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The direct use of physical force
is so poor a solution to the 

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problem of limited resources 
that it is commonly employed, 

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only by small children and great
Nations. 

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Probably my favorite quote from 
this excellent book. 

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The Machinery of Freedom by 
David Friedman, you can find mr.

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Friedman's work at David D 
Friedman.com where you can also 

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find PDFs of his books, both 
nonfiction and his novels and 

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That's where you can find his 
blog. 

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Mr. Friedman. 
Thanks so much for taking the 

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time happy to be here. 
I don't think I actually have 

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the text of either of my novels 
there. 

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Although I do have a link to 
recordings of my first novel but

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I do have the text of a number 
of my other books in one one 

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form or another HTML or page 
images or depending which book 

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it is. 
Okay, that's that that must have

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been the link. 
I was looking at. 

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How would you define capitalism 
and why is it morally Superior 

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to socialism? 
Huh? 

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That's hard to answer because 
the word socialism means a lot 

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of different things to different
people. 

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I think of capitalism. 
Let me go back a step all 

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societies face. 
When he condom is called a 

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coordination problem that in 
order for anyone to do anything.

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You have to somehow coordinate 
the activities of a very large 

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number of people, that famous 
example, was that to make a 

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pencil. 
You need wood to get wood. 

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You need chainsaws to get 
chainsaws. 

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You need steel and Fuel, and a 
bunch of other things. 

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So if you push back, that supply
chain making a pencil involves a

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million people more than a 
million, probably somehow 

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coordinating what they're doing.
So there's enough steel to make 

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enough chain saws to cut down 
enough trees. 

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He's to make the number of 
pencils, you want to make that's

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a grossly oversimplified version
and they're basically two 

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solutions to the coordination 
problem. 

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And the obvious one doesn't 
work. 

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The obvious one is to have 
somebody at the top, telling 

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everybody what to do and that 
works for very small groups. 

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If you think about sort of a 
football team or a small firm 

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with a few employees, you're 
going to have one person more or

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less, making the decisions, but 
it's scales very badly. 

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And when you have a large 
Society, It turns out that the 

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problems with trying to run it 
that way, make it pretty much 

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unworkable which is part of why 
the Soviet Union didn't work and

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why China stayed poor until now 
died, the alternative method and

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the non-obvious method is some 
decentralized system where each 

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individual has a tiny bit of the
problem that he's solving how 

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much he wants to make how much 
he wants to consume and so 

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forth. 
And you have some mechanism to 

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coordinate signals among those 
People. 

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So the fact that I need steel 
shows up from the standpoint of 

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the Spiel manufacturer as the 
price of steel being higher 

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which makes it in his interest 
to make more steel. 

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That's again a vast 
oversimplification of a semester

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or two above price, Theory and 
economics course, but the basic 

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argument is that the solution 
that works. 

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So there are a number of 
different variants of it. 

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Is some decentralized one in 
which each person is controlling

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a tiny bit of the problem that 
being With problems, which he 

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has the best information so that
I know more about what I can do.

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And what I want than you do and 
decisions of what I consume and 

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produce in part. 
Depends on what I want. 

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And what I can do the other part
that depending on other people 

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want is handle demanded to me. 
Mostly through the price system 

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that I observe that people are 
willing to pay for certain 

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things that makes it in my 
interest to produce them. 

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I observe the people charged me 
for certain things, that makes 

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it me in my interest to consume 
them. 

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Only if they're worth more to me
than the cost of making. 

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And again, that's a very, very 
sketchy description of a much 

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more complicated argument. 
But basic point point I'm 

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making, is that capitalism is 
one label for the system in 

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which we use private property 
and trade to get a decentralized

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solution to the coordination 
problem, to get a way in which 

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we can somehow coordinate, so 
that there's enough of 

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everything done without having 
anybody in charge. 

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And I was told that an An 
economist spoke to a Chinese 

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visitor. 
This was quite a long time ago. 

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And the Chinese visitor was part
of the department in China that 

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was responsible, for making sure
that all the firms had the 

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inputs they needed, and he 
wanted to know he wanted to meet

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his opposite number. 
He wanted to find out who in 

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America did the same job. 
And the answer was either nobody

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or everybody that is, there is 
no one in charge of that and 

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understands everybody is in 
charge of that when you I'd that

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you would like to have ice cream
with your dinner. 

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That sends a very weak signal 
via, you are buying some ice 

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cream or the grocery store, and 
the grocery store, order 

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00:05:06,500 --> 00:05:09,500
ordering some ice cream foreign 
suppliers, and its suppliers 

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ordering input for ice cream 
from the people who produce the 

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inputs, but you are in a sense, 
doing a tiny bit of the 

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signaling, which is controlling 
the allocation of impulse, is 

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that it's a long answer, but I'm
afraid there isn't a short 

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answer that that's useful. 
Sure, juice, begin your book 

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with a defense of property, 
basically saying that it's 

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understood operationally pretty 
much by everyone but 

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intellectually by no one. 
Why is it important to have a 

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proper intellectual 
understanding of property? 

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Because private property is the 
Machinery that lets us do the 

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trick that I was describing 
that. 

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That one of the problems that 
Libertarians have to face is 

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that we would love what we want.
Is the world where everybody 

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controls his own life, which 
sounds like a wonderful idea 

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Until you realize that 
everything you do is depend on. 

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Lots of other people. 
So, we have a highly 

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interdependent society and 
property gives you the solution 

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to that problem in the sense of 
giving away in which you can 

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Define my controlling my life, 
which is consistent with 

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interdependence and Actually was
actually works and that's that I

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control what I own. 
Which includes most importantly 

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me, you control? 
What you own? 

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If I want to get something from 
you. 

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I've got to make you an offer. 
You're willing to accept. 

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Unless what I want is for you, 
not to take my property and then

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I'm allowed to use Force to stop
you from taking my property, but

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it's a way of breaking the world
up into tiny bits with each 

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person controlling one bit and 
it's hard to see. 

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See any other way that you 
could. 

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I mean I don't I don't think 
we've imagined all possible 

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human institutions, but it's 
hard to see any solution that 

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doesn't come down to some 
variant of that. 

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And of course there are lots of 
different variants of one of the

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things you Economist realize 
when they study law is the 

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property is a much more 
complicated idea than than when 

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it first thinks. 
So that you say well I own this 

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house and land. 
What rights does that give me? 

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It doesn't give me the right to 
prevent somebody else from 

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standing outside my Operating in
talking to his friend, even 

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though that affect my property 
because I can hear him from 

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there. 
It doesn't give me the right to 

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prevent my neighbor from turning
on the light in his living room,

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even though the fact that I can 
see that light means of there 

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are photons that he's creating 
that are trespassing on that 

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property. 
So it's actually quite a 

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complicated concept. 
I believe it is the case that I 

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own along with my house half the
width of the street in front of 

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my house because the house I 
believe is Other than the 

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street, but I am confident since
I observe cars. 

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Going along that straight that 
long ago, some previous owner of

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the house in effect, sold the 
city of San Jose, the use of 

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00:08:07,900 --> 00:08:10,600
that bit of his property. 
That's what we call an easement 

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and property law. 
So you can think of my ownership

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of land as sort of a bundle of 
Rights, and one can sometimes 

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take one piece of the bundle and
transfer it to somebody else 

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because that strip of land was 
worth much more in the city of 

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San Jose. 
A to have a street on that. 

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It was to me to have a little 
more grass on or the previous 

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owner of my house, 80 years ago,
whenever the transaction was 

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made. 
So property is not a simple 

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idea. 
If there are any lawyers 

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listening, they already know 
that but most other people don't

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but it is the basis to the 
problem of deciding who gets to 

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use. 
What when, how our proper how 

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what gets produced what gets 
consumed and so forth. 

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I once asked a woman who was 
saying capitalism's terrible. 

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It's exploitative. 
It hurts the poor, it creates 

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poverty. 
She even said, and I said, how 

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would you define capitalism and 
her face turns white? 

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And she goes capitalism, is when
the rich get richer, and the 

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poor get poorer. 
You have a great chapter in your

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book titled, the rich get 
richer, and the poor get richer.

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If I'm a poor person. 
Why should I want or The Kate 

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capitalism. 
Well empirically, of course if 

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we look at more or less 
capitalist societies, we observe

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that in the more capitalist 
societies, the poor have gotten 

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richer. 
Sometimes they've gotten richer 

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faster than the rich have gotten
richer. 

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Sometimes slower that varies in 
a sense, one of the most 

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interesting experiences from 
this standpoint. 

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I've had was visiting in India 
because India is a country that 

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has been nominally socialist 
since it came into existence. 

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It is always considered itself. 
Socialist. 

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India is also feels to me as a 
visitor like what Russians? 

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Imagine capitalist societies 
must be like, because this is 

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society with a mass of very poor
people and a small number of 

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relatively well-off people much 
much more strikingly so than the

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us or Western Europe, or Hong 
Kong or Singapore Taiwan or any 

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of the more nominally capitalist
capitalist country. 

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So I gave a talk. 
A cat a sort of the equivalent 

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of a business school in a city. 
And in India, it had been 

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initially subsidized by the 
government. 

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Although I think they claim they
were now paying their own way, 

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and it was very lovely. 
It was about a half-mile. 

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Rectangle, square, roughly 
rectangle of forest, and grass 

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and buildings. 
Lovely Place, surrounded by a 

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high wall topped with barbed 
wire and that's the image that 

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00:10:47,900 --> 00:10:51,500
the critics of capitalism have 
and is in a society, which at 

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least claims. 
May be an exaggeration to be 

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socialist, and always always 
since that government existed 

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since it became independent of 
England has been. 

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00:11:01,100 --> 00:11:03,400
But if you ask, what's in the 
sense? 

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00:11:03,400 --> 00:11:06,600
The more relevant question in 
our context, which is why should

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00:11:06,600 --> 00:11:10,100
you want the kind of what the 
society more capitalist, then 

194
00:11:10,100 --> 00:11:14,800
you have to ask, what are the 
ways in which the governmental 

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00:11:14,800 --> 00:11:16,500
Parts? 
The non-capitalist parts are 

196
00:11:16,500 --> 00:11:18,400
making poor people better off or
worse off. 

197
00:11:18,400 --> 00:11:21,700
And both of those exist that you
have welfare transfers, which 

198
00:11:21,700 --> 00:11:25,300
certainly helps. 
Poor people, you also have rules

199
00:11:25,300 --> 00:11:28,300
for professional licensing, 
which says that if you want to 

200
00:11:28,300 --> 00:11:31,800
employ yourself as a barber 
depending on the particular City

201
00:11:31,800 --> 00:11:34,800
or in you first have to take 
several hundred hours of classes

202
00:11:34,800 --> 00:11:38,400
and how to cut hair, despite the
fact that lots of people, lots 

203
00:11:38,400 --> 00:11:41,000
of parents manage got their own 
kids here, no particular 

204
00:11:41,000 --> 00:11:43,700
difficulty. 
That, if you want to be a flower

205
00:11:43,700 --> 00:11:46,900
arranger, you've got to pass the
test of the people who already 

206
00:11:46,900 --> 00:11:50,800
flower arrangers, are typically 
in control that test and use it 

207
00:11:50,800 --> 00:11:54,400
to keep down the competition. 
So, there are a bunch of ways in

208
00:11:54,400 --> 00:11:58,500
which the Pam up is blocked. 
One of the ways Which is less 

209
00:11:58,500 --> 00:12:00,800
obvious. 
And most people disagree about 

210
00:12:00,800 --> 00:12:04,300
is the existence of a minimum 
wage law that a minimum wage law

211
00:12:04,300 --> 00:12:06,500
sounds as though, it ought to 
help the poor by giving the 

212
00:12:06,508 --> 00:12:10,600
higher wages. 
But the problem is that when you

213
00:12:10,700 --> 00:12:14,700
raise a price above the market 
price, that means you're raising

214
00:12:14,700 --> 00:12:17,800
it above the price at which the 
amount people want to buy equals

215
00:12:17,800 --> 00:12:20,600
the ovule want to sell. 
Which in this case means, you're

216
00:12:20,600 --> 00:12:23,900
raising it above the price at 
which the number of unskilled 

217
00:12:23,900 --> 00:12:27,000
workers employers want to employ
is equal the number Who want to 

218
00:12:27,000 --> 00:12:29,300
work? 
So, the typically the result is 

219
00:12:29,300 --> 00:12:32,100
that, when you push up the 
minimum wage, you are pricing at

220
00:12:32,100 --> 00:12:35,600
least some low wage laborers. 
Off, labor is off the market. 

221
00:12:35,800 --> 00:12:38,700
So, the result is that instead 
of getting a low wage, they get 

222
00:12:38,700 --> 00:12:41,100
no wage. 
And that's a particularly 

223
00:12:41,100 --> 00:12:45,600
serious problem because 
typically the low-wage job is 

224
00:12:45,600 --> 00:12:48,300
the first step in a ladder. 
Not necessarily laddered being 

225
00:12:48,300 --> 00:12:50,300
rich for the latter two being 
less poor. 

226
00:12:50,700 --> 00:12:54,000
That part of the way you get a 
decent job is demonstrating that

227
00:12:54,000 --> 00:12:56,400
you come to work on time and 
hard work. 

228
00:12:56,600 --> 00:12:58,800
ER, and don't steal stuff and 
things like that. 

229
00:12:58,800 --> 00:13:01,400
And you can't demonstrate that 
if you never get the first job, 

230
00:13:01,700 --> 00:13:05,100
now, people will disagree on 
this and it's an open question 

231
00:13:05,300 --> 00:13:07,900
that if you raise the minimum 
wage, some people will get 

232
00:13:07,900 --> 00:13:10,000
higher wages. 
Some people will lose their 

233
00:13:10,000 --> 00:13:13,000
jobs. 
You don't know on Theory, how 

234
00:13:13,000 --> 00:13:16,800
big those two effects are, but 
one of the effects at least is 

235
00:13:16,800 --> 00:13:21,000
to make it harder for people who
work for stopping for one thing 

236
00:13:21,000 --> 00:13:24,400
that I found striking a long 
time ago, was looking at the 

237
00:13:24,400 --> 00:13:26,500
pattern of the poverty rate in 
the US. 

238
00:13:27,300 --> 00:13:30,800
And roughly speaking using a 
constant definition of poverty. 

239
00:13:31,100 --> 00:13:34,400
The pattern is that from the 
after World War 2, which is 

240
00:13:34,400 --> 00:13:38,200
about when our data go to, from 
then until the point, when the 

241
00:13:38,200 --> 00:13:41,900
war on poverty was declared the 
percentage of the population 

242
00:13:41,900 --> 00:13:46,600
that was poor was falling pretty
rapidly from the time. 

243
00:13:46,600 --> 00:13:50,000
When the war on poverty, got 
fully funded, got fully into 

244
00:13:50,000 --> 00:13:52,200
operation. 
The percentage of the population

245
00:13:52,200 --> 00:13:53,900
that's poor at least by the 
statistics. 

246
00:13:53,900 --> 00:13:56,400
I Look to a few years ago has 
been roughly constant. 

247
00:13:56,600 --> 00:13:59,100
Isn't going up and down with 
General economic conditions. 

248
00:13:59,400 --> 00:14:00,700
Now, that certainly isn't a 
proof. 

249
00:14:00,700 --> 00:14:04,100
You know, you correlation is not
causation is people correctly 

250
00:14:04,100 --> 00:14:08,500
say, but at least suggest that 
the war on poverty. 

251
00:14:08,500 --> 00:14:11,900
Who's declared purpose was to 
make people no longer poor. 

252
00:14:12,200 --> 00:14:16,000
The declared purpose wasn't to 
make it a little less unpleasant

253
00:14:16,000 --> 00:14:17,900
to be poor, which is what it 
ended up doing. 

254
00:14:18,100 --> 00:14:20,500
It was to provide retraining and
other things. 

255
00:14:20,500 --> 00:14:22,600
Such that people would end up 
with good jobs and be 

256
00:14:22,600 --> 00:14:24,000
self-sufficient that never 
happened. 

257
00:14:25,400 --> 00:14:27,900
There's an interesting book, 
Charles Murray is first book. 

258
00:14:27,900 --> 00:14:30,900
I think called losing ground, 
which is a description of that 

259
00:14:30,900 --> 00:14:34,000
process of how you started out 
with policies. 

260
00:14:34,000 --> 00:14:37,900
Who's declared purpose was to 
make people no longer poor. 

261
00:14:37,900 --> 00:14:41,300
They failed. 
And as it became clear, they 

262
00:14:41,300 --> 00:14:44,900
failed. 
They sort of retrofitted it into

263
00:14:44,900 --> 00:14:47,800
a policy into a program for 
making poverty, somewhat less 

264
00:14:47,800 --> 00:14:51,300
unpleasant. 
So, you know, it's hard to prove

265
00:14:51,300 --> 00:14:54,100
anything to anybody at least any
reasonable person who's as 

266
00:14:54,108 --> 00:14:56,400
skeptical, as you ought to be of
people trying to prove things. 

267
00:14:56,500 --> 00:15:02,000
This to you, but I think if you 
compare the situation that even 

268
00:15:02,000 --> 00:15:06,300
the poor in a country, like the 
US with the situation of the 

269
00:15:06,300 --> 00:15:08,900
average, people say, in the 
Soviet Union, when it was 

270
00:15:08,900 --> 00:15:12,400
Communist during China, and it 
was Communist, which are 

271
00:15:12,500 --> 00:15:16,500
relatively extreme cases. 
The poor in America are quite a 

272
00:15:16,508 --> 00:15:19,100
lot better off and that's true 
in other countries. 

273
00:15:19,100 --> 00:15:21,200
Now, of course, none of these 
countries are fully capitalist. 

274
00:15:21,200 --> 00:15:24,600
We don't have the experiment of 
saying suppose we have what I 

275
00:15:24,600 --> 00:15:27,600
would want to have what I argue 
for in the Cure referring to 

276
00:15:27,900 --> 00:15:30,900
those data aren't available. 
Unfortunately, but we can say 

277
00:15:30,900 --> 00:15:34,700
that on the whole if you compare
more capitalist and less 

278
00:15:34,700 --> 00:15:38,600
capitalist societies. 
We've had a number of pretty 

279
00:15:38,800 --> 00:15:41,500
about as close to controlled 
experiments as you get in this 

280
00:15:41,500 --> 00:15:44,800
field because we had East 
Germany and West Germany which 

281
00:15:44,800 --> 00:15:47,400
were culturally the same 
society. 

282
00:15:47,800 --> 00:15:51,300
And one of them was under a 
communist government, one of 

283
00:15:51,300 --> 00:15:55,400
them under a more or less 
capitalist government and after 

284
00:15:55,800 --> 00:15:58,900
that. 
Separation existed for like 50 

285
00:15:58,900 --> 00:16:02,800
years or so, it was clear, that 
East Germany was a great deal 

286
00:16:02,800 --> 00:16:05,700
poorer than West, Germany 
enough. 

287
00:16:05,700 --> 00:16:07,900
So people some people were 
willing to risk their life to 

288
00:16:07,900 --> 00:16:11,600
get across to get out. 
We have had the example of North

289
00:16:11,600 --> 00:16:15,000
Korea and South Korea, where 
again, you are starting out with

290
00:16:15,000 --> 00:16:19,000
more or less the same society 
and you have ended up you've 

291
00:16:19,000 --> 00:16:23,200
probably seen these satellite 
photos people show of the Korean

292
00:16:23,200 --> 00:16:25,800
Peninsula at night and it's 
quite striking because the South

293
00:16:25,800 --> 00:16:28,600
half is light. 
The north half is black because 

294
00:16:28,600 --> 00:16:32,200
there isn't enough power there. 
So that ordinary people have 

295
00:16:32,200 --> 00:16:35,400
their lights on at night. 
And, of course, there's lots of 

296
00:16:35,400 --> 00:16:38,800
other evidence that things are 
much worse off there and we had 

297
00:16:38,800 --> 00:16:42,300
in a sense and even bigger and 
more interesting experiment with

298
00:16:42,300 --> 00:16:47,000
China because to begin with, we 
had china, Taiwan and Hong Kong.

299
00:16:47,000 --> 00:16:51,000
So those are three places with 
culturally the same the same 

300
00:16:51,000 --> 00:16:55,000
population, Singapore. 
You could argue as a fourth and 

301
00:16:55,000 --> 00:16:59,300
while China was He's under a 
explicitly socialist, and 

302
00:16:59,300 --> 00:17:03,900
communist system, but 
formaldehyde Taiwan Hong Kong 

303
00:17:03,900 --> 00:17:06,500
and Singapore, were all getting 
by their standards. 

304
00:17:06,500 --> 00:17:08,200
Rich. 
And China was standing still 

305
00:17:09,700 --> 00:17:14,099
that Hong Kong is the Striking 
case because in terms of 

306
00:17:14,099 --> 00:17:18,099
material, resources, Hong Kong 
was probably the poorest Society

307
00:17:18,099 --> 00:17:22,700
on Earth back a long time ago. 
When people were, when people 

308
00:17:22,700 --> 00:17:25,000
believe that, the reason poor 
countries were poor was 

309
00:17:25,000 --> 00:17:28,900
overpopulation. 
I did a very simple calculation 

310
00:17:29,200 --> 00:17:32,500
of population density just 
people per square mile for every

311
00:17:32,500 --> 00:17:35,500
country in the world and it 
turned down to the 5. 

312
00:17:35,500 --> 00:17:39,400
Most densely populated countries
where to Rich European countries

313
00:17:39,400 --> 00:17:43,500
Belgium and the Netherlands, and
three poor countries in the 

314
00:17:43,500 --> 00:17:48,100
process of getting rich, Taiwan,
South, Korea, and Singapore. 

315
00:17:49,200 --> 00:17:51,400
Singapore. 
Have the highest population 

316
00:17:51,400 --> 00:17:54,900
density of any country in the 
world Hong Kong, which was not 

317
00:17:54,900 --> 00:17:58,500
an independent country had 10 
times the population, density of

318
00:17:58,500 --> 00:18:03,800
Singapore. 
So you had a basically a place 

319
00:18:03,800 --> 00:18:06,300
with no real natural resources 
other than a good Harbor. 

320
00:18:06,800 --> 00:18:09,500
A place that had the import 
drinking water from China 

321
00:18:09,500 --> 00:18:11,600
because they didn't produce 
enough for their population, 

322
00:18:11,900 --> 00:18:16,100
which had masses of poor 
refugees coming in and some 

323
00:18:16,100 --> 00:18:18,800
decades, back the per capita 
income of home. 

324
00:18:19,000 --> 00:18:22,700
On past that of England. 
So, that's a sort of an extreme 

325
00:18:22,700 --> 00:18:23,900
case. 
So, again, it's not a perfectly 

326
00:18:23,900 --> 00:18:26,700
capitalist Society, but it's a 
great deal, more capitalist than

327
00:18:26,700 --> 00:18:28,900
the alternative. 
But then you've got the, in a 

328
00:18:28,908 --> 00:18:31,800
sense, the most dramatic 
example, and that's what 

329
00:18:31,800 --> 00:18:36,700
happened to China, after mom 
died, because I expect that both

330
00:18:36,700 --> 00:18:39,600
now and the rest of the top 
people in the Czech ominous 

331
00:18:39,600 --> 00:18:41,700
party. 
We're mostly well-intentioned 

332
00:18:41,700 --> 00:18:46,100
people who wanted their country 
to prosper when Mal, they all 

333
00:18:46,100 --> 00:18:49,800
believe in socialism. 
When Mao died, I'd the others 

334
00:18:49,800 --> 00:18:53,100
were now free to go abroad. 
And what did they observe? 

335
00:18:53,100 --> 00:18:55,700
They observed that their country
with what they believed to be. 

336
00:18:55,700 --> 00:18:59,300
The best economic system in the 
world was dirt, poor compared to

337
00:18:59,300 --> 00:19:01,800
the rest of the world. 
They could look at a place like 

338
00:19:01,800 --> 00:19:05,400
Japan which isn't very far away 
and see the Japanese were 

339
00:19:05,600 --> 00:19:07,800
ordinary. 
Japanese workers were enormously

340
00:19:07,800 --> 00:19:10,100
better off than ordinary Chinese
workers. 

341
00:19:11,000 --> 00:19:13,600
So what was their conclusion? 
They were still socialist, but 

342
00:19:13,608 --> 00:19:15,800
they said we must be doing 
socialism, wrongly making some 

343
00:19:15,800 --> 00:19:18,500
kind of mistake. 
So let's experiment. 

344
00:19:19,000 --> 00:19:24,000
Let people do things and not 
stomp on them and they tried in 

345
00:19:24,000 --> 00:19:26,500
a number of ways to change their
system and some of them made it 

346
00:19:26,500 --> 00:19:28,300
a little bit better in some of 
them didn't. 

347
00:19:28,500 --> 00:19:32,500
But meanwhile, things were 
happening on the margin. 

348
00:19:32,500 --> 00:19:35,400
Things were happening that the 
Communist Party had not decided 

349
00:19:35,400 --> 00:19:39,300
to have happened, but when it 
discovered didn't stop of which 

350
00:19:39,300 --> 00:19:42,300
the most important, one was the 
shift to something close to 

351
00:19:42,300 --> 00:19:44,500
private property for 
agricultural land. 

352
00:19:44,800 --> 00:19:47,200
Where what happened was that 
there were a number of very poor

353
00:19:47,200 --> 00:19:52,400
Villages, which covertly assign 
plots of land to families to 

354
00:19:52,400 --> 00:19:55,900
households and let them be 
responsible for cultivating them

355
00:19:55,900 --> 00:19:58,200
and getting the crop from the - 
whatever. 

356
00:19:58,200 --> 00:20:02,200
They had to contribute for their
share of the of the common in 

357
00:20:02,200 --> 00:20:05,000
one Village. 
It was done covertly by the 

358
00:20:05,000 --> 00:20:08,800
local communist official and in 
once in one Village, it was done

359
00:20:08,800 --> 00:20:11,400
covertly by The Peasants, not 
telling the Communist official 

360
00:20:11,800 --> 00:20:14,500
in both cases. 
The result was that what had 

361
00:20:14,500 --> 00:20:18,000
been very poor Villages. 
Did much better eventually they 

362
00:20:18,000 --> 00:20:21,000
went public. 
And the response of the 

363
00:20:21,000 --> 00:20:23,400
Communist party was this is 
illegal. 

364
00:20:23,500 --> 00:20:25,800
You're not allowed to do it, but
we are going to punish you. 

365
00:20:27,000 --> 00:20:30,800
And they watched for a while and
then they said well in those 

366
00:20:30,800 --> 00:20:33,000
Villages where the present 
system is working very badly, 

367
00:20:33,000 --> 00:20:36,000
you're allowed to try this 
experiment and they walked for a

368
00:20:36,008 --> 00:20:37,500
while and maybe everybody should
do it. 

369
00:20:38,200 --> 00:20:41,800
So that was a case in which it 
wasn't that they figured out 

370
00:20:41,800 --> 00:20:44,000
what to do. 
It was a they had the good sense

371
00:20:44,000 --> 00:20:45,600
to realize it didn't know what 
to do. 

372
00:20:46,000 --> 00:20:48,100
Unless not to stop. 
What was happening is a very 

373
00:20:48,100 --> 00:20:50,600
interesting book. 
By Ronald coase who was a very 

374
00:20:50,600 --> 00:20:52,600
important Economist who died a 
few years ago. 

375
00:20:52,600 --> 00:20:56,000
His last work was a book on how 
China went capitalist. 

376
00:20:57,000 --> 00:21:00,000
Bunch more stuff. 
I'm summarizing a lot of stuff 

377
00:21:00,000 --> 00:21:03,300
from the book. 
But the basic bottom line is 

378
00:21:03,300 --> 00:21:07,000
that between Mao's death and 
2010. 

379
00:21:07,600 --> 00:21:11,700
The per capita, real income of 
China, went up, twenty fold. 

380
00:21:12,400 --> 00:21:16,000
It's probably the largest 
increase in you and Welfare. 

381
00:21:16,000 --> 00:21:18,700
There's ever happened in that 
short period of time in history,

382
00:21:18,900 --> 00:21:22,200
and that was the difference 
between a socialist system and 

383
00:21:22,200 --> 00:21:23,800
they more or less capitalist 
system. 

384
00:21:23,800 --> 00:21:26,100
And again, it's certainly not a 
pure capitalist system. 

385
00:21:26,500 --> 00:21:31,500
I would say that Shanghai where 
I visited on paper, in theory, 

386
00:21:31,500 --> 00:21:34,800
is a little bit less Capital 
than America and in practices a 

387
00:21:34,800 --> 00:21:37,600
little bit more capitalist 
America that as far as I can 

388
00:21:37,600 --> 00:21:40,100
tell, there are various 
regulations, but if you know who

389
00:21:40,100 --> 00:21:41,800
to pay off, they don't get 
enforced. 

390
00:21:43,100 --> 00:21:45,600
Other parts of China, are 
probably less capitalism that I 

391
00:21:45,600 --> 00:21:48,800
think Shanghai is one of the 
better areas, but check China. 

392
00:21:48,800 --> 00:21:52,500
In terms of the economy is not 
strikingly less capitalist than 

393
00:21:52,500 --> 00:21:54,700
the u.s. 
Western Europe Canada. 

394
00:21:55,200 --> 00:21:58,500
And it is Norma seem more 
successful than it was when it 

395
00:21:58,500 --> 00:22:01,300
was a real communist Society. 
They still call themselves 

396
00:22:01,300 --> 00:22:04,400
Communists. 
They kept changing the label. 

397
00:22:04,400 --> 00:22:07,600
It was socialism with Chinese 
characteristics was that they 

398
00:22:07,600 --> 00:22:09,600
were doing because they couldn't
say it was capitalism. 

399
00:22:10,200 --> 00:22:13,700
But nonetheless, it's 
essentially a largely private 

400
00:22:13,700 --> 00:22:17,000
property market exchange society
in which the government owns a 

401
00:22:17,008 --> 00:22:19,200
bunch of firms and metals and a 
bunch of other firms. 

402
00:22:19,200 --> 00:22:21,500
And as a lot of other stupid 
things just like our government 

403
00:22:21,500 --> 00:22:23,600
does. 
But it's still a whole lot 

404
00:22:23,600 --> 00:22:24,700
better than what they had 
before. 

405
00:22:25,100 --> 00:22:27,900
So I think that would be those 
are some fairly striking pieces 

406
00:22:27,900 --> 00:22:32,800
of evidence that capitalism on 
the whole is good for the poor 

407
00:22:32,800 --> 00:22:35,000
as well. 
As well as for the for the rich 

408
00:22:36,700 --> 00:22:41,300
Ben Shapiro had a discussion 
with Sammy and rest. 

409
00:22:41,800 --> 00:22:47,300
And Sam Harris said, there is 
one argument that I basically 

410
00:22:47,300 --> 00:22:51,700
cannot get on the capital aside 
for the reason we can't really 

411
00:22:51,700 --> 00:22:56,100
have a market Society is because
of the existence of Market. 

412
00:22:56,600 --> 00:22:59,500
You've actually given a 
presentation on market failure. 

413
00:22:59,600 --> 00:23:03,500
Yeah, you address the market 
failure concern. 

414
00:23:03,700 --> 00:23:07,500
Just let me first, give what I 
think is the best definition of 

415
00:23:07,500 --> 00:23:10,500
market failure because it isn't 
really about markets. 

416
00:23:11,500 --> 00:23:16,000
What market failure is is the 
situation where individual 

417
00:23:16,000 --> 00:23:19,800
rationality does not produce 
group rationality, that is where

418
00:23:19,800 --> 00:23:22,400
you have a group of people. 
Each of them is making the 

419
00:23:22,408 --> 00:23:25,800
correct decision for himself and
yet all of them be better off 

420
00:23:25,800 --> 00:23:28,000
for they. 
Something else and my favorite 

421
00:23:28,000 --> 00:23:30,500
example, story. 
I like to use when I give a talk

422
00:23:30,500 --> 00:23:33,800
on, this is to imagine. 
It's a thousand years ago and 

423
00:23:33,800 --> 00:23:37,200
you're somewhere in Europe and 
you're one of the line of 10,000

424
00:23:37,200 --> 00:23:41,500
men with Spears. 
And the reason you are standing 

425
00:23:41,500 --> 00:23:44,400
in that line with your spirit 
pointing in One Direction 

426
00:23:44,400 --> 00:23:48,100
pointing North is that North of 
you there, another 10,000 men 

427
00:23:48,100 --> 00:23:51,600
with Spears on Horseback and 
they're coming at you and you do

428
00:23:51,600 --> 00:23:55,000
a very quick cost-benefit 
calculation to decide what to 

429
00:23:55,000 --> 00:23:58,100
do. 
And you say, well, if all of us 

430
00:23:58,100 --> 00:24:01,900
stand, and if we keep our Spears
planted and pointed at them with

431
00:24:01,900 --> 00:24:05,300
luck, we can stop there charge 
and some of us will be killed 

432
00:24:05,300 --> 00:24:09,600
but most of us will survive. 
If we run horses run faster than

433
00:24:09,600 --> 00:24:12,800
we do, I should stay. 
And then you think amazing. 

434
00:24:12,800 --> 00:24:14,300
Wait a minute. 
I'm making a mistake. 

435
00:24:14,800 --> 00:24:17,900
I said we I don't control him 
and him. 

436
00:24:17,900 --> 00:24:21,800
The guy on either side of me. 
I only control me if everybody 

437
00:24:21,800 --> 00:24:26,200
else stands and I run one man, 
out of 10,000 won't have much 

438
00:24:26,200 --> 00:24:29,000
effect on the chance of stopping
the charge and I will be one of 

439
00:24:29,008 --> 00:24:32,600
the ones who gets killed if 
everybody else runs and I stand.

440
00:24:32,600 --> 00:24:36,100
I'm dead. 
In fact, whatever everybody else

441
00:24:36,100 --> 00:24:38,300
is doing. 
I am Her off running than 

442
00:24:38,300 --> 00:24:41,800
standing. 
We all run in most of us die. 

443
00:24:42,100 --> 00:24:45,300
Welcome to the dark side of 
rationality and that's a 

444
00:24:45,300 --> 00:24:48,200
particularly dramatic example, 
but it's a problem that exists 

445
00:24:48,200 --> 00:24:51,300
in lots and lots of other 
contexts and you can find, if 

446
00:24:51,300 --> 00:24:54,700
you go on my webpage. 
I've got a link to recordings of

447
00:24:54,700 --> 00:24:57,800
talks I've given and you could 
find it there. 

448
00:24:57,800 --> 00:24:59,500
If you read my book Machinery or
Freedom. 

449
00:24:59,500 --> 00:25:02,900
I've got a chapter on it, but 
this the logic of such a 

450
00:25:02,908 --> 00:25:06,200
situation happens in lots of 
context of which the market has 

451
00:25:06,200 --> 00:25:08,800
only one. 
And what's basically happening 

452
00:25:08,900 --> 00:25:12,700
is that I make Decision or I get
the benefit of other people get 

453
00:25:12,700 --> 00:25:15,600
the cost. 
And in that case, even if the 

454
00:25:15,600 --> 00:25:18,200
cost is larger than the benefit,
it pays me to make it. 

455
00:25:18,700 --> 00:25:22,900
So when I run away, the cost is 
the whole line is a little bit 

456
00:25:22,900 --> 00:25:27,100
less likely to hold that's cost.
Spread of Mi all 10,000 people. 

457
00:25:27,100 --> 00:25:29,200
The benefit is I'm a little 
farther ahead and might get 

458
00:25:29,200 --> 00:25:31,700
away. 
So it's in my interest to do it,

459
00:25:31,700 --> 00:25:36,300
even though we're all worse off 
as a result, the standard 

460
00:25:36,300 --> 00:25:38,900
example of the textbook is 
something like air pollution. 

461
00:25:39,700 --> 00:25:44,800
Where when I when my factory put
sulfur dioxide in the back side,

462
00:25:44,800 --> 00:25:49,300
in the air that imposes costs on
the people downwind but I ignore

463
00:25:49,300 --> 00:25:51,600
those costs. 
It makes it cheaper for me to 

464
00:25:51,600 --> 00:25:53,900
make steel. 
So I do it that way. 

465
00:25:54,300 --> 00:25:57,600
Even if the cost of filtering 
the smokestack and preventing 

466
00:25:57,600 --> 00:26:00,900
the sulfur from going into the 
air is less than the damage done

467
00:26:00,900 --> 00:26:03,500
because the damage is done to 
other people in the cost of the 

468
00:26:03,508 --> 00:26:08,200
filters, will be to be. 
So these are situations where 

469
00:26:08,500 --> 00:26:11,500
individually rational. 
Activity on the market May 

470
00:26:11,500 --> 00:26:14,300
produce the wrong result and it 
could also in the other 

471
00:26:14,300 --> 00:26:16,800
direction. 
If you have a case where I bear 

472
00:26:16,800 --> 00:26:20,600
the cost that you get the 
benefit, again, even if benefit 

473
00:26:20,600 --> 00:26:22,800
is larger than cost of doesn't 
pay me to do it. 

474
00:26:23,100 --> 00:26:26,600
Those are the economist often 
refer to that kind of cases an 

475
00:26:26,600 --> 00:26:30,100
externality, but it's really a 
pretty General pattern and it 

476
00:26:30,100 --> 00:26:32,900
describes market failure. 
And it sometimes happens on the 

477
00:26:32,908 --> 00:26:35,800
market and the result is that a 
market was, no government 

478
00:26:35,800 --> 00:26:37,700
intervention. 
Sometimes does the wrong thing. 

479
00:26:37,700 --> 00:26:40,600
That's actually correct. 
The Problem is that we have no 

480
00:26:40,600 --> 00:26:43,600
better alternative because if 
you think about the alternative 

481
00:26:43,600 --> 00:26:46,900
to the market, it's having those
decisions made by the political 

482
00:26:46,900 --> 00:26:50,000
mechanism. 
Why do you expect the political 

483
00:26:50,000 --> 00:26:52,000
mechanism to do the right thing 
for the group? 

484
00:26:52,300 --> 00:26:55,600
And if you think about that for 
a little, you realize that the 

485
00:26:56,000 --> 00:26:58,600
mac and the machinery for 
getting the government to do, 

486
00:26:58,600 --> 00:27:01,800
the right thing is run through 
with market failure. 

487
00:27:02,200 --> 00:27:05,200
So if you think about the sort 
of simple model of democracy, 

488
00:27:05,500 --> 00:27:07,400
which is, why does the 
government have to do the right 

489
00:27:07,400 --> 00:27:08,900
things for us? 
Because we'll vote them out if 

490
00:27:08,900 --> 00:27:12,200
they do. 
For that to work, the individual

491
00:27:12,200 --> 00:27:15,300
voter has to know what the 
government is doing and what it 

492
00:27:15,300 --> 00:27:18,200
should be doing. 
Answering both those questions 

493
00:27:18,200 --> 00:27:22,800
is hard that when a politician 
introduced a bill into Congress.

494
00:27:22,900 --> 00:27:26,400
He never says this is the bill 
to make Farmers richer and city 

495
00:27:26,400 --> 00:27:29,800
folks poorer. 
Every year we have such a bill 

496
00:27:29,800 --> 00:27:32,900
is called the farm program. 
He will naturally present it in 

497
00:27:32,900 --> 00:27:35,400
a way, which is designed to make
it look good for everybody. 

498
00:27:35,600 --> 00:27:37,900
And then you have to pay some 
attention as an effort to figure

499
00:27:37,900 --> 00:27:42,000
out it is, as far as I know. 
No politician ever runs on the 

500
00:27:42,000 --> 00:27:43,200
slogan. 
I'm the bad guy. 

501
00:27:43,700 --> 00:27:48,200
So again, in order to figure out
in order for that mechanism for 

502
00:27:48,200 --> 00:27:51,100
controlling government to work, 
each individual voter has to put

503
00:27:51,100 --> 00:27:54,200
quite a lot of time and effort 
into figuring out what the 

504
00:27:54,200 --> 00:27:56,600
government is doing, what it 
should be doing, what the 

505
00:27:56,600 --> 00:27:59,400
particular politician is voting 
for, or against has been doing 

506
00:27:59,400 --> 00:28:01,500
what he should be doing. 
So this is not a trivial 

507
00:28:01,500 --> 00:28:04,100
problem. 
There is essentially no benefit 

508
00:28:04,100 --> 00:28:08,700
to doing that because if I do 
that in a presidential election,

509
00:28:08,700 --> 00:28:11,900
my voting for the right guy, 
instead of the wrong guy 

510
00:28:11,900 --> 00:28:16,200
increases by about One five, 
millionth the chance of getting 

511
00:28:16,200 --> 00:28:18,600
elected, right? 
We've got large populations 

512
00:28:18,600 --> 00:28:19,800
here. 
Exact numbers ready? 

513
00:28:19,800 --> 00:28:21,900
Come here. 
That's the right approximate 

514
00:28:21,900 --> 00:28:24,500
number. 
So if the right guy gets 

515
00:28:24,500 --> 00:28:27,600
elected, that benefit is spread 
among 300 million fellow 

516
00:28:27,600 --> 00:28:30,000
Americans. 
I get a tiny fraction of it. 

517
00:28:30,900 --> 00:28:33,400
I Bear all of the costs of my 
decision to make it a little 

518
00:28:33,400 --> 00:28:37,000
more likely, that's an extreme 
externality in the extreme case 

519
00:28:37,000 --> 00:28:39,000
where I Vera cost. 
Everybody else gets the benefit 

520
00:28:39,000 --> 00:28:41,900
so I don't do it. 
And the result is that in 

521
00:28:41,900 --> 00:28:43,900
practice. 
There are many people People 

522
00:28:43,900 --> 00:28:47,600
believe that they are rational 
voters, but if you actually ask 

523
00:28:47,600 --> 00:28:49,900
them, I've done the experiment 
when I was teaching an 

524
00:28:49,900 --> 00:28:54,100
undergraduate class in 
University and Silicon Valley of

525
00:28:54,100 --> 00:28:56,100
asking. 
My students most of whom almost 

526
00:28:56,100 --> 00:28:57,900
all of them were old enough to 
vote. 

527
00:28:58,000 --> 00:29:00,900
If they knew the name of their 
congressman and about half of 

528
00:29:00,900 --> 00:29:04,100
them did really hard to keep 
track of what a politician is 

529
00:29:04,100 --> 00:29:06,900
doing. 
If you don't know his name and 

530
00:29:06,900 --> 00:29:11,100
in general if you went people, 
do polls the population. 

531
00:29:11,200 --> 00:29:13,500
Vastly overestimates the size or
something. 

532
00:29:13,700 --> 00:29:16,000
Actually government budget. 
Such as foreign aid 

533
00:29:16,000 --> 00:29:19,200
underestimates others, and 
that's perfectly rational 

534
00:29:19,600 --> 00:29:22,900
because the information in order
to be a, well, informed voter is

535
00:29:22,900 --> 00:29:25,600
quite expensive and it's 
irrational, not to buy 

536
00:29:25,600 --> 00:29:27,500
information if it costs more 
than it's worth to you. 

537
00:29:28,100 --> 00:29:32,300
But the result is that the 
fundamental mechanism that 

538
00:29:32,300 --> 00:29:33,900
supposed to make our political 
system. 

539
00:29:33,900 --> 00:29:38,000
Work is one where market failure
is not the exception, but the 

540
00:29:38,000 --> 00:29:41,100
norm and that's true. 
If you run through the political

541
00:29:41,100 --> 00:29:43,200
mechanism, the governmental 
mechanism. 

542
00:29:43,200 --> 00:29:47,100
It's Ooh, right through it. 
So you might say, well, the 

543
00:29:47,100 --> 00:29:49,700
reason the system works is not 
really Democratic voting. 

544
00:29:49,700 --> 00:29:55,000
That's sort of the cover story. 
It's really Market corruption. 

545
00:29:55,000 --> 00:29:58,700
It's really the fact that if 
some positive, some Bill 

546
00:29:58,800 --> 00:30:01,400
benefits your group, you're 
willing to offer, Congressman 

547
00:30:01,600 --> 00:30:03,800
donations. 
If they'll vote for it, if it 

548
00:30:03,800 --> 00:30:06,700
hurts your group, you're willing
to vote offer donations. 

549
00:30:06,700 --> 00:30:09,400
If they vote against it, so, you
have a sort of a market for 

550
00:30:09,400 --> 00:30:12,200
legislation in which people 
might say, if it's worth more 

551
00:30:12,200 --> 00:30:14,700
than it costs. 
The Winners will outbid the 

552
00:30:14,700 --> 00:30:17,200
losers. 
So, to speak the trouble with 

553
00:30:17,200 --> 00:30:21,000
that, is you again have a market
failure problem, because if my 

554
00:30:21,000 --> 00:30:26,700
group of people, let us say, the
contest is between the producers

555
00:30:26,700 --> 00:30:29,000
of automobiles in the consumers 
of automobiles. 

556
00:30:29,400 --> 00:30:31,800
And the question is, shall we 
have an auto Terror, shall we? 

557
00:30:31,800 --> 00:30:35,800
Make it expensive to import for 
and the American Auto companies 

558
00:30:35,800 --> 00:30:37,900
would like to do that because it
means they can charge higher 

559
00:30:37,900 --> 00:30:41,400
prices for their automobiles. 
The American consumers would 

560
00:30:41,400 --> 00:30:43,500
like not to do that because it 
means they pay a higher price. 

561
00:30:43,600 --> 00:30:46,900
Has the American Auto companies 
are a handful of large 

562
00:30:46,900 --> 00:30:48,700
organizations. 
Must one big Union. 

563
00:30:49,500 --> 00:30:53,000
They can pretty easily get 
together and say look we all 

564
00:30:53,000 --> 00:30:56,600
contribute 50 million if you 
contribute 40 million and at the

565
00:30:56,600 --> 00:30:59,100
United Auto Workers tells all 
its people to vote for the guy. 

566
00:30:59,100 --> 00:31:02,100
We told them to vote for and 
weaken us push for the tires. 

567
00:31:02,800 --> 00:31:07,500
The victims are 100 million 
people who are going to buy 

568
00:31:07,500 --> 00:31:10,600
automobiles. 
There's no way they can get 

569
00:31:10,600 --> 00:31:12,000
together from the standpoint of 
each. 

570
00:31:12,000 --> 00:31:13,500
One of them. 
It isn't even worth. 

571
00:31:13,700 --> 00:31:16,500
Cost of finding out whether the 
terror for its mmm, let alone 

572
00:31:16,500 --> 00:31:19,200
doing anything about it. 
And, you know, I go into more 

573
00:31:19,200 --> 00:31:22,800
detail on this elsewhere, but 
the basic argument is, if you 

574
00:31:22,800 --> 00:31:26,800
think about the sort of silikal 
version of why it works, it 

575
00:31:26,800 --> 00:31:31,100
still works very badly because 
you heavily overweight, the 

576
00:31:31,100 --> 00:31:34,600
interest of organized interest 
groups of relatively small 

577
00:31:34,600 --> 00:31:38,000
numbers of large players like 
the Auto industry and you 

578
00:31:38,000 --> 00:31:40,700
underestimate how will be 
underweight the interests of 

579
00:31:40,700 --> 00:31:43,500
large numbers of dispersed 
disorganized group. 

580
00:31:43,600 --> 00:31:47,500
Such as all consumers. 
So, again, sort of tariffs are a

581
00:31:47,508 --> 00:31:50,400
case with your sort of striking 
for an economist because the 

582
00:31:50,400 --> 00:31:54,200
realm of Economics were worked 
out by David Ricardo a little 

583
00:31:54,200 --> 00:31:58,100
bit over 200 years ago. 
We understood them quite well, 

584
00:31:58,100 --> 00:32:01,800
ever since the implication of 
those arguments is that with 

585
00:32:01,800 --> 00:32:04,400
certain rare exceptions, a 
country that imposes. 

586
00:32:04,400 --> 00:32:09,000
A tariff makes itself worse off 
that quite aside from anybody 

587
00:32:09,000 --> 00:32:13,000
else, does in response to the 
Tariff in effect means that we 

588
00:32:13,000 --> 00:32:15,000
are producing. 
Goods at home, get them, more 

589
00:32:15,000 --> 00:32:17,700
cheaply by producing something 
else and trading it for for 

590
00:32:17,700 --> 00:32:22,700
those goods. 
And yet for those 200 years, 

591
00:32:22,800 --> 00:32:26,300
almost no countries, follow the 
logic of that argument and had 

592
00:32:26,300 --> 00:32:29,200
no tariffs. 
The England of the 19th century 

593
00:32:29,200 --> 00:32:32,700
was a famous exception and it 
did very well Hong Kong in the 

594
00:32:32,700 --> 00:32:35,600
20th century was another 
exception and it even better. 

595
00:32:36,100 --> 00:32:37,600
But those were very much the 
exceptions. 

596
00:32:37,600 --> 00:32:40,200
Almost every country has had 
tariffs. 

597
00:32:40,700 --> 00:32:43,400
And the reason is that a tariff 
is away. 

598
00:32:43,600 --> 00:32:45,700
Of benefiting a constant rate of
interest group. 

599
00:32:45,700 --> 00:32:48,700
Namely, The Producers have the 
cost of a dispersed interest 

600
00:32:48,700 --> 00:32:51,900
group, namely, the consumers and
the result is that it's 

601
00:32:51,900 --> 00:32:54,500
politically profitable to have 
it, even though it makes the 

602
00:32:54,508 --> 00:32:57,700
country worse off. 
So those are the example. 

603
00:32:57,700 --> 00:33:00,600
But the basic point I'm making 
is that the choice of the 

604
00:33:00,600 --> 00:33:04,400
alternative is not. 
Do we have a less a fair free 

605
00:33:04,400 --> 00:33:09,800
market, which works perfectly. 
Sorry, is less a fair free 

606
00:33:09,800 --> 00:33:12,600
market where, which works 
imperfectly or have the 

607
00:33:12,600 --> 00:33:13,500
government correct, this 
mistake? 

608
00:33:13,600 --> 00:33:17,400
X, the alternatives are between 
a free market system, which 

609
00:33:17,400 --> 00:33:22,100
mostly works and occasionally 
doesn't, and a governmental 

610
00:33:22,100 --> 00:33:25,200
alternative, which occasionally 
works, but mostly, but mostly 

611
00:33:25,200 --> 00:33:29,900
does not work due to the fact 
that the same problem of market 

612
00:33:29,900 --> 00:33:32,900
failure, is the exception on the
private Market. 

613
00:33:32,900 --> 00:33:37,100
Most of the time, if I want an 
input, I have to pay for most of

614
00:33:37,108 --> 00:33:38,700
the time. 
If I produce an output, I can 

615
00:33:38,700 --> 00:33:42,300
sell it to someone so I get paid
for it and only in some special 

616
00:33:42,300 --> 00:33:44,900
cases like a radio. 
Broadcaster, I can't control who

617
00:33:44,900 --> 00:33:49,600
hears it, or air pollution 
where, I don't have to pay for 

618
00:33:49,800 --> 00:33:51,000
the people who are injured by 
it. 

619
00:33:51,000 --> 00:33:53,500
Only in those special cases, 
does the free market give the 

620
00:33:53,500 --> 00:33:55,800
wrong answer? 
Where's the political system is 

621
00:33:55,800 --> 00:33:57,400
one in which the normal 
situation is. 

622
00:33:57,400 --> 00:34:00,000
It gives the wrong answer. 
Because almost without 

623
00:34:00,000 --> 00:34:03,700
exception, the actors of the 
political Market, neither bear 

624
00:34:03,700 --> 00:34:07,700
the costs nor receive the 
benefits, all of the benefits of

625
00:34:08,500 --> 00:34:12,199
their action. 
It's true of the politicians. 

626
00:34:12,199 --> 00:34:16,400
It's true of a lobbyist. 
It's true of the administrators 

627
00:34:16,600 --> 00:34:18,800
people who are enforcing the 
rules. 

628
00:34:18,900 --> 00:34:22,100
It's true of Judges. 
If a judge sets, a precedent, 

629
00:34:22,100 --> 00:34:25,800
which is the wrong legal rule, 
if that legal rule makes the 

630
00:34:25,800 --> 00:34:31,199
country 100% poor, a hundredth 
of a percent of the national 

631
00:34:31,199 --> 00:34:34,000
income of the u.s. 
Is something in the tens of 

632
00:34:34,000 --> 00:34:37,199
billions of dollars a year. 
It's an enormous amount of 

633
00:34:37,199 --> 00:34:39,699
damage for a human being to do 
and you'll never know. 

634
00:34:40,500 --> 00:34:44,199
He's not paying for it. 
So it's not like a A system 

635
00:34:44,199 --> 00:34:46,800
where it is in the rational 
interest of judges to make the 

636
00:34:46,800 --> 00:34:49,500
right decision or of 
Administrators or if 

637
00:34:49,500 --> 00:34:52,699
politicians. 
So, what you want to do is to 

638
00:34:52,699 --> 00:34:56,100
think of the government, not as 
a sort of a god reaching down 

639
00:34:56,100 --> 00:34:59,200
from behind to fix things. 
But is itself a market, a 

640
00:34:59,200 --> 00:35:01,800
system, which the individual 
actors are acting in their own 

641
00:35:01,800 --> 00:35:03,800
interest. 
The only difference is that is 

642
00:35:03,800 --> 00:35:07,500
under a set of rules in which 
the conflict between their 

643
00:35:07,500 --> 00:35:09,300
interest, in our interest is 
normal. 

644
00:35:09,500 --> 00:35:12,100
Whereas on the market its 
exceptional but that sometimes 

645
00:35:12,100 --> 00:35:14,600
happen, perfectly true. 
So, that would be my long 

646
00:35:14,600 --> 00:35:19,000
answer, but I don't think I have
had the opportunity to argue 

647
00:35:19,000 --> 00:35:20,300
with Harris. 
So I don't know if I could 

648
00:35:20,300 --> 00:35:24,300
persuade him with that or not. 
All right. 

649
00:35:24,300 --> 00:35:29,300
So the other day in the Wall 
Street Journal, this was on the 

650
00:35:29,300 --> 00:35:35,200
cover, the iPhone now. 
So basically this article says, 

651
00:35:35,800 --> 00:35:40,200
if you take each part of the 
iPhone and add them up, it costs

652
00:35:40,200 --> 00:35:44,000
$390. 
However, the evil greedy 

653
00:35:44,000 --> 00:35:49,200
capitalists are charging 1099 
dollars. 

654
00:35:49,700 --> 00:35:52,300
The average person might look at
this and say, okay, I could see 

655
00:35:52,300 --> 00:35:58,000
400. 500 or 600. 
But how can you charge so much 

656
00:35:58,000 --> 00:35:59,800
more? 
This is ridiculous. 

657
00:36:00,100 --> 00:36:02,400
How would you approach this 
subject? 

658
00:36:02,900 --> 00:36:05,800
Suppose we think about all the 
stuff that goes to make up you? 

659
00:36:05,800 --> 00:36:08,800
And it only comes down to a 
bunch of carbon and bunch of 

660
00:36:08,800 --> 00:36:11,200
hydrogen. 
A bunch of water and certain 

661
00:36:11,200 --> 00:36:14,800
amount of nitrogen and oxygen. 
If you other chemicals, and I 

662
00:36:14,808 --> 00:36:17,800
think, if you value it up all of
those chemicals at market 

663
00:36:17,800 --> 00:36:20,000
prices, I doubt your worth as 
much as 20 bucks. 

664
00:36:20,000 --> 00:36:22,700
Probably less than that. 
Me too. 

665
00:36:23,600 --> 00:36:27,800
So the problem is that you're 
taking the individual pieces and

666
00:36:27,800 --> 00:36:31,900
you're ignoring all of the costs
that go into assembling them, 

667
00:36:32,000 --> 00:36:37,500
designing them, marketing them. 
You've got to get that phone to 

668
00:36:37,500 --> 00:36:39,700
somebody. 
So, there are a whole bunch of 

669
00:36:39,700 --> 00:36:43,600
costs other than the literal 
costs of the pieces, that that 

670
00:36:43,600 --> 00:36:47,100
go into it. 
And I think the real answer is 

671
00:36:47,100 --> 00:36:51,600
that Apple, after all, has to 
compete with Samson, they have 

672
00:36:51,600 --> 00:36:57,100
to compete With who away they 
have to compete with a bunch of 

673
00:36:57,100 --> 00:37:00,400
other firms. 
Even after compete with tiny 

674
00:37:00,400 --> 00:37:03,100
firms. 
Let me show you a toy that I 

675
00:37:04,100 --> 00:37:08,700
acquired not long ago. 
There used to be a personal 

676
00:37:08,700 --> 00:37:11,300
digital assistant called the 
Scion made in Britain, which I 

677
00:37:11,308 --> 00:37:14,400
love dearly and it was basically
a miniature laptop. 

678
00:37:14,400 --> 00:37:17,900
This was before cell phones. 
And what was amazing about it. 

679
00:37:17,900 --> 00:37:20,400
Was that a keyboard you could 
actually use that. 

680
00:37:20,400 --> 00:37:23,100
They had some kind of a magic 
spell or something on their 

681
00:37:23,200 --> 00:37:25,400
Board. 
So that in this in the size, or 

682
00:37:25,400 --> 00:37:28,000
the form factor of what I'm 
holding, which looks very much 

683
00:37:28,000 --> 00:37:30,900
like a Scion. 
But isn't you actually had a 

684
00:37:30,900 --> 00:37:35,900
real keyboard with movable keys 
that you could type on and some 

685
00:37:35,900 --> 00:37:39,200
people in England, I think a 
couple of years ago who like me 

686
00:37:39,200 --> 00:37:41,700
remember, dearly their old 
Saiyans because it went off the 

687
00:37:41,707 --> 00:37:44,000
market. 
Many years ago, decided to 

688
00:37:44,000 --> 00:37:48,300
create a cell phone based on the
sign on this line and they put 

689
00:37:48,300 --> 00:37:51,900
it up on Indiegogo, which is one
of these websites where you get 

690
00:37:51,900 --> 00:37:54,300
funding for new projects. 
Was one of the people who 

691
00:37:54,400 --> 00:37:57,400
offered money to go into the 
early buyers of it and I ended 

692
00:37:57,400 --> 00:37:59,600
up getting it. 
That's a tiny firm. 

693
00:38:00,000 --> 00:38:03,100
I doubt that there were as many 
as 20 people involved in the 

694
00:38:03,100 --> 00:38:04,600
original group from what I can 
tell. 

695
00:38:04,600 --> 00:38:09,400
I don't know it cook, but I 
think a couple of years, it 

696
00:38:09,400 --> 00:38:13,100
costs. 
I think less than half, what 

697
00:38:13,100 --> 00:38:15,000
that iPhone does. 
On the other hand. 

698
00:38:15,000 --> 00:38:17,900
It's got some disadvantages 
compared to the iPhone that I 

699
00:38:17,900 --> 00:38:20,600
haven't actually switched to 
making it my main cell phone yet

700
00:38:20,600 --> 00:38:22,600
because I'm still figuring out 
how to use it as a little bit 

701
00:38:22,600 --> 00:38:25,100
less smooth. 
And the Samsung I've got, which 

702
00:38:25,100 --> 00:38:29,200
cost twice as much, but if it 
was really true that one could 

703
00:38:29,200 --> 00:38:32,500
produce a phone as good as the 
iPhone for $400. 

704
00:38:32,800 --> 00:38:34,400
I got a feeling somebody would 
be doing it. 

705
00:38:34,700 --> 00:38:38,400
It's not as if there is a block,
which keeps those people from 

706
00:38:38,400 --> 00:38:39,600
starting your cell phone 
company. 

707
00:38:39,600 --> 00:38:42,600
I'm giving the example of Planet
computers that For the make my 

708
00:38:43,200 --> 00:38:47,300
little machine, which I say it's
a very pretty machine called The

709
00:38:47,300 --> 00:38:49,800
Gemini. 
And I expect some point. 

710
00:38:49,800 --> 00:38:52,700
I'll switch my SIM card to it 
and make it my main phone 

711
00:38:52,700 --> 00:38:54,400
because it would be really nice 
to have a phone. 

712
00:38:54,400 --> 00:38:56,800
I could really type one. 
I would no longer have to Lug 

713
00:38:56,800 --> 00:38:59,400
around my laptop all the time in
order to type on it. 

714
00:38:59,700 --> 00:39:02,700
Maybe younger people have got me
good on these virtual keyboards,

715
00:39:02,700 --> 00:39:05,100
but I've never gotten to be able
to use one decently. 

716
00:39:06,000 --> 00:39:09,300
So in fact, there's a world out 
there where if you really 

717
00:39:09,300 --> 00:39:12,500
believe that for four hundred or
even five, A hundred dollars. 

718
00:39:12,500 --> 00:39:14,300
You can make a phone as good as 
that iPhone. 

719
00:39:14,400 --> 00:39:17,300
You ought to be out there making
it and selling it for 550 and 

720
00:39:17,300 --> 00:39:21,500
becoming a billionaire. 
But somehow we observe that the 

721
00:39:21,500 --> 00:39:25,100
companies that are making phones
at the level of the iPhone, 

722
00:39:25,500 --> 00:39:29,700
which is basically Samsung and 
Apple, and a few others also. 

723
00:39:29,700 --> 00:39:32,000
End up charging roughly similar 
prices. 

724
00:39:32,500 --> 00:39:34,400
Occasionally. 
Somebody comes in and disrupt 

725
00:39:34,400 --> 00:39:37,100
that there is a which company 
would there's one of the smaller

726
00:39:37,100 --> 00:39:40,400
companies now which has a phone,
which is noticeably last, it's 

727
00:39:40,400 --> 00:39:43,400
not as big as five. 
Dollar even is noticeably less 

728
00:39:43,500 --> 00:39:45,300
with some reviewers think is as 
good. 

729
00:39:45,600 --> 00:39:48,800
But it, that's all in sort of 
the margin of how well you can 

730
00:39:48,800 --> 00:39:51,700
do it and what features it 
hasn't and, and all the rest of 

731
00:39:51,700 --> 00:39:53,800
it. 
So, so the basic answer is that 

732
00:39:53,800 --> 00:39:56,300
just looking at the pieces that 
make it up, doesn't really tell 

733
00:39:56,300 --> 00:39:59,200
you the cost of bringing it to 
Market and distributing it and 

734
00:39:59,200 --> 00:40:01,600
selling it and telling people 
about it and all the other costs

735
00:40:01,600 --> 00:40:10,000
associated with Bernie Sanders 
was debating Ted Cruz and he 

736
00:40:10,000 --> 00:40:15,200
said You can't be free. 
If you don't have health care, 

737
00:40:15,200 --> 00:40:17,700
you can't be free. 
If the government doesn't 

738
00:40:17,700 --> 00:40:21,300
regulate such and such the 
leftist will look at the economy

739
00:40:21,300 --> 00:40:25,400
and say, well first, you need 
the state to control a great 

740
00:40:25,400 --> 00:40:29,700
deal and then you can be free. 
Why is why is that an incorrect 

741
00:40:29,700 --> 00:40:33,000
way to look at Freedom? 
Yeah, they're really two 

742
00:40:33,000 --> 00:40:35,200
different dishes. 
And one of them is definitional 

743
00:40:35,200 --> 00:40:38,900
and one of them is sort of 
real-world Economic, and the 

744
00:40:39,200 --> 00:40:44,600
definitional issue is The 
distinction, which I would make 

745
00:40:44,600 --> 00:40:46,200
the distinction between freedom 
and power. 

746
00:40:46,800 --> 00:40:50,200
That I would have said that, if 
I'm dying of an incurable 

747
00:40:50,200 --> 00:40:53,900
disease, I am still free. 
I am just very unfortunate. 

748
00:40:53,900 --> 00:40:56,500
I don't have very much power. 
And of course, we all are dying 

749
00:40:56,500 --> 00:40:57,500
things. 
Horrible disease. 

750
00:40:57,500 --> 00:41:00,600
It's called Aging farther along 
than you are unfortunately. 

751
00:41:01,700 --> 00:41:06,500
But but that freedom, I think 
it's usefully. 

752
00:41:06,500 --> 00:41:09,400
At least one useful way of 
thinking about it is to, what 

753
00:41:09,400 --> 00:41:11,600
degree, what you can do is 
constrained. 

754
00:41:11,700 --> 00:41:14,400
By other people, by other 
people, forcing you to do 

755
00:41:14,400 --> 00:41:16,700
something, not allowing you to 
do something, and so forth. 

756
00:41:17,100 --> 00:41:21,000
And in that sense, the person 
who is dying of cancer is still 

757
00:41:21,000 --> 00:41:24,700
free, even though he's very 
unfortunate now, we value both, 

758
00:41:24,700 --> 00:41:27,400
of course, I don't want to be 
dying of an incurable disease. 

759
00:41:27,600 --> 00:41:33,400
So one point is that, that I 
think Sanders is confusing and 

760
00:41:33,400 --> 00:41:35,000
confusing is unfair. 
Use words. 

761
00:41:35,000 --> 00:41:37,500
He wants to use them, but he's 
not making an important 

762
00:41:37,500 --> 00:41:41,600
distinction between having your 
choices constrained by the fact.

763
00:41:41,800 --> 00:41:44,700
That other people are stopping 
you from doing things and having

764
00:41:44,700 --> 00:41:48,200
your choices constrained by the 
fact that either you can't do 

765
00:41:48,200 --> 00:41:50,100
things or other people and help 
you to do them. 

766
00:41:50,500 --> 00:41:56,000
So I guess I would ask Sanders 
whether if he is in love with a 

767
00:41:56,000 --> 00:42:00,000
woman and wants to marry her, 
her refusing him as a violation 

768
00:42:00,000 --> 00:42:03,800
of his freedom. 
Because in his terms it is that 

769
00:42:03,800 --> 00:42:08,200
something he desperately wants, 
he can't have it and he can't 

770
00:42:08,200 --> 00:42:10,000
have it because she refuses to 
marry him. 

771
00:42:10,700 --> 00:42:13,500
All right, and yet, I am not 
sure he would be comfortable 

772
00:42:13,500 --> 00:42:16,500
with saying, therefore we should
have the government intervene 

773
00:42:16,500 --> 00:42:18,700
and make sure if you're enough 
in love with a woman, they make 

774
00:42:18,700 --> 00:42:21,700
him make her marry you which 
would in a sense be the launch. 

775
00:42:22,200 --> 00:42:25,100
But the second question. 
The first question is, is this 

776
00:42:25,100 --> 00:42:26,300
really what you want to call 
Freedom. 

777
00:42:26,300 --> 00:42:29,500
And the other question is is he 
right that people would have 

778
00:42:29,500 --> 00:42:31,100
more power. 
Would have more control over 

779
00:42:31,100 --> 00:42:32,200
their own. 
Lives. 

780
00:42:32,200 --> 00:42:35,900
If we did it his way into dead 
and I think in a sense, I've 

781
00:42:35,900 --> 00:42:37,800
already answered that question 
twice. 

782
00:42:38,100 --> 00:42:41,500
That is, we've had a whole bunch
of examples where you had two 

783
00:42:41,500 --> 00:42:45,700
Societies in one of which 
resources were allocated, 

784
00:42:45,700 --> 00:42:48,900
primarily through the market and
one of which they were allocated

785
00:42:48,900 --> 00:42:52,400
primarily by government 
decision, and we can observe 

786
00:42:52,400 --> 00:42:55,100
that we ended up with North 
Korea among individuals. 

787
00:42:55,100 --> 00:42:58,900
Much worse off than South Korea 
East Germany, individuals, much 

788
00:42:58,900 --> 00:43:01,300
worse off than West, Germany. 
Malice. 

789
00:43:01,500 --> 00:43:06,500
Is China individuals much worse 
off than in Taiwan or Singapore 

790
00:43:06,500 --> 00:43:10,800
or Hong Kong or modern China? 
No law, which has shifted large 

791
00:43:10,800 --> 00:43:13,500
a they're not entirely they 
having things allocated on the 

792
00:43:13,508 --> 00:43:18,600
market that after all the fat, 
if the fact that the government 

793
00:43:18,600 --> 00:43:21,000
makes a decision doesn't mean 
it'll make the right decision 

794
00:43:21,000 --> 00:43:25,100
that you mentioned earlier. 
The fact that I've written a 

795
00:43:25,100 --> 00:43:29,400
couple of novels, the second one
was called salamander and it was

796
00:43:29,400 --> 00:43:35,400
a fantasy and it Didn't out the 
original idea, was the fantasy 

797
00:43:35,400 --> 00:43:39,600
version of what I think of as 
the central planning fallacy and

798
00:43:39,600 --> 00:43:42,800
the central planning fallacy is,
the idea that there's all this 

799
00:43:42,800 --> 00:43:46,300
stuff out there, people labor 
materials, and so forth. 

800
00:43:46,600 --> 00:43:48,900
Only some sensible person at 
control of it. 

801
00:43:48,900 --> 00:43:50,300
What wonderful things he could 
do. 

802
00:43:51,500 --> 00:43:54,700
And that seems very plausible 
and there are three things wrong

803
00:43:54,700 --> 00:43:57,200
with it. 
One of them is forgetting that 

804
00:43:57,200 --> 00:43:59,500
all those things are already 
being used by the people who 

805
00:43:59,500 --> 00:44:00,900
owned them for their own 
purposes. 

806
00:44:01,300 --> 00:44:05,000
So in order to be able to give 
you something, we've got to take

807
00:44:05,000 --> 00:44:08,500
it away from somebody else. 
And then the question is, is it 

808
00:44:08,500 --> 00:44:11,300
really true that whoever decides
what gets taken and let's gets 

809
00:44:11,300 --> 00:44:13,900
given as got everybody's best 
interests at heart. 

810
00:44:14,200 --> 00:44:16,300
Why would you expect him to any 
more than you expect? 

811
00:44:16,300 --> 00:44:18,300
Anyone else that everyone's best
interests at heart? 

812
00:44:19,700 --> 00:44:25,300
Second thing wrong with it is 
not realizing how complicated a 

813
00:44:25,308 --> 00:44:27,200
problem it. 
Is that goes back to my pencil 

814
00:44:27,200 --> 00:44:29,500
at the beginning to figure out 
what everybody should do. 

815
00:44:30,100 --> 00:44:33,200
And the third thing wrong with 
it, which I've touched on is 

816
00:44:33,200 --> 00:44:36,500
assuming that whoever controls 
will be a good guy that he will.

817
00:44:36,500 --> 00:44:41,000
In fact, be acting. 
And so in in salamander I had a 

818
00:44:41,000 --> 00:44:45,500
world where magic was very weak 
where a fire Maj was more like a

819
00:44:45,508 --> 00:44:47,800
match than a blowtorch in terms 
of the power. 

820
00:44:47,800 --> 00:44:54,000
He has and a brilliant naive. 
Young magical theorist thinks up

821
00:44:54,000 --> 00:44:58,300
a way in which one Maj could 
pull in the power of everybody 

822
00:44:58,300 --> 00:45:00,000
around him. 
Funnel it through him. 

823
00:45:00,000 --> 00:45:04,000
And finally do real things. 
And that's like the central 

824
00:45:04,000 --> 00:45:06,600
planning fallacy is. 
The idea all these little bits 

825
00:45:06,600 --> 00:45:08,600
of dispersed, magical power, 
only controlled. 

826
00:45:08,600 --> 00:45:11,400
By one person. 
He could do wonderful things and

827
00:45:11,400 --> 00:45:15,700
he's making the same mistakes. 
So in the story, he is the, uh, 

828
00:45:15,900 --> 00:45:18,700
he's one of my protagonist. 
So the other protagonist is 

829
00:45:18,700 --> 00:45:20,800
Annie, Lee Drew brilliant, 
female student. 

830
00:45:21,100 --> 00:45:23,700
And he tries to persuade her to 
help him with his project to 

831
00:45:23,700 --> 00:45:29,000
develop this spell. 
And her answer is my mother is a

832
00:45:29,000 --> 00:45:31,600
Healer. 
I have seen men with gaping 

833
00:45:31,600 --> 00:45:36,100
wounds that she has closed when 
you have taken her power to end.

834
00:45:36,100 --> 00:45:39,100
The flutter of plague on Whose 
hand is the blood of those. 

835
00:45:39,100 --> 00:45:42,300
She can, I feel that is she is 
making the point which he has 

836
00:45:42,300 --> 00:45:46,200
been forgetting that he's got to
take away from all these people 

837
00:45:46,200 --> 00:45:48,800
in order to use it in the way he
wants to use it. 

838
00:45:49,000 --> 00:45:51,300
And they already are using their
power for what they think are 

839
00:45:51,308 --> 00:45:55,000
important. 
And in the same sense, if 

840
00:45:56,000 --> 00:46:00,200
Sanders sets up a system where 
the government decides who gets 

841
00:46:00,200 --> 00:46:03,600
Medical Care and who produces 
Medical Care, and how that's 

842
00:46:03,600 --> 00:46:07,200
gotta mean controlling people 
and making them do what he wants

843
00:46:07,200 --> 00:46:08,600
them to do. 
Not what they wanted to. 

844
00:46:09,600 --> 00:46:12,800
Now the novel, what you also end
up with a bad guy, sort of take 

845
00:46:12,800 --> 00:46:15,200
trying to take it over which is 
one of the problems and the 

846
00:46:15,400 --> 00:46:16,700
third problem. 
With Central planning. 

847
00:46:16,700 --> 00:46:19,400
I never get to in the novel 
because I like to, Say that no 

848
00:46:19,400 --> 00:46:21,700
clot survives contact with the 
characters. 

849
00:46:21,700 --> 00:46:24,700
So the story went the way it 
wanted to go and set the way I 

850
00:46:24,700 --> 00:46:28,400
planned it to go, which was fun.
But, but the basic point I'm 

851
00:46:28,400 --> 00:46:33,300
making is that it isn't a choice
between having things done. 

852
00:46:33,300 --> 00:46:35,100
The way, the market doesn't 
having them done. 

853
00:46:35,100 --> 00:46:37,300
Right? 
It's the choice between having 

854
00:46:37,300 --> 00:46:39,800
things. 
Done the way the private Market 

855
00:46:39,800 --> 00:46:42,100
wants them done and having them 
done the way the political 

856
00:46:42,100 --> 00:46:45,200
Market wants them done. 
And the way the political Market

857
00:46:45,200 --> 00:46:48,500
wants them done does not 
consistently lead to the kind of

858
00:46:48,900 --> 00:46:51,400
um's that Sanders would like 
that. 

859
00:46:51,400 --> 00:46:54,100
If you look at how what 
government apps was of actually 

860
00:46:54,100 --> 00:46:57,700
subsidized, they subsidize Opera
which is consumption of the 

861
00:46:57,700 --> 00:47:01,800
rich, not of the poor, they 
subsidize heavily subsidized 

862
00:47:01,800 --> 00:47:06,200
college education, which is a 
consumption not if the rich, but

863
00:47:06,200 --> 00:47:09,900
of the top third or top 40 
percent or so of the population 

864
00:47:10,400 --> 00:47:14,100
with General taxes, some things 
governments do help the poor, 

865
00:47:14,100 --> 00:47:16,100
that's certainly true. 
But a lot of things that 

866
00:47:16,100 --> 00:47:20,100
governments do help. 
Our people, the expense of the 

867
00:47:20,100 --> 00:47:23,500
poor and a lot of things cover 
to just make it all of us poor 

868
00:47:23,700 --> 00:47:27,000
and that's often not visible. 
That when the when Trump puts up

869
00:47:27,000 --> 00:47:31,800
a tariff that's really imposing 
a cost on ordinary, poor people 

870
00:47:31,800 --> 00:47:35,600
who have to pay more for their 
shirts, but you don't know. 

871
00:47:35,700 --> 00:47:38,500
They do the shirt doesn't have a
note on it saying, 15% of the 

872
00:47:38,500 --> 00:47:42,500
prices is due to the Tariff. 
So that's invisible, but it's 

873
00:47:42,500 --> 00:47:49,000
nonetheless a very real cost. 
I have about 10 more questions 

874
00:47:49,000 --> 00:47:51,500
for you. 
Could you do a lightning round 

875
00:47:51,500 --> 00:47:54,400
as in, give me a one minute or 
less answer? 

876
00:47:54,500 --> 00:47:57,500
I can try. 
Alrighty. 

877
00:47:57,900 --> 00:48:00,700
Capitalism creates inequality 
therefore. 

878
00:48:00,700 --> 00:48:02,300
It's immoral. 
How do you respond? 

879
00:48:04,300 --> 00:48:07,700
The fact that human beings 
differ creates inequality, as 

880
00:48:07,700 --> 00:48:12,300
far as I can tell, all political
systems, end up with inequality,

881
00:48:13,100 --> 00:48:17,400
capitalism creates wealth, and 
makes people better off some 

882
00:48:17,400 --> 00:48:18,800
people. 
It makes a lot better off. 

883
00:48:18,800 --> 00:48:20,200
Some people, not so much better 
off. 

884
00:48:20,200 --> 00:48:23,300
Very few people worse off. 
That's a net benefit. 

885
00:48:24,400 --> 00:48:30,700
How would you define government?
That I spend about a chapter 

886
00:48:30,700 --> 00:48:33,300
doing that in the Third Edition,
Machinery of Freedom. 

887
00:48:33,600 --> 00:48:37,600
My short answer, is that all of 
us have lines. 

888
00:48:37,600 --> 00:48:39,900
We Believe other people can't 
cross that. 

889
00:48:39,900 --> 00:48:42,800
All of us have this sort of 
built-in system of commitment 

890
00:48:42,800 --> 00:48:45,300
strategies. 
Such as you try to push me 

891
00:48:45,300 --> 00:48:47,500
around in ways that I strongly 
approval. 

892
00:48:47,500 --> 00:48:51,700
Fight back very hard government.
Is that institution against 

893
00:48:51,700 --> 00:48:54,600
which we drop those strategy? 
Those commitment strategies. 

894
00:48:55,000 --> 00:48:58,000
So I when I in the first 
edition, I Described it. 

895
00:48:58,000 --> 00:49:01,300
As an agency of legitimised, 
coercion that government is that

896
00:49:01,300 --> 00:49:05,100
agency, which can do the sorts 
of things that we would see is 

897
00:49:05,100 --> 00:49:08,900
outrageous of anybody else did 
them, but we don't respond to 

898
00:49:08,900 --> 00:49:10,700
them the way we respond 
outrageous things. 

899
00:49:10,700 --> 00:49:14,800
So if an employer says, we've 
decided to hire you today, we're

900
00:49:14,800 --> 00:49:17,700
going to pay you $15 and if you 
don't come to work, we're gonna 

901
00:49:17,700 --> 00:49:21,900
put you in jail, we would 
object-- very violent that when 

902
00:49:21,900 --> 00:49:25,700
you get a notice saying that 
you've got jury duty, however, 

903
00:49:26,100 --> 00:49:28,800
you don't eject violently over. 
That's essentially the terms of 

904
00:49:28,800 --> 00:49:31,800
the jury duty so much longer 
term when we had military 

905
00:49:31,800 --> 00:49:34,900
conscription, but we still have 
at least conscription for being 

906
00:49:34,900 --> 00:49:39,100
on a jury. 
If if a seller said, here's what

907
00:49:39,100 --> 00:49:40,900
I've produced, you're going to 
get it, you're going to pay for 

908
00:49:40,900 --> 00:49:41,800
me. 
You don't have a choice of 

909
00:49:41,800 --> 00:49:45,700
saying, no, we would again, 
regard that as a violation of my

910
00:49:45,700 --> 00:49:47,900
rights, except the government. 
Does that all the time, when it 

911
00:49:47,900 --> 00:49:50,000
collects taxes for things that's
producing. 

912
00:49:50,300 --> 00:49:52,000
So that's the defining 
characteristic. 

913
00:49:52,000 --> 00:49:56,700
Government. 
I think is that we accept don't 

914
00:49:56,700 --> 00:49:59,100
respond. 
To it's doing the sorts of 

915
00:49:59,100 --> 00:50:01,800
things, which we would strongly 
object to have anybody else. 

916
00:50:03,300 --> 00:50:08,500
How would you define anarchism? 
I would Define it as a society 

917
00:50:08,500 --> 00:50:11,300
without a government and that 
could be good or bad. 

918
00:50:11,700 --> 00:50:14,700
That is after all private people
can violate your rights to. 

919
00:50:15,900 --> 00:50:19,100
But what I argue in Machinery or
freedom is the one could 

920
00:50:19,100 --> 00:50:22,200
plausibly have a set of 
institutions in which there was 

921
00:50:22,200 --> 00:50:25,400
no government. 
The useful things governments do

922
00:50:25,400 --> 00:50:28,400
including preventing people from
killing you, we're being done by

923
00:50:28,400 --> 00:50:31,700
private institutions and the 
undesirable things weren't being

924
00:50:31,700 --> 00:50:34,500
done. 
And I spend about what, I don't 

925
00:50:34,500 --> 00:50:37,600
know, 80 pages are 90 pages of 
the book, trying to sketch, how 

926
00:50:37,600 --> 00:50:40,000
such a system would work and 
people can read the book. 

927
00:50:40,000 --> 00:50:41,500
They want. 
I can't do it in a minute. 

928
00:50:42,800 --> 00:50:45,900
If we didn't have a government, 
wouldn't there be chaos? 

929
00:50:48,300 --> 00:50:51,400
There are large parts of life, 
which are not controlled by 

930
00:50:51,400 --> 00:50:55,100
governments that are not chaotic
foreign trade. 

931
00:50:55,100 --> 00:50:58,200
For example, is mostly private 
and the way in this world 

932
00:50:58,300 --> 00:51:01,000
governments do control. 
And yet we've got this enormous 

933
00:51:01,000 --> 00:51:02,100
lie. 
Elaborate enter. 

934
00:51:02,400 --> 00:51:05,800
Interacting interdependent 
system where goods are made in 

935
00:51:05,800 --> 00:51:08,500
one country from inputs made in 
another and sold in the third 

936
00:51:08,500 --> 00:51:11,200
country and so forth. 
Most of it by private actors. 

937
00:51:11,900 --> 00:51:15,000
The English language is an 
enormously complicated 

938
00:51:15,000 --> 00:51:19,000
construction. 
Being shared by what may be 500 

939
00:51:19,000 --> 00:51:20,500
million people. 
Maybe a bit more. 

940
00:51:20,500 --> 00:51:22,700
If you count all the Indians 
speak English. 

941
00:51:23,000 --> 00:51:25,700
Nobody controls it. 
There is no one who designs the 

942
00:51:25,700 --> 00:51:27,400
English language. 
There is no one who tells you 

943
00:51:27,408 --> 00:51:30,100
how you use words and yet 
somehow it's a very orderly 

944
00:51:30,100 --> 00:51:31,900
system. 
We get to understand each other.

945
00:51:32,600 --> 00:51:35,000
With with no government 
government control. 

946
00:51:35,200 --> 00:51:36,700
And it's true of markets in 
general. 

947
00:51:36,700 --> 00:51:39,600
So I would have said that. 
If anything governments tend to 

948
00:51:39,600 --> 00:51:42,800
create chaos, although they also
sometimes reduce it. 

949
00:51:44,800 --> 00:51:49,900
What are the best examples of a 
society without a government if 

950
00:51:49,900 --> 00:51:52,700
there are any? 
Yeah, there are a number of 

951
00:51:52,700 --> 00:51:56,800
historical examples of much 
earlier Societies in which you 

952
00:51:56,800 --> 00:52:00,300
had nothing that we would 
recognize as a government. 

953
00:52:00,700 --> 00:52:03,000
I suppose the closest one to 
where Where we are at the 

954
00:52:03,000 --> 00:52:04,100
moment? 
Would be the Comanche. 

955
00:52:04,100 --> 00:52:06,200
Indians, who were stateless 
society? 

956
00:52:06,200 --> 00:52:09,500
Not a very attractive one. 
The interesting thing about them

957
00:52:09,500 --> 00:52:12,700
is that one would problems for 
commit for a stateless society 

958
00:52:12,700 --> 00:52:15,200
is, how do you defend yourself 
against governments without a 

959
00:52:15,200 --> 00:52:17,600
government Army and the problem 
of the command? 

960
00:52:17,600 --> 00:52:20,100
She proposed was, how is 
everybody else to defend 

961
00:52:20,100 --> 00:52:22,700
themselves against them? 
Because they had to stateless 

962
00:52:22,700 --> 00:52:26,500
society, but one that was very 
good at fighting people and in 

963
00:52:26,500 --> 00:52:29,300
fact, did quite an impressive 
job given that they were heavily

964
00:52:29,300 --> 00:52:32,100
outnumbered by people with much 
higher technology. 

965
00:52:32,400 --> 00:52:35,400
They still blocked expansion 
across Texas for 20 years. 

966
00:52:36,800 --> 00:52:39,500
Hey, the one I know most which 
is not. 

967
00:52:39,500 --> 00:52:42,400
I wouldn't call fully stateless,
but clothes would be Saga 

968
00:52:42,400 --> 00:52:46,200
period, Iceland. 
That was a society in which they

969
00:52:46,200 --> 00:52:50,200
had a court system, and they had
a legislature, but there was no 

970
00:52:50,200 --> 00:52:52,300
executive arm of government. 
So there was no government to 

971
00:52:52,300 --> 00:52:55,000
enforce the results. 
So that courts that was entirely

972
00:52:55,000 --> 00:52:58,200
private. 
And that Society lasted for 

973
00:52:58,200 --> 00:53:02,300
about a third of Millennium bit 
over 300 years and it eventually

974
00:53:02,400 --> 00:53:05,300
He collapsed but of course, our 
society went into the Civil War 

975
00:53:05,300 --> 00:53:07,200
less than a century after it was
set up. 

976
00:53:07,200 --> 00:53:11,700
So that's they did relative. 
They took them about 250 years 

977
00:53:11,700 --> 00:53:14,200
to get to their equivalent of 
the American Civil War. 

978
00:53:14,600 --> 00:53:20,800
So that was a what I think of as
a semi stateless society, the 

979
00:53:20,800 --> 00:53:24,100
another interesting one which 
people say nasty things about 

980
00:53:24,100 --> 00:53:25,900
clear. 
Only thing about it would be 

981
00:53:25,900 --> 00:53:30,600
Northern Somalia Somali land 
where you had a society which 

982
00:53:30,600 --> 00:53:36,200
had For settling disputes, which
did not involve the government 

983
00:53:36,300 --> 00:53:40,500
and at the point when England, 
ceased being nominally in charge

984
00:53:40,500 --> 00:53:44,000
of Northern Somalia and Italy 
ceased being nominally in charge

985
00:53:44,000 --> 00:53:47,000
of Southern Somalia. 
They set up a modern centralized

986
00:53:47,000 --> 00:53:49,700
democratic government for a 
society that a never had such a 

987
00:53:49,700 --> 00:53:52,300
thing. 
It lasted for a few years to be 

988
00:53:52,300 --> 00:53:54,500
replaced by a military 
dictatorship or rather 

989
00:53:54,500 --> 00:53:56,800
unpleasant. 
One the military dictator 

990
00:53:56,800 --> 00:54:00,300
eventually got thrown out at 
which point the US and the UN 

991
00:54:00,300 --> 00:54:01,800
decided that some all you need 
are two. 

992
00:54:02,300 --> 00:54:04,800
Aunt and we've been trying to 
impose the government on them 

993
00:54:04,800 --> 00:54:07,300
ever since with very unpleasant 
results. 

994
00:54:07,600 --> 00:54:10,900
And the way we try to impose the
government on them is to use the

995
00:54:10,900 --> 00:54:14,700
troops of Ethiopia, which is the
country next to Somalia and its 

996
00:54:14,700 --> 00:54:17,100
traditional enemy. 
It's a little bit like trying to

997
00:54:17,100 --> 00:54:19,600
set up a government in France, 
using German troops. 

998
00:54:20,600 --> 00:54:24,400
So, Somalia to the extent, it's 
amasses a mess because we've 

999
00:54:24,400 --> 00:54:27,100
been trying to impose the 
government on them and the 

1000
00:54:27,100 --> 00:54:29,900
northern part of it. 
Somaliland has in fact, set up 

1001
00:54:29,900 --> 00:54:32,200
its own system, mostly long 
traditional lines. 

1002
00:54:32,400 --> 00:54:35,800
The sort of a very weak 
government over it and seems to 

1003
00:54:35,800 --> 00:54:38,900
be doing tolerably well, but we 
aren't willing to recognize them

1004
00:54:39,100 --> 00:54:41,200
because that would be admitting 
that there is no such country as

1005
00:54:41,200 --> 00:54:43,300
Somalia. 
So that would be another 

1006
00:54:43,300 --> 00:54:46,100
example, but there are a fair 
number of examples. 

1007
00:54:46,100 --> 00:54:49,700
I think in the anthropological 
literature, what we don't have 

1008
00:54:49,700 --> 00:54:52,600
is a modern developed Society 
with no government and that's 

1009
00:54:52,600 --> 00:54:56,000
what I would like to see, but I 
can't give you any examples of 

1010
00:54:56,000 --> 00:54:56,700
that. 
Obviously. 

1011
00:54:56,700 --> 00:54:59,300
There are lots of chunks of it, 
in the sense of international 

1012
00:54:59,300 --> 00:55:02,700
trade has no government in that 
sense and really the Internet 

1013
00:55:02,700 --> 00:55:05,300
has no real government, which is
what we're attracting on the 

1014
00:55:05,300 --> 00:55:07,300
moment, but you don't have 
anything. 

1015
00:55:07,300 --> 00:55:09,600
That's the equivalent of a 
country with no government over.

1016
00:55:09,900 --> 00:55:12,400
You could say the sea ocean is, 
I guess to some extent. 

1017
00:55:13,900 --> 00:55:17,500
We need government to protect us
from monopolies. 

1018
00:55:19,300 --> 00:55:22,300
Government is, of course, a 
monopoly or tries to be a 

1019
00:55:22,300 --> 00:55:26,500
monopoly, at least over the use 
of force governments can 

1020
00:55:26,500 --> 00:55:29,500
sometimes reduce Monopoly, but 
government's quite routinely 

1021
00:55:29,500 --> 00:55:33,600
increase Monopoly, any terrorist
tends to increase Monopoly 

1022
00:55:33,600 --> 00:55:35,300
because it means you have a 
smaller Market. 

1023
00:55:35,400 --> 00:55:40,100
If you had a high tariff on 
automobiles, that means that for

1024
00:55:40,100 --> 00:55:42,000
doesn't have to compete with 
Mercedes. 

1025
00:55:43,600 --> 00:55:48,200
That governments quite often set
up monopolies or cartels. 

1026
00:55:48,400 --> 00:55:52,500
That before deregulation the US 
airline industry was a cartel 

1027
00:55:52,500 --> 00:55:55,700
run by the government. 
Meaning that if an airline 

1028
00:55:55,900 --> 00:55:58,900
wanted to cut its fairs and had 
to get permission from the Civil

1029
00:55:58,900 --> 00:56:01,600
Aeronautics board and the other 
airlines can go to the Civil 

1030
00:56:01,600 --> 00:56:04,000
Aeronautics board and says don't
let them cut their fares that 

1031
00:56:04,000 --> 00:56:06,800
will hurt us. 
If they wanted to fly a new 

1032
00:56:06,800 --> 00:56:08,300
route. 
They had to get permission. 

1033
00:56:08,600 --> 00:56:10,700
That was also true of the 
trucking industry under 

1034
00:56:10,700 --> 00:56:14,200
regulation that if you wanted to
have a truck line going from 

1035
00:56:14,300 --> 00:56:18,200
Chicago to Detroit, the other 
trucking companies could go to 

1036
00:56:18,300 --> 00:56:20,500
To the Interstate Commerce 
Commission and say we've got 

1037
00:56:20,500 --> 00:56:22,700
enough trucks on that route. 
Don't let them do it. 

1038
00:56:22,700 --> 00:56:25,300
We don't want the competition. 
So I would have said that all 

1039
00:56:25,300 --> 00:56:28,600
the monopolies occasionally 
occur in a free market Society 

1040
00:56:28,800 --> 00:56:31,500
government on that does much 
more to promote Monopoly the 

1041
00:56:31,500 --> 00:56:38,000
defendant without government. 
The poor would not be helped in 

1042
00:56:38,000 --> 00:56:41,900
forms of food stamps or welfare.
Therefore, would die. 

1043
00:56:41,900 --> 00:56:45,600
And this is immoral without 
government. 

1044
00:56:45,600 --> 00:56:48,200
The poor would not be hurt in 
terms. 

1045
00:56:48,400 --> 00:56:51,500
The sales taxes that they are 
paying in terms of the 

1046
00:56:51,500 --> 00:56:53,900
restrictions that keep them from
doing things. 

1047
00:56:54,600 --> 00:56:58,100
And that is immoral. 
That if you, in fact, look at 

1048
00:56:58,200 --> 00:57:02,400
times when there was essentially
no welfare, the whole society 

1049
00:57:02,400 --> 00:57:04,900
was much poorer than it now, is 
but you didn't deserve that. 

1050
00:57:04,900 --> 00:57:09,200
The poor were dying on, mass 
populations, kept going up. 

1051
00:57:09,200 --> 00:57:12,700
And those were size where the 
bulk of the population was was, 

1052
00:57:12,700 --> 00:57:15,800
in fact, poor, not very poor by 
our standards and he would core 

1053
00:57:15,800 --> 00:57:21,200
by, by their standards. 
That in a very poor Society. 

1054
00:57:21,200 --> 00:57:24,500
Some people will probably die, 
but they may die with welfare 

1055
00:57:24,500 --> 00:57:26,600
because they guy giving the 
welfare it sighs. 

1056
00:57:26,600 --> 00:57:29,000
He doesn't like them or they may
die without welfare because I 

1057
00:57:29,000 --> 00:57:32,600
don't have a job, but generally 
in any reasonably Rich Society, 

1058
00:57:32,600 --> 00:57:36,400
like ours people can earn enough
money to feed themselves. 

1059
00:57:36,800 --> 00:57:39,300
One of the interesting 
statistics that I came across, 

1060
00:57:39,300 --> 00:57:41,800
was the calculation by an 
economic historian. 

1061
00:57:42,400 --> 00:57:47,000
That the, if you look at the 
average income of the world, 

1062
00:57:47,000 --> 00:57:51,000
through most of History, The 
current average income of the 

1063
00:57:51,000 --> 00:57:55,100
world is about 10 times as high 
as that and the current average 

1064
00:57:55,100 --> 00:57:56,900
income of the developed world of
countries. 

1065
00:57:56,900 --> 00:58:01,200
Like the US and Western Europe 
is 20 to 30 times as high as the

1066
00:58:01,200 --> 00:58:04,100
average income of the world was 
through most of History. 

1067
00:58:04,400 --> 00:58:07,500
So I don't think we appreciate 
just how rich we are by 

1068
00:58:07,500 --> 00:58:13,500
historical standards. 
What is the most important 

1069
00:58:13,600 --> 00:58:17,500
message of your non-fiction book
laws order? 

1070
00:58:19,700 --> 00:58:21,700
I don't think there is a most 
important message. 

1071
00:58:21,700 --> 00:58:26,400
The book is an attempt to use 
economics to understand law and 

1072
00:58:26,400 --> 00:58:28,700
that's part of a project that's 
been going on. 

1073
00:58:28,700 --> 00:58:32,900
Before I got involved in it. 
Referred to the economic 

1074
00:58:32,900 --> 00:58:36,200
analysis of Law and laws order 
tries to do that. 

1075
00:58:36,200 --> 00:58:39,300
And I hope when you finish 
reading it, you will understand 

1076
00:58:39,300 --> 00:58:42,500
that law is a much harder 
problem Than People imagine that

1077
00:58:42,500 --> 00:58:45,400
it really is not trivial to 
construct a good legal system. 

1078
00:58:45,700 --> 00:58:48,000
And indeed, one of my Arguments 
for Anarchy. 

1079
00:58:48,300 --> 00:58:52,100
Is that just as Remnants, do a 
bad job of building cars are 

1080
00:58:52,100 --> 00:58:54,500
growing crops. 
They also do a bad job of 

1081
00:58:54,500 --> 00:58:58,300
Designing law that designing 
laws, a similarly difficult 

1082
00:58:58,300 --> 00:59:00,500
problem. 
And the you therefore need some 

1083
00:59:00,500 --> 00:59:03,700
system which the legal rules are
being designed on the market 

1084
00:59:03,900 --> 00:59:06,700
rather than by the government. 
And I try to sketch a way in 

1085
00:59:06,700 --> 00:59:11,100
which that could be done. 
What is your biggest criticism 

1086
00:59:11,100 --> 00:59:13,600
of the Austrian School of 
economics? 

1087
00:59:14,800 --> 00:59:17,700
That's tricky because it 
depends, which Austrian there is

1088
00:59:17,700 --> 00:59:21,300
an extreme version of the 
Austrian position which holds 

1089
00:59:21,300 --> 00:59:25,800
that economics is entirely ah, 
priori that you don't have to 

1090
00:59:25,800 --> 00:59:28,400
look at real world evidence. 
You just work out the logic, and

1091
00:59:28,400 --> 00:59:30,600
reach your conclusions. 
And I think that's clearly 

1092
00:59:30,600 --> 00:59:33,500
wrong. 
That is far as I can tell. 

1093
00:59:33,700 --> 00:59:35,500
There are no real world 
conclusions. 

1094
00:59:35,500 --> 00:59:37,700
At all. 
You can get purely on the 

1095
00:59:37,700 --> 00:59:41,100
grounds of theory. 
Because Theory does not tell you

1096
00:59:41,400 --> 00:59:44,400
any Economist. 
Jargon either utility functions.

1097
00:59:44,600 --> 00:59:47,100
Action functions. 
It doesn't tell you either what 

1098
00:59:47,100 --> 00:59:52,400
people want or what are the ways
of getting it, and even real 

1099
00:59:52,400 --> 00:59:55,500
world conclusions. 
That seemed very unlikely. 

1100
00:59:55,500 --> 00:59:58,800
In terms of economic theory, you
can generally think up some 

1101
00:59:59,100 --> 01:00:02,700
logically possible set of 
utility function, the production

1102
01:00:02,700 --> 01:00:04,400
funds that we gave you that 
result. 

1103
01:00:04,400 --> 01:00:09,100
So for example, I mentioned that
we expect a minimum wage law to 

1104
01:00:09,100 --> 01:00:12,100
result in fewer workers fewer 
jobs for low skilled workers, 

1105
01:00:12,200 --> 01:00:15,700
and I would expect that but you 
could imagine Imagine a society 

1106
01:00:16,000 --> 01:00:20,800
where the consumers really want 
to enjoy much more buying goods 

1107
01:00:21,000 --> 01:00:23,600
when they're sure that they were
made by workers who were paid 

1108
01:00:23,600 --> 01:00:28,300
well, and the result is that the
consumers value those goods more

1109
01:00:28,400 --> 01:00:30,200
and therefore you put in the 
minimum wage law. 

1110
01:00:30,200 --> 01:00:33,500
There's more demand for those 
goods than before and therefore,

1111
01:00:33,500 --> 01:00:35,700
they, the low-skilled workers 
are better off. 

1112
01:00:35,700 --> 01:00:38,100
It's not what I expect that but 
it's logically possible. 

1113
01:00:38,700 --> 01:00:42,900
So, in my view, the right way of
doing economics is the use the 

1114
01:00:42,900 --> 01:00:47,000
theory to form conjectures. 
The form plausible guesses, but 

1115
01:00:47,000 --> 01:00:49,800
because the system is too 
complicated in the real world to

1116
01:00:49,800 --> 01:00:53,100
be sure of your conclusions you 
then test those those 

1117
01:00:53,100 --> 01:00:57,000
conjectures against Real World 
predictions, and that's the way 

1118
01:00:57,100 --> 01:00:58,500
I think, economics want to be 
done. 

1119
01:00:58,800 --> 01:01:00,600
But I am sure there are people 
looking through themselves. 

1120
01:01:00,600 --> 01:01:04,000
Austrians would agree with me. 
So it's not a, a black and white

1121
01:01:04,000 --> 01:01:08,300
decision division. 
It's only that some people in 

1122
01:01:08,300 --> 01:01:09,600
the Austrian School believe 
that. 

1123
01:01:09,900 --> 01:01:12,800
Now, the other issue is one. 
I'm not really competent to 

1124
01:01:12,800 --> 01:01:15,700
judge. 
And that's Various theories of 

1125
01:01:15,700 --> 01:01:19,100
the business cycle of what's 
referred to as macroeconomics 

1126
01:01:19,400 --> 01:01:23,200
and there. 
I have been told by people. 

1127
01:01:23,200 --> 01:01:26,000
I trust that the Austrian 
version of that is not 

1128
01:01:26,000 --> 01:01:28,100
consistent with the data, but 
that's not something I really 

1129
01:01:28,100 --> 01:01:29,500
know about because it's not my 
field. 

1130
01:01:30,800 --> 01:01:33,200
But as I say the the 
methodological issues, really 

1131
01:01:33,200 --> 01:01:36,500
the one that interests that 
interests me, any more 

1132
01:01:36,500 --> 01:01:41,000
questions. 
Yep, just four more quick ones. 

1133
01:01:41,100 --> 01:01:43,900
What is the most important thing
you learned from Adam Smith? 

1134
01:01:48,500 --> 01:01:50,100
That's a very interesting 
question. 

1135
01:01:50,300 --> 01:01:55,600
But I think it would take me a 
while to answer that Smith was 

1136
01:01:55,600 --> 01:01:58,600
not a very good theorist. 
Ricardo was a much better 

1137
01:01:58,600 --> 01:02:03,300
theorist Smith, new an enormous 
amount and he was a very bright 

1138
01:02:03,300 --> 01:02:07,100
guy and he writes a whole lot 
about interesting things, but I 

1139
01:02:07,100 --> 01:02:10,400
can't think of a single lesson 
that I would say that I have 

1140
01:02:10,400 --> 01:02:13,300
learned from Smith. 
Maybe there are some lessons 

1141
01:02:13,300 --> 01:02:15,700
that I learned from people who 
learned to be able to learn to 

1142
01:02:15,700 --> 01:02:18,100
learn them from Smith, but 
that's a very different and 

1143
01:02:18,100 --> 01:02:19,400
much. 
Or indirectly. 

1144
01:02:20,300 --> 01:02:23,700
What is the most important thing
you learned from David Ricardo? 

1145
01:02:26,900 --> 01:02:31,500
Boy, that is theory of 
comparative advantage, which is 

1146
01:02:31,500 --> 01:02:33,900
the modern understanding of 
international trade. 

1147
01:02:33,900 --> 01:02:38,900
I didn't learn directly from 
him, but he invented it and I 

1148
01:02:38,900 --> 01:02:42,100
learned it therefore, through 
many hands from him. 

1149
01:02:43,200 --> 01:02:48,500
Similarly the well, he didn't 
really invent the ricardian 

1150
01:02:48,500 --> 01:02:51,100
theory of rant even though it's 
named after him, but he did 

1151
01:02:51,100 --> 01:02:54,000
invent marshallian quasi events,
which are named after somebody 

1152
01:02:54,000 --> 01:02:55,900
else. 
And that's again a very 

1153
01:02:55,900 --> 01:02:58,700
important. 
Of ideas, which I think I get 

1154
01:02:58,700 --> 01:03:02,300
from get from him. 
But again, it's you can't really

1155
01:03:02,300 --> 01:03:03,900
give one minute answers to these
things. 

1156
01:03:03,900 --> 01:03:08,300
That that part of the problem 
with a lot of courses in history

1157
01:03:08,300 --> 01:03:10,700
of economic thought, is that 
what they're teaching is 

1158
01:03:10,700 --> 01:03:15,500
cocktail party conversation with
their teaching is six sentence 

1159
01:03:15,700 --> 01:03:18,400
descriptions of ideas that take 
a book to explain. 

1160
01:03:19,500 --> 01:03:25,100
So I'm an admirer of Ricardo. 
He's I think the first person 

1161
01:03:25,100 --> 01:03:26,900
who did General equilibrium 
Theory. 

1162
01:03:27,300 --> 01:03:30,000
And he did it with no 
mathematics Beyond arithmetic, 

1163
01:03:30,000 --> 01:03:33,200
which any modern economy should 
tell you is impossible, but he 

1164
01:03:33,200 --> 01:03:35,900
was a very bright guy and he did
I thought a very interesting 

1165
01:03:35,900 --> 01:03:38,300
job. 
So I guess maybe, you know, way 

1166
01:03:38,300 --> 01:03:43,600
what I learned from him is the 
use of simplifying assumptions 

1167
01:03:43,600 --> 01:03:47,400
to build models because what he 
did was to make some assumptions

1168
01:03:47,400 --> 01:03:50,600
that he knew weren't true. 
Make, a rough estimate of how 

1169
01:03:50,600 --> 01:03:54,000
one true they were, how much 
they would destroy these results

1170
01:03:54,400 --> 01:03:56,400
and then build a model of the 
economy. 

1171
01:03:56,500 --> 01:03:59,100
Which depended on those 
assumptions because without them

1172
01:03:59,100 --> 01:04:00,700
the problem was too complicated 
self. 

1173
01:04:01,300 --> 01:04:04,300
And that was a very impressive 
intellectual accomplishment. 

1174
01:04:04,300 --> 01:04:08,700
One that I admire. 
If you could recommend one book 

1175
01:04:08,700 --> 01:04:11,300
for everyone in the world to 
read, what would that one book? 

1176
01:04:11,300 --> 01:04:13,500
Be there? 
Isn't any such book, different 

1177
01:04:13,500 --> 01:04:17,500
people need different books. 
Final question. 

1178
01:04:17,500 --> 01:04:20,500
What is the most important thing
you learned from your father 

1179
01:04:20,500 --> 01:04:25,500
Milton Friedman? 
That would be a bunch of lists. 

1180
01:04:26,900 --> 01:04:29,600
One of them, I guess is not to 
argue about whose fault things 

1181
01:04:29,600 --> 01:04:33,800
are that his, his attitude was 
that if we have any question, 

1182
01:04:33,800 --> 01:04:36,500
whose fault it is, it was his 
fault as he would say, my 

1183
01:04:36,500 --> 01:04:39,700
shoulders are broad, but it's a 
waste of time. 

1184
01:04:41,800 --> 01:04:43,100
I guess. 
One of the things is, to be 

1185
01:04:43,100 --> 01:04:47,900
honest. 
One of the things is to in a 

1186
01:04:47,908 --> 01:04:51,900
certain sense, treat everybody 
as equals, that is to say that 

1187
01:04:51,900 --> 01:04:55,400
if I was having an argument With
my father, the question was not 

1188
01:04:55,400 --> 01:04:58,300
whether he was older and I was 
younger but only who had better 

1189
01:04:58,300 --> 01:05:02,500
arguments. 
And I was having a discussion 

1190
01:05:02,500 --> 01:05:05,400
actually, with my older son 
recently on the question of 

1191
01:05:05,400 --> 01:05:08,200
status and signaling status in 
various ways. 

1192
01:05:08,600 --> 01:05:11,900
And I said that part of what I 
admired about my father was that

1193
01:05:11,900 --> 01:05:16,400
he didn't signal status that. 
He as an Englishman would say he

1194
01:05:16,400 --> 01:05:20,300
had no side if he would argue 
with anybody as equals as long 

1195
01:05:20,300 --> 01:05:21,300
as they had. 
Good arguments. 

1196
01:05:21,300 --> 01:05:23,500
So to speak. 
And I've tried Tried to imitate 

1197
01:05:23,500 --> 01:05:25,400
that as best I can. 
But that was certainly one of 

1198
01:05:25,400 --> 01:05:28,400
the lessons that I learned but 
it's hard. 

1199
01:05:28,400 --> 01:05:32,400
I learned an awful lot of 
lessons from him when I finished

1200
01:05:32,400 --> 01:05:37,400
my first novel, I concluded that
I had modeled the personality of

1201
01:05:37,400 --> 01:05:40,200
my protagonist on my father. 
I didn't realize I was doing 

1202
01:05:40,200 --> 01:05:42,900
that but I think it's pretty 
clear looking back at it. 

1203
01:05:42,900 --> 01:05:46,700
That's what I was doing. 
Well, mr. 

1204
01:05:46,700 --> 01:05:49,700
Friedman. 
Thank you so much for for taking

1205
01:05:50,000 --> 01:05:52,700
the time to do that. 
My final comments. 

1206
01:05:53,100 --> 01:05:58,300
For the show notes, people, the 
Ronald coase books that I would 

1207
01:05:58,300 --> 01:06:03,000
recommend, our, how China became
capitalist and his work on 

1208
01:06:03,000 --> 01:06:06,800
lighthouses, and my favorite 
works of Milton Friedman are 

1209
01:06:06,800 --> 01:06:09,900
from his book free to choose. 
Who protects the worker and who 

1210
01:06:09,900 --> 01:06:13,600
protects the consumer to Great 
chapters in that book. 

1211
01:06:13,600 --> 01:06:16,500
Mr. Friedman, recommend for my 
father, would be the first one 

1212
01:06:16,500 --> 01:06:20,100
name in capitalism and freedom. 
Excellent. 

1213
01:06:20,100 --> 01:06:22,600
Perfect. 
I finally got an answer for for 

1214
01:06:22,600 --> 01:06:25,500
the one book. 
Mr. Friedman. 

1215
01:06:25,500 --> 01:06:27,900
Thank you so much for your time.
I greatly appreciate it. 

1216
01:06:28,100 --> 01:06:29,600
I enjoyed it too, bye-bye.