Legalize Consenting Capitalist Acts

0:00Before I get into my talk, I wanted to just mention very briefly how I met Kirk Doolittle. My son Matthew had just got a job working at Microsoft and he was my baby and all alone here and we were in Vancouver at the time and I saw this guy just sitting at a Mises Institute event with a thing that said, Kirk Doolittle Bellevue and I figured, wow, you know, this is amazing. So I went over to him and tried to get him, cajole him to sort of mentor my son because I didn't realize that he was a nerd also, a fellow geek of my son, but it turned out that he was, and I'm just very delighted that Kurt and I and Laura, his lovely wife, who I met later, have become friends, and he has been a mentor to my son, so I thank him not only personally but also professionally for putting on this event.

0:52Thank you. We're just good friends. Our wives are here. We have to behave. I love you too. Uh-oh. I'm in trouble now. The title of this conference has to do with capitalism, capitalism the creator, and my topic is legalizing consenting capitalist acts. So I thought I'd start with a discussion of the word capitalism. The word capitalism was a denigration created by Marx to derogate free enterprise, businessmen, profits, earning a living through markets. And what we have done, it seems, has been similar to what the gays have done with queer. At one time the word queer was a denigration and they took it on themselves and they said okay Today we favor queer studies and we're queer, we're here, whatever.

1:55Similarly with the N-word for black people. At one time the N-word was a clear derogation and no one would dare use it, except in very malevolent ways, but black people have adopted it for themselves and use it with regard to each other as a way of sort of being in your face. Well, capitalism provides somewhat of a similar function for libertarians, because it started out as a derogation of what we regard as good and proper, namely free enterprise. And we have used this word as a word of trust or benefit or what have you. It's our flag, in a sense. How did I come up with this legalizing, consenting capitalist act?

2:45This came up from a person named Robert Nozick, who in some circles is perhaps the most famous libertarian. He was a Harvard professor, recently deceased, too early. He wrote a very famous book, Anarchy, State and Utopia, which was perhaps the only book that was given some sort of respect in academia. The books of Rothbard, who I regard as much, that I regard as much better, were not given the same accord in academia. And he had this phrase that we should legalize capitalist acts between consenting adults. And that sort of stuck in my craw, I thought that was a very nice way of saying it because our friends on the left were always saying that they favored consenting adult behavior.

3:35And for them, consenting adult behavior were things like pornography, prostitution, drugs, things like that. And what Nozick was saying is, yes, yes, we favor the legalization of those things. We don't have to favor them themselves, but we don't want to put people in jail for adult consensual behavior. That's a very subtle distinction that I have to make clear. As a libertarian, I do not favor these things themselves. I think they're harmful, immoral, what have you. But I think that since they do not initiate violence against non-aggressors, the people who perpetrate them or the people who engage in them should not have violence perpetrated against them, namely, they shouldn't be put in jail.

4:21So what Robert Nozick said is, okay, lefties, we'll do you one better. You say you're in favor of consenting adult behavior. Well, how about capitalist acts between consenting adults? Namely, he's trying to say, you know, in karate, what you do is you punch the opposite guy. In judo, you use the opposite guys or your opponent's momentum. He charges you, you toss him over your shoulder. So what Robert Nozick was doing was a sort of judo move. He was saying, okay, lefties, you favor consenting adult behavior. How Bad Capitalists Consenting Adult Behavior, namely markets. I don't know if this succeeded, but I thought it was a very good ploy, and that's how I got the title of this. Now, to return to Marx for a second, he thought that capitalists, that there were two forces, there was capitalists here and there was labor here, and the function or the purpose of capitalists was to exploit labor.

5:21And von Boehm-Bawerk, Eugen von Boehm-Bawerk, A famous Austrian economist wrote blistering attack on Marx. And after Boehm-Bawerk, there was really nothing left intellectually from the neck up of Marx. Boehm-Bawerk is part of the Austrian School. The main contributors to the Austrian School are Carl Menger, who started it, Boehm-Bawerk, Ludwig von Mises, after whom the Ludwig von Mises Institute is named, and Murray Rothbard, his chief student. What Marx said was that capital exploits labor, and he didn't realize what capital or capitalists or entrepreneurs provide for labor.

6:06Now, for example, suppose I am a capitalist and all of you people are workers, or as we used to say in Brooklyn, voycas. You're all white guys and what we want to do is go into business making these podiums. Well, we're starting from scratch right now. You're all poor workers. You don't have much money. I've got a bit of money. Suppose you were to try to do this by yourselves without me. In other words, if I'm exploiting you, well, get me out of the picture and let's see how you guys do on your own. Well, before you can make If you want to make these podiums, you've got to buy some land, you've got to put a factory up, you've got to buy some wood, you've got to get machines that will cut the wood and you've got to buy some screwdrivers and other things that make these podiums.

6:55How long is that going to take you? How long before the first podium comes off the assembly line? I don't know, half year, year, whatever. do in the meantime to eat. There's no salary because the capitalist supplies the salary. What you people are going to have to do is use your own savings to finance yourself for the year or the half year that it takes to make these podiums. So that's the first thing that the capitalist provides for the workers. He provides time between the onset of the business and the The first product of the business comes off the assembly line. But he provides something else, because suppose we make these dark brown podiums, and in a year later, right now they're selling, everyone wants one, but a year later what they want is short truce podiums, or pink ones, or something like that, and we can't sell them.

7:54So now you guys are up to your armpits in podiums, but they can't sell, so again you're You're in trouble. Whereas, if there's a capitalist, what the capitalist can do is bear the risk. So that's the second function of the capitalist. He bears the risk. The capitalist can't come to you and say, hey, you know that salary I paid you for the year necessary to get the thing going? Well, guess what? It didn't sell, so give me your salary back. You can't say that because it's contractual that he is going to be the one who bears the risk. And the third thing that the capitalist gives to the workers to indicate that he's not exploiting the workers is entrepreneurship. It's usually the capitalist's idea to produce these things or a better mouse or a better mouse trap or whatever it is.

8:39Better mouse as in the Disney kind of mouse, not the mouse that crawls around. So the capitalist is giving something on the basis of which he deserves his recompense, I venture to say that if Marx were alive now, and the present Marxists, who would their public enemy number one be? Who would their poster-trial for evil capitalists be? Walmart. Walmart, as we know, exploits workers. Ha ha. They set up a new place in Bellevue or in Seattle or wherever, in some places they're not allowed to, like New York City, they've tried, but the political powers that be will not allow them to set up a place in New York City.

9:36But let's say they set up a place and they're looking for 500 workers, typically they'll get 5,000 people lining up to get those jobs to be exploited, which is ludicrous. As an Austrian economist, and by the way, Austrian economics has nothing to do with the economics of Austria, it just so happens that the leading Austrian economists all came from Austria, that's why it's called Austrian economics. As an Austrian economist, we can deduce from the fact that somebody's working for Walmart, the fact that, at least in his or her own eyes, that's the best option available, because there are other options available that they regarded as better, What am I doing wrong? Chad, are you? I'll just keep going, okay? Maybe if I go like this, it's bad. Whoops. I can't do that. That takes away half my power here. This is my favorite move.

10:40So what I was saying is that the Walmartians are not exploiting anyone. And yes, they are putting some mom and pop shops out of business, but so did Henry Ford put the horse and buggy industry out of the market when he came out with the horseless carriage. That's what capitalism is. It's an attempt, as Mises saw so clearly, to get things for the consumer. It's no accident that the relative There are relatively poor people in areas where you have capitalism, have refrigerators, have air conditioners, have radios, TVs, refrigerators, all sorts of things that would be the envy of most of the rest of the world.

11:26Mises makes the point that capitalism helps the poor more than the rich, because take a small car. Well, compare the people nowadays with a small car with 200 years ago when the king or the prince had a carriage or the poor had a walk. Okay, now the king or the prince or the big businessman now has a Cadillac or a Mercedes, but a little teeny car is closer to a Mercedes than walking into a carriage with four horses or take light bulbs. The rich person has a wonderful chandelier. The poor person just has an electric light. But in the bad old days, the king had all the candles he wanted, whereas the poor were consigned to the darkness.

12:13So what Mises mentions and emphasizes is that capitalism makes everyone richer, but it makes the poor relatively more richer than the rich because of this sort of mass production. So what Walmart is doing is bringing lower prices to the Poor People and yet they are the poster enemy number one of the modern day Marxists and it's just a big problem. There are three areas in which a political philosopher or an economist can have views as I see it. It's interesting that libertarians agree with the left more than the right on two out of these three issues, foreign policy and civil liberties, civil rights, than with conservatives, and yet somehow I feel more of a kinship with conservatives. I think that most people who are now libertarians came from conservativism. I'm not sure why that is. It's a puzzle. We'll have to write something. If anyone's got a great idea, tell me in the comments.

13:26Well, on foreign policy, Ron Paul has mentioned again and again, eloquently, that the U.S. has, what is it, some 700 military bases in 130 different foreign countries? And to think that this is defensive, I mean, suppose another country did that, China, Russia, Iran, whatever. Would we think that that was defense? No, we would think it's offense. Not that the left is good on this, the democrats sort of like democrat wars, they hate republican wars, but they're sort of a little bit better than the mad bombers on the right. So I would say libertarians agree a little bit more with the left on that view than with the right. Not that much more because they're not that much better, the left than the right, but a little bit.

14:16What about civil liberties, civil rights, discrimination? Well here, I think the left is very bad, and this is the area where, well, I don't know. I changed my mind on that. I think, again, the left is a little bit better on this than the right is in terms of legalizing all sorts of sexual and drug-related kinds of things. In Canada, the only party that wants to legalize drugs is the NDP, which is the far-left party, whereas the right-wing party, the progressive conservatives now are dead-set against that. Let me talk a little bit about drugs, heroin, marijuana, cocaine, things like that.

15:05Again, I am certainly as a libertarian not advocating their use, but I am saying that if we prohibit them, we have problems. Problems. Happily, for intellectual purposes, we have a wonderful example, or horrible example, however you want to look at it, namely the prohibition of alcohol. We had alcohol prohibition in the thirties, and we saw what happened to that. Bathtub gin, people dying of impure drugs, alcohol, people shooting each other in the streets over alcohol. Nowadays, under legalization, it is still a social problem, there are alcoholics, but it's not It is a medical problem, but it is not a social problem. Nobody is in jail for killing anyone over alcohol.

15:55Whereas nowadays, the estimates are that some 60% of all people in prison are in prison for drug-related issues. Either buying and selling drugs, or shooting each other over drugs, or since the price of drugs is so high because of the prohibition of it, They're stealing stuff in order to feed their habits. This is a devastating policy. And again, the left is a little bit better on this. Libertarians are clear, we should legalize these things.

16:28Again, we have children. We would not want our children to do this. But if our children did this, we wouldn't want them to be put in jail. That would be the ad insult to injury. So again, I'm not favoring the use of these things, but I am saying that the prohibition of them is highly problematic. Similarly with prostitution. There are places in this country where prostitution is legal, namely Nevada, except for Las Vegas. And there, the problems of pimping and beatings and bad health and other things do not arise. When the market is allowed to operate, the industry is much more rational than when it has to go underground and it is criminalized.

17:15So here, the libertarian, with maybe the exception of the feminists on the left who are against these things as much as people on the right, the libertarian sort of veers a little closer to the left. So here we have two out of three areas where libertarians and leftists are a little bit closer to each other. Not much closer, but a little bit. How about on economics? Well, on economics, clearly the libertarians are close of conservatives. Not that the conservatives are all that good. I remember watching the Republican debates and Ron Paul was there. He wasn't allowed to say much, but he was there. And you had Matt Barmer, McCain. And what McCain said was, I think it was sort of an aside, but sometimes asides indicate where your heart really is. And what he said is, well, these These people were out after profits, and he sneered, you know, profits are evil.

18:10Well with a guy like that, championing our cause, you know, we're in trouble. Profits aren't evil, profits are part of voluntary transactions, indeed every voluntary transaction you make profits. Look, if I want to trade you this pen, your pen for my tie, I like your pen more than my tie, so I'm willing to give up my tie for your pen, I make a profit of the difference The difference between the value I place on the pen and the value I place on the time. You people, on the other hand, are giving up your pen for my time. That means, necessarily, that you value my time more than the pen. And the profit to you is the difference between how you evaluate the time and the pen. So we're both making profits. We're both exploiting each other.

18:55Come on, give me a break. We're not exploiting each other. Or rather, what we're doing is each cooperating with each other. Let me talk about a few economic issues. Because sometimes economics are more complex than these other social issues. Let me talk about the minimum wage for a few minutes. That's one of my favorite examples to indicate or illustrate and the perniciousness of the left's view on economics. What is the minimum wage law? The minimum wage law is a law that says it shall be illegal to pay anyone less than $6 an hour. I don't know what the level is. It went up from $5.15 or $6.15 or something like that.

19:43It's on its way up to $7, but let's suppose it's $6 an hour. The law says that it shall be illegal to pay anyone less than $6 an hour. What's your name, Mark? Here's a guy in a pink shirt. Suppose I go to Mark and I say, Hey, Mark, please wash my car and I'll pay you $4 an hour. And he agrees. We can both go to jail for that. Talk about a capitalist act between consenting adults. Imagine putting me in jail and him in jail. They've never put him in jail, but they should, according to the law. For making an offer to an adult person to make a commercial transaction, you go to jail for that. Now why is it that people accept this sort of a thing, that the average person acquiesces in the minimum wage law, when they have plebiscites or referendums on the minimum wage law, typically it'll win by three to one, four to one.

20:38The reason is, I think, that most people think that a minimum wage law is sort of like a floor under wages. If you keep it at $6 an hour, then no wage can go below $6. And if somebody like Mark is now making $4, well, the $4 will push him up to $6. And this sounds nice. I mean, it sounds humane. The poor are poor because they're making low wages. Well, with a stroke of the pen, we'll just raise their wages. What could be wrong with that? Well, one thing wrong with that is a violation of rights. I mean, I'm going to jail for making a perfectly reasonable offer. On an economic basis, though, this is totally misbegotten and mistaken. The minimum wage law is not a floor under wages that raises wages.

21:28Rather, the minimum wage law is a hurdle over which you have to jump to get a job. Let's discuss why people get jobs in the first place to make it a little bit more basic. What does the employer want out of the employee? What the employer wants out of the employee is his productivity. Namely, how much can this worker add to the bottom line? That establishes a maximum that he'll pay. So, for example, if Mork's productivity is $4 an hour, I hope you don't mind me using you as this negative example. The only reason I pick on people close is I can't see far away and I can't see who's out there, He had the misfortune of sitting close to me, so I can sort of see him. His productivity is $4 an hour. I, as a capitalist pig, what would I like to pay him?

22:18Well, I'd like to pay him negative infinity. But I'm humane. I'll offer him a penny an hour. I don't want to get him uppity with too high a wage rate. But if I offer him a penny an hour, that means I'll be making $3.99 pure profit off of him. And we have this young man here, Zed, who was also a capitalist pig, who sort of is rooting me on to say, yeah, go get him, exploit the hell out of him. But then he says, but better than I make $3.98 off of him than Block makes $3.99. You get it? So what Zed will do is offer him $0.02 an hour. Now my wife here, Marybeth, is also a capitalist pig. She wants to maximize profits, and she'll offer three cents an hour.

23:09Because better that she make 397 exploiting mark, than Isaiah 398 or me, 399. You see where this is going. It's going up toward four dollars an hour. Because if the wage is below productivity, that opens up a profit opportunity for exploiting employers to exploit workers by offering higher wages. Suppose the wage is somehow $7 an hour, and his productivity, remember, is $4 an hour. Well, that means I'm losing $3 an hour on his work for every hour I have him. If I keep doing that, I'm going to go broke. Maybe I can do it if I'm rich enough, one or two employees, but that's no way to run a railroad. So the wages tend to be $4 an hour, and if you compel an employer to pay a worker $6 an hour, nd the worker is only worth $4 an hour, he's going to lose $2 an hour on him, he's not going to hire him.

24:03That's why you have unemployment rates that are much higher for blacks than whites, that are much higher for teens than adults, because blacks have lower productivity than whites, for reasons that we don't get into as economists. Older people in their 50s and 40s have higher productivity than teenagers. That's why you have higher unemployment rates for people with lower productivity, Because fewer of them can jump over the hurdle to get a job in the first place. If the minimum wage law was such a great idea, why be so niggardly, use that word advisedly, somebody got in trouble for using it, but I think I'm safe here. Why be so niggardly? Why raise it to six or seven? Why not raise it to, I don't know, 100,000 an hour?

24:52I mean, we'd all be rich. We could cure poverty. But no, those pinkos in the Congress, they won't do it. Why? They should do it. Of course, we'd all be unemployed at $100,000 an hour, because the minimum wage is not a floor under wages raising it. Rather, it's a barrier over which you have to jump to get a job. If the minimum wage law is such a great idea, why do we have exceptions to it? Who do we have exceptions for? Preeminently teenagers who have low productivity. And during the summer, all these people are always advertising that we should give teenagers a job. And also for mentally handicapped people. Physical handicaps don't matter too much with regards to productivity.

25:39I could give this lecture in a wheelchair, right? Mental handicap is a problem in terms of productivity and what they discovered with regard to mentally handicapped people is that it helps them to have jobs and somehow they consent when it's a real job job and when it's just raking leaves for the government. And when they had the first minimum wage law in 1934, 43, somewhere in there, I forget, they didn't have an exception for handicapped people and no one would hire any handicapped people so they made an exception. But if you have to make an exception, how does that indicate that it's a help, that it's a floor under wages raising, and rather it's more evidence that it's a barrier over which you have to jump in order to get a job?

26:30There are some people, Cardin Kruger, you have to go to Princeton or be a Princeton economist to make this kind of mistake, who wrote this paper saying, well, the minimum Minimum wage law isn't so bad, you know, it actually raised wages, and when other people try to replicate their empirical research, they were unable to. And Clinton, that is Bill Clinton, relied on this in support of the minimum wage. Look, this is not an empirical issue. For Austrians, it's an apodictic, logical thing. It's sort of like triangles have 360 degrees, or the Pythagorean theorem is correct. and measure triangles and see if they have 360 degrees. If they don't, they're not triangles. This minimum wage law that says that if you assume profit-maximizing behavior or profit-seeking behavior, raising a minimum wage above productivity means unemployment.

27:20You don't test that, you illustrate that. Similarly with the pen and the tie, you don't test that, you illustrate that. And if you try to illustrate and you don't do it correctly, well, you know you're wrong, because we know which is the dog and which is the tail. The logic for the Austrians is the dog, not for our friends who are the mainstream economists. See, the point is, suppose I am now hiring you and we're all making these podiums and your productivity is all, oh, $4 an hour and we raise the minimum wage law to $6 an hour, do I fire you all in one second? No, I can't fire you all in one second. Look, the reason that Major League Baseball players throw the ball at the batters at around 100 miles an hour, 90 miles an hour, is because the faster the ball comes, the less time you have to react. Well, the shorter the time you have to react, the less reacting

28:16you can do. So yes, in the next minute, I'm not firing all of you guys, but over the next weeks and months, what I'm going to do is start hiring higher productivity workers with and maybe more sophisticated capital equipment, and one by one letting all you guys go. The minimum wage law was raised from 40 cents to 75 cents in 1951 or something, I forget the numbers, the exact year. In the old days, some of you people my age will remember this, you'd get into an elevator and there'd be this guy standing there. He wasn't a pervert. Rather, you would tell him what floor you wanted and he would sort of move this thing Young people, you whippersnappers, you don't know from this stuff. I say, I don't think he understands.

29:03What? What are you talking about? The guy's a pervert if he's hanging around in an elevator. They raised it from 40 to 70 cents, which was the highest percentage raise of the minimum wage ever raised, almost a doubling. And the next day, how many manually operated elevator people got fired? None. Not a single one. Everyone said, whoa, look at that. What do you do? The minimum wage law is great, great shakes. Everyone's wages rose. It is a floor under wages. But then what happened? Over the next six months, 12 months, 15 months, they started bringing in automatic elevators. And there was no connection made by anyone. Everyone thought, oh well, you know, it's the interest rate, or the times are changing, or it's innovation.

29:54They had this technology. It's just that the technology was not able to out-compete 40 cent workers, but it was able to out-compete 70 cent an hour workers. So don't expect the minimum wage law to have effects right away. It takes a little time, and then economic theory kicks in, takes in because economic theory says that things take time. You can't act instantaneously unless you're in the never, never world of perfect competition, beloved of our friends on the mainstream economics. Let me take a few more examples to illustrate the benefits of capitalism and the problems of regulation, interferences with markets. One of my favorites is the laws against sexual discrimination and racial discrimination.

30:44I just love this stuff. No, I'm not serious here, I'm joking. Walter Williams, a black friend of mine, tells the story of when he wanted to get married. And he decided, he played for the hetero team, so he decided to marry a woman. Well right then and there he is discriminated against half the human race. Despicable fellow! Look, heterosexuals discriminate against half the human race. Male heterosexual refuses to go to bed with another man. Female heterosexual refuses to go to bed with another woman. So all heterosexuals should be in jail for violation of human rights. But even homosexuals, disgusting pigs that they are, also discriminate against half the human race.

31:34Mainly, male homosexuals refuse to go to bed with any female, and female homosexuals refuse to go to bed with any male. The only people that pass the muster under this law are bisexuals. So, what we really should have is compulsory bisexuality for everybody. That is, if they were serious about their crappy views. I mean, you know, one way to see if these people are serious about the views is to take them to the logical conclusion, to try a reductio. We say, okay, you're against sexual discrimination? Well, let's try it out. Homosexuals? No. Heteros? No. Bi. Bisexuals. Groovy. Take this thing about restaurants.

32:20Now, it would be illegal for a restaurant to refuse service or employment to an Italian person. But suppose we're in an Italian restaurant, so I'm picking that as an example. Suppose we say we hate Italian food. Is anyone going to force us to come to an Italian restaurant to eat pizza? No, but they should, if they were serious. Now, it's true you can't figure it out, it's theoretical, it's hard to do. But if somehow we had God's eye view and we could look down on people and see their inner minds and say, Aha, you hate Chinese food, off to jail. You hate the soul food, you're a racist, you know. And we'd put people in jail for refusing to patronize the restaurants that we think they should be patronizing.

33:06Walter Williams is despicable on many other levels. In addition to wanting a woman, he wanted a black woman. Horrible, man. And he wanted a pretty one, so he was a lookist. And he also wanted an intelligent black woman with a sense of humor and, you know, sort of who was there together, you know, not mentally ill or whatever. So he was discriminating on many, many bases. He really should be in jail five, ten times over, as should we all, because we're all a bunch of pigs on the basis of these crazy laws. laws, and yet somehow these laws are seen as okay, preposterous. Why is it that women earn 70 cents for every dollar that men earn on the market? Well, our friends on the left will tell us that this is due to the inveterate, basic sexism of the market. This is nonsense Supposed Colin and I can each run the mile in 4 minutes and 30 seconds and we get up to the starting line and all of a sudden I put a 50-pound sack on his back. Who's going to win the race?

34:24Obviously, I'll win the race. Well, men and women are equally productive this century. In past centuries, men were a little bit more productive because upper body strength meant something. You know, you had to push that plow or lift that bale, tilt that something or other. Men were a little stronger, so men were a little bit more productive. But nowadays, the way to excavate a big hole for a new building is with a steam shovel, and women can push the button just as well as men. So there is no difference in productivity between men and women. But women have a 50-pound sack on their back. It's called household baby care, non-market activity in the home.

35:11I want to take a little survey here, and I'm going to give you three choices. And if you're married, use your own marriage as an example. And if you're not married, use the marriage as an example with which you're most familiar, presumably that of your parents. And I give you three choices. In your marriage, or the marriage that you're now contemplating, the wife does more housekeeping, baby care, shopping, cleaning, all sorts of household-related issues, and the husband does less. Raise your hand. Virtually most people. Okay. How many think that it's equal between the wife and the husband? Roughly equal. bunch of liars out there and how many people think that it's the other way around that the husband does more than the life ah one liar okay two liars sociologists I'm no big fan of sociologists either all a bunch of commies have done studies showing that the numbers that I got here namely 90 I mean, 95% gave more husband than wife household and a few gave equal and one or two gave the opposite.

36:26That's true. And it's been true for years and years and years. Look, how many concert pianists are professional golfers? How many top flight physicians are great tennis players? Very few. We have such a thing called specialization in division of labor. If you're going to put a lot of time and effort into housekeeping, it's a little difficult to also be very productive in the market. You get this cartoon where the husband and the wife, they're both PhDs in chemistry and they both work from nine till nine and then they come home. And what does the husband say to the wife? What's for dinner, dear? In other words, even when they're are equally productive in the market, still the wife is doing way more of the housekeeping and the cooking and the cleaning and stuff like that, and the wife has much of a less of an attachment to the labor force, so they both get a job, they're both living in Seattle and one of them gets a job in Boston, if it's the husband who gets it and the wife is the

37:30trailing spouse, they're more likely to take it than if it's the opposite. And also, if the wife thinks that she's going to have three kids aged three years apart, so from the time the first kid is born until the last kid is in grade school and can go off to school, it's 10, 15 years, even though she has a PhD in chemistry equal to her husband's and even though she's as bright as him, she's not going to be able to keep up with him because she's got a 50-pound sack on her back. Now, there are two proofs of this, or two evidences of this. One is that if you take all females and all males and you compare their wages, the females earn 70% as much as the males. But if you take never married females and compare them to never married males, the wage differential disappears.

38:23And if you just take married or ever married, widowed, divorced, separated, whatever, then the ratio is way below 70, it's more like 40. That's one indication. If you take age as a proxy for marital status and look at the male-female ratio of people under 23, again, there's no difference. Because most people under 23 haven't been married, haven't been biased by the institution of marriage. So it's the institution of marriage, it's not anything endemic to capitalism that is unfair. Let me give you another one. CEO salaries. Everyone says, well, CEO salaries, they're just out of control. The CEOs are making zillions, and the people on the shop floor are making $12 an hour, and it's unfair.

39:12And capitalism helps the CEOs and hurts everyone else. Well, there's this guy, Michael Milken, who, before he went to jail, specialized. He was the market's antidote to this sort of a thing. What he would do is, when he saw a CEO's salary way above reasonableness, he would buy shares of stock in that company, and he would make a hostile takeover. That's an interesting one, hostile takeover. You know, in the market, the market consists of all sorts of voluntary actions. Remember the pen and the tie? How can you have a hostile takeover? I mean, if I want to buy Isaiah's wristwatch and he agrees, where's the hostility?

39:58He agreed. The hostility comes about similar with the Microsoft trying to take over Yahoo, its so-called hostile takeover. It's hostile in terms of the managers of Yahoo, but it's not hostile in terms of the stockholders of Yahoo. If they're willing, then there's no hostility. So what Michael Milken would do is would buy up shares of stock and then take over the the executive or take over the company and boot out the overpaid executives and we saw what happened to him he was put in jail on all sorts of nefarious charges so here the the critics of the capitalism the critics of the market have the effrontery to say that CEO salaries out of hand and it's due to capitalism on the one hand and on the other hand they put in jail the and the person who is acting so as to ameliorate the problem.

40:47Well of course there's going to be a problem if you prohibit the market's response to it. So we have another invalid criticism of the market. Let me try another one on you. I teach in Loyola University, New Orleans, and we had Katrina a little while ago, three years ago. I say a little while ago because we're still not past it You can still go to New Orleans and see houses that are halfway up a tree or something. I mean, it hasn't been solved yet. See, I'm not really that angry at FEMA or the Army Corps of Engineers. So what? They killed 1,000 people. What the heck? You know, 1,000 people. What really bugs me is that they're still in business.

41:34Look, the reason they put erasers on the end of pencils is because people make mistakes. Mistakes. The vicious part of it is that in the market when you make a mistake you're out of business. You lose money and then you go bankrupt and other people come in. Where is Pan Am? Where are these other companies that didn't do so well? Where is Snyder Baker? The Army Corps of Engineers and FEMA, my favorite bumper sticker is FEMA happens. I've got it right on the door of my office, wonderful In any case, what happened right after FEMA was just really great. Not only couldn't they help the people of New Orleans at all, but Lew and I have an article co-authored, a series of two articles on that, where we show what they did mainly was prevent places like Walmart from coming in and bringing stuff to help the people.

42:34Well, what happened to prices of things like flashlight batteries, orange juice, milk, water, bread, things that people needed in the aftermath of Katrina? Gasoline. They went up. They went way up. Now there are salutary benefits of high prices for things like that. One of them is rationing. At the old prices, if you're the first in line at Walmart, and the prices of orange juice and flashlight batteries and candles are at the old low level, What you do is you grab up as much as you can, because who knows if you'll need it or not, and you march out of the store.

43:19Namely, you're not acting in a cooperative way with regard to people at the back of the line who aren't going to get anything if the people in the front of the line hog it all up. But if the price rises tenfold, you start saying, well, do I really need 3,000 flashlight batteries? No, you know, I can do with 10. Thus, you leave some for the other people. by the people, namely, the market capitalism is encouraging us to act in a way that is reasonable and responsible. The second benefit of a catapulting price is, well you see right now, or right then, the only motivation people had at the old low price to bring stuff in from Kentucky and Seattle or wherever was compassion, benevolence, people in New Orleans are hurting so let's But as Adam Smith said, you can only go so far with benevolence. If you have a problem, you want to mobilize all human capacities, not just benevolence, of which we have plenty.

44:21But you want to mobilize selfishness too. So at a high price, not only do we have benevolence, but now we have selfishness. People say, well, I'm not selling any flashlight batteries in Seattle. Or someone says, I'm not selling any orange juice in San Francisco. San Francisco, I'm going to bring it to New Orleans to take advantage of the high prices to exploit those people by bringing in stuff that they're in desperate need of. And when they do that, the prices then tend to move toward some sort of equilibration. But Governor Blanco is having none of this. Oh no, no, no. These price gougers, they're evil, they've got to be put in jail. And the people were applauding her, whoop-de-doo, put the price gougers in jail. See, they just, they're economic illiterates. They think that somehow that the market, capitalism, the price system, the profit system is against them.

45:14They don't realize the benefits of it. They don't realize this benefit in terms of rationing and bringing forth new supplies, and they applaud this. Let me give you another example, public housing. Two of my favorite boxes were the Spinks Brothers, S-P-I-N-K-S, Michael and Leon. They both won gold medals in the Olympics in 84. One of them lost to Mike Tyson later on. The reason I bring up the Spinks Brothers is they lived in the Pruitt-Igoe houses in St. Louis. St. Louis, and the Pruegot-Igoe Houses where it was a public housing unit of just gargantuan proportions. There were maybe 50 buildings each 30 stories high, really, really big, and they had to blow them up, and this wasn't terrorist. Well, it was. The U.S. government had to blow it up. Why? Because these places became dens of iniquity.

46:20You know, there's that movie Lord of the Flies, and in Lord of the Flies you sort of get a A Ten-Year-Old Boy's Version of Heaven, Killing Each Other Well, the Pruitt-Igall Houses and public housing are more like a 15-year-old boy's version of heaven. Because what they do in public housing is they have, public housing is supposed to help the poor, so you have an income level. And if you get above the income level, you get booted out. Well, who's going to get above the income level, or who's not going to be allowed in the public housing in the first place? intact families with a father present. So the people in public housing are female-headed households and the women are unable to control the teenage boys because traditionally the people who teach teenage boys respect, watch out Isaiah, are adult males. But if there are no adult males there then the place becomes havoc. Did they learn anything from this?

47:16No. They decided well instead of having high-rise we'll have low-rise public housing. But it's That's the same thing. It doesn't matter how high the buildings are. If there are no adult males around, you're going to have chaos. This latest thing with microfinance, where the eunice has got some sort of medals for giving money to women, cut out men, men are the evil. Look, an intact family is one of the best ways to cure poverty. If you try to break up the family, whether with welfare, with public housing, with microfinance, with or any other way, men are part of the solution, not part of the problem. The problem in the black community, the poor community is not men, it's the fact that there are no men there.

48:03A lot of them are in jail or they're in their grave before their time due to drug prohibition. Why is it that if the case for capitalism is so rational and so secure based on empirical findings, why is it that we don't have capitalism? Why is it that Ron Paul only got five, eight percent of the vote? Why is it that there isn't a Mises Institute in every city or that there's no Mises Institute at all because we don't need one? My explanation for this, is pushing up the rock of Sisyphus, and then it comes down the fact that every time I got a freshman class, they're all a bunch of commie, pinko kids, and I have to sort of, you know, bring it out of them.

48:57It's due to sociobiology. Sociobiology is the theory that we are the way we are now because of what it took to survive a million years ago. 50, and there you could only have explicit cooperation. I scratch your back, you scratch mine, I help you move this bowl, you help me move that log, I help you with food when you didn't get any, you help me the next day. Explicit cooperation. We're hard-wired for that. That's why when there's a tragedy somewhere in Myanmar, Burma, everyone is saying, oh wow, you know, we've got to help. It's the human condition. But we're not hardwired for explicit cooperation, or rather implicit cooperation, through markets. The only way you can deal with 300 million people, or 6 billion people, is implicitly through markets.

49:46You know, the Hollywood people say they're going to invite 10,000 of their best friends to their birthday party. We're not constituted to have 10,000 best friends. We can't. We can hardly remember, you know, 100 people, 500 tops, whatever, namely, what it meant to survive and leave genes to the next generation a million years ago. That's why we don't appreciate markets. That's why we don't appreciate capitalism. That's why there'll always be a need for the Mises Institute until biology changes, which takes a long time. That's why it's an upward struggle. I'm not depressed about this. To me, it's the most enjoyable thing in the world to tweak noses, to promote liberty where we need it very much, even though it's hard to do because people are biologically not attuned to it.

50:43Thanks for your attention.