If schools can educate students in exchange for their tuition.
Why can't businesses educate students in exchange for their
labor? No reason.
Just anti-market bigotry. Welcome to Keith's night, don't
tread on anyone. And the libertarian Institute
that is a quote from today's book.
It is titled labor, econ, versus the world.
You will have an image of it on my screen.
I know it's a little blurry at this moment, but the author is
dr. Bryan Caplan of George Mason
University, Dr. Kaplan. Where is the best place?
Place to purchase this excellent book.
Amazon.com is the best at Holy place.
Links will be in the description below, Dr. Kaplan, what is
Labour econ? And why is it important?
Labor economics is just the application of Economics to the
world of Labor, so jobs, obviously, but also everything
that people do to get ready for their jobs, education job,
training, everything that impinges on labor economics,
actually winds up getting counted there.
So economics the family. Well, non-marital births
divorce. All of this plays into whether
or not people want to get a job. So all that winds up coming out
of the heading of labor economics, as well for this.
We have The great Economist Gary Becker to thank he's the one who
took a formerly narrowly defined field and turned it into this
vast expanse that we now have. One of the if I had to summarize
the general objection to this book, it might go something like
this workers have less bargaining power than employers.
Thus, the first rule of labor, economics is to recognize the
necessity of worker, safety regulations, mandatory benefits,
and minimum payments for hourly work, what's wrong with that
worldview? If anything first thing to
remember is, well, what does it even mean to say that someone
has less bargaining power when you're really thinking about it?
Was a different from they're just not being much demand for
your services. You say well Tom Cruise is tons
of bargaining power well because people really want Tom Cruise,
janitor doesn't have very much. Yeah.
Because the janitor seems very replaceable when you put it that
way then you realize, mmm how exactly is this regulation
supposed to help someone? Just because there's not a lot
of demand for my services. How does this help me?
When there's a bunch of laws saying, I have to be treated.
Well, when people always have the option of saying I don't
need to trade with you at all. All, actually, this is really
the fundamental issue of Labor regulation people.
See someone not doing as well as they want.
They think we just passed a law, then we can solve the problem,
but there's always the option of just saying, I don't need that
person. I can do without that person,
and what we see in the real world is totally standard.
This is not an ideological Point.
Everybody in real life thinks about the cost of Labor when
they consider hiring everybody hires somebody at some point if
only to go and give them a I'd or motor grass or whatever like
to come and fix the plumbing and the idea that there's something
ideological or philosophical about the view, that the amount
that people want, depends upon how much labor is charging, it's
just crazy. It's absolute Common Sense its
ideology to say otherwise When it comes to regulation is the is
government intervention. The only method of sort of
regulating and making sure consumers and workers or are
treated will, or is there any method in the free market that
people can use to sort of achieve this end of getting
well-treated workers and reliable products and services.
But the ultimate check upon all Behavior markets is if you don't
like it, don't shop there or don't sell your labor there.
This Is the main thing that workers have going for them in a
free market. Is I don't have to work here.
Now, this does not mean that it is well advice for worker to
scope to the boss with a list of Demands and say, do all this or
else I quit. Boss is likely to say, yeah,
well, I guess we could do without you rather, it's
realizing that. If you're not satisfied, then
you should look around for something better.
You will find something sooner or later.
And that's the time when suddenly, you can say, hey,
look, but maybe I'll just go to this new thing that I like
better. Or maybe I'll tell my boss.
I found something else if you want to keep me great.
So yeah that is the main thing of course.
This also just shopping around before you take a job for
professors. This is a very big deal because
normally for Professor, take a job, they need to move to a
totally new area and once they start working that job, it's
actually an enormous burden to try to find any other kind of
employment. If we look at the lies were
vesser's, they're actually really sweet pressors.
Have ridiculously good deal. What's Going on, what's going
on, is that before someone moves out to North Dakota, it is
totally standard for them to go and talk to people already there
and ask. How do you get treated here?
And if the answer is poorly then you just don't move in the first
place, which is, by the way, the same story behind the actual
economic history of company towns.
People think of company towns is, you're just randomly dropped
in the middle of nowhere, and then you have no other easy
options. But the thing is, is to get
someone to moved your company Town.
You've got to make them think that it's a good deal.
And the main way company towns, historically made people think
something's a good deal was by making it a good deal.
When it comes to the example of sweatshops, this is where
regulatory Advocates sort of have their best example of big
company, very powerful. Nike Apple something in this
area versus people with very little bargaining power.
Making very small amounts of money.
What's wrong with government sort of stepping in and saying,
hey, you don't get to walk all over these people.
They need to be treated with dignity.
You're making enough money. You're still going to sell
shoes. You're still going to make tons
of profit, but you have to meet these minimum standards.
Anything wrong with that? Yeah, tugs wrong with it.
I mean, here's the main thing to keep in mind just because
someone has very low demand for the services doesn't mean that
their customers can't drop them and say we can do without you.
In fact, if anything you'd think that I said that's exactly when
businesses would be most likely to say you're not really that
valuable anyway, I guess we could figure out some other way
of doing. Doing this.
So the very fact that you have a big Corporation dealing with
low. Skilled workers does not mean
that regulation can put improve their conditions without
changing the willingness of business to hire this is
critical. Now, in terms of understanding
the actual facts on the ground, the main thing to know about
so-called sweatshops is that normally, they pay a lot better
than native competitors. They not only offer a better
deal partly is because they are trying to go and find that our
workers and on top of that, they're also giving better.
Job training, then local firms usually are they're going and
introducing you to what is The Cutting Edge in the global
Marketplace? So they aren't just going and
giving better compensation. They really are investing in
human capital of the workers. Put your greatest misconception
that people have about life in third world.
Countries for workers, is the think that most verbal workers
are employed by big multinational corporations?
Nothing could be further from the truth formal employment.
In poor countries is in very rare, it's almost always way
below the level you would have in countries.
Like the u.s. it is normal. Actually, in the poorest
countries for most people to be self-employed to have no formal
employment of any kind. And if you're wondering, well,
what is that? Like if you ever been interested
in poor country and someone comes up to you and tries to
sell hats to you on the beach. That's what life is like for
most workers in the poorest countries.
Just sort of desperately trying to eke out an existence running
their own business, but not really knowing what to do most
people. You're not cut out to run their
own business. And in poor countries, we do see
the sad spectacle of people who really don't know what's going
on trying to run a business and generally doing quite poorly at
it in those countries formal jobs of any kind of Highly
prized but formal jobs with the multinationals are almost always
the very best jobs in those countries.
The regulation is a way of encouraging firms to not go
there in the first place or to close up, right?
Meaning you do that and you'll yeah.
In like main thing to realize is still channels that would do
almost all of their business, almost their own employment in
rich countries, not poor ones. If you ever tried running a cup
business in a poor country, if you ever thought about how hard
it would be, it's hard because things are just so screwed up
their actual multinationals usually prefer to work in rich
countries. If there weren't much lower
wages in poor countries there be almost nothing to recommend
doing it there. So even if I see business as
this evil profit-seeking predatory dog-eat-dog mechanism,
I should still support it because it even helps the people
who I'm claiming to speak on behalf of even though I've never
met any of them and see that they obviously choose the job.
So you're saying they're still a reason to support to oppose
regulation if you support the poorest workers on the planet.
Yeah, if you're really worried about the poorest workers in the
plan, Is me trying to figure out how to get a lot more
multinationals to open up in poor countries, you should be
looking for ways to get their careers and really you should be
looking for governments that put multinationals at ease and say,
we love you guys, we want as many of you here as possible.
Normally you get in the real world you have domestic
businesses that are trying to keep multinationals out so that
they can continue running the businesses.
Well below the normal level efficiency and also as a result
paying their workers quite a bit less than they would be getting.
Ting if they could work for multinationals.
So yeah, I mean, you know, the main thing you have in mind is
that the way that you make life, better for people say, giving
them more options, not less. When you regulate multinationals
or keep them out, you were just taking options off the table and
it turns out if you really go and compare with the options,
are these are the best options multinationals are the best
companies to work for the best places to be employed in the
poorest countries. So yes, you really should be
feeling like this is the best that's available.
It really is. What is the hedonic treadmill
and how does it apply to labor economics?
Great question. And donut treadmill is.
Basic fact about human happiness that for most parts of your
life. At first, they if they improve
first, you feel happy, but then you start to take it for granted
and eventually it's like it never happened.
Same thing for many bad things that happen to you at first,
your say, oh this is my toe, so terrible.
My life is over, and you get used to it and stops bothering
you. I often talk to people about
getting a granite, countertop people.
Sell is so great, so lovely. But after a month, do you really
sit there stroking? The granite and saying, I love
you, Granite such, great Granite - thing goes for most luxury
products and so on. Now, many people look at this
and say, is this really a very anti economics point is, it
comes down to happiness, is not nearly as dependent upon
material well-being, as most people believe, looks like we
yeah, it's a little bit more complicated because you don't
get impatient, varies a lot with the exact kind of good.
There are some kinds of goods they can like Granite, where you
don't got, a tation is very quick, and very reliable.
There's others where not so much anyway why this is relevant for
labor economics there, a lot of people argue for regulations
saying look all right. Fine is true.
The labor market regulation does cause some unemployment.
That's unfortunate but it does raise the compensation for all
the people to keep their jobs. So as long Is it that too and
even losing their jobs? All the other people getting
them, that's good for them. And on the, in the end, it winds
up being worthwhile and my response to that is no, because
the thing that people are likely to get used to pretty quickly
are the extra luxuries. The other thing, what is hard
for people to get used to something that people do not
hedonic? We adapt to.
Well, at all is idleness unemployment.
A lot of work saying that the sheer fact of being employed
causes an enormous harm, human happiness.
Even if you Make up all the loss and earnings with unemployment.
Still you will see that people are unemployed feel unhappy on
average because they just feel useless, their lives are
meaningless. They are part of anything.
One of the parts of human happiness.
The people adjust to the least is the social world, right?
Do you have a people around you that you like being with when
people unemployed it's very isolating, these feel like
there's no one around you know companionship no nothing that
you're part of So what I say in the book is that actually, if
you are going to have a wiser view about human wellbeing, this
is does not mean that stricter labor market.
Regulation is a good idea. Yeah.
It does raise wages for the lucky ones with jobs but the
important thing to remember is those changes in earnings are
pretty ephemeral, but on the other hand, the harm of
unemployment is very durable. People who feel miserable being
employed for many years. Whereas most luxury products you
really do, get use them pretty quickly.
Lee. What is labor elasticity and why
does it matter Lee well? So I think you mean love labor,
demand, elasticity, and labor demand.
Elasticity is one of the most important technical Concepts
that bores almost everyone to tears.
It comes down to this. The act of Labor demand at a
point, is the percentage change in the quantity of Labor that we
employed divided by the percentage change in?
Which all right. So if there is a very large
change in the wage when there are issues very large change in
the amount that employers want to hire.
When this when there's a small change in the wage that you have
very highly elastic, labor demand elasticity, right?
And this is a circumstance where if you were graphing, this would
roughly mean like depends upon the scale but roughly mean that
you've got very flat labor demand in this scenario, you
need to be very concerned that almost any regulation.
Any activity could cause mass unemployment on the other hand,
you can also have a low liberal and elasticity which means that
when you raise wages a lot them only be a very small change in
the quantity of Labor that people consume should say.
It's percentage of this all percentage terms.
So percentage change in the quantity divided by percentage
change in the price. Now again if this seems very
technical and I can imagine almost everyone, hearing it is
not going and taking out some paper and writing and writing
things down right now. And as I said, in one of the
pieces that I wrote, I just went and searched all Twitter.
And there were like 100 uses per year on the entirety of Twitter.
And yet, this is the variable that you really need to take a
strong stand on. If you are specially supportive
labor market regulation, you need to be very convinced that
this number is that this number is actually small, but you need
to believe. This is a small number that you
could raise wages a while, you would have a large percentage
change in the wages. I would not lead to any
noticeable percentage, change in the amount of Labor.
The people want item and again, if you're like well you're still
falling asleep. So look, you can't fall asleep.
If you think regulations, good idea, you got to have a very
specific belief about this or else what you're doing is
clearly harmful, even from your own point of view.
I do have a piece where I tracked down estimates of what
this is, right? And a pretty standard estimate
is something like negative .25, which basically says that if you
can push wages up by 4%, Is reduce the quantity of Labor
that people want to hire by about 1%, alright?
And you're like, hmm. All right, is that I lat?
Well, it basically means that if you've got say unemployment at
7% the you could get rid of it if wages would just fall by 12
percent, right? And if you remember that three
percentage points of unemployment is really
difference, between it being super hard to get a job and
super easy. So it's kind of thing where when
you appreciate it's like wow. All right, it's not that huge of
a deal to have a world of Full Employment right now.
Of course we have such low levels of employment doesn't
seem relevant but you know, sooner or later and yeah,
probably not only my guess is after the election unemployment
is going to be going way up. When it comes to discrimination,
you had an observation regarding illegal immigrants.
What is what is important for us to understand about
discrimination? If we look at the case of
illegal immigrants. Yeah.
Great question. All right.
If you just think about all of the groups of workers in
American society that people feel comfortable complaining
about, so comfortable that you would just loudly talk about it
standing in line at the grocery store without looking over your
shoulder to make sure you're not offending.
Somebody like almost no one is going to go and start
complaining about Chinese workers or black workers or gay
workers. And yet, people will at the
grocery store audibly go and say these goddamn illegal immigrants
right now, what do we learn from this?
What we learn that there is a quite high level of negativity
towards illegal immigrants. A lot of People do not feel good
about them. They are unhappy with them on a
pretty deep level and yet and yet, if you were to go and tell
people well given how much people dislike illegal
immigrants, we don't really need government to do anything about
this because obviously employers are human beings, they won't
like illegal immigrants either and therefore they won't hire
them. If you imagine making this
argument in the derision that you would receive, You'll Think,
of course, employers will go and hire them.
They're out of there. Just trying to make money.
Money. I actually agree with that.
They say, hmm. Well, if that's what you think,
if you think that even a group of people that is, widely
despised will still have very little trouble getting jobs
because employers are after money, then what is this a about
all of the other kinds of discrimination that people worry
about? What does this say about the
actual necessity for having any discrimination laws?
They say it gives us a pretty clear answer which is that
discrimination laws are actually at most use Best useless because
they are stopping people from doing something that they don't
really want to do which is to go and hire less qualified people
when they could hire more qualified person.
If you most employers, it's not that they sit around saying God,
I love illegal immigrants, those soul of the earth, it's more
like I can get a better worker for a lower wage if I go and
hire illegal immigrants, so though it kind of bothers me,
leaves a bad taste in my mouth. I'll do it anyway and we should
expect that people would have a very similar attitude for any
other. Of the people think is being
discriminated against except of course milder because illegal
immigrants being probably the most despised group are getting
the. We're getting the worst evil eye
and yet even that is not enough to prevent them from getting
work. And on top of the evil eye, I
think there has to be legislation in Arizona because
on the front of so many businesses, you'll see we
enforce this standard know it, we don't hire illegals because
this law says if we you know hire them, it's what we get
furniture instead of it has been a Federal Regulation since I
believe 1986 that said that actually imposes fines on
employers for hiring illegal workers.
And then there may be Additional state level sanctions as well.
Yeah, this goes back to basic idea of the economic
discrimination, which is, if you really want to have
discrimination, has to be government required.
It's not enough for government to say you can discriminate, if
you feel like it, if you want discrimination, your government
to say, You must discriminate whether you like it or not.
That's obviously what's going on with illegal immigrants?
Where the government says you better?
You better or you be harshly, punished, you better put up
these signs. There's going to be finds that
could be jail time. We're Watching you big brother
is watching you. But again, if you think that
that's the kind of thing necessary to ensure
discrimination against illegal immigrants, then you'd think
something similar, it would be necessary to get discrimination
against women or blacks or gays in my own view, is the real
world. Right now is one where there is
government enforced discrimination in favor of black
slacks women and gays. I'd such the that employers are
in fact, nervous, if I hire people solely on their merits,
I'll get in trouble because People will say that, my work
face. Remember, force is not
sufficiently diverse and get mad at me, and, of course, not just
mad. The law will come down upon you.
There was an interesting moment in the debate between Jimmy
Carter, and Ronald, Reagan in 1980.
Where Carter says, what we need to do is start enforcing the
Equal Pay Act because at this time women get about 65 cents on
the dollar for every dollar that a man makes and then like the
next day, I heard, Amy Schumer, I've at the Oscar saying, they
hired three women to host because it's still cheaper than
one man. Now, Lies the average person
actually believes that this is true.
That literally a man and a woman work, the same job, create the
same value, same effort and they pay the man a dollar in the
woman gets between 60 and 80 cents.
For every dollar, first of all, what is the intellectual
response to that? Is that true or false?
Second how is this scam been pulled off for decades, right?
There's something really bizarre about this because if this is
true, then every employer in the country entry should be able to
make an enormous profit by firing all their mails,
replacing them with equally qualified women for lower, pay,
and pocketing the difference right now.
I suppose that's logically possible that could occur, but
it is a pretty amazing get-rich-quick scheme that any
dummy could understand. This is not saying we have to go
and take the logarithm of something.
And in order to go and make more money, this is just saying a
fire all your men, replace them with women and you'll make tons
of extra money. Like that is what I will let the
with us. Is really saying, in terms of
the data, what we actually see is that if you simply go and
compare single childless, men and women, with the same level
of skills, same same education level.
They look the same on paper that the earnings of the two groups
is virtually the same and has been for a long time.
This is without even making a lot of other adjustments such as
well. Women with college degrees are
really the same as men with college degrees because men are
a lot more likely to do stem, were you?
Unreal useful skills and women are a lot less likely to do stem
and instead learn something that you don't ever need to know for
any practical purpose in terms of how this scam has been going
on. Well there's the scam of paying
women weigh less than their worth and I'll say there's just
not much sign that scan has been going on.
I get more looks more. Like what has happened is women
were really low paid when women really though, scaled and as
women have increased their skills, their pay has gone up if
you think of the scam as making a lot of false accusations.
Nations against employers for discriminate against women when
they're not. Well that's can probably is
preserved by the level of intimidation in our culture.
Against someone that says, what I'm saying, people are afraid to
say this kind of stuff for fear of having their heads, bitten
off, obviously by women themselves but also by male
feminists and sympathizers and not just on the left.
These are things that people say when they want to go and win
votes from moderates, anyone with a mom?
Like they'll like doesn't like hearing this kind of thing.
Right. And yet the evidence is very
strongly. That it's true in an Ideal
World. We just wouldn't have to bring
it up everyone. We take it for granted and no
one would be mad about it. The problem is when people start
flinging false accusations against the entire business
world, really, what can you do? Other than say, look, this
doesn't make me sound good, but I'm not mad about anything but
nevertheless, the story just does not check out.
It doesn't check out in terms of Common Sense and it doesn't
check. in terms of the numbers, I've had this conversation with
one of my relatives and every time no matter what I say, it's
just an intellectual exercise for me at this point because
she's never coming over. But no matter what I say, she'll
just be like, I was reading Walter blocks explanation in
1963. I think and defending the
undefendable. I go.
This is how far back the LIE goes and she'll just chill.
Just listen. And she won't interrupt me, she
goes, but how could they keep saying it if it wasn't true?
So, I I love your your explanation.
It just it seems like maybe I'm too sensitive.
There's a lot of self-censorship to you know you'd actually get
yelled at very often people could actually be nice 90% of
the time and yet the one chance in 10 that a person is going to
bite your head off will leave lead very psychologically
normal. People not to say stuff it's
like, well I say what's true? And they don't mind.
I don't really get anything, but I say what's true and they do
mine. Then I get my head bitten off,
so I'll just keep my mouth shut. What?
Exactly? And it am I too?
Am I looking into it too much to think that it's sort of
vilifying men? I don't mean to throw this
victim card, but if I were to say these, the thing about
Asians is they earn is white CERN, you know, 80 cents for
every dollar and Asian earns. If you look at the average
income and the average Jew earns a dollar for everything.
So not a Western European Ernst. I mean that is I would not want
anyone saying that about any group, isn't there a little
vilification there? Well what I would say is it's
mostly the tone yeah right look at this is this is just the way
that life works. You can say two sentences and
how you're using the same sentence, two different ways in
one way. No, normal person.
Wouldn't it would take anything amiss?
And another one people will be very upset.
It's electone, is it matters a great deal?
So if you know, someone says Jews are earning a dollar fifty
for every Our a gentile earns just in the were just in the
pronunciation of the word Jews. That's one where people will
flip out and someone's gonna get mad and rightly.
So, yeah, don't excerpt me on the other hand, if you just say,
and we will juice on a dollar fifty for every dollar Gentiles
learned can say it in that way, and then I'd say, like, no,
sensible person would think that you would any negativity about
it. They would just say, all right,
that's interesting. Why is that That then you could
talk about it. Say, well, there's a lot of
reasons. We'll know what's going on, you
like only a messenger here and maybe I don't really know, but
I'm not going to find out better because someone is breathing
down my neck for saying something that offends the most
high preventable person in the world.
And that's what I like so much about this book is it's not just
a straightforward, great communication mechanisms it.
It's like you really value the readers time, which I feel like,
I don't get that with a lot of authors straight to the point.
And then on to a new topic, and every little article, what are
there? Like, 30 or 50 chapters in this
thing? Your productivity.
Yeah, yeah. So I learned something and every
little chapter and my time is appreciated.
I'm not going anywhere with that.
Besides the fact that People should buy the book and thank
you. Well, I got seven more books in
this series coming out eventually.
So eventually I want a lot of your time Keith but in any one
sitting I don't need much. That's good.
What? One of my favorite articles is
involved, you discussing social desirability bias, two quotes
here, the key economic Point, Banning Resorts saves no Mexican
children from Hunger. Banning Resorts would rather
call Cause Mexican children to be hungry by depriving their
parents of the best jobs, they can get.
You go on to say at this point, it's tempting to and those,
let's just have a dialogue about this.
The demagogues have their view economists have theirs.
Let's try to reach a consensus to this.
I at once a dialogue we don't need no, stinking dialogue.
Why would you not want to have dialogue with someone who just
wants to consider the possibility of regulating
Resorts like this? The problem with a dialogue is
that some views are true but they just sound really bad and
other views are false, but they sound really good.
And when you have a dialogue between those views, The View
that is wrong. Generally wins out.
I've been you multiple debates, we're just realized there's
really no winning this debate because the true position to
sounds. So awful it would be debate
about really is person, X too fat.
There's only one answer that sounds good, which is, no, of
course not, they're great. The way they are, doesn't matter
how the person is actually doing.
There's still this problem of. Hmm, I sound like a real jerk.
When I say this right? You know, there are many areas
right now. We're regulation is very low.
And yeah, if you just imagine a dialogue, there's almost no
doubt where it would come out if we had a big dialogue about
pornography, The arguments in favor of pornography, do not
sound good. There's like, well, a lot of
people really enjoy it and it's the best job option for the
workers. I wouldn't want my kid doing it,
but there's a lot of jobs that wouldn't want my kid doing.
Alright, that's the case for a the case, against just give
every horror story, every awful thing that you can think about
every really like, yeah. We're like just imagine like
these. There's this horrible kind of.
There's that horrible kind of porn.
What kind of a world are we living?
It in like who's going to win the debate?
Obviously the person who goes and list, 100 horrifying, forms
of pornography is going to crush it in the eyes of the audience
and yet the arguments in favor. Pretty good.
Actually and the other stuff is mostly just inflammatories, like
well, yeah. This isn't sound too good.
Yeah, but still with a bunch of people and Charlie, the people
were delivering, it don't seem to mind.
Like, how is this, my business doesn't sound like a good
argument, but it's a good argument.
Bernie Sanders and Alexandria. Cascio Cortez were in the
headlines this week for speaking to Amazon workers, who are
trying to unionize. I hate to say workers as though
entrepreneurs and investors. Don't work, such a lie.
So Bernie and AOC are talking to these people.
And Bernie's big point you are up against a guy worth a hundred
and seventy billion dollars. One guy has all this money piled
up. So when it comes to I want to
take his First, when it comes to one guy, having a hundred and
seventy billion dollars and these other people earning $15
an hour. What is wrong with?
Oh gosh, we have to sacrifice one guy and redistribute his
wealth boohoo. We could help so many other
people. What's wrong with that way of
thinking. Wow, we just to start the fact
that the customers really rich does not mean that his labor
demand elasticity as low as to go back to that previous
technical concept, but to put it in simpler terms just because
you're rich and could easily afford something, doesn't mean
that you were going to ignore the price.
There are plenty of Rich sheet people in the world.
And if you take the price of something and you raise it a
lot, even a rich, she person real cheap person who is Rich
will say, well, I can live without it.
I don't need it. Thinking about my dad, my dad is
loaded but he literally wears Rags really does.
He wears t-shirts that are ripped like a 18 inch rep?
And he just walks around like that he doesn't care.
Like could he afford? I'm going to get new t-shirts.
Of course, my dad could afford 10,000 new t-shirts, doesn't
mean that he's going to ignore the price when he decides
whether he wants to go and get new t-shirts.
The same goes for any business. The fact that they totally could
Afford. It doesn't mean that they will
be insensitive to the price. And that question about
sensitivity, the price is really the pragmatic one for whether
you want to go and push for more.
Second point is that even though a person can be worth billions?
And yes, you could say, hey at this point would be really easy
to go and just expropriate them hand out their stuff to a bunch
of people. Need it more and that would be
great in the problem is that this hat leads to very bad
incentives, over the longer, run in such a world Who would ever
want to amass that kind of money in the first place?
I did a world where no one can become a billionaire.
No one wants to work hard. Not to become a billionaire like
or course also in the real world, people try to figure out
ways to own billions without officially owning billions and
there's plenty of ways of doing that.
My you'll say well, look, will you just think about the
Catholic church? I'm I did my favorite part.
My favorite caricature of a see, someone living very well in the
Vatican is oh, I don't do anything to church.
Owns at all. All right.
So similarly, you can just have the wealth, the owned by the
business and not be officially owned by the owner, and then he
can still live super well without in fact, legally, being
in possession of it. So that's another very easy way
that people can get around it. But, yeah, like it comes down to
imaginable, where no one can go and become a billionaire.
What is this due to the efforts of people to go and come up with
new ideas and do new things and improve things.
Again, the idea that no one needs More than a billion.
It's like, Yeah, Boy, sure no one needs more than a billion.
No one really needs under thousand.
You can survive on way less than that.
Doesn't mean the Mone money is not motivating.
Not only to the individuals concerned, but all the people
who are in what we can call a tournament, the tournament to
become really successful. This is I don't think that I
talked about in library Converse of the world.
There's something in labor you can call tournament theory.
That says that one reason for having high salaries for top,
people isn't just a motivate. The top people is to motivate
all the people who think they have a shot.
Shot at becoming that top person in the same way that the prize
and athletic contest. It motivates more than the
winner and motivates all the losers, too, because you don't
know who's going to be the winner for sure until the end,
Do you see that? There is a complete lack of not
sure if appreciations the right word but recognition as to what
the innovator entrepreneur investor actually does.
Because it's as though they say this, as though, one day, you
know, things were falling from the sky Bezos, got 170 billion.
I could have gotten it just as easily but he sort of got this
as a result of happenstance. If you had to explain to people
People the value of say the entrepreneur or the value of the
planning that goes on behind the scenes managing, what would you
say to that person? I would start by looking at
other cases that have nothing to do with business because people
have so much resentment have been to get about business.
It's hard to start there, I would say.
So, what do you think about the people that made the Moderne
covid vaccine? You think they did something
really good? What they did impressive good?
Anybody have done that or only some people I do.
You think there were a lot of other smart people who are
trying really hard, who just didn't make it.
I think I can pretty easily get yes this to all these kinds of
questions and then say, all right well, so why is it so hard
for people to actually come with a vaccine?
Well, you need a lot of knowledge.
You need Insight, you need diligence training.
You need some luck to, of course, put that all together.
It's a very hard for me. Laughs for figuring that thing
out this a great to know why? Because it's an intellectually
extremely difficult task. So.
Okay, how about making McDonald's?
Is that something any dummy could do?
Right. Hmm.
Well, it's just Burgers, isn't it?
It's not just Burgers. There's a lot more in McDonald's
than just Burgers a lot more than just going and setting up
one restaurant. You go and watch a movie like
the founder about the creation McDonald's, you realize.
Wow, there's actually an enormous amount of intellectual
effort that goes into making one successful restaurant.
Now, the official theme of that movie, by the way, was that the
guys who really All the ideas got ripped off by a sit by me or
salesman who showed up realize that a good idea and then rip
them off. But if you watch the movie with
a more reasonable mindset, you realize, look, they're the guys
who could the first McDonald's, they did a lot of great ideas
but they were terrible in marketing, terrible, and
scaling, and Ray Kroc was great. At those other things.
He took some other ideas that people had, which were not his
own and he combined them with a bunch of other critical.
Cool ideas. And even he actually was not
make money in four years, he needed to spend a lot of time
tweaking that formula until finally hit Pay Dirt for every
person like that. There's a lot of other people
that are really smart and try really hard and never succeed.
This is something where you just have to go and try a lot of
ideas out, a lot of people if you trying in tandem to get the
success, the reused to there were a whole lot of vaccine
ideas. They got tried bunch of them
succeeded there's a you don't hear about the losers but no
doubt there were many Losers, that just failed.
You might say, we're the losers weren't?
They just too smart. I don't know.
Probably, they weren't quite as smart.
Maybe they got lucky. Maybe they had some other
advantages, but the important point is that running a
successful business is actually extremely intellectually
demanding. It's not something that anybody
could do. Furthermore, it's not is in some
one way, one important way it's much harder than science, which
is the ones you figure out a scientific result, it stays true
forever. Once you figure out a great
business model, it does not stay.
Great forever. Very quickly, other people may
be borrowing your idea, improving your idea, you might
only have months or maybe a few years you're lucky of using your
idea. Before the whole world has
copied you and then improved and you're left in their dust.
Yeah it would see you. My are you old enough to
remember Blockbuster Video? Yeah, that would go every week
Blockbuster Video. I still remember the whole
country was Blockbuster sprouting out with these giant
optimistic signs. We grow again and then they
vanish into nothingness. I get one point.
Blockbuster was an incredible Innovation and then it turned
into a dinosaur in not even a generation and like, 10 years,
it went from being the main people place where people were
getting were able to choose movies to the Dustbin of
history, and it'll actually very demanding task.
And one more someone who's smart enough to start it, still
dependently was not smart enough to transform it to adapt to
changing conditions. That's That's what business
really is. Like, whatever I have done
anything business. See my admiration for people
were actually running successful.
Businesses goes up another time another notch because it's
likely you'll officially I'm smart.
I've got fancy credentials. I got a lot of connections and
yet even going and selling a book of my own.
He's actually very hard. Very discouraging.
Just imagine how hard it is to do something really well.
Yeah, it's like it would those guys they got something.
Something that I had at least not demonstrated.
Maybe if I devoted my whole life to running businesses, I could
do it. But then again maybe not.
Maybe I could give it my very best shot and totally fail.
I'm grateful that other people do that.
So I don't have to I think that's so important because if
you look at right after Karl Marx and the Communist Manifesto
says, look at all these great things capitalism has done for
us just in the last 100 years. Josh, think of how much better.
It's going to be once the workers are calling the shots as
it like the greatest example of static thinking, you've ever
you've ever come across? It's like, if we drastically
changed the primary, decision-makers things will
continue in on their current trajectory that Just so shocking
to read. I had to read it.
Like, I checked two copies to make sure that line was
translated correctly. Yeah, that is a bizarre part of
the book. I mean, it's essentially
reverse, empirical, reasoning of saying, you know what's going to
be the best system ever. The system that didn't create
all this incredible progress, you don't.
System is going to be terrible. Is going to be seen to be
terrible real soon. The system that did deliver.
Like, wait a second Carl, you know, the best predictor of
future success is. Past success.
The best way forward is to stick with the system that has worked
so far. Not to go and dismantle it in
Fire and Blood and then trust in the promises of people who, as
far as we know Karl Marx, never even visited a factory in this
whole life. Angles did of course, he was a
factory owner when we talk about, how should this economic
issue be approached. A lot of people will say, well,
we have to look at the studies, and look at the research now, I
really appreciate people who take the time to do this.
My question is, do studies give tyrants too much leeway.
For example, you might look at something and say, okay, it's
good. So what we need is for the
government to fund more of this good stuff.
It's really bad. Well, government needs to step
in and improve this under almost any scenario of you see this big
Magic Money printing machine. As having no - downside is, is
empiricism a way to sort of just open the door to tyrants who
control the media, who will spin any study any way they want.
Ultimately, I don't think so. Here's the thing, you have to
ask, well, what would the media be doing?
If there was no empirical work, they shut up.
No, they would not shut up. What politicians do if there was
no academic research on any of the topics they want to talk
about? Would they shut up?
No, they would not shut up. They would just make stuff up or
engage in. Poetry.
Think the of the real story of almost all empirical academic
research, is that it's irrelevant to the real world.
It's basically a way for professors to go and get their
dream jobs for life. It's a way to establish an
academic pecking order. It is true that doing this kind
of research is one of the better ways of getting a high-ranking
position as Actually in a democratic Administration, but
once you're in that Administration, nobody cares
about your studies, all they care about is that you're on the
right team and you need to seem smart and say what people higher
up want to hear? It's really what's required.
So, yeah, I think that the actual relevance of empirical
work for making the fruit for creating tyranny is pretty darn
low. You know, if you just think
about something like covid, like, you did Empirical research
on covid, actually. Cause the enormous overreach
Action to covid. I don't think you can fairly say
that, you know why? Because the over reaction
happened before, there's any evidence in really like there
was like wheezing of the of the world economy was shut down
before there was barely time to do any actual barracks.
And then what happened? Well, the empirics that were
done were of the among the lowest quality you can do just
the observational study writer an often worse often.
It's like, here's a paper showing that this policy works.
Why we? Model.
What a model is to empirically tested, it's not just a model
and then say this model justify something, you can always come
up with a model of anything. So that's pretty ridiculous.
What was not done during covid, as far as I know in any country
so we have UK is finally done a little bit but during the
serious period nothing was done. Is a voluntary human
experimentation? Let's go and actually show you
how go, you know so we will your voluntary, paid you a human
experimentation and in particular paying people to go
and do things that are dangerous Yes, of course, vaccines were
voluntarily tested on people, but only in a highly inefficient
way where you didn't give them vaccine and then you wait three
months and see where they got covid.
There's a much better way of doing it.
Which you can the vaccine, and then you deliberately expose
people to covid and see whether the vaccinated people were
deliberately exposed. Who you Suzie?
Oh, Sue was a, whether whether to vaccinate people will be
exposed or less like a developer or not.
And then you got an immediate measure this way.
You could know about vaccine efficacy and a month, instead of
three to six months. I'd say this is a case where I
think empirical work would have actually been a big improvement
over was done like good, empirical work and the same
thing. Like I think it would have been
great if we done real empirical work on masks ones, where we
actually randomly selected, some people with masks some of that
out and then put them in a room with a lot of covid.
And saw what happened? That would have been a way back,
big Improvement. And again, honestly, I think
that the most likely outcome would have been the mass, don't
work very well. And in perhaps, the experiment
wasn't done because people, feared the truth.
Well yeah well but we need to do something and then if it turns
out the masks aren't really very good and the end probably if the
mass could come out saying that mask wearing reduces infection
by 1% people would have said just said, well if it saves one
life, that's good enough and even then it would have mattered
but I think it probably would have been helpful for quelling.
The true hyperbole follow you. Like you want you, you want to
have mass death in schools and that kind of nonsense.
Yeah. So overall empirical work.
Greatly overrated by people who do it because they just think
That it's much more influential the real world than it really
is. Although I mean, if you really
talk to them, there's there's there's not even with a miracle
researchers, this, a disconnect where they said, well we why do
we need to do this o because it's so important to answer
these questions. Yeah.
But who actually in politics listens?
Yeah. Well, I guess kind of, no one
whoops. So anyway, that's what are the
with the active researchers think?
Anyway, it's it's so it's overrated by them but I think
it's about to go and blame it for what's wrong with the world.
I think that's mostly pretty. Be silly.
Bad stuff is going to happen regardless because people just
want to do bad stuff. Yeah, and even the CNN dr.
Lena, when has come out and said that masks are little more than
facial decorations at this point, you basically have to get
the vaccine if you want anything, so two years of Lies.
Yep. No apology.
Just just run over the body and just keep driving.
There are some mercy cheese with ink with the, I think least lean
a little bit in the direction of does a little bit.
But yeah, well I don't like five or ten percent that would still
be my guess. Ultimately, I think I've read
the summaries the studies and read the studies themselves but
I'll say that puts me in the top 1.1% terms of how much potential
people who pay to actual evidence.
But is he a like five to ten percent?
This is not worth it for the for risk of this kind.
It's crazy. The book is labor.
Econ vs. The World essays on the world's
greatest Market. More questions for you dr.
Gatlin. Thank you for your patience with
me in the year 1800 versus the year of 2020.
To adjusted for inflation wages have risen.
In that time we've seen a lot of unions.
We've seen a lot of labor laws, we've seen the government
involve itself in education. Therefore, this we know is the
method of getting low wages to become higher investments in the
population and unions coming together to Lovely, bargain for
higher wages. True or false false?
What's true? Is that some of these things
might have some small effect, some of the time that's very
different from giving these regulations government policies
credit for anything close to the whole thing.
Here's the knockdown bulletproof argument.
Look if we just went and divide it, all of the income in the
world in 1800, by all the people it would have been a pittance
compared to what we have today. So clearly the main thing that
is mattered is increasing productivity per worker, it
can't be anything redistributive.
It can't be anything where we're taking money from business to
work or Rich to poor the math for that totally does not add
up. We have greatly increased
production per person. So anytime there's a law that is
re distributive. You just can't give that more
than a most at the moment you can't give it any more than a
tinier. A share of the credit almost all
the credit just goes to increase production in terms of whether
these These laws have had any positive effect at all for
workers, this is where you really need to go and consider
them one by one. And look at first of all the
basic Theory, common sense. But also the numbers for
something like unions. Here's the main thing that we
can say, unionization Peaks around.
Let's see. I want to say around 1950 and
then it's been falling ever since Yeah.
Well there were a whole lot of fantastic years for for wage
growth long before unions for anything noticeable.
And there were a whole bunch of great years for wage growth as
unions were on the decline. And that's just what we see.
All right, so the idea that unions are somehow.
Crucial look, if they were crucial wages, should have been
going down since 1950. They went up, right?
So, that's pretty crazy. Right?
For things like education, that's one where I do have.
Book on this and I say that just to understand what's going on.
Step one is you have to look at what schools really teach and
when you realize that what most schools spend their day on as
nothing to do with real life, the idea that education has been
an important part of increasing the size of the pie or raising
productivity per worker is just crazy.
Most of the day is not spent on literacy or numeracy is spent on
else. Yeah.
Spent on arts and crafts and music and history.
He and his poetry just a bunch of stuff that has nothing to do
with almost any kind of actual production.
So the idea that that was important is pretty crazy.
In my book, I go over a lot more of the details.
What was going on? We really can see is that when
people who desperately want to find that education is crucial
for economic development. Look at the numbers.
They struggle to find the effect.
They struggle to find it. You know, Haiti desperately
poor. And yet he is now as educated as
France was and like 1960. I just going and put it having
kids sit in chairs and be talked at is not the path to economic
progress. And you know what is the path
and really learning by doing is what's critical?
I say again get those multinationals in to go and get
them to bring you up to the frontier of the modern world of
business. That's what you really want.
Yeah. Hmm.
I love how you make that point in.
Just one quick sentence at the beginning of the book, it's
increased production and competition.
Like, I just love The calling them dogmatic is, you know,
belittling. But it's just these one sentence
answers that, hey, we've been given one in one sentence
answers from their side for so long.
It's about time. We get some push back here.
My favorite really? Like here is one thing that's
really crazy. Look, the any of the minimum
wage is important for Rising wages.
Look, only a very tiny, share, the workforce earns, minimum
wage. You think that lawyers are
making more money because there's a minimum wage for the
janitors in the same building. Obviously, the vast majority
workers are getting paid way above the minimum, so the
mineral couldn't possibly matter for them.
I'd it's more complicated saying is the minimum wage has it
helped anyone but the Eichmann to give it credit for much of
what actually happened is, just off the wall.
One of my favorite sentences in this book page 149.
Suppose you could have a Princeton Education Without The
diploma or a Princeton diploma without the education.
Which would you choose? What are the implications of
that question? Hmm.
Yeah, and I don't remember, they said it there, but one of the
things I often add-on is. So if you want, if you even have
to think about this question, you agree with me, because my
point is not that the answer is clear, but that it is unclear,
which means that the effect of having the pure effect of having
the diploma without the education, people already think
that it's big. The point in the background is
this a lot of, the reason why education pays is not the
e-learning useful job skills and school.
It's that you get a stamp on your forehead or what
economists, call a signal. This doesn't matter very much
from the point of view of the individual workers like well if
I want to get a good job, who cares, whether I learn skills in
school or was I just get the stamp on my forehead, which
allows me to get the job. But from the view of society, it
matters immensely. A society can prosper if the
work force becomes more scaled Society, cannot Prosper because
the work force becomes more stamped.
If everybody has more stamps, the result is this credential
inflation where you need more stamps, even to not get your
application thrown in the trash for a better job.
I like that point about credential inflation because it
explains the downside of something like subsidy.
So you have two quotes here, insofar as the signaling model
is right. However, government support for
college impoverished Society by sparking a credential list arms
race. You then continue on the next
page. If one laborer gets more
irrelevant education, he outruns the competition but if the whole
labor force gets more irrelevant, And education
societies time and money goes down the drain.
What can credential inflation? Teach us about the subsidies.
Yeah, well subsidies are a great way to get more credentials
latian, you just to get an idea about how bad this is in 1945.
The average American over 25 had about 40 less years of
education. How many for you for Less years,
right? So basically right here with a
high school degree back then was like was about what a college
degree is. Now it's set you apart not
enormously apart but it put you in about the top quarter of the
population, right? In terms of Education which
meant that many managers, many people with high status jobs,
just at high school degrees in those days.
Those all the you needed when people have looked at individual
occupations, what they found and get a lot of this work actually
comes from quite left-wing sociologists who are just
empirical. So once again, you don't do not
be quick to dismiss the empirical work for understanding
the world. It's not going to change policy
and Shelly. But in terms of improving,
understanding useful, anyway, what they found is the large
majorities rise in education has not been reflected in people,
doing higher, tech jobs, or space-age, type jobs, or
information, or Information, Age type jobs.
A little that the main thing that's happened though is that
jobs that have existed since 1945 and again, probably since
the year 45 BC or just done by more Highly Educated workers,
it's now very common for waiters nice, restaurants, have college
degrees for Uber drivers to have Judge agrees for cashiers to
have college degrees. This would have been almost
unheard of in 1945. But when there's a lot more
people have the degrees with the stamps in the forehead, this
raises, the competition means that employers can afford to be
picky. And say, why should I go and
interview someone to work in my fancy restaurant?
Who hasn't even got a college degree?
So, if we look at the downsides of subsidies, if I run a class
and instead of having, you know, people either by their way, in
or getting, any means through a voluntary method, if the state
then subsidizes free college like the military's free
government pays for it. It now I have a ton of students
who otherwise wouldn't have been there.
Good. You might be giving people
opportunities. But the downside I'm thinking,
are these people going to be as passionate?
I'm getting a lot of people, so I might have to decrease the
criteria for what an a would give someone.
So I have to lower the credentials.
So now everyone is getting a worse off education so I could
find a bigger common denominator.
I mean, how many professors are going to say?
Well, the I'm not changing the standards, everyone in the class
has failed. Are their professors, that will
do that, just to prove a point, maybe in math or physics.
There's a few people like that. That's sort of the last Bastion
of absolute standards even there.
I don't really believe it except for an occasional true.
Eccentric mean, I do think that the definitely the typical
Professor is as much as much better off because of this
regime, because it means they have a job.
And in the end, if it weren't without the subsidies there,
just what those positions wouldn't exist and then they
have to have a real job. Well, I don't want a real job.
You know, like how many real jobs are there?
I could just go and take an hour out of my afternoon to go and
talk to you about this book, right?
How many jobs are there where I could get paid to write this
book? Very few but because of all the
subsidies the system is swimming in money.
And then these opportunities exist, important to remember.
There's a big distinction what's good for buying Captain?
What's good for the world? I don't think that public.
Subsidization of higher education is good policy.
It's terrible policy but I'm honest enough to say it's made
my life a lot better and maybe I would have been one of the lucky
few. You who would be at Harbor or
something, but probably not and then I'll be stuck at have to do
this as an invocation rather than as my calling.
And is there anything to the concept of changing who the
producer is accountable to? So, if I go to the restaurant,
hey, this food is disgusting. Hey, the waiter was rude.
I'm very likely to get a positive response from any
restaurant that I've been to with, I mean, microscopic
exceptions because I the customer have the leverage but
if their money instead came from the state, then I wouldn't have
Leverage, they'd say well in four years vote for a different
guy who's going to appoint someone restaurant commissioner.
So they could then improve its. So it's almost like what makes
this so bad subsidizing things decreases.
The quality is you're increasing the amount of distance between
the producer and the consumer. Is there anything?
Here are my just taking on things that I already don't.
Like, there's definitely something there but it's more
but it's actually more complicated than all that.
Here's the thing. If it's the government, Really
just hands money to the producers.
Then your story is great if the government hands money to the
consumer and then the consumer can spend it the way they want.
Then it's less clear, why? The these producers would be so
unresponsive because they still need to get the customer to
spend their money there in order to get it right?
So for example, the alike with food stamps, the way the food
stamps work is you give them to a customer who then takes them
to store. The government is the ultimate
person that pays for it, the ultimate Oreo the ultimate
payer. And yet if the customer is
unhappy, with the way the grocery store treats them, they
can still complain or take that, take the food stamp someplace
else. But then you go and take a look
at college and you see hey, like even private schools actually
seem to be highly unresponsive to what customers want.
Let's just say that my kids college.
They recently denied my request to be able to stay in my son's
room overnight. They previously granted it but
this time they said no and wise as well we just decided not to
Grant any rain, any of these, any more for the rest of the
year. Why like why are you treating a
so shabbily? Like, what's the problem?
Like my dad wants to stay with us.
Really like, we're two board. Brothers were roommates.
We want him here and yet you're just saying, no and we pay to be
here. We pay for the storm.
Why are you? Why do you act in this horrible
way? Right?
And with and what I can say honestly, is that what higher
education most of the CEOs, least a lot of the subsidy they
get? For example from student loans,
they do come from a student who could take the student loans to
go someplace. Else.
And yet, they still are stubbornly pigheaded, Lee
horribly unresponsive to what students actually want and
what's going on. See part of it is that they have
a lot of these schools have giant endowments such that they
could just, they could lose a ton of a ton of customers and
everything would be fine for it because they could, they could
basically stopped charging tuition and still never got a
business. Just live off the interest, the
richest schools? Are that rich, right?
So partly, they've just been given, too many.
Donations, that allow them to be oblivious or rude or just very
rude and insulting to the people that are officially their
customers. So there's that think another
part of what's going on, honestly, is that the main
customers are children and children are very confused about
what's going on in the world and you are not good advocates for
their own views. So there today, tend to actually
just accept whatever they're given, this is the way that
children are so yeah. I mean, I don't think that you
can really understand pathologies of hi.
Education, without realizing that, the main customers our
children. Right?
And similarly, I don't think you understand the pathologies of
case 12 without realizing the main customers are not students
that are there are there, the parents and the parents on the
one hand, if you're running a private school, the only you
need to be very concerned about some kinds of things, especially
stuff that upsets mom's. But on the other hand, there's a
lot of other stuff where you can do whatever you want, because
Mom's, you don't care. And the kids are not the ones
that pay the tuition. The book is labor.
Econ vs. The World essays on the world's
greatest Market link will be in the description below.
Dr. Kaplan always a present pleasure.
Thank you. Thank you very much Keith.
This was very, very this was great fun.
You see you thank me for my patients but no patience is
required because this is a thrill.
Thanks a lot Keith,