If something is wrong for you or me, it is also wrong for the
cop, the soldier, the mayor, the governor, the general, the FED
chairman. The president, Seth does not
become acceptable when called taxation counterfeiting, when
they call it monetary policy. Kidnapping, when they call it
the draft mass murder when they call it foreign policy.
Welcome to Keith's night. Don't tread on anyone today.
We have a professor of Economics at George Mason University, a
senior fellow of the fa Hayek program for advanced study in
philosophy. See, politics and economics.
Mr. Boudreaux. Thank you so much for coming on.
Thank you for having me. When you say free market
capitalism. What does that mean?
For me, it means that there's a heavy strong presumption that
every adult can use his or her property as he or she he or she
sees fit, they can sell it, they can use it.
They can destroy it. They can accumulate, they can
build on a, they can deal with it.
It's a strong presumption. I understand that you can make
good re you can make plausible reasons for having that
presumption rebutted in. Certain circumstances, but in
all societies that Prosper that presumption does remain very
strong and it is relatively seldom overturned.
So that's what I mean by free markets and and the resulting
exchange ratios the prices at which people sell their products
including their labor Services, is also determined by voluntary
exchange and not by tradition, and not by the day.
Dictate of political authorities.
And what would you say? You've been very critical of
government intervention? What would you say is the main
difference between doing something in the market or
having using the state as the mechanism to achieve a goal?
Well, in the market, the in the, the actions are voluntary and
they are discrete. So you, and I agreed to do this,
this program on, whatever terms we agree.
I go to the supermarket. I agree to pay three dollars for
a gallon of milk in the Agrees to give me a gallon of milk in
exchange for my three dollars. And we don't have anyone
superintending, our decisions. They don't have any one
overriding, our decisions. And so there's a strong
presumption that when two adults engage in voluntary trade both
adults gain from that trade, of course, people make mistakes,
but that's true in all Realms of human endeavor.
So the presumption is that when people exchange voluntarily
property that belongs to themselves, rather than property
that belongs to others that eat. But because in each case, Each
person is made better off the accumulation of those exchanges
makes everyone in the society. Better off.
Now, say, I am a progressive, who believes that the consumer.
It's very difficult to have knowledge about all the products
you use throughout the day, in order to have, whereas these big
corporations. They have so much money.
That why would they care about One?
Customer out of the billions? They have potential.
My question to you is, as the free market Advocate, who
protects the consumer competition, protects the
consumer. And if a corporation for each,
from each consumers perspective, that her is one of many
customers for the corporation, the corporation cannot afford to
treat each consumer in that way. If the, if the corporation
mistreats me, then word, gets out to other consumers, and
other consumers, that are less likely to deal with that
Corporation. If you look at, actually, the
way corporations, big corporations are incredibly
sensitive to what consumers think about them.
Of course, you can find exceptions.
You can find acceptance, almost any rule in human behavior, but
corporations are incredibly sensitive.
The public to their Public Image and just my colleague, Tyler
Cowen wrote a wonderful book earlier this year called big
business called big business in Praise of America's great Anti
Hero or something like a subtitle.
And he makes the point. I think he's correct.
If you look at, actually the performance of large
corporations in market economies, they have done far
more to improve the living standards of ordinary men and
women van have any intellectuals than has the state.
Because As businesses know that the greater their success at
satisfying consumers, the higher will be their profits, the
higher, or their profits. The greater is the Temptation
for other people, other Corporation other, entrepreneurs
to imitate them, or to try to outdo them.
That's the competitive Dynamic Market process.
And that is what that is key to what has driven, our standard of
living to the astonishing height, at which it rests at
that breast, which it is today and will continue to rise.
Long as the market is, it continues to breathe?
So, say, I not only care about the consumers, but I also care
about the workers that very bad can working conditions can
exist. And if there's not a regulatory
state to sort of keep an eye on these corporations, the state
representing us obviously through our elected
representatives. Then how then who protects the
workers in the absence of the state.
Overseeing Worker regulations such as OSHA.
Competition once again, I don't have to work just for my
employer. There are many employers out
there who would like my services in one form or another.
Now the I work for my particular employer because that particular
employer gives me the very best bargain given all my preferences
and and options. There are other places which I
can, I can work. Very few Americans have worked
for only one employer in his or her life.
Very few. Americans fact, I would say no
American has only An option of working for one employer.
If you look at the data on worker, pay it tracks, very
closely worker productivity. There are claims from time to
time that there's been this disc decoupling, between compensation
and productivity, you know, if you want to, if you want to diss
the market, you you got to find reasons why the markets not
working, but when you look at the data carefully as I and a,
and then my graduate student Lisa Elliot Allagash really did
a number of years ago. We looked at the data on
American worker, pay an American worker productivity and we found
along with some other Scholars. Some other Scholars at other
universities. We found that worker pay tracks
productivity. The reason worker pay tracks
worker productivity because if my employer doesn't pay me what
I'm worth, then I am to likely to get bit away.
And so it's my Obviously would like to pay me a pittance to
work for it, but I'm not going to work for a pittance.
And the reason I'm not going to work for pittance is because I
have other employers who are willing to pay anymore.
So this competitive process just as it pushes the price of
consumer goods down, as far as possible and increases the
quality and abundance and variety of consumer goods.
As much as possible. That same competition raises,
the work raises wages, and fringe benefits to Heights as
high as possible as well as the quality of jobs Americans.
Today. I think a lot of Americans today
are under this myth that somehow American workers are being
mistreated and abused. And the general fact is that
that's simply not not true. Again.
Of course, you can find exceptions or 150 million jobs.
In today's American economy, nearly 160 million actually, but
overall the typical American workers.
Highly paid. Well, compensated, and working
in conditions, by the way that are as comfortable and as safe
as Any time in history, now, see, I fear that monopolies will
exist in the absence of a state, sort of intervening making sure
companies don't merge in merging.
They will create less competition.
They will give me as the consumer less choice.
And in fact, well, I don't want to go there.
That's the theory. So another words, the monopolies
will almost become more powerful than the state.
In in the way of They'll control a large portion of the
resources. They will be able to bid up the
price. I will have no bargaining power.
As a consumer, nor a worker is the existence of monopolies.
In our a justification for State intervention and a argument
against free market capitalism. No, you know, you can tell that
story and you can certainly tell a logically coherent tail where
that might happen. But both Theory and history lend
no. To that story first, just just
look at history. There's no example in history
that I know of in which private firms have gained power in the
market on their own without government, support to harm,
consumers over any length of time at all.
You know, we Americans we had the story of American antitrust
and when I was a young scholar, that was a major focus of My
research, the history of American antitrust policy and
what I, and my then colleague, Tom dilorenzo and some other
Scholars, Gary, live cap, economic story, what we found
largely through independent research, is that in the 1880s
to the First Federal antitrust, statute was passed in 1890, the
Sherman Antitrust, Act. And so you'd think if the story
is correct at the Sherman Antitrust Act was enacted in
order to rid the American economy of these monopolies that
were rise, and you'd think that they'd be evidence during the
1880s. Sweeping up to 1890 of
monopolization of high prices of of worker wages, being kept way
too low of the reduction, and output of a reduction in the
quality of consumer goods, we find just the opposite.
If you look at what happened in the 1880s, was a period in
American economic history of incredible economic growth.
It did give rise to large firms. That's because of the railroad
and the telegraph, they were making the market larger.
And so, with a larger market larger sized, firms become
Sufficient to serve those markets and so we did have
larger firms but the accusation that standard oil for example or
the Chicago slaughterhouses in the 1880s and 1890s were
monopolies in the way that economists use the term is
simply not borne out by the facts quite the opposite.
These firms were driving prices down.
They were driving outputs up and they were driving quality
antitrust. The antitrust legislation that
we had in the United States was in fact enacted.
To protect consumers from monopolist.
They were enacted the statutes work at the federal and state
level. They were enacted to protect
existing less efficient producers from the competition
of these very firms that were accused of being monopolist.
And so there's no history lens. No support to those people who
worry that merges. A large firms.
Will will undermine a competitive economy and in
economic theory, it's pretty simple.
As long as the government doesn't restrict entry
entrepreneurs are Totally creative and fortunately
incredibly persistent and Incredibly interested in making
a buck that when an opportunity when offers are constantly on
the lookout for opportunities to satisfy consumers in ways, that
consumers aren't well. Satisfied at the moment.
That's what you make a profit. And when, if a firm isn't
adequately treating its consumers, if it from isn't
adequate treating its suppliers, it such as workers that presents
a profit opportunity to other entrepreneurs.
They sweep in and they offer better products.
They offer better jobs. This is the story of American
economic growth. This is a story of growth in all
market economies, including Great, Britain, when markets
have have been free when the state intervenes.
It's almost always whether it's the intent or not of the
intervention. It's almost always the effect of
the intervention, not to promote competition and to help
consumers and workers. It's the opposite, it's to
stymie competition and the harm consumers and workers.
That's what history shows and we have good, good good theory of
understanding why? That consequence emerges, why
are some countries wealthy and some countries?
Poor, the simple answer? Is this the extent to, which
they're so, I like the economic historian Deirdre McCloskey.
He's way of putting it. Rich countries or countries,
that have made. What she calls the bhujbal
bargain. We agree to play by the, by the
rules of the market. So so entrepreneurs are free to
innovate. Which means free to to cause
existing producers to go bankrupt.
So that resources, move from less efficient to more efficient
uses consumers, get new, and better, and less expensive
products. And so if consumers, if a
society makes the Buchwald bargain, where the the large
number of people in that Society are willing to play by the rules
of the market economy, then those and, you know, respect
private property rights, you have Something close to a rule
of law. The government isn't isn't
excessively intrusive. Look in my ideal world.
I suspect in your idea where government be really, really
tiny. If it exists at all.
I have since I was your age, I have learned that the market is
more robust than I once thought it was.
It can actually stand up to a lot of beating and abuse.
I don't Advocate that beating and abuse, the world would be
better if that beating, and if you didn't occur, but It's not
the case that the slightest intervention here.
The excessively High taxpayer is going to cause Society to cause
a market oriented Society to crumble, into in into Rubble.
It takes a lot to destroy a robust market economy.
And so, that's why over the long run.
I remain optimistic, but but, but, but we in the United States
are wealthy to the extent that our ancestors have, and the
extent that we Continue to stick to this to have made and
continue to stick to the bushwa whose real bargain.
We still largely honor entrepreneurs.
There's freedom of entry into most markets government doesn't
Isn't So arbitrary. Yet that it destroys Enterprise.
And as long as those little niches of Freedom exists, we
will continue to prosper again. I Would like the government to
be much smaller. I would like Texas to be much
lower. I like regulations by government
to be much fewer. Things would be even better.
But but we still do, have I think a more or less a bushwa
society and that can save us from a lot of evil and a lot of
calamity. You wrote an article titled.
You are richer than John D Rockefeller.
I'm curious. What did you mean by that?
And how do you measure wealth in an economy?
Yeah. So obviously, at one, at the
ultimate level, how wealthy you are, how materially well-off you
are or how wealthy you feel is a subjective matter.
But what I meant by that is, if you just look at the access to
material goods and services that people have today.
Compared to the material goods and services that John D.
Rockefeller had a hundred years ago.
I wrote I wrote the piece in 2016, but still applicable 2020
19. And so John D.
Rockefeller was arguably the certainly the richest man in the
world. Certainly one of the richest
Americans famously Rich. He had things that you and I
don't have and you and I will never have, he had many many
homes. Get a home in Newport.
He had a, you know, he could buy a nice.
And if you wanted you and I will never be able to buy an island
or have Prime beachfront property.
So, in that sense, he is richer, but in a lot of Senses, we are
Richard, we have. Oh, I don't know.
Antibiotics, which, for me is a big thing.
If I or you get a blister or cut ourselves while while doing yard
work, there's very little risk that will die from any infection
that we get because we have antibiotics.
And we had these Little many of which you can buy over the
counter, you know, antibiotics spray and antibiotic bandages,
John D. Rockefeller didn't have that air
conditioning. It's a hot day here in Northern
Virginia and without air conditioning.
How would be really uncomfortable?
John D. Rockefeller didn't have air
conditioning until the very end of his life.
He died in 1937. He did not have jet travel.
He could not pick up. A little slab like a cellphone
and and talk to people whenever he wanted in real time.
He and 19 before 1920. He could not listen to a
commercial radio broadcast. He certainly didn't have
television, didn't have YouTube, didn't have the internet and
have laptop computers. The range of food that he had
available is was to him, even though he was the one of the
wealthiest people in the world was much smaller than the range
of food that you and I have within five miles of where we
live. If we live in any any place
close. To a even, a medium sized,
American city. So compared to there are lots of
things that John D. Rockefeller did not have that
ordinary Americans have today and they and these things are in
such abundance that I think it's a fair argument to say that
ordinary Americans today are at least as wealthy as, and perhaps
even wealthier than in a material sense as John D
Rockefeller. One way, I put it in my piece.
Aces. If you know, if you take a real
careful survey of the life of John D Rockefeller in the late
1910s, and your life today. And ask yourself.
If you could go back to 1919 or 1916 and live like John D
Rockefeller, what would it be? What would it be worth to you?
Would you have to be paid to do it?
Or would you pay to do it for me?
I would have to be paid to do it.
I would not want to live without antibiotics.
I mean I want to Without air conditioning.
I would not want to live without radio and television or the
computer or the internet or you know cars that don't break that.
Don't break down a cell phones. These are things that we take
for granted. It's an irony of the market that
it provides an abundance of goods and services at so cheaper
price and frankly. So reliably that they don't have
to be around for very long, but they become part of the
background like white water to a fish.
We just take them for granted. And it's ironic, that people
will complain about capitalism while tweeting on their iPhones.
They don't see the irony in that, but it's highly ironic.
When you, when you think about it.
Look what we're doing here. We are talking about.
Where are you physically right now?
Chandler, Arizona. Yeah, you know, it would back
back in John D Rockefeller. Thursday would take, probably at
least three days by railroad for me to get from Northern,
Virginia to Chandler, Arizona. And by the way, I probably would
not want to be in Chandler, Arizona, in mid-august without
air conditioning. What's the temperature outside?
There are five annotated. Yeah, but it's dry here is
getting up to 95, but it's humid.
So pretty bad in both places and yet neither you nor I want to
suffer. We're not we're not going to die
if heat stroke because we're in an air-conditioned places and so
just just just what we're doing today.
We take it for granted. We think it's normal.
I'm talking you and I are talking in real time and we are
separated. By almost 3,000 miles.
This is astonishing yet. We take it for granted, and what
gave would gives us? This is the Bourgeois bargain.
It's the Innovation and the dynamism of market-driven
capitalism. Now say hi.
Look out at the world and I see very, very rich people with
billions of dollars in net worth and I see homeless people in the
same country in the same city. If you go to San Francisco, does
the existence of monetary inequality justify State
intervention? And is it an argument against
free market capitalism? No, it does not justify state in
intervention. As long as the inequality of
wealth was earned by through a process of voluntary.
Changes, I don't see that. It's anyone's business.
How much Jeff Bezos has or how much Bill Gates or Warren
Buffett have been. Obviously if people get to the
extent that people get their wealth by predating on others
than that. That that wealth is unearned,
but what is on what is dis undesirable about that
distribution of wealth? Is not the distribution itself.
It's the manner in which the distribution came about.
And and you know, I think people when they worry about wealth
inequality, a lot of this concern, some of his I think you
just plain Envy which is a sentiment that good parents
teach their young children to avoid.
It is a natural human emotion. I get it because I'm human but
it's not a sentiment that we should be that we should be
proud of it went on those occasions when I feel Envy
ice-cold myself. I don't like myself.
I try to try to rise above that, that base sentiment.
So I think a lot of the hostility to wealth inequalities
Envy just knowing that. That some Jeff Bezos has more
money than me. I wish I had that much money and
some envious, but a lot of the concern I think is that it is
well, meaning and sense. It is not driven by Envy, but
it's driven by. Economic ignorance.
A lot of people have this notion that that that wealth in the
world. Is this Big Blob and it exists.
If not in fixed quantities, independently Of Human Action
and human institutions. And if wealth is just this Big
Blob of stuff out there that has nothing really to do with your
choices, or my choices, or the institutions of the society, in
which we live. Then if you happen to grab a
larger chunk than I have. Or if a larger chunk happened to
fall onto your House, then fell into my house, then it might be
difficult to justify. But of course.
Well isn't a a pre-existing chunk of stuff that exists.
It's created, wealth is created. You know, the the first book
first book in modern economics, my by discipline, it was written
by in 1776, by Adam Smith. And full title is an inquiry
into the nature and causes of The Wealth of Nations into the
causes of The Wealth of Nations. Wealth is causes.
And for most of you History, not much wealth was caused because
we weren't very wealthy. We fortunately in the past 200
so years have stumbled upon a set of social institutions is
bhujbal. Bargain that mycoskie talks
about. That allows the creation, the
causation of a great deal of wealth for ordinary men and
women. And what people who complain
about income inequality, many people who complained income
inequality forget. I don't realize is that if you
just start willy-nilly, Eating the fruits of wealth creation,
you will destroy, or at least greatly hamper, the institutions
and origins of that wealth itself.
And so you'll have a lot less wealth to to distribute.
And also there's this when wealthy.
So so Jeff Bezos, I don't know what magnitude one, but multiple
of wealthy has more than me, you know, several hundred thousand
times more wealth than me and I'm, you know, I'm pretty well
off, even by American Standards, but he's vastly more Rich than
me, but this Jeff Peace. Be so seats a 170 thousand times
more food than I do is the quality of his wine 170 thousand
times better than mine. Will he live a hundred seventy
thousand times longer than me. He says computer 170 thousand
times better than uses Healthcare hundred seventy
thousand times better than you know, all right.
In some cases. It's not better at all.
I bet when he has a headache, he takes exactly the same thing.
I do. Bayer Aspirin.
I bet he eats the same number of calories as I do.
I bet the Sir, and his home is identical to the temperature in
my home. She probably sleeps the same
number of hours that I actually need to sleep Swift because he's
more productive than I am and so much of it.
Jeff the great majority of Jeff Bezos has wealth and this is
true for other people. Like him is not tied up in a
bunch of consumption Goods that he's gobbling down its invested
in companies that produce outputs that make your life and
my life better, that create jobs.
For fellow Americans and people around the world.
And so if you if you see the government seizes a great deal
of Jeff Bezos as well. It will take resources from
where they are being used to produce, not for Jeff Bezos
directly, but for you and me and countless other people and and
be wasted in whatever programs, the government uses those, those
resources for. But, but again, but on this
issue, I, My ultimate argument is an ethical L1 if Jeff Bezos,
didn't steal his wealth. If Bill, Gates didn't steal his
wealth and they are entitled to the.
Well, I am not entitled to it. Even if you can tell a fully
coherent story that the world would be made better off by
taking his wealth and giving it to me.
I'm not entitled to it. So it's not mine, and I don't
want it. So say, I only care about the
polar and the general well-being of the nation state.
Why should I someone with such a big?
Mark Advocate, something like free market capitalism because
free market. Capitalism is proven
historically to be the greatest benefactor of the poor and the
middle class free market. Capitalism, is done, far more
for the 99% than is done for the one percent.
Sure. It's Rich to everyone.
But, 300 years ago, the elite the 1% They had solid roofs
above their head. They had solid floors beneath
their feet. Feet.
They could take Leisure, they could educate their their
children. They had, they could snap their
fingers and get white when the servants would run in and like,
the chandelier right Ordinary People. 99 percent people didn't
have that. Most people had thatch roofs
above their heads and they had dirt floors beneath their feet.
They didn't have, they didn't have indoor plumbing.
They didn't even have Windows on the Huts that they lived in.
In many cases, they used farm animals for heat.
They died, really early. They had no very seldom had
opportunities to learn and and for cultural enrichment.
And and what capitalism is done with free market capitalism is
done. Its greatest achievement is to
bring material prosperity to ordinary men and women and their
children and that material prosperity in turn has allowed
ordinary men with Women to have two League dignified, meaningful
lives in a way, that was simply impossible when we were living
hand-to-mouth subsistence. Existences, prior to the
Industrial Age. I got two more questions for
you. I want to respect your time, say
I am an environmentalist. And my primary concern is about
the well-being of the environment.
Surely. We need a state to protect the
environment and deal with externalities is my care for the
environment. Just reason to support state
intervention and opposed free market capitalism.
I can tell, by the way, you asked the question that you
understand the economics of it. Yeah, you can, you can make a
case that if externalities negative externalities, when
economists call negative externalities exist.
So, you know, pollution out of the smokestack, then the market
doesn't work often in those circumstances to cause private
actors to behave in a socially responsible, way.
You can tell that story but have to keep two things in mind.
One is The state itself is State officials themselves are
affected by the same, lack of information, and lack of
property rights that sometimes cause private individuals to not
act in in the socially best Manner.
And so turning power over to the state that doesn't necessarily
cause the problem to, to be improved, you have to trust
State actors to do. What's right.
You okay? You can tell a coherent story
where that might happen. But if you look at the most
powerful states in the past 100 years, they have been the states
that have they have ruled over countries, that have had the
worst pollution, Soviet Union, Eastern, Eastern Europe,
pollution, and those countries under the collectivist
governments of the 20th century have have been much more lenient
on polluters then have Western governments.
It's the second thing to keep in mind.
So the first thing is the danger of granting the state power to
interfere in markets. The goose may be killed, that's
laying the golden eggs. We the state might eliminate
pollution, but at the same time eliminate the the the wealth
that we all like the markets to provide second thing to keep in
mind is that if you look at the actual environment that we
ordinary people live in, I like to put Wait, we today are lucky
to be able to worry about things like global warming and species
loss. I'm not saying here that we
should worry about those things. But we're fortunate that most
that so many of the environmental problems that
Afflicted, our ancestors have been solved that.
Now we can turn our attention to problems that are far more
speculative and whose consequences are far more
distant than where the environmental damages and that
ravaged our ancestors. Prior to the Industrial Age.
That was the wind or Plumbing. That I don't have to your mat.
You don't need much of an imagination to figure out how
bad that would be. Again.
We will living beneath fact proves and on dirt floors.
They were no antibiotics. The one of the greatest
pollutants in human history is is bacteria or bacteria that
killed us. We have this great anti balut
anti pollutant called antibiotics that when we get a
cut or we get infection somehow, take the antibiotic and that
pollution goes away. That's Brought To Us, by the
way, by industrial capitalism. We have, we have Eric.
Again. We have air conditioning flush
flush, toilets. We have antibacterial soaps.
We have cleansers in our home. We have these machines in our
own car washers. Dryers and electronic
dishwashers. All of these things, make our
personal environment a lot cleaner.
And so, our personal environments in which we
personally live, today are far cleaner, then with the
environments in which even the rich lived, 200 years ago.
And so now that those environments are clean.
Okay, then we can turn our attention to worry about what's
going to happen to the global environment. 75 75 years from
now. And the reason people can and do
dispute what's happening. And what are the best approaches
to deal with that? But let's stop and thank
industrial. Capitalism the bhujbal, bargain
the Bourgeois ideal for cleaning, our personal
environments, making a personal environment.
Actually antiseptic and and spotlessly clean compared to
what those environments were for the vast majority of all of our
ancestors. And finally, one book, if you
could recommend one book for everyone in the world to read,
what book would that be? Wow, what a great question.
Any constraints. I mean, so you're asking my so
the book that I found most influential.
On me. Fa Hayek's, the first two
volumes of f. A Hayek slaw legislation and
Liberty, but I can't just say one.
I would say Julian Simon is the ultimate resource.
Oh, that's a good one. Gotta send a copy to Paul are
lick and Thomas. Malthus is great.
Boudreaux. Thank you so much for coming on.
I greatly greatly. Appreciate your time.
It's been a pleasure being with you.
Thank you.