The Free Market: Fallacies and Facts

0:00to look out here and see so many friends, Vedran Vuk and Jason Rink and Deanna down here, I haven't even gotten to say hello to, and Jeremy Davis, a great donor and benefactor, how wonderful to see you all and thank you very much for your important contributions. Now here's what I'm going to do today, and I'm extremely dehydrated by the way, so I'm sorry I have to keep doing this, but this is our first week on the Primal Blueprint, and if you don't know what that is, Please go to primalblueprint.com and oh, some of you may either be dead set against it or not know what it is, but basically you can eat meat, fish, fowl, eggs, fruit, vegetables, seeds and nuts, which should keep you more or less occupied, but yet you find you have a hankering for Oreos, a hunk of bread, whatever, but you really need to drink a lot of water when you're transitioning to this and especially when you're traveling.

0:59so I am gonna have to do that. But it just goes to show that in every aspect of my life I don't listen to the government. Every aspect of my life. The Department of Agriculture says I should be consuming six to 11 servings of grain per day. Isn't that amazing? So that's the food pyramid. So as usual, everything they do is exactly the opposite. You gotta flip that pyramid over. All right, now you're thinking, I know why he's going on and on with all this chit chat. They just added him to the program three days ago. He doesn't have anything to say. No, I do, actually. I do have a little bit to say. And it actually involves, to one degree or another, Twitter. Now, I don't know, some of you probably are on Twitter. Some of you were cajoled into being on Twitter by me, namely Bob Murphy, who is on Twitter.

1:51I'm on as Thomas E. Woods, so please follow me. and you could come up with anything, like Liberty Avengers, I think I'm going to go the old-fashioned, the old-timey way, at Thomas E. Woods and I don't follow Twitter very much and for those of you who don't know what Twitter is, it's something where you can post a 140-character statement or update about what you're doing or opinion about the world or link to an article or whatever that can be only 140 characters so that really limits you in what you can say and it means you have to really economize on your letters and space So, you wind up seeing people saying, you know, I want to be you, and I think, oh, all right, I just hate this thing already.

2:36But people have said, you know, you got to, like, all the cool people are on it, and when somebody tells me that, I basically do it. So, I don't follow it that much, because how, how inane and frustrating is it to try to carry on an argument with somebody, and each argument you have can be only 140 characters. Now, all right, if you're like a supporter of Obama, well, yeah, you could probably sum up everything you want to say in 140 characters. Everything's a bumper sticker, all right? But, you know, it takes a teensy-weensy bit longer to explain the Austrian theory of the business cycle than to say, hey, man, let's tax people or something like that. You can get in like 20 characters. So I just, most of the time, just pay no attention to it. I tweet on there. I do have statements that I make on Twitter, but I try not to read it because I know it's just going to enrage me.

3:27Not that I have a lot of people I'm following who are Obama supporters, but I do have people who apparently are supporters of non-Ron Paul candidates. I don't know how I ended up following them. I guess my view is if you want to follow me, I guess I'll more or less follow you as long as you don't seem to be completely insane. Well apparently my discernment capability is not as great as I thought, so I get some of these statements about America needs MIT and all this and that, so I just don't want to look at this. But I do try to see what people are saying in response to me because I feel like I'd be rude not to look at their comments. Well one day I woke up, I literally, this is what happened, I woke up in the morning and I was looking on Twitter and sure enough there was a really hostile response by somebody on the Left, and she was linking to, at least she had the DC to link to me, but she linked

4:20to this video of me speaking at the Mises Institute. So right away, you know I must have been up to no good. And she says, this is how these right-wing Ayn Rand followers want to destroy our country or whatever. So I went back and thought, what speech is she talking about? So this is a speech I gave to high school students where I basically went through some Some of the common arguments against the market economy that, well, capitalism is responsible for child labor, it's responsible for long working hours and terrible working conditions and low wages and exploding consumer products and whatever, wide wealth disparities and so on and on. The sorts of things that we've all heard growing up and since we were born. And I was answering some of these and she was not happy about this at all so she's got a whole bunch of tweets, but because she's not satisfied with the 140 characters, nobody really is, she would then link each tweet to a longer, some Twitter site where you can

5:19then expand on your 140 characters. She's cheating. And so she would expand on each of her complaints about me, and the statements she was making, again, were fairly conventional things. Now the normal response to this is to say, well, you know, people are going to disagree I agree with you, you gotta just go on, and that's what I do most of the time, and this is, I think this is good advice for a lot of people, you always shoot up, not down, when you're fighting against somebody, so if some guy with a blog with 12 visitors attacks you, it's not worth your time, you have other things to do, I don't mean that his worth as a human being is low, I mean you have a finite amount of time and many tasks to perform, But if Brad DeLong attacks you or if Paul Krugman attacks you, well, you darn well better respond.

6:15And so that's, for example, that's the rule that Rudy Giuliani broke in 2007 when he attacked Ron Paul in the debates who was well below him in the polls. He shouldn't have done that. Instead, he gave Ron Paul all this publicity that was really one of the turning points in that campaign and in the whole movement. That was a huge mistake for which we are very much in the former mayor's debt, of course. So, right now, I'm gonna tell you that I violated this rule. I violated this rule because I finally thought, you know, somebody has to make an example of people like this, you know? Enough is enough, who drive, these drive-by shootings of inane anti-market arguments that have been refuted a hundred times, like, that's it. Like, we have been so tolerant with this, that is it. So I said, all right, that's it, I am gonna reply to this woman, and no, I am not replying in 140-character bits, I refuse to do this.

7:04I am throwing over the table, baby, The new rules begin right now. Australian rules. That's my saying for something that's just totally new rules, because Australians have their own rules for football, so anytime I do something that's a little bit out of the ordinary, I say I'm following Australian rules, baby. So Australian Twitter is as many characters as you want. Alright, so here's the sort of thing, let me go down through some of the sorts of things that she said, and I think you're going to find these to be very familiar, the sort of things that you'll have thrown at you, and here are some of the kinds of responses that I gave. So the first one is, the market really encourages only the survival of the fittest. I'm sure no one's ever heard this, right, the survival of the fittest argument. Well, is that true? Is that really true?

7:50I think that's more true of pre-capitalist economies, economies that did not have functioning markets in them, pre-economies that came before the Industrial Revolution. And as F.A. Hayek pointed out in his great introduction to a wonderful collection of essays in the 1950s, I think 1954, called Capitalism and the Historians, when you look at these pre-Industrial Revolution economies, People could not integrate themselves into these economies unless they either could succeed in agriculture or happened by some fortunate happenstance to possess the tools necessary to go into a craft of some kind. Otherwise, there was no way you couldn't go and sell your labor services to some factory owner. There weren't any.

8:38And so, really, people say, oh, who would ever want to work in a factory? Well, the question is, who would want to die? Because that was your other option. It's not like people said, you know, I think I'd like to work 16-hour days in miserable conditions. That seems like the best option I have. Well, that's because the other options were much worse. And this is why the economist David Henderson says whenever you want to help the poor, don't look at the list of their choices and cross off the one they actually chose. If they actually chose the factory system, it could be there was a reason for this. And it turns out that in fact there were, because their population was growing dramatically in Britain, there was a huge surplus population for which there was no existing outlet whatsoever in the economy as it existed.

9:27So the market with its employment opportunities was at least able to absorb these people, and even though obviously nobody would want to be a factory worker in 19th century England today, The fact is that in terms of housing space per capita, caloric intake, they compared favorably to the agricultural workers of their day. And in fact, in all these other metrics that we look at, it turns out that indeed living standards were improving, even during this time of tremendous population growth, and even during a time when Britain was on and off engaged in war, in the wars of the French Revolution and the Napoleonic Wars. So the standard of living would have been even higher in the absence of that. So, now there's obviously a great deal more that one could say about the Industrial Revolution, but the point is that before we had the kind of sophisticated markets that we have today, there wasn't anything for a lot of these people to do that would have allowed them to earn an income at all.

10:22Moreover, the production processes in the economy were so primitive that we could produce only a tiny, tiny fraction of the consumer goods we can produce today. And so that means that each person, on average, had to content himself with a much tinier fraction of goods than we take for granted in our great abundance today. But when, under the free market, businesses are free to take their profits and reinvest them in their businesses and purchase capital equipment that makes the production process much more physically productive, That means we have a much greater abundance of goods, so we have a greater abundance of goods per capita. It becomes cheaper in terms of prices vis-a-vis wages for people to acquire the necessities of life than otherwise.

11:09And this is how our living standards increase, because we become physically capable of greater and greater abundance. I always use the example of my father, who was a forklift operator in a food warehouse for 15 years. of Money, The Theory of Money and State, The Theory of Money and State, The Theory of and wasting their time taking pallets and walking 100 yards with them and putting them somewhere and then walking all the way back.

11:56That's obviously not the best use of their services. Now that they're released to produce other goods, everybody is better off. There's a greater abundance of goods, the greater abundance through competition leads the prices of those goods to go down vis-a-vis wages, and we see our real incomes increase. And this is true in all lines of production.

12:45could be produced or ways that goods could be produced more cheaply now that labor is more abundant. But just think about any one of us. Any one of us would love to have the personal services of three or four people. Any one of us would love to have a gardener, a chef, and a chauffeur. Any one of us could put at least three or four people to work if labor were abundant enough for that to be possible, but it's not. The way we know it isn't is that nobody in this room can afford to do it, which means is they're being pulled away by something more urgent elsewhere in the economy. We always find some place in a free market, a genuine free market, we always find some place to put them. But the point is that what is this process doing for the most vulnerable people in society? It's dramatically increasing their standard of living. And in fact, in the United States throughout the 20th century, the purchasing power of

13:33the poorest increased by about 1900%, which was much higher than we saw for any other income quintile. In fact, if we look at the poverty statistics during the 20th century, we see that the beginning of the 20th century, we would say by today's standards that 95% of Americans were living in what we would today call poverty. By the late 1960s, that figure was down to between 12 and 14%. And that was with really almost no anti-poverty programs worth speaking of, very, very little. The great society programs of Lyndon Johnson really got going in terms of funding only in the late 60s. And then the poverty rate more or less stagnated. So you get, let's say 1994, they're spending quadruple per capita what they'd been spending in the late 60s and poverty rate had stagnated.

14:28Now suppose the situation had been reversed. Let's suppose we began with 95% poverty and that all through the 20th century, up through the late 60s, we had very well-funded anti-poverty programs, trillions of dollars poured in, and let's say that we saw the poverty rate fall to 12 to 14%. Let's say further that at that point we just decided we hate the poor and we're greedy and we want to stop giving them all this money, and we just cut off all those programs and then the poverty level stagnated. I think we know what the story that we would hear would be. To see, government programs are what eradicate poverty. Look at the great success we had, all from the 1900s, all the way down to the late 1960s. And then we got rid of the anti-poverty programs and poverty stagnated. Man, you stupid Neanderthals, isn't that all you need to know that we need more government funding?

15:16But you notice that that's not what happened. That's the exact opposite of what happened. So what do we hear about this? Nothing. No acknowledgement of this. Nothing in a textbook the kids are reading about in school. Nothing. No mention of it at all. So this is I think one of the explanations for my Twitter critic having this view. I understand, I don't think she's an idiot having this view, this is only what she's been taught every single day her whole life, what else would she think? But in terms of the survival of the fittest question, is that the market allows the survival of people who would surely have perished in a pre-market society. There simply wouldn't have been the resources to keep them alive. And so Murray Rothbard wrote in Man Economy and State, he says, The free market is precisely the diametric opposite of the jungle society.

16:05The jungle is characterized by the war of all against all. One man gains only at the expense of another, by seizure of the latter's property. With all on a subsistence level, there is a true struggle for survival, with the stronger force crushing the weaker. In the free market, on the other hand, one man gains only through serving another. It is precisely through the peaceful cooperation of the market that all men gain through the development of the division of labor and capital investment. To apply the principle of the survival of the fittest to both the jungle and the market is to ignore the basic question, fitness for what? The fit in the jungle are those most adept at the exercise of brute force. The fit on the market are those most adept in the service of society.

16:51The jungle is a brutish place where some seize from others and all live at the starvation level. The market is a peaceful and productive place where all serve themselves and others at the same time and live at infinitely higher levels of consumption. The free market, therefore, transmutes the jungle's destructive competition for meager subsistence into a peaceful, cooperative competition in the service of oneself and others. In the jungle, some gain only at the expense of others. On the market, everyone gains. It is the market, the contractual society, that rests order out of chaos, that subdues nature and eradicates the jungle, that permits the weak to live productively in a regal style compared to the life of the strong in the jungle.

17:39Furthermore, the market, by raising living standards, permits man the leisure to cultivate The Very Qualities of Civilization that Distinguish Him from the Brutes. Alright, so now my next attack that was directed my way came in the form of a statement, a series of sentences, and I'm just going to pull them apart one sentence at a time, and I'll give you my response. First sentence of the next response to me is, in the ideology of the free market, freedom Freedom is Conceived of as the Absence of Interference from Others. I guess that's a criticism? I'm not understanding how else freedom could be conceived.

18:24I mean, really, basically, if we just reword it, freedom is conceived of as the absence of the initiation of brute force against innocent, peaceful people. Well, okay. That one I accept. I'm gonna leave that arrow stuck in my back. So let's move on. There are no common ends to which our desires are directed. And this, I think, reveals a very, very unfortunate mentality that exists among a great many people in the world, and again, it's the sort of thing that they're just taught in the propaganda factories that a lot of our kids go through, is that society can't function unless there's some kind

19:34that they don't approve of, but what's bad about that? How do we know that the coercers will always have good ends in mind? How can we be assured of that? Can we be assured that we would all be coerced into pursuing laudable goals? Where do the coercers get the right to decide for everyone else what their goals should be? But at the same time, I would say there obviously are common goals that are carried out all the time on the free market, and it's almost a cliche now to refer to Leonard Reed's essay, Eye Pencil. But of course, if you haven't read Eye Pencil, go to Google and read Eye Pencil, where he talks about all the different, he basically tells the story from the point of view of the pencil. And all the different steps that go into making a pencil and the different production processes that need to be known and the raw materials that come from all over the place and then you need to know how to build the structures

20:23that are going to transport these goods from one place to another. There's so many things that you would need to know, no one could possibly master it all. So, even just simply from a technological point of view, it would not be possible to carry this out by just one individual. Nobody could be that smart. And this is a little different from the Hayek knowledge problem. This is just a strictly technical question. You have to know about rubber production. You gotta know about mining. You gotta know about lumber. You gotta know about all kinds of different things involved in transportation. Nobody could know all these things. So you would think, with her mentality, there's no way a pencil could ever be made. There can't be any pencils. There would have to be a worldwide pencil production board presided over by this person, presumably. Telling everybody what to do, when to do it, you better start growing the trees, because pretty soon Murphy's gonna need a pencil,

21:12and we're gonna need to chop that tree down for the wood and whatever, and yet it all happens. And you can think of this with any production process you can imagine for any consumer good. All these different firms at all different stages of the production process are all working on different things separately, and yet the finished consumer good is produced with no surpluses and no shortages, time and again, with no central direction. So it is absolutely false to say there are no shared ends. Look at that, that's a shared end. And every firm, every industry, every stage of production involved in this process, depends on the success of every other. Because the lower stages of the production structure need the supplies produced by the higher stages. They need those supplies. So this is a cooperative venture in the best sense of the term.

22:00Meanwhile, these higher stages depend for the profitability of what they're doing on the demand that comes from the lower stages. And that demand, of course, is a derived demand that derives from the demand of the consumers for the finished product, and that demand ripples up through the production structure. This is a tremendous example of how we all become integrated into a structure greater than ourselves that produces something that, on the face of it, if we're just looking at the dictator barking out orders model would seem impossible and yet it's done with no dictator and no orders barked out in a macro sense. So that's pretty interesting and yet there's no credit given to the market for this. Critics like this don't even notice this. They just go with, they just use up consumer goods every day as if they just fall from heaven and we don't need to be amazed and awed at it.

22:48Well, I am amazed and awed at it. I mean, I'm, to almost a ridiculously dorky extent, amazed and awed at this process. And I told the story at the Mises Institute over the summer, but there was a time a few years ago, one of our little kids was sick and really late at night, I had to go out and get her a vaporizer. And I was able to go out and get a vaporizer for 10 lousy bucks. In the middle of the night, I got a vaporizer, 10 lousy bucks, and I actually stood there. I actually stood there in the store and said, this is amazing, that somehow, I mean the greatest king of Europe couldn't have done this. I can go and get, and then it occurred to me, I have a sick kid at home, I can't stand here philosophizing.

23:33But think also about the price system, which develops spontaneously. Nobody dictates the prices to us. The price system develops, as you can see through reading any of the Austrians, from The price system develops through a series of competitive bids by buyers and sellers. And the price system helps entrepreneurs decide between the literally trillions of options they have at their disposal in terms of what product to produce and how to produce it. They're all different combinations of inputs they could choose. It could be more labor-intensive, more capital-intensive, they could locate their plant here, they could located farther away, and they find that the transportation is not so expensive that it wouldn't have been better to just have a closer plant, I mean how do you decide between that?

24:21Should I have a plant that's closer to my market or one that's farther away given that the land values are lower back there, I'd save money there but then I'd have to pay for transportation? How would you know in what way you are burdening society more or less? In what way would you know that you are employing resources in a way that is sub-optimal from in the point of view of everybody's welfare. There's no non-arbitrary way to know that. Should I use 10 units of lumber and nine units of rubber or 10 units of rubber and nine units of lumber? There's no way to know that without the entrepreneurial calculation possibilities that the price system provides. And so if you're using an input in your production process that's demanded more urgently elsewhere by a product that people are more urgently demanding elsewhere then it's gonna be bid away from you and you're gonna have to look for a substitute.

25:10And this is the way these things just occur without absurdly destructive and uneconomic decisions being made that would impoverish us all. This makes certain that when we engage in production, we are doing it at the least cost in terms of opportunities foregone. So when I hear people say, we need to be great stewards of our resources, there is no greater steward than the free market. It's impossible for there to be a greater steward of resources because only the price system helps us to figure out how valued the resources are. Now there is no dictator that forces this happy outcome on us. Then she goes on, in the absence of such common shared ends, all that remains is the sheer arbitrary power of one will against another. Well that's not a description of the market economy, that's a description of government.

25:59How else would we describe the exercise of power by a privileged class against peaceful people with the aim of expropriating and ordering about those peaceful people by that privileged class. That is the sheer arbitrary will of one power against another. Nobody forces you to buy a Twinkie, but governments do force you to fight in their wars and pay for their bailouts. Now, some people might call that sheer arbitrary power. In fact, now, a friend of mine has a good analogy. If you want to say that corporations are just as dangerous as the government, think of it this way. What would alarm you more? And which call would you feel more comfortable hanging up on?

26:45An Apple computer marketing phone call? Or an IRS phone call? Then finally, freedom thus gives way to the aggrandizement of power and the manipulation of will and desire by the greater power. Power. Well, again, this has the situation entirely reversed. It's government that does these things. If you've ever seen government's propagandize for war, they can get people hating people not only they've never met, but they don't even know where these people are on the globe. I mean, that, you want to talk about manipulation of will and desire by the greater power. Well, she might start by looking first at the political class in which she reposes so much misplaced confidence. And then she says, in another one of her tweets, again, thinking that she's attacking me, so she doesn't even bother to take the time to figure out who I am or what my views are, even though she linked to my website, so she could have taken the three seconds to look at it.

27:39So she says, our main enemies, court protocracy, American Empire, okay, well, what, right, okay, so our would include me. So then what's your problem? But then her Twitter avatar includes the Obama 2012 logo. I mean, talk about being totally a captive, here she is talking about the free market brainwashes you into doing things you wouldn't otherwise do. And here she's somebody who's against corporatocracy in the American Empire, and she's supporting Obama, who hands out bailouts like crazy, and who, if you ask him, well, you're going to bring the troops home from all these various countries, he says, we can't retreat into isolationism. he's got the robot propaganda PC term down absolutely packed when anybody ever asks him a question like that.

28:27So my good friend Anthony Gregory, who in one of the best essays I've read in a long time, said this about Obama. So now we actually come down to earth. Obama shoveled money toward corporate America, banks and car manufacturers. He championed the bailouts of the same Wall Street firms his very partisans blamed for the financial collapse. He picked the CEO of General Electric to Oversee the Unemployment Problem. He appointed corporate state regulars for every major role in financial central planning. After guaranteeing a new era of transparency, he conducted all his regulatory business behind a shroud of unprecedented secrecy. He planned his healthcare scheme, the crown jewel of his domestic agenda in league with the pharmaceutical and insurance industries.

29:13Now, as for foreign policy, again, my critic seems to think The American Empire is the result of a thoroughly bipartisan foreign policy that's gone on for over half a century. Andrew Bacevich, who is sort of a conservative foreign policy analyst, had a good book last year called Washington Rules. He uses this term Washington Rules. I think it's a more elegant term. I was referred to the bipartisan foreign policy consensus. But what he's basically showing is that the foreign policy difference between Hillary Clinton and John McCain is basically cosmetic I mean, there's nothing no really the fundamental assumptions behind it are really shared by by both these people and they're shared by the New York Times the Washington Post and pretty much all the major US newspapers Now again, Anthony Gregory, he says Obama continued the war in Iraq even extending Bush's schedule with a goal of staying longer than the last Administration planned and then finally the Iraqis said you've got to get out He tripled the U.S. presence in Afghanistan, then took over two years to announce the eventual

30:15drawdown to bring it back to only double the Bush presence. He widened the war in Pakistan, launching drone attacks at a dizzying pace. He started a war on false pretenses with Libya, shifting the goalposts and doing it all without congressional approval. He bombed Yemen and lied about it. He enthusiastically signed on to warrantless wiretapping, renditioning, the Patriot Act, Prison Abuse, Detention Without Trial, Violations of Habeas Corpus, and Invasive Airport Security Measures. He deported immigrants more than Bush did. He increased funding for the drug war in Mexico. He invoked the Espionage Act more than all previous presidents combined, tortured a whistleblower, and claimed the right to unilaterally kill any U.S. citizen on earth without even a nod from Congress or a shrug from the courts.

31:01But this is the opponent of corporatocracy and American Empire. Never underestimate the ability of politics and government to confuse people. That's what they're there for, is to fill our heads with this idea that they're the great saviors, or there's at least one party among them that's the great saviors. And without them, oh, it would all be terrible, we'd all have jobs earning us three cents an hour, we'd all be dead, just what you read in your seventh grade textbook. And she says, another problem with the idea of the free market is that humans make decisions based upon the short term rather than the long term. All right, now let's assume that I take, that I accept this dubious psychological proposition. Let's assume that it's true. Somebody who makes this type of criticism never applies it to government.

31:49Wouldn't governments also think in the short term? Wouldn't the voters who elect the people in governments also think in the short term? So how does government improve on this? and in fact when you think about what governments have done thinking about short-term I mean look at what Richard Nixon did on the eve of his re-election campaign in 1972 dramatically increasing social security benefits I'd say that was for a short-term benefit you know call me a cynic I don't think he was thinking about what the consequences would be 30 years down the road and in fact when you look at those programs the entitlement programs are underfunded right now to an amount greater than the GDP of two planet Earths so I would I'll say that the U.S. government has had a little bit of a problem not thinking in the long term. But supposedly, this is a problem that's exclusively confined to the free market.

32:36But again, to the contrary, the free market discourages people from short-term thinking. So, for example, think about this very critic. She probably drives a car. Does she wait 80,000 miles between oil changes? She should, if all she thinks about is the short term. In the short term, this is going to take half an hour out of my day. I don't have time for that, baby.

33:27by temporary caretakers who don't own the capital value of the resources of the country. So it doesn't matter to them. If the country was a giant car, they wouldn't do an oil change the whole career they were in office. What difference does it make to them? They don't have to drive that car. It doesn't matter to them to preserve the capital value. Instead, sure, we have to loot these people as much as we can right now because I may be out of office next year and I won't have the chance to loot them then. We have to think in the short term. We've got to use stuff up to benefit us politically. Then she says, and I'm not going to look over at Doug Frenton. Keep you a little bit, because I think I got started five minutes late. I'm going to keep you slightly late. Don't anybody boo and hiss, please.

34:13But I do want to get, she deserves this and I would feel bad if just time kept me. So then we get this. So now we've, so supposedly there's this law. People think only in the short term. She says, this enables shrewd individuals or groups, and by the way, this is copied and pasted from other people's stuff that she just put there. This is not her own creation. Enables shrewd individuals or groups to manipulate markets and exploit individuals for their own gain. The invisible hand Smith described is either too slow or becomes too entangled to effectively make corrections to the market in sufficient time to prevent real, long-term harm from occurring. Consequently, free market corrections can produce enormous misery for the many while Well, they take their sweet time to correct the market. Well, all right, so we're told that groups manipulate markets and exploit individuals, though we're given no examples of this and no definitions of any of these terms.

35:05This antisocial behavior, we're told, causes the whole market economy to suffer, such that a wrenching recovery process is necessary. And these recoveries, because of the market, take too long and cause further suffering. Now let's assume, for the sake of argument, that this is a coherent point that she's making. and with the relevant terms not being defined and a causal mechanism not even being hinted at, I rather suspect I'm ascribing more dignity to this position than it deserves, we're left to wonder why the economy's not in a constant state of recession, don't we have greedy manipulators all the time, why would we be in a recession only in a cyclical pattern, why is there no curiosity about this, nowhere in any of her tweets is any mention made of the Federal and the Federal Reserve System. It's absolutely typical of conventional thinking progressives.

35:52That if an institution's been around for a long time, it must be pretty good. Now their old slogan used to be question authority. Well now it's question authority except the Federal Reserve, the US President, the New York Times. Question authority except everybody who matters, pretty much. So nothing about the Federal Reserve. So our argument is that it's the Federal Reserve's intervention in the economy in terms of money and interest rates that sets the economy on an unsustainable path that ends in a bust, it has to end in a bust, and it's self-reversing. And this is talked about in any of the Austrian books and my meltdown in 2009 was one of the, was my opportunity to sort of explain this to the general public. So it's not caused, the boom bust cycle's not caused by the market economy per se, but by this sort of intervention, and the recoveries are brief or prolonged in terms of, well, how much interference is there from the government.

36:45and as Bob Murphy often points out, the Great Depression is the first time in U.S. history that the Federal Government actually rolled up its sleeves and said, okay, we're gonna try and solve this thing. And it just goes on and on and on and on. Whereas the 1920-21 downturn, relatively little was done and there was a relatively swift recovery compared to the Great Depression. If that had been, now today they try to say, oh, that's apples and oranges. No, it's not because imagine the situation's reversed. Imagine in 1921, we had a quick recovery because there was massive government involvement and the Great Depression went on forever because we had no government involvement. You better believe what they would say is, you see, this just goes to show you need the government to get you out of downturns. So you can't win with these people.

37:32They'll either just ignore it, they'll ignore you, or they'll spin the evidence in their directions. Why? You need good theory in addition to knowledge of history. Then I'm told the free market encourages the elimination of the weak. Well, if it's doing that, it's doing a really rotten job given the growth of population around the world and given the growth of living standards and life expectancy, particularly in the developing world. Why is it that the poorest enjoy the greatest material advantages and the fewest deprivations in countries that have the freest markets? It quickly became apparent that humans could be sold products with lower or even negative of Utility, by appealing to the consumer on a deeper emotional level, this discovery along with mass advertising enabled by mass communication effectively destroyed the free market observed by Adam Smith.

38:19All right, well, this is a bastardized version of John Kenneth Galbraith's argument that you don't really have a free market because people are manipulated by advertising. We just go out like zombies and whatever it is, they want us to buy some new kind of car or a new board game and we all just walk to the store and say, well, the TV told me to to do it, so here I am. But this, I mean, there are a lot of things you could say about this, but this leaves unanswered the question, if that were the case, why do companies spend so much money on marketing research to figure out what consumers want? If all you need is a snazzy commercial to dupe them into buying anything you want to produce, if you want to produce porcupine popsicles or something, just go ahead and produce it and just have a fan, you know, just get, I don't know, just get Barack Obama Well, if the product stinks, it doesn't matter how many ads you make for it.

39:14So if nobody wants the new Coke, you can make all the ads you want, they're not buying it. The Edsel is not going to be sold by a slick advertising campaign. Or once people can download music in MP3 format, or they can stream movies over the internet, All the advertising in the world is not going to save Sam Goodies or Blockbuster. And then finally, capitalism creates inequality. Well I love the example that Mises gives about inequality. Mises says that in the old days, the rich traveled via a coach and four, a coach driven by four horses, whereas the poor traveled on foot, often with no shoes. Today, the rich travel in a fancy car, and the poor travel in a beat-up car.

40:02And people talk about, oh gosh, inequality is so terrible. Well, this is obviously, in a qualitative sense, a dramatic reduction in inequality. Now, it's true we can talk in a minute about there are people who are fantastically wealthy because of state benefits, but that would be precisely our argument, that that's why the state is so antisocial and we have to fight against it. against it. But we all take for granted amenities that the richest of the rich couldn't have imagined a hundred years ago. I mean, flush toilets, even flush toilets, which apparently they had in ancient Crete, in Minoan Crete they had flush toilets, and then somehow that technology was lost to Western civilization until like the 19th century. So even, you know, the Habsburgs, well, I don't want to get too graphic about what they had to do, I mean, these are the sorts of things that, I mean, in my, you don't need to know the details of my master bathroom at home, but I'm going to tell you, because it illustrates,

40:56I'm going to go through, because it illustrates a larger point about capitalism. We moved into our house, the previous owner had lived there only five years, built the house and then something went wrong and he had to move away. And he installed a whole house audio system, we, for the life of us, couldn't figure out how this thing worked for a year. We've got speakers all over the house, we get nothing comes out of them, nothing. Turns out we had a technician look at it, he had it wired all wrong, it's lucky that we didn't blow the house up when we turned on the switch. So we got it fixed, but would you believe there are two speakers in my master bathroom? So now every day in the shower, I don't have to sing in the shower anymore, I can turn on Pandora and a computer system that figures out based on my tastes what music I might like is endlessly streaming music for me in my bathroom.

41:50And there was one day we had some little problem with it, you would have thought the world had ended. I mean we don't bother to stop and we are so ungrateful and critics like this are so ungrateful for the sacrifices made by people who in many cases just gave everything they and they had in terms of wealth and energy and entrepreneurial skill and foresight to provide these things for us, it's astonishing, but okay, again with inequality you can talk about are the statistics correct and so on and on and that they don't take account of mobility, so it's not enough to say the lowest 20% only owns X% of whatever because when you look over time the lowest 20%, it's not the same people, they move from the lowest 25% to 30% of them, 10, 15 years later, are in the highest quintile.

42:40So it's not like there's just this group that's just, they never move. There might be a sliver of such people. But the mobility is completely left out of these statistics. Well then, finally, this is the last point, very quick. Didn't this yield us, didn't the free market give us the robber barons of the 19th century? Okay, well the quick answer to this is, read Tom DiLorenzo's book, How Capitalism Saved America, that talks a lot about this. about this, but just very quickly, it's true that you did have parasitical businessmen who grew wealthy through tariffs and through other benefits that came at the expense of their fellow Americans, but those aren't the people we should salute. The fact that Andrew Carnegie almost single-handedly could take the price of steel rails and lower them from like $160 a ton to $17 a ton, that reverberates through the whole economy.

43:28production process now becomes cheaper. Now it becomes possible for everybody's real income to increase. Or the efficiency of Carnegie, 4,000 people at his homestead plant could produce more steel than the 15,000 workers at the Krupp Steel Works in Germany, which was Europe's most renowned facility in the late 19th century. John D. Rockefeller brings the price of kerosene down from $1 a gallon to 10 cents a gallon. James J. Hill, who is was in charge of the Great Northern Railroad from St. Paul to Seattle, made money and prospered with no government subsidies at all. And in the panic of 1893 when a lot of railroads went bankrupt, he turned to profit and did very well and fares were decreasing on his line.

44:15Cornelius Vanderbilt, when he helped to defy New York steamboat monopoly, well he was able to go around the monopolist for like a quarter of the price and then later when the monopoly was lifted, he was able to transport people from one place to another around the New York area for not three dollars, but ten cents. And then later the ten cents he got rid of and just figured he'd make his money selling food aboard the ship. And then later, Edward Collins in the 1850s got a government subsidy for his steamship business to provide mail delivery across the Atlantic, $858,000 a year. Vanderbilt entered that field in 1855. He He outperformed Collins in passenger travel and mail delivery with no subsidy at all.

45:00Collins' subsidy was finally done away with and he eventually went bankrupt. But Vanderbilt consistently delivered mail and passengers to California for a quarter of the cost that protected subsidized institutions did, and he defeated them all. Now I don't see why I'm supposed to despise people like this who are obviously benefactors of mankind. and my whole life will never contribute a tiny fraction to the material well-being of my fellow man of what these people did. Now I hope that intellectually I might contribute something and you can't, these are incommensurable things so who knows what's worth more or whatever. Maybe you'll find that my books are worth more than heating your home more inexpensively but I'm a little dubious about that. Alright now finally I'll just conclude with this. I like to say we at the at the Mises Institute because I was there for four years as a resident scholar and I have never been more proud to be associated with an organization in my life

46:01because here we are at a time when above all we should be understanding how the market works. We see more attacks on it, more unfounded attacks than we have seen, I don't know, maybe in 30, 40 years. And the Institute has been, and I don't mean to disparage other institutions that have done perfectly good work, That's not my purpose here. But the institute, number one, is extremely good in how it spends money. I mean, not a penny is wasted. You don't have to worry about, oh, well, you know, they're all gonna go on fancy vacations if I donate money. It's very hard for nonprofits to be very good about watching their dollars, but boy, do they, at the institute, they're very careful with donor money. They're also fearless, and it's the Mises Institute that I owe my own intellectual trajectory to. I went to that Mises University program in 1993 that was made possible by donors like yourselves.

46:52And that was where I got to meet Murray Rothbard, and I got to meet and talk with him about four or five times over those couple of years. And suddenly I became just a committed Austrian. And I went through a few intellectual phases here and there, but basically I stayed an Austrian, and now I've got to the point where in 2009, with the financial crisis, I thought, somebody better write an Austrian look at what just happened to the economy. And so I did it, I did it very quickly. We got it out there. It was a New York Times bestseller because a lot of people responded to the message in it. But how was I able to do that, to turn that around, to have that book be the first book off the presses about the financial crisis and the bailouts? How was that possible? Because of the training the Mises Institute had given me, because of the books that they had given me, the professors they had put me in touch with,

47:39the studying that they had encouraged me to do made this opportunity possible for me. and it's made possible my whole life. I get to go around the country and talk to people about this stuff and I'm hearing all the time about how the Mises Institute changed the way I think about things. And as I say, here we are at a time when the greatest benefactor, materially speaking, the world has ever seen, is under greater attack than it's been in the lifetimes of many of us. And the attacks are so unfounded and so unfair and so frankly deranged, made by people who wouldn't even have the leisure time to make these arguments had it not been for the pampering of them that the market provides. It is our responsibility, one person at a time, to change all this.

48:30I set up a little page that links to a lot of Mises' resources, learnaustrianeconomics.com, so that you can, at your leisure, know what would be best to read, what you can listen to in your car, and whatever, but ladies and gentlemen, together, we are on the cusp of an intellectual revolution because when you see that somebody like Ron Paul, the personification in politics of Austrian economics is getting nearly half the youth vote in Iowa and New Hampshire and this is just going on and on, that means these ideas are the future. But unlike the communists who believe that history moves according to inevitable historical laws and you can just sit back and watch it. Well, we believe that it couldn't hurt to give history a little bit of a push at a time like this when you got all these kids thirsting for knowledge.

49:22Please join and support the Mises Institute generously to give them the knowledge and the tools these kids are craving. Thank you very much.