Welcome to Keith's night. Don't tread on anyone in the
libertarian Institute today. I'm joined by David L bahnson.
He is the chief investment officer and managing partner at
the bahnsen group. His book is there's no free
lunch, 250 economic truths. Here's my interview with David
Bronson. What is economics and why is it
important economics is the study of human action around the Ian
of scarce resources, so as a basic definition goes, I think
it captures the most important things in defining, the field
that it is about human activity, and specifically, the way in
which humans act around the reality of scarcity.
So, those basic concepts pack quite a punch, but it does
Define the field of economics. When people look at economics,
they don't usually think that it's usually well GDP or the
stock market. Can you walk us through how
Robinson Caruso on the island all by himself faces economic
decision-making? Yes of Robinson crusoe's on the
island by himself. Then he is acting out of the
objective of self-preservation as making decisions to allocate
resources in the most rational. And preserving manner possible.
The Robinson Crusoe is not on the island by himself.
And is there with one other person and Robinson Crusoe has
in his possession. Bananas the other person as
water and they decide, they want to do a trade to provide food to
one and beverage to the other on its own organically with no law
with no regulation with no brick-and-mortar.
Marketplace to individuals, freely act and what we call that
is a market and our belief is that markets are not imposed
legislated, created markets, organically happen when two
people act and of course, their actions reflect their own
sometimes subjective taste, sometimes their Necessities, but
they certainly all come out of self-interest.
Interest in the desire to either Elevate one's quality of life or
in some cases like the deserted island scenario that us
economists love using just to simply survive.
But the point is is that defining economics Lee I have is
very important and avoiding economics being defined the way
that you alluded do is also very important because the second one
starts to finding economics as econometrics GDP.
Inputs, mathematical inputs and formulas and spreadsheets.
They not only have they dehumanized the field but they
have implicitly allowed for this mistaken idea.
That somehow one can optimize economics by mere.
Empirical observation by data inputs by feeds that they can
depersonalize and essentially set the table for the Real
planning of an economy. But the reality is that because
economics is at its Central tenant about the human person,
one cannot centrally planned such a thing and one certainly
cannot reduce it to me or mathematical inputs.
That are devoid of the, what, why, when where how human beings
function? Please walk me through those two
different approaches when it comes to something like the
minimum, Or but, maybe State Health Care could be a better
example. Some people will say, well, what
we got to do is we got to look at a country like Sweden where
the state's heavily involved in medical care and then other
countries, maybe Singapore, Hong Kong and America and then we're
going to study these the people in these countries.
And then we're going to come up with a standard as to what
constitutes good health care. And that's how we find out
what's good health care is or the effects of the minimum wage.
What is it? Alternative way to find out the
effects of the minimum wage if we're not going to places and
studying the results. Well, I think that in both
cases, there's a sort of political connotation here that
has to do with something very different than the basic
economics of it. But to the extent that the
question is just simply how we want to evaluate the efficacy of
certain policies. I believe very much that we To
observe policies. Now, of course, when I say that,
I don't mean merely the intent, but I also mean the actual
outcomes in the end, the product and the byproduct one of the
limitations though, as Basquiat taught us with the broken window
fallacy, that most economic fallacy comes from observing
only that which is invisible and Not Invisible, observing that
which is short-term and Not long term in visiting the effects on
some, and not the effects on all.
So to properly, understand things like the minimum wage.
We first have to understand the concept of price Discovery.
We have to understand the concept of the knowledge problem
who has the knowledge to appropriately determine what the
clearing price saw to be between producer and the consumer or in
this case, an employer and a labor.
Um, so there are sort of philosophical Concepts that have
a social context. Why do they have a social
context? Because economics is about human
activity. It's about human cooperation.
So it is not merely a condom metric.
So I think there's a number of angles.
I had taken answering your question.
But how we evaluate policies has to be hold a stick visible and
invisible short, and long-term some and all parties.
He's impacted, but it also allows for empirical
observation. We can look to the quality of
healthcare. Now, of course the Quality
Healthcare may very well be non-economic.
And the way in which we look at it, one country may have a
particular economic structure in place for how they pay for
healthcare, but may have really bad health care because they
don't have good. Doctors, another country may
have a different mechanism for financing Health Care.
Might be a really good one. My might be bad health care or
good health care. Just again, depending on the
medical outcome. So you have to have separation
of categories in the way. You look at these things.
I love the title. There's no free lunch because
that gets to the heart of so many of the major issues.
When it comes to, there should be free college.
There should be free. K through 12.
There should be free healthcare. It's like okay one side thinks
that it should be free. That means everyone should have
it. So that must mean there's
another side where they just want to exclude people from
having this thing, walk me through how you would talk to
someone with the mindset of we can just make this free with the
Federal Reserve. Is digits into people's accounts
and this way everyone can buy this thing called college
education. For example, how is that not
free? If the state's printing the
money into our accounts and we're simply buying the product
for free. Well, first of all, the Federal
Reserve is not doing that with college.
The the government is state, is providing the funding and asking
that it be paid back and the state the College providers are
being paid the money. So it isn't funny money.
It's real money. And the colleges are being paid
that now. They could forgive the debt of
the person who borrowed it, but it wouldn't change the fact that
the money had already been spent, the colleges are not
willing to provide the education for free, but, but regardless of
that, I guess it's quite important.
When we talk about there, being no free lunch.
And when people talk about wanting either free medical
care. Are free college free, this free
that that of course, they don't mean free either.
It's a matter of changing who the payor is and that's fine.
But that is different than referring to something, actually
being free. So then the question has to be,
what is the optimal situation in socially and economically?
Should the person who is receiving the good or service
pay for it? Should someone else be compelled
to pay? For someone else, receiving a
good or service. We have traditionally in a
market economy. And in a free Society recognized
that the most logical payer of a service is the person receiving
the service, and when they cannot afford it, we have needs
based programs, which I believe in a very robust Society of
Charity and philanthropy, but I do, but I don't confuse charity
for compulsory activity when we force one to pay for the goods.
Services of somebody else. We haven't prescribed anything
charitable. We've prescribed something that
is actually coercive and the opposite of how a normal person
would Define charity, but when it comes to the question about
free, what we have done is push prices up at levels.
Never thought imaginable, all in the name of trying to create
Freer Healthcare or higher. Education or lower cost of
housing because when you subsidize something, you get
more of it and we have subsidized three things at a
massive governmental level at scale in the last 40 years.
And these are the only three things in our entire society
that have experienced substantial price inflation in a
period that is mostly been known until the last year or so for a
great moderation of inflation. And that is housing, higher,
education, and Healthcare, not coincidentally, the only three
things that the government subsidizes at scale.
There's a girl, famous Antonin, Scalia quote, the transformation
of Charity into legal, entitlement has produced donors
without love and recipients without gratitude.
We you explain taxation is coercive therefore putting it in
a separate moral category. What are some of the secondary
effects that Haslett would have us?
Look at when it comes to the effects of having a welfare
state Beyond also higher prices. Well, what I would say is the
first The most important I couldn't live with all the
others as bad as I think they are.
And as unfair, as I think they are, the number one component.
Is that the welfare state, Rob's the recipients of the welfare of
their god-given dignity. I don't believe the welfare
state is Affordable, but I'll put that aside for a moment.
I don't believe the welfare state is just for people like
you or me to be asked to foot the bill.
Bill for the welfare cost provided to others.
I don't think the welfare state is efficient that lack of a work
requirement. The administration of it, the
rampant abuse and fraud that takes place.
But when you put aside affordability, Justice and cost
as if those three things don't matter put those aside, you're
still stuck with the real fatal error, which is that it treats
people made in. Image of God as if they are,
merely recipients of others largesse as opposed to actual
productive, agents created with an ability to be Innovative.
And to be productive. I think it robs them of their
dignity. I think it's dehumanizing, and
it is the great moral iniquity of the welfare state mentality.
What do you say to the mindset? That the free market is the
institution which Rob's people of their dignity by turning
everyone and everything into a commodity that can be monetarily
purchased. Yeah.
Well, I think that, if I understand the question
correctly, well, you know, repeat the first part of it for
me. The wording you used is
interesting. The free market system, turns
everything into a commodity that can be purchased monetarily.
Therefore, that is what really Rob's people of their dignity
and Living. Well, spiritually, how do you,
what do you say to that mindset? Yeah.
I mean, of course on the merits of just the basic facts, it's
totally untrue. The free market is completely
incapable of turning love between a mother and daughter
into a commodity. Aditi.
The free market is completely incapable of turning.
The act of human compassion, 14 towards their neighbor into a
commodity. The free market is incapable of
turning the virtues. Those great character traits
that we exhibit in the way. We cooperate and transact and
Society into Commodities to the extent that the free market
takes goods and services that have values the free.
Market enables free human beings operating, under the rule of law
without coercion. It enables them to set up right
pricing mechanism. That is a glorious thing.
It provides a lot of information to people in the decision-making
process. It enables us to enhance quality
of life for others. It enables us to meet human
needs in a more efficient and productive manner.
It cannot make a commodity though out of scarcity.
T. Now, water and sand are more
available in our society than other raw materials that are
much more rare. So, the market is unable to
commoditize or, or solve for the problem of scarcity.
And the market is certainly unable to make a commodity to
turn into crass, that which is unclear ass virtue,
relationships loves things of that nature.
But what the market Does not do in.
Those regards is exactly what the central planner attempts to
do in those regards and fails miserably as the entire 20th
century as a testimony to what I love about this book is that I
could just turn to any page or any section and learn something
in like 30 seconds or at least be reminded of some of the great
wisdom that we have inherited. One of my favorite quotes was a
Thomas L, call you chose the most.
Most basic question is not, what is best but who shall decide
what is best? Walk us through why that's
significant, please. Well, I alluded earlier to what
Friedrich Hayek called the knowledge problem.
It is my belief that when decisions are made in in a
market economy that are being made by people who have more
time and place knowledge than a central planner ever could time
and place. Circumstances that individual
actors have better. Optics towards the situations
that face them. That require decision-making,
whereas the central planner because of the broad dispersion
of knowledge in a society can never.
Before they plan before they act have the knowledge necessary to
make efficient decisions, but what soul is getting at there?
There goes even beyond the knowledge problem, and it gets
into the incentive problem. What one might call skin in the
game. My View is that disinterested
third parties, lack, both knowledge and incentive.
And as nesam Talib is written in recent years skin, in the game,
cannot be defined merely on the positive front, meaning those
who will benefit from a good decision.
You know, we look at trade and we say, well, you know, What
this person's obviously buying something and paying for it
because they think they're going to benefit from its receipt.
However proper skin in the game, also requires someone to hurt,
if something goes badly, if they make a bad decision and the
decisions that get made need to bring pleasure when they're done
well and pain, we're done poorly.
And that's something that a disinterested third party, like
a central planner is Totally incapable of bearing, their lack
of skin in the game. Not only does not give them
positive incentives for advancement, but it doesn't
force them to deal with the negative repercussions of bad
decisions. So lacking positive incentives,
lacking negative incentives and lacking the basic knowledge to
Steward the Affairs of society. I can think of No Greater error
than And to delegate decision-making in society to
someone in that position and that's exactly what central
planners are lobbying for. What is the difference between
the federal government giving power to the state governments
who give power to the county governments versus wall, Mart
CEO gives regional managers power and those regional
managers give local managers power.
The progressive might look at this and say this is all top
down ruling but we need is the workers of the world to unite.
So therefore both of those systems, the free market and the
state. Of this knowledge problem, where
some people have way too much power for things.
They're totally distant from what is it?
The difference between those two?
Well, of course, the fundamental difference is that in the case
of Walmart decentralizing their processes their operating out of
a profit motive. If Walmart decides to put the
power of Bentonville Arkansas over, what is the most
profitable? Herbal, efficient, and, and
beneficial to the bottom line of the company that not only can
their board of directors, be removed.
Can shareholders remove managers, can the board remove
managers who make the conscious decision to utilize, and Steward
and Harold power over profits. But but you also theoretically
have a system in which the Bottom-up people that they're
reporting down to our decentralizing power down.
Do ideally, can tell them which decisions they can make most
officially which ones they can in a power environment with the
federal government example, no such structure exists.
They cannot Steward the Affairs of the economy because they do
not have the incentives to do. So.
Now I happen to think that the analogy Is still on the margin,
a good one for a basic business practices of subsidiarity.
I like local Walmart's having decentralized authority to make
decisions beneficial for their store, apart from the regional
level, the state level and what you might call the national
level. But of course in any
organization, they're going to formulate a hierarchy a
management system that is going The theoretically serve the
needs of the shareholders and optimize, what makes most sense
for the administration of the company's Mission?
The delivery of goods or services to the extent a company
becomes guilty of the same thing.
I fear with the government, which I think happens in
Corporate America all the time, there is recourse for such
suboptimal Administration, you can and You see this all the
time. You see shareholders lobbying
for the removal of overly bureaucratic managers.
Why do they want to do that? What is the thing that they are
watching when they are underperforming because we take
for granted in a for-profit entity that they have the
ability to, and the obligation to maximize profits, to optimize
the delivery of goods and services with the government.
Everything is rooted in the exact.
To sit. There is no assumption to be.
We can debate what level of bureaucracy and Central Central
planning is necessary within a private organization.
But with the government we take for, granted that there is no
need for such things. Subsidiarity is thrown out the
window entirely, and I go back to my prior point.
The reason is that power is held off as a means unto itself, an
end unto itself and, and Company at Walmart.
Could never get away with something like that.
They would lose to competition and consumers and shareholders
alike would hold them accountable.
That's the beauty of a market economy.
When people look at capitalism. It's usually seen as greedy
dog-eat-dog. Very focused on materialism.
You have a great quote in here. Capitalism is a system that
begins not with taking but with giving to others, how can You
say, such a thing capitalism's about greed and pursuing your
self-interest. Well, I believe that capitalism
properly understood is about self-interest and that market,
free enterprise system that I advocate for Define
self-interest as antithetical to greed greed, where one holds a
callous disregard of one's neighbor, has no In whatsoever,
in an economy of greed in a system.
Agreed. There's no reason to stop where
one may committee legality fraud, coercion.
As long as one can properly. Avoid getting caught.
It's devoid of any system of morals or Transcendent truth.
Generally in a market, economy is difficult to do because one
will get caught, but to the extent one, could just be become
very clever, at not getting caught.
They violate a basic code of morality and I believe that when
we talk about self-interest that we need to talk about it, in the
burkean sense of an enlightened self-interest that cares about
community that holds in high regard.
The concept of moral formation. So I Don't hold to a highly
secularized or humanistic sense of morality.
I desire that are market economy, be administered with a
greater pursuit of virtue and character and discipline.
However, in the state and encounter capitalist systems, I
remain mystified by one by one believes that those things
operate, devoid of greed by the obsession, with a power.
Religion over economic self-interest.
It does not strike me that we have achieved the Holy Grail of
good moral living. The former Soviet Union.
The CCP in China State actors that generally run on autocratic
basis, that are tyrannies, have not.
Additionally been known for their great benevolence where I
say that market economy is a mode where we can serve our
neighbor. Is it to tala G?
It is self a testing Lee true that in a market economy.
One must first identify, then meet the needs of another human.
In order to have access to a Profit Stream.
One can do so more efficiently than Someone else and turn the
knobs up or down on the way in which they exhibit greater
service, to others greater patients with employees, higher
regard, for their personal lives, greater amount of
flexibility, in the way one deals with a vendor, the
specific decisions will still operate out of a constructive
freedom and yet allow for, I true morality.
That is not compulsory, which is the only kind of morality one
that is not coerced. But fundamentally, I go back to
the two people on an island. We spoke about at the beginning
of our talk that if economics is the study of human action.
You cannot avoid the fact that human beings are going to have
to interact with one another in a market economy.
And that what most but still imperfectly promotes.
Also cooperation is a system in which one benefits by meeting
the needs of others. Great points there.
It's not like you look at Congress and say, well, those
are the selfless people in society.
Do they think that Congress like works at a monastery and is a
bunch of volunteers, who refused to take any money for themselves
or or any fame or any Fortune of of course not?
That's why books like this are so.
So, vitally important, you mentioned the work of Deirdre
McCloskey a number of times throughout this book.
Where they're generally getting into what's referred to as the
hockey stick of mankind. Where you have very little
economic growth up until say around the year 1800 and you
have drastic growth after that. What do you say is?
What caused the hockey stick of economic growth throughout human
history. Well, there really isn't any
ambiguity about what caused the hockey.
Stick growth after the enlightenment was indeed.
What? What Saskia, first is the great
enrichment, is the embracing of a modern economy after the
development of classical economics, that allowed basic
concepts of private property, and individual, human Liberty to
become some of the guiding precepts of how Society was
organized in the United Kingdom and eventually the United
States. So the Anglo World adopted
Certain social contracts that allowed for the rapid promotion
of a market economy and therefore greater human
flourishing to come with the classical school of Economics
that rejected. The mercantilism you had prior
basic, Birthright views to economics to feudalism.
There were four centuries entire.
Systems of thought that were incredibly limiting and the
ability to meet human needs and benefit from meeting human needs
through the development of Greater goods and services.
When you all of a sudden married, the ideologies that
stemmed out of the Enlightenment, the social
contract, and of course, the kind of development of the
American Experiment in particular, you you really
poured accelerant on the idea of economic enrichment coming out
of human Freedom shortly thereafter.
Let's call it 100 years. The this incredible ideological
phenomena was met with the Industrial Revolution.
Now the it is my argument that since the Garden of Eden.
This has been the story of Economics, which is raw
materials that already. Stood being met with human
Ingenuity, resulting in advancement of civilization.
But there's no question that after the ideas of the American
experiment were met with the technological.
Advancements of Industrial Revolution.
That we really saw some of the greatest hockey, stick growth,
this great enrichment. The mycoskie refers to in the
19th century. Ever thought possible, and we
haven't exactly slowed, the pace.
It's in the 20th and now 21st century is either.
I'm trying to get a solid definition of Regulation.
I think the closest thing that I came across was a what was an
article at Cato. The original meaning of
regulate. As in the Constitutional
authorization, to regulate interstate commerce was to make
regular in this sense regulations, provide customers
information and help people make informed decisions so that they
can protect themselves from dubious products.
When you hear that. And is there anything that
screams out to you? This is a unique thing that only
the states can achieve or can we achieve regulation in the
voluntary sector as well? Oh II believe that significant
amount of Regulation can and in fact is obtained in the private
sector that before we feel the need to provide a bureaucratic
definition or a sort of administrative definition to To
regulation we have to remember what a market is producer.
And a consumer are engaged in regulation with one another, the
ability to not buy a product the ability to adjust Jamaica,
formulated decision around one's reputation.
Now, you can make this more formal with Good Housekeeping,
seals of approval with voluntary trade groups with Consumer
Reports. Journals trade Publications.
There's any number of forms in which privatized regulation
takes place. But where we talk about State
regulation, we get into the Restriction of activity.
And again, there may be some forms of Regulation that we
decide we will tolerate as a society, you know, for example,
that we're not going to win a free and moral Society allow
people to refuse to serve. A good or service to someone
based on the color of their skin.
There's a certain civil rights regulation that we've said, we
will allow as a society. And and then working downhill
from that. There may be other forms of
Regulation less striking less obvious than those of civil
rights, that may or may not have a place, but fundamentally most
regulation is As the restrictions around voluntary
exchange that are imposed by a disinterested third party.
So our basic assumption around regulation should be one of high
skepticism. That's not to say that all
regulation is bad, but it is certainly to say that most
regulation is unnecessary and that Human Action being what it
was what it is. All humans are engaged in a
constant Act of Regulation themselves and yet they're doing
so with more knowledge. More incentives than a
disinterested, third party, like, Washington DC is doing in
1986 Thomas, Soul wrote a book, civil rights rhetoric verse
regality. I believe is the title and he
said that proceeding, the Civil Rights Movement.
You saw black literacy Skyrocket, you saw black
entrance into professional Fields, increase at a higher
rate than they did after the Civil Rights Act, after before
the Civil Rights Act in affirmative action, so Ed.
You saw a black family, staying together more.
You also saw an increase in income among black households at
a higher rate than after affirmative action.
Legislation took place. Do you, are you of the opinion
that this need for discrimination?
Legislation is actually unjustifiable or would you
support something like affirmative action and civil
rights legislation? Well again, I think that there
were about two totally different things, the Civil Rights Act of
1964. 64 that prohibited one in the Public Square from refusing,
service to a member of another race.
I think, is in the public interest of a free and virtuous
Society, that's categorically different than affirmative
action. In fact, I would argue
affirmative action in most examples or administration's
thereof is itself. Highly discriminatory.
It calls for by definition, the determination of a policy based
on the color of one's skin. And and so to me is very counter
to the notion of civil rights that is looking for a more,
genuinely free and open Society. So I would bring a very
different point of view about civil rights, then as then I
would with affirmative action. But the role of the state, in
these things ought to be very limited in case of affirmative
action, which is race-based quota systems.
It ought to be none at all. And the reason is not only
because the state is a bad administrator of such things,
but that because the very notion in my opinion, generates race
based outcomes as opposed to meritorious ones which ought to
be The pursuit of a racially, just Society.
If I had to say my favorite quote of yours in this book,
that there were so many to choose from, but use
specifically said, the vast majority of poor economic
policies. We have seen over the years do
not come from those who disbelieved key principles, but
rather those who fail to consistently apply the
principles, they claim to believe in to matters of
application. Please give me an example of a
principle that someone believes in but does not.
Not apply it. Consistently where?
Where they absolutely should. Yeah, there are so many examples
here. We can take the remainder of our
time. I think a great prevalent one in
kind of public policy has to do with Healthcare, where one says,
they desire better Quality Healthcare and they desire that
to be at a lower price and they've already established they
believe in principles of supply and demand and competition.
And yet then That when it comes to health care for some totally
inexplicable reason believes that competition reputation
Market forces would not produce the higher quality of service
and lower cost that a market economy, produces and every
other aspect. And so one is sort of making an
exception to the rule. Without justification.
I do believe this also to be the case of minimum.
Wage laws where one says, we believe that a price is to be
discovered between a voluntary to voluntary actors.
Neither, one of which is being is operating under a gun with
that, with with no threat of coercion or compulsion.
And yet we believe that somebody in Washington d.c.
Should set the clearing price for a wage between a worker at a
restaurant. In South Carolina and the new
owner of a restaurant in South Carolina and it strikes me as a
grotesque violation or principle.
That one would otherwise recognize they believe in.
Now I can go on and on two principles around credit and
sound money principles around the optimal allocation of
resources. I have no problem with people
who believe in the cause of a free enterprise.
Economy, recognizing the need for some legitimate function of
government, but when one operates as, if the expenditures
of even the legitimate functions of government, do not come at
some cost that they do not extract from what would
otherwise be a more optimal allocation of resources by
extracting from the private sector.
We at least have to recognize the principle.
That it is a sort of necessary, evil, in a free society.
And I think that that's where we get ourselves in a lot of
trouble. Forget these general,
time-tested principles. Alexandria Cascio Cortez.
And Bernie Sanders went to go speak to a group of Amazon
employees who were attempting to form a union.
And the general statement was were the ones.
Here we show up. We do all the work Bezos.
Basically just sits back and collects a check and all these
people are making billions. We need more money.
What would you say to someone? Who says the workers who show up
to the physical facility. They should be the decision.
Makers, not someone like Bezos who doesn't do any work.
Well, of course, every it's barely worthy of a response.
But to be as gracious as I can be, the work that Bezos did was
in formulating, the entire architecture of the business to
allow for them to be there to begin with and so the principles
of private property. Extended the ownership of a
business and the right to make decisions about the direction of
a business. And the labor also has
tremendous rights. Number one of, which is the
right of portability, the right to go work somewhere else and
utilize and leverage Market forces to their own advantage.
And we're company a is not treating them well or giving
them enough role in These are giving them long enough, lunch
breaks, or paying them generously enough in salary or
bonus compensation, or, or stock options, or whatever.
The case may be Company B or companies C or company D may
very well. Choose to do.
So, and employees, as free market actors made in the image
of God, have the ability to take advantage of choice and
competition to pursue a different outcome.
They cannot be compelled to work for a company.
Company treating them poorly, certain companies, choose in
their own management structure and corporate philosophy to
allow greater decision-making from employees than other
companies do sometimes, it's circumstantial.
Sometimes, it's even token, but the fact of the matter is that
the general primary responsibility comes down to the
management of a business and to try to take away.
That right and have a disinterested third party,
determine who should be the decision maker in a business is
a form of theft. It's a form.
It's a theft of the control of private property.
In this case, the business interest of an e-commerce
retailer, or of course, we can apply this to any number of
other companies. So the distinctly marxian notion
that the worker is at odds. With the employer or the
entrepreneur, or as Marx called it.
The capitalist that there is an internal intrinsic struggle
between the proletariat and the capitalist is a distinctly
Marxist idea. And one that does not stand up
to the testimony of history and the great social cooperation.
They comes from employers and employees transacting freely to
Gather for the betterment of all economic and existential
interests. Ludwig von mises wrote a book
planning for Freedom, where he says, what makes wages rise is
capital investment and competition.
Whereas I had always thought it was every few years, the state
steps in raises. The minimum wage organizes
unions, and that's what pushes wages up.
How do wages rise in a voluntary system wages rise in a voluntary
system for the same way that any price mechanism functions and Is
it is wages. Are a reflection of the
agreed-upon clearing price between a employer and employee.
And as the employee becomes more vital to the profits of the
employer, the employee generates greater leverage where it is
more indispensable and skilled and specialized labor.
The labor has even more advantage.
And so, it is constantly subject to Market forces, and Market
forces or subject, competition, competition.
Puts downward pressure on prices sold to a consumer, puts upward
pressure on wages. Paid to a laborer.
In the sense that the labor has when one sees the profits of a
business. Another producer is incentivized
to come in and enter the same space and And try to compete for
talent by offering more wages. This is hardly a mystery.
We see this in free agency and professional athletes.
We see it as Hollywood scripts, often times, by the way,
reflecting a distinctly socialist view of the economy,
our society and yet ironically agents are out pounding the
pavement to get the greatest possible.
Wage for their clients. The actors, the stars of a
movie. Who after their agent, competes
to get them from 15 million up to 20 million dollars in a, in a
performance fee, the actor then comes in and plays their role in
a script that denigrates the idea of Market activity.
The irony is rich, Fa Hayek wrote a book, The Constitution
of Liberty in which he says I just lost it.
Sorry. Our rapid economic advancement
is in larger, part and result of inequality and impossible.
Without it progress at a fast rate.
Cannot proceed on a uniform front but must take place in an
Echelon fashion. Why is it that inequality is
actually able to create more wealth for people at lower
income scales as And to inequality just benefits the
rich. Well, the first thing we have to
do is Define inequality and generally most in the classical
liberal tradition have understood that our aspiration
for equality as codified in the Declaration of Independence is
in that pursuit of life, liberty, and happiness, that the
equality meaning the right to life, liberty, and the pursuit
of happiness. Is enshrined in our Declaration
of Independence as equality, of opportunity.
And equality of outcome, is not something that we view as a
noble aspiration. For the very simple reason that
it is not a theoretically possible Pursuit that exact
equality cannot ever take place when we are dealing with the
subjectivity of A stand appetites when we are dealing
with Des differences in output and effort and risk, taking, I'm
fond of using the example of what we would happen.
If we took all of the Capital stock in the world and divided
it up perfectly evenly. Just right, we're gonna have a
great reset of wealth equality and that whatever the total
amount of capital Lambda. Land cash value is in the entire
world. We're going to divide it up,
equally by the number of citizens or or the population.
If you will, it would take something in the range of about
five seconds to have wealth inequality, because almost
immediately, there would be some stewarding more wisely than
others. Others making different
decisions that the free activity.
Human beings would create a dispersion of result
immediately. And so, any quality is not to be
thought of as good or bad, unless we're referring to the
quality of opportunity. That is encapsulated in the
concepts of life, liberty and pursuit of happiness.
But if we're talking about equality in terms of a paycheck
or a balance sheet, we're talking about something that
cannot and never has and never will exist, and would not be
beneficial. So to anybody, if it did exist
the quality of effort, what would would be a complete and
total non sequitur to this notion of human flourishing.
And so because we believe in different.
Tastes different efforts different risks, we necessarily
agree and believe in different outcomes.
So this is as much a logical conversation as it is an
economic one. And and to the extent that what
we want is a greater equality of opportunity.
It would behoove us to eliminate the central planner who plays,
such a vital role in the cause of cronyism that exist to
actually. Enshrine in equality, instead of
allow for continued fostering of innovation Ingenuity Ergo
competition. When I watch the G7 and people
like Justin Trudeau or Emmanuel macron, even Michelle Obama and
Barack Obama. Some of the most powerful people
on planet Earth, get up there and on the stage talk about
equality. Whereas there is the least
amount of equality between him and everyone else not only in
that room. But in the world you have a
general theory as to why people with the greatest amount of
power actually preached, the doctrine of Quality of all
things. Yeah, I have a very good idea
why they do. So, but it doesn't come from an
ideological commitment to the concept that comes from the self
protected agenda of power. That by preaching a concept of
inequality. They preached the concept of
aggrievement and that, as long as one believes that you can
govern the Affairs of society under the The pretext of there
being an oppressed and an oppressor, then you are be who
you are. Shall we say, catalyzing votes
in your favor all the while leaving a continually distressed
Society to show for it. So I don't think that the talk
of inequality, from leaders, like Trudeau reflects any
different understanding of human nature than the understanding
I've shared with you today. I think it stems from the self
in the business model if you will of politicians, and I think
it's unseemly. You discuss in the bookmarks,
verse freedmen, as far as the lesson of the 20th century or
lessons that we've learned after 1945, when it comes to real
world examples. I get the theory, I've read the
books show me where I can go, where I could see the free
market working and places that have more state-controlled
economy's doing worse off. Where are the empirical
examples? Oh, why thinking in the 20th
century? We see the general failure of
soviet-style Communism to deliver on the meeting of needs
of the working class. That was the great promise of
Marxism was to deal with The Angst.
That was an errant in the proletariat.
And because a market economy, delivered, many, many.
Many tens of millions of people satisfied in their work, in the
fruits, of their labor, in their economic advancement, that came
from there were and the Socialist Vision.
Resulted in such a incredible and systemic dissatisfaction.
I think that that argument became one of the easiest ones
to make in the for the cause. Milton Friedman versus the cause
of Karl Marx, but I would add that even if one is looking
Beyond worker satisfaction to a more generic dare.
I say econometrics, you know, you talked earlier about GDP for
me, you know, they'll of measuring things with some kind
of inputs. Well, I don't think history is
totally ambiguous here about where greater GDP growth.
Came from that as somewhat primitive parts of the world
very much. Mired in third world conditions
embraced on the margin greater Market reforms, they experienced
incredible growth of prosperity and such that Global poverty
saw. Greater reduction in, 25, 30 40
and 50 years out of Market, out of embracing of Market
mechanisms. Then we had seen in thousands of
years combined prior. So the testimony of history is
very clear and at this point the great debate is no longer about
whether or not we believe that a market economy or Ilysm creates
a greater outcome. Now.
We're just simply debating as to who ought to be in charge of the
administration of these things. And it's a debate I intend for
our side to win. Final question, sir.
Thank you so much for your time. What do you think is the
greatest contribution to the field of Economics by Adam
Smith? Well, there's no question that
Adam Smith is most known for his contribution.
The concept of self-interest, his famous quote about the
butcher Baker and Brewer that we have our dinner at night because
not of their benevolence. But because of their own
self-interest, did he enabled us to see the ways in which as a
kind of classical economists that market forces generate a
mutually beneficial result in a free Society, but I would argue
that we're Smith. Is that the biggest influence on
me and indeed where his thinking is most vital is when one
synthesizes, his two, great books.
First theory of moral sentiments and second The Wealth of Nations
to where the general concept about self-interest is married
to our understanding of moral formation in society, then leads
to not only the intrinsic, good of a free Society.
Sia T, but our ongoing Noble aspiration for a virtuous
Society. I think that Smith's work on
this synthesized objective is vital and why Adam Smith is the
greatest of the classical economist.
The book is there is no free lunch, 250 economic truths by
David bahnson links will be in the description below, mr.
Bonds, and thank you so much for your time.
Thanks so much for having me. I enjoyed the conversation.