Monopoly and Anti-Trust, Monopsony

0:00Okay, I guess we're ready to start. This is the ninth and penultimate session of the Radical Austrianism, Radical Libertarianism, a Steve Berger seminar with Walter Block. This time I'm reading it, so I'm getting it right. Usually I mess that one up. Could we please start with a moment of silence? Okay, before I start on today's topic, which is monopoly, And I'm going to stick in a few other points on which I make some radical analyses. I wanted to take care of a few housekeeping details, questions that arose from the last session. One of the questions that was raised from Noah was, Is it possible that if you had a full free enterprise economy, there would be less equality, more inequality?

1:00Remember, the way we had it was here was economic freedom, and here was inequality, And there was some sort of line like that, namely, the more economic freedom, the less inequality, but could it have been U-shaped? And I was thinking about that, and it seems to me that it's praxeological that it couldn't be, because if the only thing that's varying is economic freedom and coercion, and we know that economic freedom benefits both parties to it, Then, it has to be, I think. I'll have to think more about that, but that's my inclination.

1:48However, we're now talking about statistics, and when you have statistics, you have GDP, which has problems, and you don't have ceteris paribus. There are other things that are going on. For example, suppose you had a society that was totally and completely economically free, Only you had a frequency distribution of IQ, something like this, two tails, you had very stupid people and very smart people and that was free, a free country like that and then over here you had an IQ and here's the frequency, where everyone was the same, there were virtually no people in these little tails. Well, now, the free economy would tend toward equality, but you're starting off with such unequal people that you might not get there.

2:43And this might end up being more equal, provided it wasn't too unfree. You get the point? And the statistics that we did don't even think of taking into account anything like that. It's politically incorrect to think about IQ, I suppose, and certainly the data doesn't consider it. So I think it's a praxeological point, and I speak on the correction as I do on everything, but you can't count on the statistics. The second point that came up in the coffee clutch after the session was somebody falls off the 25th story of a building and he lands on the 15th story and he's holding a flagpole.

3:28and now he wants to crawl his way back down into the apartment and you know get in the elevator and go upstairs and stay away from the balcony and some little old lady comes out with a shotgun and says drop you know let go of the flagpole and drop to your death and some critics of libertarianism try to say well if you're really a libertarian you have to let go and the point I was is making is that libertarianism does not answer those questions as to what you should do it only asks is the question of is it justified to use violence against you if you don't so if the little old lady shoots him because he's not letting go is she a murderer and my answer was no now the objection from Adam was well you really are skirting the issue it's common law says not only does she I'm not that knowledgeable about common law to say whether he's right or not, but my thinking still is that libertarianism is a very narrow concept.

4:39It only asks under what conditions is force justified or legitimate punishment. And I don't think it can be pushed to answer the question of whether you should let go or not. I think the only question or the only issue that it can answer is if the old lady shoots him for trespassing, she tells him gently to leave go, but you know there's no real gentle way to do that. Is she guilty of murder? And I think the answer is no. One more point. After the last session, we went from 2 to 3.30, and then we had discussion, dialogue from 3.30 to 5, at which time I am ashamed to say that I punked out, I'm getting old and feeble. When I was a young man, I would have kept up until 10 at night or kept up as long as there were anyone interested, but I'm getting weak.

5:29Week. The point I wanted to make, you ladies might not know this, but on the men's rooms of the nation there's a graffiti, it says the jobs not over until the paperwork's done, well the same thing here, the jobs not over until the paperwork's done, it's all well and good to sit around and talk about these things, but I want to see some of you writing up these things, I want to see in the next year or two in the Journal of Libertarian Studies or in the Quarterly Journal of Austrian Economics some papers Published by you, that you got based on discussions here or published elsewhere and if you do please send them to me if they're published elsewhere and I don't see them. So what I'm saying is that this session is is a very good session I'm very happy to be part of it but let's not let it end with just this session. Let's take these ideas and run with them, work with them, write about them, publish them,

6:25spread them out to other people. Okay, enough for housekeeping details. I now want to launch myself into the issue of monopoly and I want to read to you something that just appeared on the Mises web the other day. It's from some person, I don't know who he is, from Uruguay and he says as follows, Uruguay The United States is a highly state regulated country. The state has monopolies over several services including telecommunications. This monopolies, his English isn't too good, I'll read it as he wrote it, are consecrated by the Constitution of the Republic itself. A couple of politicians promote the idea of privatizing several state owned companies without deregulating and freeing the market in those areas.

7:16They say that a monopoly is better if it is in the hands of private owned companies. My common sense tells me that no monopoly is good, but that a legal monopoly granted by the state to a privately owned company is the worst of evil, I guess he means the worst of all evils. I believe that in fact private monopolies are the least of all evils. Let me stop there even though he goes on further and read again that last sentence. I believe, in fact, that private monopolies are the least of evil, or the least bad.

7:50Can there be such a thing as a private monopoly? Well, for the mainstream, there most certainly can be. And even for some Austrians, there can be. One of my first publications in the Journal of Libertarian Studies, What I did is I took Murray Rothbard's chapter 10 of Man, Economy and State, which is the most brilliant piece ever written, I think, on monopoly, where he says that there can't be any such thing as a private monopoly. And I used it to criticize two other Austrians who said that there could be in resources. And these two other Austrians were Mises and Kirzner. So the point I'm making is that even a Mises and even a Kirzner can make an error on this issue of monopoly.

8:38Taking the neoclassical view, which counts noses. For the neoclassicists or the modern economists, it all depends upon how many firms there are in an industry. If there are many, many, many firms in an industry including a whole bunch of other criteria like homogeneous goods and each company is small and there's no entrepreneurship and there's no profit and we're at equilibrium and there's the same price for everybody, a whole bunch of other criteria, if that occurs then it's a thing called perfect competition. but if any deviation occurs in these very stringent and wild-eyed assumptions then you have monopolistic elements and if you have a few companies then you have oligopoly, if you have two companies you have duopoly, I guess three companies would be triopoly and one company would be monopoly, so for them For them, the determinant of whether there's a monopoly or not, you just sort of look and see how many firms there are in an industry.

9:53For the Austrians, monopoly came about as an exclusive grant of government privilege. In the old days, the Duke of, I don't know, London would fight the good battle and he'd be given the monopoly of salt. The Duke of Edinburgh would fight a good battle against the French and he'd be given the monopoly of candles. What this means, if anyone else sells candles in Edinburgh, they cut off his head or put him in jail or whatever the penalty was because the monopoly was given to this guy. That's what monopoly means. There are also problems in terms of defining the industry. The more narrowly you define the industry, the more monopoly you get.

10:41The more widely you define the industry, the less monopoly you get. For example, if you are defending against an attack of monopoly, you're a defense attorney. What you want to do is define the relevant industry as all beverages. A medium interpretation of the industry would be soft drinks. A narrower definition would be colas. There are fewer colas than all soft drinks, which includes milk or orange juice or, I don't know, wine coolers or whatever. But what's right? What is the industry? Well, it's all arbitrary. The whole thing is totally arbitrary and capricious as to what the industry is. Everything competes with everything.

11:26Things that are totally unrelated compete for the consumer dollar. For example, I'm very rich. I just got a million dollars. I want to buy something. I can buy a sailboat or a piano. Now, you don't think of sailboats and pianos being in the same industry, do you? And yet, that might well be the choice that I'm considering between those two things. So I suppose if you want to be a reasonable person you just define everything as the industry in which case there can never be monopoly but that too is silly because the whole thing is messed up because what we ought to be focusing on is competition and not number of competitors.

12:11Any of you ever been in a boxing ring, fighting someone? There are only two, well there are three people in the ring, including the referee, but there are only two fighters. And yet it's very competitive. On the other hand, there are thousands of taxi cabs in a big city, and that's a monopoly. Because if you start riding around and offering to take people for a ride, you know, they'll throw you in jail. So the number of competitors is a very silly way to look at monopoly, and yet that is the key element of what they do. Let me talk about free entry, which is a very important element of competition.

13:01The Austrian way of seeing whether a industry is competitive is can you enter it without going to jail or without having to get permissions that take ten years and hundreds of thousands of dollars. Milton Friedman isn't one of my favorite economists but on this issue with the occupational licensure for doctors he's absolutely magnificent. One of his chapters in the book Capitalism and Freedom, he goes over the case of doctors and the reason he picks doctors is this restriction on entry, if there's any case for restriction on entry, it's with doctors. That's the most powerful case and if he can obliterate that case, he can take down this argument for monopoly quite a bit.

13:53The situation with doctors is between 1928 and 1932. The number of new doctors in the U.S. was about the same as from 1933 to 1937. Well, what's wrong with that? What's wrong with that is that from 1933 to 1937, there were a lot of Jews who were running away from Austria. And some of the best doctors were Jewish Austrian doctors at that time. There are a lot of other brilliant people who came over from Austria, and one of the reasons we're called Austrian economics is because a lot of other people came, not just economists, but physicists, chemists, what have you, mathematicians, and they all got jobs, but the doctors couldn't get jobs. Why? Because to become a doctor in the US then, and even now, you have to take the exam in English, plus you have to do a whole bunch of other things.

14:45And it wasn't an easy test in English, it was so hard that they couldn't become doctors. Now, the justification on the part of the AMA for this horrendous incident was, well, you know, if you have a doctor who can't speak English, you know, you go and you say, my elbow hurts and he starts operating on your knee and we can't have that. But a moment's thought will convince us that the real reason that these AMA types were trying to keep the doctors out had nothing to do with customer care, which is what they say, but everything to do with not allowing competition. It's very similar to get off the point for a second with regard to the butter and the margarine people.

15:34When margarine first came out, it was sort of a yucky color, sort of like my shirt, sort of a yellowish, whitish, grayish color, and nobody was buying it. So what the margarine people wanted to do was to color it yellow. And it wasn't fraud because they would put on the package, you know, this is colored yellow or something like that. Now guess which states were the most adamant in making sure that they couldn't do this? I'll give you a hint. It's the states where they had cows. Because, and obviously, they couldn't argue, well, you know, we don't want a margin colorized because it's competition for butter. They couldn't say that. They said, oh, no, no, this is, you know, protect the public's health or something like that. And you get a continual situation like that where you have entry restrictions that have nothing to do with protecting the public, but they use that as an excuse.

16:26Well now back to doctors. First of all there are unconscious patients and with regard to unconscious patients the language doesn't matter if you're from Korea or from Vienna and you see an unconscious patient he's not going to speak to you anyway so certainly they could doctors who can't speak a word of English can treat unconscious patients. Secondly they could treat patients of of their own nationality. Surely there would be some Viennese people who were patients and the Viennese doctors who couldn't speak English could do quite fine in German or whatever they speak there. And a similar thing occurred when a lot of Cubans came over to this country, I guess in the 70s or the 80s or a little later on in the 30s.

17:16All the Cuban intellectuals could get jobs except for doctors. And if there was a Cuban patient and a Cuban doctor And neither of whom could speak anything, well, so what? And the third point is translators. That's why God invented translators. So that, you know, you could hire a nurse who could speak bilingually and that would be that. So the reason for precluding entry was to keep prices up and it had nothing to do with protecting the public. It was an attempt to monopolize. It's not that there was one doctor, but we're not now in the arena of neoclassical economics. From the Austrian point of view, there's no monopolization as long as there's no restriction on entry and we don't care how many doctors there are.

18:12At this point, sometimes the antitrust laws preclude exclusive dealing like a deal where, you know, I'm Walmart and I say to you, Maximilian, you're handy because you're in the front row, that'll teach you, that if you deal with Rosa Maria's company, I won't deal with you. Exclusive dealing, and this is a per se violation. The reductio ad absurdum of this is that this is really an attack on monogamous marriage. Because doesn't the monogamous marriage, each spouse say to the other, you must deal with me exclusively in certain areas, mainly sex. I mean, you can, you know, talk to other people, but in sex you can only deal with me and I'll only deal with you, exclusive dealing.

19:01Well, if taken literally, this would fall afoul of the monopoly laws because, you know, you're restricting trade, you know, a certain trade with other people if you're a monogamously married person. And I think it's good to see Carrie-Anne isn't the only one who does reductios. I do it, too. And I think this is a very good one. It's true. It's a totally different area that they didn't mean to. You know, here they're talking about companies and here we're talking about spouses. But the law is the law. And if the law is an ass over here, and it's clear to see it, then the law is an ass everywhere.

19:41Okay, what else do we have? Well, there are three players here. There are the lefties, there are the moderate Chicagoites, and there are the Austrians on the right. And I want to compare and contrast them with regard to their attitude of government regulation of business, and is it in favor of the consumer or what's going on? Well, with regard to the lefties, the Ted Kennedys, etc., the Hillary Clintons, business necessarily or almost always exploits the consumer. and the government steps in on the white horse with the lance to rescue the consumer from the depredations of business. The Chicago School says it's more complicated. What they say is yes there is exploitation of consumers by business and government has to step in however they get a little more They're not sophisticated and they have this thing called capture theory.

20:54Capture theory is government is regulating business, but the way you get ahead in government and business is sometimes you go through this escalator situation. For example, you're a government regulator. Let's say you're a lawyer in the antitrust division and then you're making $80,000. What you do is you get a job in the company that you used to be regulating and they'll pay you a lot more, $150,000, because you now know and can now advise them as to what to do to keep off the regulators, keep the regulators off their back. And then you work there for a few years and then you get a job much higher in the government, Maybe not with much more money, although the opportunity for graft and then for rising even higher in business is there.

21:49So the careers of a lot of these people is sometimes they're regulators and sometimes they're regulatees. And the two of them get into bed with each other, namely business captures government, even though government is a good guy. Business captures them because, you know, the regulator now thinks, well, you know, I really want to get a job with these guys. So, I'm going to go a little easy on them, okay? Now, there's this guy, Kolko. There's an interesting story about Kolko, Gabriel Kolko. He takes the view with regard to the Food and Drug Administration and the Safety Commissions and all the alphabet soup kind of stuff that started in the progressive period in the 1890s and 1880s in the early part of the 20th century, what he says is no, no, no, capture theory is not quite right.

22:45What really happened was that the reason we have all these alphabet soup regulatory agencies was that big business was being overtaken by small, more competitive, more rivalistic competitors And the big business called for regulation by the government, not to stop them, but to stop their competitors. And the meat inspection acts are one example that stick out in my mind. Swift and Armore and other meat packing companies, before the advent of the regulatory apparatus, were calling for it. And the reason they were calling for it is that the regulatory apparatus, first of all, they would staff it with their people. And secondly, there are economies of scale in filling out paperwork.

23:34And the big companies were better able to fill out the paperwork than their small competitors. So the function of this whole thing was to, you know, get rid of their small competitors. And COCO shows that before the advent of the regulatory agencies, they were losing and losing and losing market share. And afterward, their competitors lost the market share and they rebounded. So this worked. So this is a very sophisticated, cynical way of looking at government regulation of business. Now there's an interesting story behind Coco. He was a Marxist, an out-and-out Marxist, good old commie. And the libertarians would invite him to their conferences because this supported their view. And Coco came. And he came once or twice, but he's a bright guy, and he realized, you know, that the libertarians were using him for their own nefarious purposes.

24:26So he refused to come because he hated liberty because he was a commie. He's a very interesting kind of fellow. Murray used to cite him and quote him all over the place. There's another... The main advocate of capture theory was Stigler. So here you have the anomalous situation of a commie being better than a free enterprise There's another attack on Stigler, and it has to do with advertising, and here it comes from Kirzner, and here Kirzner is very much on the side of the good guys. Again, there are three views on information.

25:13This is the side of the of the good guys again there are three views on information the most left-wing view the totally wrong view is that information ought to be free because in perfect competition is defined that information is free and knowledge is you know there's no problem everybody knows everything so if everybody knows everything what's the function of advertising well the function of advertising is to screw the public So that's the most left-wing view, a total suspicion of all advertising. Stigler had a more moderate view, similar to the capture theory, only now we're in advertising. And what Stigler's view was, was here is time spent in search.

26:01The idea is you move to a new city and you need to buy a car, you need to get an apartment, If you live in a new city and you need to buy a car, you need to get an apartment, you need to find out where the best restaurants are, things like that, and here is money. And what you do is you search, and there are marginal costs of search. The more you search for an apartment without buying one, the more you have to live in a motel and live out of a suitcase, and it becomes more and more of a pain in the neck as time goes on, right? On the other hand, there are declining marginal benefits from search because, you know, the first day you see a house for $100,000. The second day you see the same house for $91,000, so you gain $9,000.

26:48The second day you see the same house, same to you, it might be a little different, a little different neighborhood, but for you it's of equal value. So now it's say, so let's say we go 100, 91, 85, so the marginal benefit here was 9, now the marginal benefit is 6, right? You get where I'm coming from? And eventually, so that's how the marginal benefit curve is going down and eventually you stop searching right here, Because the marginal benefits from future search are now less than the marginal costs, you search up to this point x because the expected value of another day of search is positive and then you stop searching there.

27:34Okay, this is not totally crazy. There's some coherence in this. Although Austrians don't like cost curves because for us cost is alternative or opportunity costs. The next best option foregone by doing anything? You people are sitting here, what's your next best option or opportunity? I don't know, it could be sleeping, it could be bicycling, it could be swimming, it could be taking a, well, probably not taking a walk because it's pretty hot out there, but it could be, you know, some of you weirdos might want to take a walk. So no one else knows anyone else's cost and to objectify it in this way is problematic. But, forgetting about that, we're moderates here, you know, we're supportive, we're open, not really, but what the heck, we can fool them.

28:24This is not totally crazy, but what Stigler gets from this is that the only kind of advertising, you see, the left is saying no advertising at all is justified. What you get from this analysis, or what Stigler gets from this analysis, is that there is some advertising that's justified, but the only advertising that's justified is name, rank and serial number kind of advertising. How many camshafts does the car have? What's the mileage per gallon? What's the guarantee? It's the, I don't know, the speed from 0 to 60 or whatever, but to put a girl on the hood of the car and sort of imply that if you buy the car you get the girl, that advertising is called motivational advertising and Stigler, great free enterpriser, comes out against that.

29:19Now here's where Kirzner and Mises come in and they do a magnificent job and I'll introduce this with a joke as is my want. There's a mule skinner, a neophyte apprentice mule skinner, he's trying to get the mule to do something and the mule is just standing there. So the master mule skinner or the master mule trainer comes along and they ask him, well, what can we do? And he takes his sledgehammer and he bops the mule over the head and he practically kills the mule. And the apprentice said, well, why'd you do that? And the answer is, first, how to get his attention. Well, Kirzner is all into first getting people's attention. How do you get their attention? There are a lot of messages out there. Well, one way to get their attention is to put a half naked beautiful woman or beautiful man on a tractor or a car or wearing a suit or something like that.

30:14So the function of that advertising is to get people's attention. It's got nothing to do with the Stiglirian search for information. You see, the search for information only works if you know what you're searching for. Oh, you're searching for a house, you're searching for a car, you're searching for a restaurant, fine. But before you knew about the frisbee, were you searching for a frisbee? No. In order to get you to buy a frisbee, they sort of have to conk you in the head and say, frisbee, frisbee, slap you around and say, you know, frisbees are great. They have to capture your attention. So this is the Austrian type justification for advertising as we see it, as opposed to the Stiglerian kind of very bloodless kind of advertising where you just sort of read a manual report of the sort that an engineer would like.

31:09Okay, let us now get into some heavier stuff with regard to the good old monopoly diagram. And here I apologize for those of you who are freshmen in college and haven't had economics or people in law school that are not econ majors. You know, give me 10 minutes, tune out now, or maybe you can get something out of this. But here is the monopoly diagram. The monopoly diagram starts with average cost and you'll remember that what we said is that when marginal is above average, average rises, when marginal equals average, average is constant, and when marginal is less than average, average falls.

32:01Remember the the bowling averages? Okay, so here's average cost, u-shaped cost because of various things that I won't go into. Marginal cost has to intersect average cost at the bottom point of average cost. Otherwise, these three rules wouldn't hold true. And here we have a demand curve and the demand curve is really average revenue. So if that's average revenue, marginal revenue has to be below it, so it's sort of pulling it down. Whoops, I'm losing myself, okay? This would be dollar or price, and this would be quantity.

32:48This is the monopoly diagram, and this point is labeled C, because the upward part of the marginal cost curve from where it hits the average cost and above is the supply curve. The demand curve is this here, so where supply hits demand, that's where the perfectly competitive model will be. But where or where will the monopoly be? The monopoly will be where marginal cost hits marginal revenue. Yes, question? What did I do? Ah! Ah, thank you. I'm a low-tech kind of guy, I'm just sort of winging it here, although I'm better than, I beat you out in this sweepstakes.

33:37Thanks for letting me know, sort of like your fly is open and no one tells you. Okay, so where marginal revenue hits marginal cost, remember first you pick Q, and Q is based on where marginal cost equals marginal revenue. and then you go you pick price and the way you pick prices by going to the demand curve it's the opposite of the monopsony case which I went over two or three days ago okay so here's where marginal revenue and marginal cost hit and that's the quantity of the monopolist this is the quantity of the perfectly competitive firm here is the price of the perfectly competitive firm And here, you go to the demand curve, so this is the end point, and this would be the price of the monopolist.

34:34Those of you that are into this stuff, how many know what I'm talking about and have seen this before? Okay, about half of you. The case against the monopolist and in favor of the perfect competition is four. First of all, the competitor sells more than the monopolist. Why this is good? It's hard for me to say. Why should more be better than less? Shouldn't we look for the optimal? You know, who says that this is the optimal? Maybe that's the optimal. Maybe they're producing too much. This criticism stems from Murray's Chapter 10. The next is that the price that the monopolist charges is higher than the price that the competitive charges. And this too is bad, but why should we believe that?

35:21Why should a higher price be necessarily worse than a lower price? Surely we need an optimal price. Price. The third one is the deadweight loss and where is the deadweight loss? The deadweight loss is this little triangle and the reasoning behind the argument is as follows and let me say that the entire, maybe that's not right, I was going to say that the entire antitrust industry is predicated on this diagram but I don't know that that's true because I think we had antitrust before we had the diagram and this might be an apologetic for it but certainly from the economics point of view the point of view of the economist this sort of a diagram is the whole intellectual case for antitrust without this diagram there's no antitrust okay so you have the deadweight loss and what's going on with the deadweight loss before the deadweight loss I said there were four things the first is price or quantity, the second is quantity or price, the third is profit.

36:32I won't go into it, but it can be proven that the monopolist will earn profit in equilibrium and earning profit is evil. So that's the third criticism. And the fourth criticism is this thing called deadweight loss. What's going on here? Now, you remember I gave you this case with the pen and the tie. You know, you had the pen, I have the tie. You value the time more than the pen, I value the other way, we each make a profit. Okay. What these guys are saying is something the obverse of that. What they're saying is that if a trade doesn't take place, there's loss. See, Austrians only say if a trade takes place, then there's mutual gain in the ex ante sense.

37:20These guys are saying something very different. They're saying that a trade doesn't take place and the trade would be the area between QM and QC. If that trade does not take place, then there's a welfare loss, because people value the area QM to QC based on the area under the demand curve from QM to QC. and it only costs the area under the marginal cost curve, and therefore there's a dead weight loss. Let me draw this whole thing for you in a much more simpler way. This is the Cournot monopoly water model where you have, here is the demand curve for water, here is quantity, here's the demand curve, there's the marginal revenue curve.

38:15We assume that this quantity axis is also the marginal cost and the average cost because it costs you nothing. What you have is a water hole in the desert. So people come with their own cup and they dip in and you charge them for it. And obviously here is price. And here is where marginal cost hits marginal revenue. So this is the monopoly price and quantity. Thank you. So here's the price, here's the quantity, here's marginal cost equals average cost. Here is where the competitive industry would charge, namely it would charge at a zero price. The monopoly price would be up here where n is.

39:02Where would be the, the deadweight loss would be right here, the idea is that people value the water under that curve, it only costs that much so there's this, all this loss, it's just another way of putting it only, the curves are a little simpler. And what they're saying is that this distance between QM and QC, the people value at this level, it only costs this level, and by not selling it, by monopolistically withholding in order to jack up the prices, the monopolist is misallocating resources. Okay, now, if there were a neoclassical economist sitting in the audience, I hope and trust that he would say that this is a reasonable rendition of the theory.

39:57It's a short one, there's a lot more to be said about it, but I've tried to the best of my ability to say what they say. This is the argument of the mainstream economists, and there's a lot that's wrong with this. One thing that's wrong with this is the idea of cost curves. What cost curves are is opportunities foregone and no one can ever tell anyone's cost curves. More important, there is this thing, whether it's this diagram or the previous diagram, it doesn't matter which diagram, the problem is ICU, interpersonal comparisons utility. So, what is interpersonality? Well, first of all, before interpersonal comparison utility, what this stuff is, is utils.

40:42They value this, it only costs that, and there's no units of happiness. So, that's a problem, but it compounds it when you make it interpersonally. Let's suppose, let's take this case and let's take a singer, Pavarotti. Now, Pavarotti wants to give nine concerts a year and the anti-trust people who are on Pavarotti's case of being a monopolist of Pavarotti services are in effect saying, no, no, no, you have to do 12 concerts a year. And the reason you dirty rat paparazzi are limiting yourself to only nine is because you're trying to jack up the price and make a shortage for yourself so you can get more money and make profits and you're evil.

41:36And we're gonna, well now there are three solutions, not so much with paparazzi, but three solutions in the case of, what do you call it, antitrust. One is to break them up into numerous little companies so that they'll act like a perfectly competitive industry. This is what they were trying to do with Microsoft. They were saying Microsoft is too big. Let's break it up into 10, 15, 20 little constituent elements and then we'll move from QM to QC. Another one is to nationalize it because the government certainly wouldn't misallocate resources. This is, you know, this is a given. and the third is to regulate them, namely force the monopolist to go to M instead of being a rather, sorry, force the monopolist to go to C and get off of M.

42:32Each of these is highly problematic. I mean, if you break them up, you make them very inefficient because presumably the size that they are now is the optimal size. And if you're gonna break Microsoft into 10 or 20 companies or however many companies you wanna break it, it's not gonna be as efficient as it is now as shown by the fact that it is the way it is now. Having government take it over and run Microsoft is, I don't know, I think, haven't they learned anything from the belly up of the USSR in the 89? Maybe not, but you'd think they'd have learned something. And, you know, this regulating is economic fascism. Getting the government in there to say, look, Microsoft, or look, Walmart, or look, Burger King.

43:18You know, you can't... Here, we'll show you how to do it. I mean, that's grotesque. And yet, this is the left-wing view. The Chicagoites, as sophisticated as they are, have one further twist. And it's an improvement over the left-wing part of the profession. Now, what's their schtick? Their schtick is tut-tut-tut, not so fast. We are not justified in either regulating, breaking up or nationalizing or anti-trusting in any way, unless a following condition is met, namely, there are costs of anti-trust. You have to have lawyers, you have to have accountants, you have to have economists, you have to have buildings for them to discuss these things.

44:05There are costs of government operation. Notice how sophisticated they are. And anti-trust is only justified if those costs are less Then the cost of the deadweight loss. You get that, that striped area? You see that this is a full employment law for economists, because who else is gonna be doing all these calculations? Economists and lawyers and you know, the Chicago School will get a lot of jobs for its adherence. And you can see that this is an improvement over the unsophisticated antitrust. These, the unsophisticated antitrust doesn't take into a cost doesn't take into account the costs of having an antitrust institution, the Chicago people do.

44:55But from the Austrian point of view, this is all silly. This diagram is dead from the neck up. I gave you my Monopoly joke, remember that one with the three guys with the wristwatch and selling high, lower and the same, and you go to jail no matter what you do? The whole thing is nonsense on stilts. There's no reason to calculate deadweight loss costs, which are made up entirely. And there's no reason to calculate the costs of anything else and then to compare them and then to have antitrust here and not there. Let me give you another version of this. Here's a diagram from an article of mine where I repeat the diagram of, what's his name? Oh, before I get to that, remember we had this monopsony business and what the monopsony argument was, was an attempt to undermine the Austrian view of minimum wage.

45:52The Austrian view of minimum wage is if you have a minimum wage, you'll move up into the left name where you'll have unemployment and they were saying no, no, no. If you start from M, you can get in here. Well, the same arguments that I've just applied against the monopoly, you know, the fact that it's interpersonal comparisons of utility and you've got these made-up cost curves and all, and the deadweight loss business applies to the monopsony case as well. Okay, now let me get a Bork, my man Bork, who was supposedly going to be a Supreme Court judge, but he got Borked. Okay, here is an article of mine, it's called Total Repeal of Antitrust.

46:39So it's my article, but as you can see, the source is his book, Antitrust Paradox Policy at War with Itself, whoops, I went too far, here we go. Okay, what's going on with Bork? What's going on with Bork is he's saying, okay, look, here is a perfectly competitive industry. The issue is, will Bork allow two companies to merge? Okay, notice the chutzpah here, he's going to decide whether they can merge or not. Okay, so what's going on here is, originally you have an average cost curve 1, which is high, compared to the later one when they merge and they get some efficiency.

47:28And also, they're at the point that I've been calling C, this is the point C. Point C. When they merge, they become a monopoly. Okay? You following me? But their average cost curves fall. So this leads, gives rise to two things. One, this triangular box or this triangular triangle of deadweight loss. And two, it gives rise to savings because the average cost curves fall due to efficiency. And what Bork is going to decide, whether they can merge or not, is if this curve is bigger, or if this area is bigger than this area, then he'll let them merge, because the savings will be greater than the deadweight loss.

48:16On the other hand, if this triangle is bigger than this square, then he won't let them merge, because the deadweight loss will be bigger than the box. And if they're the same, he'll be indifferent, he won't care as the antitrust czar. You know, talk of how many angels can dance on the edge of a pin, this is a load of hooey, they can't measure any of this stuff, it's all philosophically illegitimate, there are no dollars, they just make it up as they go along, and that's our antitrust policy. Okay, let me pull something else on you people. Since you're sitting still for this, I'll load it on. Here is a picture of the United States. There's Florida, there's Texas, there's the rest of it, here's Long Island. Just so you can see I'm accurate. Oh wait, I should go like this.

49:20So you can see the full beauty of it, and here we have the predatory price-cutting case of Standard Oil. And my source on this is a guy named John McGee in the Journal of Law and Economics, which is a Chicagoite journal, and when they do a good job, I tip my hat to them, this was a magnificent article, and the story goes as follows. Here are a bunch of independent, what do you call it, oil refiners, and they're scattered all over the place. And you also have a bunch of standard oil people around them, and how did standard oil get its monopoly?

50:08The way standard oil got its monopoly was by attacking one at a time. So let's say we go to Texas, and what standard oil does is if it costs five bucks to do the oil, they sell it for two dollars, and they make a big loss. Where do they get the money from to keep them going? Well, all the other S's, the standard oils, contribute to this one and keep them going. And then eventually, this guy gets knocked out of the box. And now there's only standard oil in Texas. And instead of $5, they raise it to $15, because they're now monopolistic advantage takers. And now we go to Washington State, and we do the same thing.

50:55Only now we're a little bit more powerful because here there's no competition and they're making money hand over fist. And they contribute money to the next one. and then this again the the oil costs five bucks to produce and they sell it for two and they make a loss but they drive their competitor out of business and now this X is gone and they just go over the rest of the country and take over the whole country and that's how you get the monopoly. This was the argument of the antitrust division of the United States government in the Standard Oil case of 1911 And McGee says that this is wrong, it's incoherent, it's silly, it's stupid on theoretical grounds and then what he does is he makes an empirical survey of what really went on.

51:45Okay, let me take each of these in order. First, why is this intellectually incoherent? Well, one reason this is intellectually incoherent is let's get back to this first guy, this X guy in Texas. What this ex-guy in Texas could do, when Standard Oil first pulls it, he could say, look, he could send out circulars to all of his customers, he could say, look, Standard Oil is lowering prices way below the cost, and we can't compete with them, so what we're going to do is, not only will we shut down, but we'll be first online getting their oil at $2, and we'll put it in big tanks over here, and we advocate that all of our Our customers go to Standard Oil along with us, but just get behind us because we're going to be first to grab up that cheap oil.

52:37And then when they come to their senses, you see, before, let's say in Texas, Standard Oil and the X company were each doing 50% of the business. So it's not just that Standard Oil has to lose $3 a gallon or $3 a barrel or whatever it is on 50%, but now on 100% because X is shutting down. So they are losing money hand over fist, and everyone else is stockpiling oil, and eventually the standard oil is going to go broke, and then the X will come back in. Or X says, you know, if and when standard oil comes back to their senses, you know, then patronize us, we'll be back open for business, and meanwhile, we'll leave a skeleton crew on, you know, just to make sure that our apparatus doesn't rust or anything, and all of our people will be buying oil from standard oil.

53:25Or, another message you could send out and say, look, here's what Standard Oil is going to do, they're going to lower their prices, they're going to, you know, make a loss and then they're going to charge 15 or 20 dollars for something, surely you guys, the big consumers of oil, trucking fleets or whoever it is, you have to realize this and help us, and customers help us. And he can send out a message to all the other exes. He can say, look, right now they're coming for me, but if they succeed with me, they'll come get you, so you help me. So in other words, this scenario assumes utter stupidity on the part of everyone. And people aren't that stupid.

54:12Then, John Magee, I think it was 1960, 1961, this article, Standard Oil Case, very good article. He makes a survey. He goes around and he finds out that the reason Rockefeller got his monopoly, which we mean not a monopoly, but the reason Standard Oil and Rockefeller did so well, is he had innovations in refining of oil and he had mass production and he took advantage of economies of scale. And if there was any problem, it was that poor old John D. Rockefeller was exploited by people who would go into the business of oil refining with the express purpose of selling out to him. And he bought some facilities that he didn't really need, and if there was any victim, it was John D. Rockefeller.

55:01So this is an insight into the predatory price cutting model. I think no one who's read that article can ever seriously uphold this sort of a thing anymore. What else do I have? I'm now completed with my monopoly part. I have a few other things to say about economics. What I'll be talking about is the triangle, the Austrian triangle from the Austrian business cycle theory. I'll be talking about a criticism that Joe Salerno, Bill Barnett, my colleague at Loyola, and me have launched against Hans Hoppe and Murray Rothbard on the issue of the relationship between wealth and time preference and a few other economic issues.

56:09Okay, I'm ready with some more, why did the chicken cross the road jokes? Are we on? Okay. Question is, why did the chicken cross the road? And Bill Gates' answer is, I have just released E-Chicken 2005, which will not only cross roads, but will lay eggs. File your important documents and balance your checkbook and Internet Explorer is an inextricable part of e-chicken. Einstein, why did the chicken cross the road? Did the chicken really cross the road or did the road move beneath the chicken? Bill Clinton, I did not cross the road with that chicken. What do you mean by chicken? Could you please define chicken?

57:01Louis Farrakhan, the road you see represents the black man. The chicken crossed the black man in order to trample him and keep him down. You don't know who Louis Farrakhan is? This is Louis Farrakhan. The Bible, and God came down from the heavens and he said unto the chicken, The Chicken, Thou Shalt Cross the Road, and the chicken crossed the road and there was much rejoicing. Colonel Sanders, I missed one? Okay, this is the last economic section and instead of just devoting the whole thing to monopoly, I wanted to add on a few other things. I want to do the triangle. I want to do time preference.

57:52And I also haven't had enough bashing of unions, so I figured I'd just have a little more gratuitous bashing of unions. That's always, you know, appropriate. Okay, with the triangle, Bill Barnett and I, my colleague at Loyola University, New Orleans, have just done a paper that we're now searching for publishers. And it's a big paper, it's single-spaced, it's about 70 pages, so it's a big paper. We've got 35 diagrams, let's take more paper and it's been rejected because it's too long and we're not sure what to do about that. But what we're doing in this paper is criticizing the triangle. And the triangle is the key element of Austrian business cycle theory.

58:40The first big user of the triangle was Hayek. In our research we found other people that sort of use the triangle, a triangle-ish kinds of things, but Hayek is the first one that really got into the triangle. The next major figure who got into the triangle was Murray Rothbard, so our criticism of the triangle is also a criticism of him. The third person, I don't know that I call him a major figure, But he might well be, he's maybe too young yet for that, and that's Roger Garrison, who's a professor here at Auburn. And while I won't say that he's devoted his entire career to the triangle, I would say that his middle name is Triangle. And I'm sure he wouldn't take this as an insult or anything, because he has devoted a lot of his career to explicating the triangle, to improving the triangle.

59:34The triangle used to have time on the vertical axis and he put time on the horizontal axis and I'll be using the triangle the way he does it. The reason he did this, I mean he'll have to speak for himself and he'll be here next week. How many people from here will be here next week for the Mises University? Okay, well, I'm sure he'll be talking about the triangle and certainly about Austrian business cycle theory. I would say that if I had to pick any one person now who is alive, who is the chief macro economist of Austrian economics, it would be Roger. He's certainly put himself head and shoulders over other people, in my opinion, and he's done it with the triangle. What he has done, his contribution is to make the triangle more accessible to the mainstream, which I heartily applaud.

1:00:26I think that the mainstream needs all the help it can get. And if Roger can put the triangle in a format that the mainstream can appreciate, all the more power to him. And he's done great yeoman work in doing just that. They haven't converted yet, but they're on the verge. You know, pretty soon they'll all become Austrians. I'm kidding. So what's the deal with the triangle? The deal with the triangle is, here's a triangle. And we put dollars or price or some value thing on the vertical axis and we put time measured in this way here and what the triangle is, is this would be consumption and this would be a higher order good or a good far removed from consumption.

1:01:15The consumption, think cement or steel or some basic industry and this would be a secondary industry and a third industry and might be this is manufacturing, wholesaling, retailing and then the consumption. So if you take bread, bread might start with the tractor, maybe the tractor is here but before you get to the tractor you have to have iron and steel and coal and stuff like that. At the tractor you get a baker, a miller, a baker, Walmart, and then finally the bread becomes a consumption item. So this is what the triangle is. How is the triangle used? It's used to illustrate business cycle theory.

1:02:01So we start off with a sort of indeterminate triangle or an intermediate triangle. So we have time and money, and what happens is that, let's suppose that people want to go from the line triangle to the dotted triangle, which means that they want to save money, which means that they want to reduce consumption by a little bit, namely they're not consuming this little bit of consumption anymore. Yes, and instead the money that would have gone for the consumption goes for higher industry Higher order goods, goods further removed from consumption, and this is all well and good and fine and there's no problem However, if the source of this extra saving is not a change in time preferences, a lowering of time preferences people aren't as impatient for present consumption, and they're willing to defer for a for Tomorrow Consumption in order to invest now.

1:03:08If that's not the source of it, but rather the source of it is government artificially lowering the interest rate and fooling entrepreneurs into thinking that there's more saving than there really is, then the entrepreneurs will start investing in these higher order goods and stop investing in this consumption. And this will be incompatible with the underlying preferences of the consumers. And this is the source of the Austrian business cycle theory. The source of the Austrian business cycle. That's the theory. And there are lots of arguments pro and con about this.

1:03:53One of the arguments I've got involved with a guy at George Mason named, I forget his name, what's the guy, sorry, not Becky, no, no, on business cycle theory, he's the macro guy there, Wagner, yeah, that's it, thanks. I don't even know who my opponents are in debates. I'm pathetic. Richard Wagner, who I like and respect, but I disagree with him on this, he had a critique of the Austrian business cycle theory. And his critique was, well, if the entrepreneurs are so smart, why won't they catch on eventually and not invest there when the interest rate is artificially lowered?

1:04:40And the point that I made is that, well, first of all, reality is tough. You know, it's hard to know what the interest rate is and nobody knows this so you can't prove that and at best this could only theoretically undermine the Austrian business cycle theory. But in addition to artificially inducing people or misleading people into making malinvestments, according to the Austrian business cycle theory, they're also subsidizing them into doing it. Because when the interest rate is low, higher-order goods become more profitable. So it's as if they're subsidizing, you know, the optimal amount of peas and carrots is half and half, but they're subsidizing peas. Well, people will make peas even though it's not compatible with the underlying preferences of the people.

1:05:33Okay, this is a very short introduction to the triangle. The present paper that I'm involved with with Bill Barnett is a critique of using the triangle and we have 15 critiques of it. I'm not going to go over all of them because I want to do some other things and leave some time for questions. But here are some of the criticisms of the triangle. Bill Barnett from this paper derives the conclusion that the triangle ought to be scrapped and I don't know. Not that the people who did it should go to jail. We're not treating it like the minimum wage, but that it's a misleading thing and Austrian Business Cycle Theory hasn't really made any progress since 1931 when Hayek came out with Prices in Production.

1:06:20The reason is we've been mired in this triangle. My view is slightly different. I sort of have a soft spot in my heart for the triangle. I was introduced to Austrian business cycle theory via the triangle. I don't think we should completely jettison it, but I think we should be aware of its shortcomings. So what are the shortcomings? First of all, it's an aggritive kind of a thing. And Austrians are not into aggregation. That's the Keynesian thing. So one problem with the triangle is that it's aggritive. It takes the whole economy. Secondly, it's hard to measure aggregations and the triangle doesn't measure them. Third, roundaboutness is confounded with more time consuming.

1:07:06See, this dotted triangle is a more roundabout triangle. Let me put this in another way. What this axis is doing, is doing two jobs. One, it is measuring time, two, it is measuring, What do you call it? Stages of production. And you can't legitimately ask one axis to do two jobs. What about, you know, suppose that there were many stages here and there were very few stages there. Then you need at least two axes. So it's sort of a mathematical problem or a geometrical problem to ask one axis to do two jobs as this does, it asks it to do time and it asks it to do stages of production and when time and stages of production are perfectly correlated then there's no problem but if there's any deviation between the two there's some sort of mathematical error implicit here.

1:08:09Another one is that this triangle, the angle of it, is the interest rate or proportional to the interest rate. And the problem with it is that if you have a straight line, well a minor problem with it is that if you have compounding, then the triangle isn't a straight line. It's rather a curved line, but that is already being taken into account. People assume that problem away, I think, legitimately. The problem is differentiability. Any straight line is a differentiable thing and as you know the way they do demand curves, the Austrians do demand curves is in step functions because we're not into differentiation. There's this wonderful thing that Murray has while I'm on the subject of differentiation and this sort of gets back to monopoly.

1:09:00Here's price and here's quantity, and here's an average cost curve, and here's the bottom point of the average cost curve, which the mainstream says is the most efficient. And if you have a flat demand curve, the flat demand curve can hit it, and all is well. But you can only get a flat demand curve if you have perfect competition. However, if you have a U-shaped average cost curve and a point here and a downward sloping demand curve, the downward sloping demand curve can't be tangent to the average cost curve at the bottom point of the average cost curve, right? It has to be tangent to it at a point to the left of the bottom point of the average cost curve.

1:09:50Everyone follow that? Okay. So what Murray does, he says, look, this is all due to the fact that you drew the crummy average cost curve in a way that's differentiable throughout its length. In a way, it's a smooth curve. Suppose you drew the average cost curve in this way. It's also down with sloping. That's the average cost curve. Well, you can have a demand curve, not be tangent to these, you can't be tangent at a cross point, but hit the average cost curve at the bottom point of it. This is a brilliant reputation of, you see, the way the mainstream operates is there's a dog and there's a tail and suppose the economics is the dog and it wags the mathematical tail.

1:10:39But for those guys, it's the reverse. Math becomes the dog and they wag the economic tail. The reason they make things differentiable is so that you can have calculus and differentiation. But Austrians know that all human action is discrete. That's why you get these step functions instead of smooth curves. Well, the triangle is a smooth curve. So the triangle is making too many concessions to the mainstream mania for math. That's that point. Another is that the triangle cannot incorporate leisure, and this is a big problem because you could take out excess wealth in the form of leisure. Another is that the triangle is the wrong, what do you call it, the wrong geometrical figure to use for the Austrian business cycle theory, and that if you're going to use any geometrical figure for it, you can't use the triangle, rather you have to use the trapezoid.

1:11:41Why the trapezoid? Because the triangle assumes that you... Where's the triangle here? I'll draw another triangle. The triangle assumes you're starting from zero. See, right there, that's zero. You'd have to go back to the beginning of time when men were in the trees going like this and, you know, ooga booga, give me a banana or something. But in the ordinary situation, what you should do instead is have a trapezoid to show that you already have production going on and that would look something like this. Do you get it? In other words, here's the triangle, but it's got to be put on a trapezoid to show that you're not starting de novo.

1:12:34So this isn't a basic criticism of the triangle, but it shows that if you're going to go geometrical, triangle is wrong, it's trapezoid. Another one is that the triangle ignores durable capital goods. It only takes stuff that's going through. It has no clear role for durable capital goods that stay right where they are, like the factory. What about the factory? All you're doing is taking the sweater when it becomes more and more sweaterish. And the last one I'll do is, what's the ideal triangle? Well, you see, as we go from here, as we go from here to here to here to here, namely, we get, let's say we go from five to four to three to two to one.

1:13:29What are we doing? What we're depicting is a society that has a higher and higher time preference rate, higher and higher interest rate, more and more unwilling to save for the future, In some sense, a lousier society, if I could use, if I can conflate just for the moment while we all know what I'm doing, normative and positive, okay? But what's the ideal triangle? The ideal triangle is this, a very small one where we instantaneously get everything we want. Do you see what I'm saying? An ideal, like if I had a button and I could press the button and what kind of triangle should we have? We should have a triangle where there's no roundabout methods of production at all.

1:14:15Why? Because there's no need for them. Because I've got this magic thing here that gets us sweaters and cars like that without waiting 10 or 20 years. So there's some sort of incoherence here. On the one hand, as you go from five to four to three to two to one, you're getting worse. On the other hand, you're getting better. So which is it? Well, these are some problems. We've got about 15 problems with the Triangle. This is sort of a radical departure from normal Austrian economics. This hasn't been published yet. There's been no referees reports. This could all be wrong, but you know, that's the way knowledge progresses by people coming up with a new idea and running with it and seeing what happens.

1:15:04What's our alternative to the Triangle? Our alternative to the Triangle is interest rate sensitivity. Certain things are very interest rate sensitive, the elasticity of them with regard to the interest rate is very high, and that's where the source of the Austrian business cycle is, and certain things are interest rate non-sensitive, and doesn't have much to do with the Austrian business cycle theory. We went through everything that Mises has ever written and there's no triangle in Mises. So we think we're on good ground, that Mises is good on this issue, even though we disagreed with him on monopoly, as I was just talking about before. So to me it's sort of a beautiful thing, you know, on some issues we agree with Hayek and disagree with Mises, on others it's Kirzner versus Lachmann, and that's the way a good social science should be.

1:15:55You know, nobody says, well Mises said it so it must be right, you know, Mises said it and now let's see if he's right. Okay, the next thing I want to talk about briefly is the article that Joe Salerno, Bill Barnett and I have attacking Hans Hoppe and Murray Rothbard on the relationship between wealth and time preference. Now, we all agree that the richer you are, the tendency is toward lower time preference because you have more money, you're not so desperate, you're not so impatient. And we all agree, both sides of this little debate, that if you are starving or dying of thirst or something, you have an infinite time preference, because if you don't get it now, you die.

1:16:45There's even an Arabic story or, I don't know, something that if you're drowning, you'll grasp a sword. You know, if you're literally drowning, you'll grasp a sword even though it'll cut your fingers. So high is your time preference rate for the present that you're willing to forego your fingers just to get out of there. So we agree that it's a praxeological thing that when you're desperately poor, the richer you are, the lower the time preference is because it's infinite now and it'll be a little less if you have something to eat and drink. However, when Bill Gates gets an extra million dollars, does his time preference necessarily fall? Rothbard and Hoppe say yes. Hoppe says this in his book, God That Failed.

1:17:33Rothbard says it in his, I forget where, offhand, I guess in Man, Economy and State. And Salerno, Barnett and I say no. We would expect that as an empirical generality, that even for Bill Gates, when he gets an extra million, his time preference rate will fall. But it need not be. And we come up with some numerical cases to show that it's not so. Okay, the next thing I've got... Ah, unions! We haven't bashed unions enough, you know. Murray is up there and he's saying, you know, block you fool, you know, how about unions? So I'm hearing the message and now I'm ready to attack unions. What's going on with unions? Well, are unions per se illegitimate?

1:18:25And notice I'm subtly moving from the positive to the normative, this union analysis combines both, so bear with me. Well, the answer is no. You can imagine a union, and I could put the unionist in a future defending the undefendable because they're not per se anti-libertarian. If a union was to confine itself to organizing mass quits, they would be legitimate. For example, I go to the boss myself. He's paying me $10 an hour. There are 5,000 employees. I say, boss, you're unfair. I want $11. And, you know, he says, take a hike.

1:19:11Whereas if I go to the boss and I say, look, all 5,000 of us are going to quit, unless you give us a dollar raise from 10 to 11. Now he sort of has to think about it because it's a pain in the neck, you know, us 5,000, we're well organized, we work together and to fire us all or to have us all quit and have to get a new 5,000 will cost them something and you know, maybe better to just give us the buck. In other words, you sort of have more of a say, more of a bargaining power or something. And if the Union limits itself to just that, they're legitimate. Because do we have a right to quit? Do I, as an individual, have a right to quit? Yes. If I didn't have a right to quit, it would be slavery. Indeed, that was the only problem with slavery.

1:19:57You couldn't quit. If you could quit, it would be a fine institution. Now, someone's going to say, Block says slavery is a fine institution. That's not exactly what I mean. I mean, if you can quit, then slavery is a fine institution, or at least a non-anti-libertarian institution. It's not fun unless you're a St. Omasochist or something. Well, if I can quit on my own and it's legitimate, can we all quit together? Yep. Just because, you know, the lover of liberty doesn't count noses. If it's right for me, it's right for everyone. The fallacy of whatever doesn't operate here. What's the fallacy I'm talking about? going from one to the group yeah fallacy composition doesn't apply here if one person has a right to quit we all have a right to quit en masse even though it'll be inconvenient are there any unions that limit themselves to just this well I was doing a little research on this and I came up with this thing called the

1:21:03Christian Labor Association of Canada I'm not kidding there is such a group Christian Labor Association of Canada and I had the guy on the phone and I said, you know, before I get to that, let me get back to the other train of thought. Okay, so one thing that you have the right to do is to have a quit or a mass quit and an organized mass quit. But a strike is not just a mass quit, rather a strike is a mass quit plus restrictions on entry.

1:21:56Because what the typical union will do after they all quit is they'll stand around and pick it and they'll prevent scabs from taking the job, and they'll beat up the scabs. Now it's one thing to quit, if I divorce my wife fine, but it's another thing if I set up a picket around her house and she tries to date anyone else, my buddies beat him up, that's the equivalent of a strike. And no one in a million years would accept that it would be reasonable or legal for me and me to make sure that my wife can't date any other man. But that's what unions do. They beat up the scab, they say they're taking our jobs, but they're not their jobs. The possessive pronoun doesn't work that way.

1:22:43A job, rather, is a manifestation of a contract. So how can it be your job? So I asked the Christian Labor Association, she said, well, would you ever beat up scabs? Oh no, no, no, no, no, we're pacifists, we're Christians, We turn the other cheek, we don't do that. If we go out on quit, it's not a strike. Then I gave them the coup d'etat and they failed. I said, well, what about labor legislation? Do you favor Canadian labor legislation similar to the Wagner Act that forces the employer to deal with you when he would rather, oh yeah, we favor that. So that they couldn't make it. So it's a null set of legitimate unions, but it's theoretically possible So what should our attitude be toward unions? Should our attitude be the conservative attitude of hemming in unions by not letting them have automatic dues, penalties, where the employer has to take the dues away and give it to the union, or should we have democratic votes or any of this stuff? No. If it's a private organization, they can do whatever they want.

1:23:56They can do anything they want. They don't have to be democratic. The key is to hit them right in the core of their illegitimate power. So what I'm saying is that the conservatives go for irrelevancies. The key is, do they have a right to restrict entry? Will the cops stand idly by when they beat up scabs? Or when they perpetrate things like the minimum wage so that the scabs won't come in the first place? Okay, we've got a few minutes for questions. Yes, Matt. I have a question about the triangle. Yes. You mentioned the problem of... Basically, I agree with you, and I think that's a good factor, and you probably support it. Because it's really important to reject the triangle. Do you edit any journal? Huh? Do you edit any journal?

1:24:42No, I'm kidding. I can start one before you start. Please. Probably the response might be, and one of the fellows is writing the paper, well there's a problem with small steps and continuous curves and aggregation and all those things, but there's one thing that you can aggregate and one thing that you can't have continuous, which is money. Well, notice that we're attacking the horizontal axis. We're not attacking the vertical axis. The vertical axis, you're quite right, money can be We're not attacking that vertical axis, we're attacking the horizontal axis.

1:25:32So, I think we're safe from your criticism but you know since you seem to be into it, I'll give you the paper and you know if you have any criticisms about it, I'd love to have them. Yes, okay, when you were talking about monopoly, you were saying that's a good way of going about it, I'd love to have them. Yes, okay when you were talking about monopoly and you were saying well how do we know that you know this is a bad price or this is you know not the optimal price well I mean all the all those being equal it you know lower prices are preferable to higher prices I mean if all you know perhaps you From a consumer's perspective, isn't this obvious?

1:26:19Well, from a consumer's perspective, but from the producer's perspective, it's not at all obvious. It seems to me that the function of price is to allocate resources. So, of any given price, if you say lower is always better than higher, the lowest price is always zero, so all prices should be zero, and if all prices are zero, you don't have much of an economy. Okay, well, but I'm just saying this could be turned around on you and some advocate of government say on taxes on cigarettes. Well, you know, the optimal price here doesn't take into account for, you know, the damage to your health. And so what we have to do is we have to tax this and, you know, lower prices be damned and we have to, you know, raise the price on this. What I think is a more striking case against any trust is something along the lines of you can't have a monopoly to come in and break up a monopoly.

1:27:06That's a very good point, very good point, that the government is a monopoly in the first place, so if you're really against monopoly, quit. I think that's a brilliant point. The other, I can't see my way clear to agreeing, because to me the function of a price is to indicate scarcities, relative scarcities, so lower is not better than higher. But that other point I think you're quite right and that's a very good point. The guy behind you? I would like to know what do you think about Roger Garrison's conception of secular growth?

1:27:48He explained that secular growth occurs without having been provoked by policy, or by technological advance, or by change in the temporal preference.

1:28:04I don't see that his view, I think you can have growth without changing time preference if you have an innovation. I don't think that anything he says about secular growth is, it sort of misses what I'm saying about triangles. In other words, I'm not against Austrian business cycle theory. I'm in favor of it. I'm trying to improve it. But I'm saying that the triangle is not the best vehicle for this and we should either use it less or use it more cognizant of its failings. But I don't think I tangle with Roger on secular growth just because I criticize the triangle. I don't think that the only way you can have growth is is to have time preference falling.

1:28:58There are other sources of resource discovery or innovation or, I don't know, Einstein comes along and all of a sudden, or Bill Gates comes along and all of a sudden we have more growth than we had before. But I don't think that there's a conflict between Roger and I on secular growth. There is on the triangle, but not on secular growth. Yeah, Adam. I've got a question about the triangle, namely that, do you have any examples of when, let's say we granted your criticisms of the formation of the, the depiction of the triangle are correct. Are there any instances when invalid things are being deduced from the triangle? I mean, because there's, like, if I talk about polka-dot horses, you might object that there are no polka-dot horses, but if I'm just talking about how fast they run, that there's nothing invalid.

1:29:48Not in this, not in our paper. All our paper, it's a limited paper. We have a follow-up paper, now that the triangle is not used, now it already do, and what I said there is we look more upon interest elasticities, and in that, our expectation is that the triangle will point us in the wrong ways, but in this paper that we've just written, There is nothing there that says, aha, you used the triangle, you screwed up, you should have zigged when you zagged. There's nothing like that, but that's a very good point. Well, I guess we're out of time. Thanks for your attention.