't think that can ever be achieved? 122 00:12:48.660 --> 00:12:51.140 just and logically sound system. 123 00:12:51.140 --> 00:12:53.060 So even though it's extremely difficult 124 00:12:53.060 --> 00:12:55.220 to ever get to that point, we still 125 00:12:55.220 --> 00:12:57.780 have to try as hard as we possibly can, 126 00:12:57.780 --> 00:13:00.180 because we should always try for those things which are just 127 00:13:00.180 --> 00:13:03.620 and right, even if they're very difficult. 128 00:13:03.620 --> 00:13:08.580 But as far as, for example, international players 129 00:13:08.580 --> 00:13:10.980 and who will be the next superpower and so on, 130 00:13:10.980 --> 00:13:15.140 these problems become much less important once you 131 00:13:15.140 --> 00:13:22.840 to achieve some liberal reforms because, for example, the United States, when it became 132 00:13:22.840 --> 00:13:28.020 the superpower, what that meant was, because at the time it was relatively more free market 133 00:13:28.020 --> 00:13:32.860 than it is today, and at that time what it meant to become the superpower was just that 134 00:13:32.860 --> 00:13:37.620 it was the United States and the people in it, for example, the entrepreneurs, were really, 135 00:13:37.620 --> 00:13:43.100 really good at producing goods and services that were valued by the rest of the world. 136 00:13:43.100 --> 00:13:56.100 So in that sense, being a superpower is not problematic, what is problematic is having a superpower in terms of, say, military dominance over the rest of the world. 137 00:13:56.100 --> 00:14:00.100 That's the kind of superpower that we should try to avoid having. 138 00:14:00.100 --> 00:14:12.100 But in a purely economic sense that we're talking about, power is only success in satisfying people. 139 00:14:12.100 --> 00:14:18.100 So, that type of power, if you want to call it, that is unproblematic, I would say. 140 00:14:18.100 --> 00:14:27.100 I'd also say that economics shows the universal benefits of extending the division of labor as far as possible. 141 00:14:27.100 --> 00:14:36.100 And so, it's very short-sighted for any economic power to say, oh, I'm going to make myself more powerful 142 00:14:36.100 --> 00:15:06.100 by doing beggar thy neighbor policies, by doing trade restrictions, by antagonizing other countries because by doing that you're creating more autarky, you're breaking down the division of labor and that just makes everybody more poor and it's artificial because then by that same logic someone in a country could say well not only do I want 143 00:15:06.100 --> 00:15:16.100 My country has certain advantages over these other countries, so I'm going to do protectionism and that kind of thing. 144 00:15:16.100 --> 00:15:22.100 Well, why not have my province have those kinds of advantages over the neighboring province? 145 00:15:22.100 --> 00:15:30.100 Or why not have my neighborhood have those kinds of advantages over the neighboring neighborhood or my own household? 146 00:15:30.100 --> 00:15:36.420 And so really, that's the logic of autarky. That's the logic of economic isolation. 147 00:15:36.420 --> 00:15:44.020 And again, that just makes everyone more poor. David Hume, who was one of the founders of 148 00:15:44.980 --> 00:15:52.740 classical economics and of British liberalism, he pointed out the fallacy in this type of reasoning 149 00:15:52.740 --> 00:16:04.660 and he ended one of his great essays by saying because of the division of labor, I pray for the business success of people in France and people in Holland 150 00:16:04.660 --> 00:16:14.780 because I know that their prosperity, but through mutually advantageous exchanges will only lead to my own prosperity. 151 00:16:14.780 --> 00:16:22.180 And throughout the age of liberalism, people realized that. 152 00:16:22.180 --> 00:16:29.680 So there was still, you know, politics and people trying to gain advantages, but for 153 00:16:29.680 --> 00:16:36.180 the most part people in Europe realized that if we extend the division of labor and if 154 00:16:36.180 --> 00:16:43.020 we have peace with other countries and if we have free trade with other countries that 155 00:16:43.020 --> 00:16:47.060 we'll all get richer than we would otherwise have. 156 00:16:47.060 --> 00:17:00.060 Sorry, but as of now, where do you see Europe with the economy opening up and all that? We don't see that advantage in taking the economy to the other side, so is that justified in that way? 157 00:17:17.060 --> 00:17:22.820 I mean, you have the European Central Bank and you have the Eurozone and there's a lot 158 00:17:22.820 --> 00:17:27.180 of centralization going on there. 159 00:17:27.180 --> 00:17:33.540 And so to the extent that Europe is rich is because historically it did liberalize. 160 00:17:33.540 --> 00:17:36.500 I mean, it was just, it was a miracle. 161 00:17:36.500 --> 00:17:44.380 When you think about all of human history and throughout all of human history, people 162 00:17:44.380 --> 00:17:50.900 People have lived basically the same, at the same living standards, that any given person, 163 00:17:50.900 --> 00:17:56.340 he lived about the same living standards as his ancestors a hundred years ago. 164 00:17:56.340 --> 00:18:02.020 And that person lived about the same living standards of a hundred years before that. 165 00:18:02.020 --> 00:18:09.740 But then liberalism grew in Europe, property became more sacrosanct, trade became freer, 166 00:18:09.740 --> 00:18:29.140 People became more secure, and for the first time in human history, there was an industrial revolution, and wealth grew amazingly, and goods and services were produced for the masses in a prodigious amount. 167 00:18:29.140 --> 00:18:45.140 Infant mortality went down. Marginal people who would have otherwise starved in other generations, they found work and they found sustenance and so that is really what made Europe rich. 168 00:18:45.140 --> 00:18:57.140 Yeah, the Eurozone is now more regulated, more intervention and more government than at any time in its history and we get that first hand every time we get European visitors here. 169 00:18:57.140 --> 00:19:13.140 I'm Julio from Colombia. I clearly understood your point of view here, from your example. 170 00:19:13.140 --> 00:19:32.140 How would you manage? Because from this point of view, having debilitated money would be better. So how would you manage? Because what would be the benefits of having strong money? 171 00:19:34.140 --> 00:19:36.140 How would you balance that? 172 00:19:43.140 --> 00:19:59.140 You know, and we would like, you know, immediately for the central bank to stop acting in markets, stop intervening in interest, on the interest rate, stop intervening in the market for loans and the market for government bonds, just pull back. 173 00:19:59.140 --> 00:20:11.140 But ultimately, we not only want to see the central banks pull back, and we want to see the money itself become based on a commodity like gold, silver, and copper. 174 00:20:11.140 --> 00:20:17.460 and when we had a world like that each national country had its own currency 175 00:20:17.460 --> 00:20:23.900 but it was all based on gold and silver and copper so even though there was you 176 00:20:23.900 --> 00:20:29.420 know again and there was a pound and there was a Frank and there was a lira 177 00:20:29.420 --> 00:20:35.660 they were all the same thing it was just different ratios so Frank you take two 178 00:20:35.660 --> 00:20:39.700 Franks to buy a British pound but that was the same amount of gold the world 179 00:20:39.700 --> 00:20:47.700 The world was in effect on the same monetary system, just different pictures printed onto those coins. 180 00:20:47.700 --> 00:20:55.700 So that's what we ultimately want to get back to in this world because a sound monetary system means that this whole complex world economy 181 00:20:55.700 --> 00:21:04.700 and division of labor and free trade, everybody knows what's going on because we're all dealing with the same money in effect. 182 00:21:04.700 --> 00:21:06.700 Thank you very much. 183 00:21:06.700 --> 00:21:08.700 Thank you very much.