 Aloha and welcome to Hawaii Together on the Think Tech Hawaii Broadcast Network. I'm Kayleigh Akina, your host and the president of the Grassroot Institute. Well, here in Hawaii we've got beautiful weather, lovely skies, ocean, mountains and wonderful people. But do we have all the liberty that we need? One thing's for sure, we live in an economy. What's the relationship between economics and liberty? Well today I'm going to ask my guest that because he knows all about it. He's an associate professor of economics at Hawaii Pacific University but more than that he travels the world spreading the message of liberty. One of his books, The Adventures of Jonathan Gullible, has been translated into dozens of languages and has become a text for anybody who's interested in free market economics. My guest is also a dear friend of mine, one of my closest intellectual companions, someone I've known for many decades and I'm delighted to have him on the show again, Professor Ken Skolin. Ken, welcome to the program. Thank you, Kayleigh. You make my job easy because I try to make my guests look good but you're already good. Too kind. Thanks for being on the show. Thank you very much for having me. We go back several years together. Yeah, indeed. Indeed. And I think what draws us together is a love of rigorous thinking and applying that to the real world. Well, that is a challenge, isn't it? Well, you do a great job. Now, how's Jonathan Gullible, the subject of your most famous book, Dilling? Well, the Adventures of Jonathan Gullible started in Hawaii. Nearby here it started off as radio commentary on local issues and since then it was published as a book by Sam Sloan at Small Business Hawaii and then it took off internationally. It's now published in 80 editions in more than 50 languages worldwide. Well, we've got copies of Jonathan Gullible in front of us over here and I just wanted to ask you if you would just very concisely tell our viewing audience what the essence of Jonathan Gullible is. Well, it's a tale along the lines of Gullible's travels in the Little Prince where Jonathan simply asks questions of people about their strange and bizarre behavior and this happens to do with public policy often. And it uses humor and satire to poke fun at a lot of the ways that public policy is established and maybe does unintended consequences for people. Now you've got this fanciful character Jonathan Gullible just traveling around in this island paradise observing different things in a pre-technological industrial environment and yet many of the things he observes seem to strike home here in Hawaii. Very much so and it's funny because when it was published in Poland someone said well how long were you living in Poland that you understood all the issues that we seem to be having here and I said well I didn't originally write it about Poland I was writing it about Hawaii but it seems to strike a chord in people almost all around the world. You've even been credited of bringing about or accused of bringing about the revolutions we've seen in the Middle East. Well the Arabic edition had been published just at the time of Arab Spring so I do like to take credit for all of the positives of Arab Spring. You know I want to talk with you today a bit about the relationship between economics and liberty and before we dive into that let's go to the newspapers and look at some of the things taking place. Right now our government is considering another hike in the general excise tax and on one hand it's being talked about as something very sympathetic something that we all care about which is the need to help our teachers to get higher salaries the need to educate our keiki our children more but really behind it is a mechanism that may or may not work. So what do you think about hiking the GE tax in order to provide for education? Politicians always offer solutions to problems that increase their power and never ones that decrease their power I would say that instead of making the cost of living so high for everybody which is what the general excise tax does it's really a almost 11 to 12 percent increase in the tax that they're imposing on food clothing shelter everything at every stage of distribution. Let me stop you there and pick apart what you said 11 to 12 percent increase I'm not hearing that from the politicians I'm not hearing that from those who are promoting the bill I'm hearing it's merely a half percent increase in the 4.25 on the Lulu general excise tax I know it's only 4 percent on the neighbor islands but I'm hearing it's only half a percent and we'd hardly notice it what are your thoughts about that? Well it's actually if it's half a percentage on 4.25 percent that's actually 11 to 12 percent increase. Oh so nobody's going around as in truth and lending telling us we're really talking about a 12 percent increase in the general excise tax. That's right and because it's at every stage of the distribution it works out something that would be comparable on the mainland to anywhere from 13 to 15 percent sales tax in other states and that's a huge amount of tax that everybody is paying and it comes as a regressive tax that comes as a higher percentage of the income of every low-income wager in the in the state here when you say regressive you're talking about its impact upon those who can least afford it in other words the ones who actually have fewer options for their tax strategies or for purchasing their goods and so forth they're not just paying 4.25 percent how does it work when you say it's regressive? Well because the general excise tax is at every stage of distribution wholesale and manufacturing wholesale distribution and retail so it's a tax upon a tax upon a tax and it becomes much more of an ultimate tax and it's largely invisible that's why politicians can so easily get away with it they don't people don't often see it they see it as the increase in prices of things they don't see that so much of it is the taxes is at every stage of distribution and you know that researchers have shown that for those who can least afford it sometimes they're going to be paying 13 to 18 to 20 percent of their income on general excise tax overall if they stay in Hawaii I mean considering the high cost of living which everybody acknowledges people just pick up and move they say well we can't afford it here and businesses they shut down and move to other places that are low cost and so employment is moves as well and a lot of people young people when they graduate from school here say we can't we can't afford to live live here so we'll move somewhere else and sad to say you sound like a cartoon that grassroot Institute published just this week on a new strategy for dealing with the high cost of living in Hawaii move yeah yeah I wish but that's happening to so many people right now that's right we have one of the guy highest per capita rates of residents actually leaving the islands and it's largely because of the cost of living and it would be so much easier if the state really wanted to to figure out how to wait how to be more efficient and productive with their expenditures rather than just increasing the tax now the education that this is supposed to be paying for I would think that a lot more efficient ways could be used on on how to spend the education dollar than than just raising the tax you're raising an important issue here you're questioning whether we actually need to pay tax dollars and give more money to education you're saying perhaps we should actually use the tax dollars that are there already in a more efficient and effective manner absolutely yeah and that would that applies to everything that the government does and they have a little incentive bright in the private sector they have very strong incentive to keep the costs down as well as there is to improve the efficiency and productivity of their performance but politicians don't have that same sort of thing they by law by by writing the law they say our salary is this and you have to pay it because the force of the state is behind it regardless of whether or not we're productive or efficient you know in in in our performance well once again before we get to our topic of liberty and economics let's pick up something else in the news we're also looking at potential increase of the minimum wage now on the surface just like helping teachers and helping our Kiki do an increase in general excise tax on the surface raising the minimum wage sounds like it's good because it's helping those people who make the lowest amount of money to get more money now ostensibly that's its purpose but you don't think that it actually is going to end up accomplishing that you know I actually it'll hurt the people at the lowest runs of the economic ladder they're on a on a career ladder and you're basically removing the bottom rungs of the economic ladder you you're not allowed to be paid to learn on the job to get to get the training on the job on those bottom rungs of the economic ladder are removed and you have to somehow get the skills maybe from a school that may or may not appropriately train you for higher rungs on the economic ladder you're suggesting that those who actually go for minimum wage jobs are people who are climbing a ladder and that that's the doorway in for them the minimum the lower the wage the easier it is for businesses to give a job and people who go into those jobs like teenagers and those without skills are trying to acquire skills and they'll move up the ladder naturally mm-hmm yeah and that's where the best training is and it's for the job whereas a school that you have to pay for you're just hoping that the training you're getting there will be appropriate to the job you want but look at the government's record on it after 12 years of education in government schools a lot of students just don't have the skills for for for the for the job that they're looking for or then they go on to university and then they graduate and they say well where's my job maybe I don't find it here in Hawaii well you've studied the minimum wage laws and you've written many articles on it how does the minimum wage increase mandated by the government affects small businesses the very employers of people well employers if they find that their costs suddenly go up they might because they're gonna have to pay more for labor and they're gonna have to pass that along to their customers the customers may not buy pay the higher price so they've got to figure out away well what do I do I've got a I can pay fewer employees so I have to lay off the least skilled or the least trained of the least valuable workers so that I can pay the remaining ones higher and if that doesn't work I close up shop that I move abroad or I might automate that's why you know when you and I were kids we used to go to the gas station and there was always someone who would fill our gas tank and take our credit card and fill the air and our tires and wash the windows check the oil do all that sort of stuff as service to us that's all been replaced by self-service machines okay so all that employment has gone because it's too costly to hire somebody to do that and minimum wage will make it even more costly to hire people if politicians could determine the value of a worker just simply by passing a law then why stop there one at a hundred dollars an hour now let me clarify something while you may be not in favor of the government imposing a minimum wage you are in favor of people making more money oh yeah absolutely sure then what's the solution if we don't want government to be the ones to force businesses to pay a certain level how do we have an economy in which wages are growing well you notice that 97% of all the employees in the workforce are getting paid above the minimum wage so the economy is working already yeah they're paid for what the value is to the employer they're no one tells them they have to pay them more than the minimum wage but most employment all is they pay them when it's worth it to the to the employer to employ them a lot of people think if you ended the minimum wage well that employers would not pay anything the fact is they pay them for what they're worth these are this is voluntary behavior between consenting adults and politicians are basically in a paternalistic manner intervening and saying well we don't you're too stupid to make judgments of this kind for yourself now another thing they mostly kind of applaud voluntary action internships and voluntary work where you'd be a paid nothing and people do that because they're trying to get the experience in the marketplace the experience is extremely valuable to people to be able to pursue the career that they really want and the kind of work that they want and it voluntary work and internships are seems seem to be applauded but if you get a dollar more than nothing then suddenly it's illegal you're considered to be exploited and and undesired well it's counterintuitive when we come back from a break we're gonna talk about the relationship between liberty and economics but before we go into it how does raising the minimum wage and additionally forcing businesses to have a I mean in addition to that raising the GE tax how do those things affect our liberty well the government raises the cost of things why wasn't the last minimum wage adequate for today because the prices of everything went up they went up because the national government has a monetary policy of creating trillions of dollars additional money and the local government raises enormous taxes so this raises the cost of everything that's why these is this is a wage reduction for all of the low wage workers when their prices go up and yet the government causes that and yet on the one hand they while they create the problem they then presumed to be the solution to that problem by saying okay now we're gonna demand that everybody pay you more to cover the things that we've made more expensive but we'll come back after a quick break and when we do I'm gonna ask Ken to talk about one more thing which is going on the creation of a situation where our government will become a major landlord providing leases for 99 years for a large number of Hawaii residents and then we'll pull it all together and say how do all of these things affect our liberties and what's the relationship between economic freedom and our liberties I'm Keeley Akina with Ken Skullin we'll be right back on Think Tech of Hawaii so Hawaii together don't go away Aloha and Mabuhay my name is Emmy or Tega Anderson inviting you to join us every Tuesday here on Pinoy Power Hawaii with Think Tech Hawaii we come to your home at 12 noon every Tuesday we invite you to listen watch for our mission of empowerment we aim to enrich and lighten educate entertain and we hope to empower again maraming salamat po mabuhay and aloha hi I'm Rusty Komori host of Beyond the Lines on Think Tech Hawaii my show is based on my book also titled Beyond the Lines and it's about creating a superior culture of excellence leadership and finding greatness I interview guests who are successful in business sports and life which is sure to inspire you in finding your greatness join me every Monday as we go Beyond the Lines at 11 a.m. aloha thanks for not going away I'm Keeley Akina you're watching Hawaii together on the Think Tech Hawaii broadcast network my guest is professor Ken Skullin the author of The Adventures of Jonathan Gullible and we're talking about the relationship between economics and individual liberty and in the news currently is a proposal by some of our state legislators for the government to become a massive landlord to take public lands build tall buildings in the urban core and lease out tiny apartments costing about $300,000 each they say to people for 99 years and if this project goes forward the government is involved in another massive public works program it on the surface is receiving a lot of good play because people say we need roofs over our heads and therefore here's a solution to the housing crisis in Honolulu what are your thoughts about that does this make us any more free or does this impinge upon our freedom oh this just reminds me of an old group by El Neil Smith the government is behaves like a disease masquerading as its own cure why is there a shortage of housing in the in the islands well for one thing the land area that's allocated for all residential and commercial use is very very strictly limited to very little maybe five to six percent of all the land in the islands in other words you're saying that ninety five percent approximately of all the land in the islands is not being developed it's either dedicated to agriculture which we know most of it is not being used or its preservation land so we're talking about only five percent to six percent actual usage of land and it was intended as a no-growth policy you know but on but by doing that the growth then comes in the prices of things the price of everything goes up and then secondly they've outlawed bringing in the lowest cost of modular homes prefab homes that were produced on the mainland we we call them mobile homes or trailer part trailers that could come in at not three hundred thousand dollars for a little tiny condo but for a double-wide expensive building that would be very very comfortable living for maybe fifty thousand dollars or less if you have a place to put it and but these things aren't allowed because it threatens you know the labor and construction market if these things were simply allowed you'd have a lot more affordable low-cost very low-cost homes that people could do in the marketplace without government partnerships now I'm always very very skeptical of government private partnerships where in fact it's the government with political insiders cronies friends of friends who have special deals and you can see what the what that's turning into with the railroad you know it's a public private partnership to build a railroad that has gone up in price so much and delayed so much it's a massive white elephant and and its cost it's going to cost people enormously and there again they've provided a solution a government solution to transportation they actually drove out of business the railroad was here that existed here in the islands a long time ago by having the government build the the highways and roads they do now they're putting in a another railroad 20 miles for ten billion dollars or so and I think that the better solution would have been just allow competition with the bus back in 1940 they outlawed the public utilities commission outlawed all competition with the bus put out of business all the competitors were providing better service better rates better roots and and times and hours they were highly favored by the public but the public utilities commission said no and so for 80 80 years we've had almost no competition with the bus so we're talking about two issues now you're talking about the rail and the course it has taken in order to explain your uncomfortability with the governor government becoming a landlord and and what is your thought about that in fact many people actually speak as if it's a virtue they say Singapore is a place that has no housing problem because the government is the landlord for about 75% of the population why not be Singapore what are your thoughts I'm not all that familiar with Singapore but I do know that it's virtually impossible to say anything against the the one party that that rules and dominates there I've the newspapers don't criticize it there and other political parties aren't allowed to criticize it and and frankly I I think any kind of system that it doesn't allow that kind of challenge to the political and media of a of a society is questionable I don't really trust the things that that one can say about it but do you think that people really value that freedom to be able to speak out against your government or be able to dissent what about people who say or I don't know if they are saying this but are people do you think people by their very nature feel gee I don't have a ripple over my head and I would love to be living somewhere even if it was the government that was my landlord Frigick Hayek wrote a book called the road to serfdom in which you are told about the relationship between one's economic life and one's personal freedoms and the more and more of economic life you give over to the government to control and run and operate for your supposed benefit the more you're going to lose your ultimate right to run everything about your life and I mean I think back to the reason that the founding fathers sought freedom and liberty wasn't just to have a roof over their heads they sacrificed the the immediate things in order to have that that freedom that's kind of like air so to speak you breathe air you take it for granted it's invisible you don't realize it's there you feel as though you're paying nothing for it and you don't value it until the day you don't have air and then all of a sudden you realize what the loss of freedom is now you look at the economic freedom of the world index which is produced by the Fraser Institute right shows all the the openness to to in the markets and you find that actually Hong Kong and Singapore though they don't have democratic and political freedoms like we might appreciate here they actually have much more economic freedom low taxes low regulation and much more economic freedom than we have in the United States and in most of the countries of the world that's an interesting point so then when people are making a comparison between Hawaii and Singapore and saying well letting the governor be government become a landlord is just making us more like Singapore there's quite a bit of difference in the two economies because as you pointed out Singapore is highly ranked amongst nations in terms of economic freedom whereas Hawaii among states is very poorly ranked very small in the mid 40s yeah right right in terms of economic freedom and what are the elements that you would consider as part of economic freedom the five conditions they consider are the measure of government spending and taxation the openness to trade the stability of their money the security of property rights and contracts and the degrees of regulation and we're just not going through all five of those just starting with the very first government spending and taxation Hawaii is now near the bottom in terms of economic freedom that's right that's right so turning the government there government into a major landlord or so many in the population would actually worsen our standing in terms of government spending and taxation and the government can do a lot because it depends on a free market to produce the goods and services in the wealth to make them make it possible for them to take junk and spend it the way they want to but you've got to allow the degree of freedom for people to pursue their own ends their own economic wealth so while Singapore may have a high measure of that free market we don't in Hawaii yeah how would the free market or how would a growth of free market in Hawaii actually help us resolve some of the problems we were talking about such as the cost of living and education and transportation options what if we were to leave more to market forces how would that look I think it would first of all would end the Jones Act which would make the cost of importing and exporting a lot cheaper that's like Singapore has open openness to trade we have a very protected market because of the high cost of shipping through the Jones Act the high cost of taxation government spending here the high degree of control over land use the high degree of control over transportation systems in the islands the high control and restriction on the the importation of housing units for the islands these are the five things that I would say are the biggest factors if they if they changed in a free market direction we could have a we could have a truly free market and very prosperous economy and society look at Hong Kong in Singapore in 50 years went from being the poorest countries in the world to being the richest Hong Kong's even richer per capita than the United States and Singapore is not far behind in terms of wealth per person and they did it because of economic freedom and we could have that same kind of economic freedom and prosperity here as a result which is practical it's humane and it's ethical so we've really got to be a little more precise in our thinking when we say Hawaii should become more like Singapore it's kind of like a poor person saying I see that rich person over there and lives in that mansion drives a Cadillac therefore I'm going to get a Cadillac which could be a disastrous economic proposition for a poor person to go out and try to acquire whereas on the other hand if if we looked at what caused the rich person to be rich and said I'm going to be like that that would actually be helpful so when we look at Singapore let's not just look at the things that they spend money on like public housing and say if we get public housing will be like Singapore when we look at Singapore let's look at the reason they have the cash with which to have public housing which is that they are economically free that they have a robust free market economy and let's admire that and go after that would you say that would be a better solution absolutely yeah we have to look at not just the prosperity and wealth but how they got there and they got there because of economic freedom I mean it may not be the political freedom that we would desire but we would lose our political freedom as well more and more we give up on our economic freedom I believe those are good words to end on today our time has gone too quickly but we would lose our other freedoms if we gave up on our economic freedom very well put Ken thank you very much for being on the program it's a great pleasure my guest today is professor Ken Scotland of Hawaii Pacific University and also a scholar at the Grassroot Institute you can access his work at grassrootinstitute.org that's grassrootinstitute.org until next time on Hawaii together I'm Kili Ikeena on the Think Tech Hawaii broadcast network aloha