 Am I alive? Yes, I am. One, two, three. There we go. Good. Yeah, we're not going to stand, I think. I think we're going to do everything. Good to go. All right. Well, thank you, everyone, very much for coming out tonight. My name's Sam Atkinson, and I'm the president of the Yale Federalist Society. To those of you watching with us here in the auditorium, welcome. We're glad to have you here for this important conversation. And for those of you watching at home on a live stream in real time, we're happy to have you join us here at Yale Law School as well. Tonight we're here to discuss one of the important political touchstones of our time, income inequality. The purpose of tonight's event is to look at income inequality and ask a simple question, but important one. Is it fair or is it unfair? Joining us tonight are two of the best people we could have to talk about that question. Immediately to my right is Professor Markovitz, and to his right is Dr. Yaron Brooks. The only time I'll be to your right is Markovitz. That is true. Give it up. Dr. Yaron Brooks is an entrepreneur, author, and a former academic who currently serves as executive chairman of the Ein Rand Institute. He was born in Israel, immigrated to the United States, and became a citizen in 2003. He attended Texas where he received his MBA and his PhD in finance, and after that he went on to teach at Santa Clara University before becoming a founding partner at a private equity firm and hedge fund. He's a co-author of several books, including Equal is Unfair, The Free Market Revolution, and In Pursuit of Wealth, The Moral Case for Finance. And Professor Daniel Markovitz, who many of you know here, is the Guido Calabresi Professor of Law at Yale Law School. He works in the philosophical foundation of private law, moral and political philosophy, and behavioral economics. Professor Markovitz has written articles on contract, legal ethics, distributive justice, democratic theory, and other regarding preferences. He earned his BA here at Yale in mathematics, summa cum laude, and then he also received a martial scholarship where he was awarded an MSC in econometrics and mathematical economics from LSE, and then a B-Phil and D-Phil from the University of Oxford before coming back to Yale Law School where he received his law degree. That's discussion, just so folks know what the logistics look like will proceed in the following way. Each speaker will be given 15 minutes to express their general views on the topics. They'll then be given five more minutes to share anything else they like. And then at that point, we'll open this up to audience question and answer, and we'd love to have your questions. There'll be microphones on both sides of the room put in the middle of the aisle, and so once we get to the Q&A portion, we'd love to have you line up and ask any questions you'd like. With that, please join me in welcoming Yaron Brooks and Daniel Markovitz to the stage. Thank you. Dr. Brooks. Thank you. Thank you all for being here. Thank you to the Federal Society for putting on this event, and thank you for all you people in the livestream. And the sushi was good, right? So inequality, is it fair? Over the last five, six, seven years, this has become a massive issue. Inequality today is blamed for almost every political, social ill that exists in the world, from the stagnation of the poor, the inability of poor people to rise up, from economic growth being stagnant, and economic growth, the middle class not growing very fast, to cronyism at the top, all the way to terrorism. Almost everything today, if you read The New York Times, almost every publication is being blamed somehow on inequality. So let's be clear about what we mean by inequality. What we mean by inequality is the gap, is the difference between how much people earn somewhere in the bottom. It could be in the lower middle class, it could be in the lower regions, to what people are earning at the 1%, somewhere at the top. That gap, that is income inequality, and that we are told is a problem, and that we are told is unfair. So let's start by asking the question, what do we mean by fair? What is fairness when it comes to income, when it comes to wealth? What do we mean when we say something is fair or unfair? Well, I think what we mean is, is it deserved, or isn't it deserved? Do the 1% deserve to make as much as they make? Do the people who make minimum wage deserve to make minimum wage? Is it right for them to make that level? And then of course the question is, well, how do you determine dessert? How do you determine what people deserve in terms of income? And I would say that you deserve your income based on the value that you create in a marketplace. So to the extent that the 1%, to the extent that CEOs of Silicon Valley or the Steve Jobs and the Bill Gates of the world, the really, really wealthy individuals at the very top, to the extent that they create massive amount of value, I would argue that they deserve to keep that value. They created it. That's the point. They create value. People who work at McDonald's, indeed, don't create a lot of value. To take a couple of buns and to put a piece of meat in it and some lettuce and tomatoes is value, it's not worth zero. But it's certainly not the same as inventing an iPhone or building a company like Microsoft which literally changed the world. Because it's interesting to ask the question because most of the claims towards the people at the very top, how do you become a billionaire? What's the secret to success? What makes it possible to be a billionaire? Well, the only way to become a billionaire in a free market, we'll get to cases where you don't have freedom. In a free market, the only way to become a billionaire is to create something that people are willing to pay more for than it costs you to produce. But not just some people are willing to pay, millions and millions and millions, maybe even billions of people are willing to pay. And why are they willing to pay, I don't know, the $500 for an iPhone? Why is anybody willing to give up $500 to get an iPhone? Because they believe that their life will be better off by giving up $500 and getting an iPhone. So the only way to become a billionaire is by creating values that other people care about, that improve the lives of billions of people. Microsoft changed the world in profound deep ways. Apple did the same. And almost every billionaire out there has changed the world in profound ways, has created value for millions of people, has made their lives, those millions of people, better off. But if you look at the inequality literature, every time I buy an iPhone, I get $500 poorer and Apple gets $500 richer. And our inequality has just expanded. I'll give you an example that's less material that I find a fun example. How many of you read Harry Potter? I assume all of you, this is a generation. So my kids loved Harry Potter, I enjoyed Harry Potter. So every time a Harry Potter book would come out, I would have to buy two copies, one for each one of my sons. And then I'd have to buy a third copy in audio for me because I wanted to listen to it and so I spent three. And then I had to go to the movies for the whole family would go to every single one of the movies. I figured out that I spent about $3,000 on Harry Potter. According to Thomas Piketty, and most economist of inequality, I got poorer by $3,000. And guess what? J.K. Rollins became a billionaire. How dare she, at my expense. But of course, I didn't become poorer by $3,000. I became richer by much more than $3,000. You just can't measure the way I became richer. I got rich in spiritual value. My life is more fun for having read Harry Potter. My children's life is better for having read Harry Potter. And J.K. Rollins made over a billion dollars, good for her, for making all of our lives better. And reaping rewards as a consequence of that. So in my view, when people earn money by creating value, who are we to then come and say, we need to take your money away in the name of what? To give it to somebody else who hasn't created that value? We often hear this analogy of a pie. You know, a bunch of friends get together and somebody brings a pizza and there's a discussion about how you're going to divide the pie. And the assumption is always you should divide it up around equally because, you know, we're all a bunch of friends and we're all going to eat about the same. And that seems right. And we assume that wealth is a pie. And that we're going to divvy up, therefore it should be divvied up about the same. But why? First of all, the pie, it's such a bad analogy. I hate the pie analogy because the pie is fixed. Wealth is created. Wealth is constantly growing through trade, through creation, through production, through the provision of services. The pie is constantly growing. So to assume that it's fixed and therefore we know exactly how to divvy it up is bizarre. But there's even a more insidious problem with a pie analogy, which everybody loves to use. And that is that there's such a thing as a pie, but there isn't. There's the pie you make and the pie I make and the pie that person makes over there, we each make our own pie. You don't get to squish all the pies together and create some kind of social pie and then decide how to divide it up. You don't have a right to take my pie and squish it into your pie and then split it equally. It's my pie because I built it. I created it and you created your pie and you have every right to do what you will with your pie. I deserve the pie that I bake. You deserve the pie that you bake. Nobody has a right to take my pie away and give it away to somebody else. So the whole idea of this pie is a ridiculous analogy. It's the collectivization of wealth, but wealth is not collective. There is no social wealth. There is no wealth of America. Yes, economists can add up all these numbers and put them all together into an equation, but that doesn't make it society's wealth. Wealth is individual. Wealth is individual. It's each one of us. We are responsible for our own lives. We are responsible for our own creation, for our own work, for the energy, the effort, the intensity we put, the focus we place in our work and what we do. So you deserve the pie that you make. Now, let me say that all the problems that are attributed to inequality, let me admit that they all really do exist. It's just none of them has anything to do with inequality. It is true that there is a real problem today in America of the poor not being able to rise up as fast as we would like them to, as fast as maybe in previous generations as they could. It is true that the middle class is not growing as fast as it would be nice if it grew, if the economy was growing much faster. And it's true that some people at the top don't actually create their wealth that have found ways to rig the system through abuse of government in order to accumulate wealth. All those are true and all those are problems, but the attempts to solve them by reducing inequality make them worse. It is attempt to improve the lot of the poor through distribution of wealth and through all kind of protection mechanisms which keeps people poor. The best example of this is the minimum wage. Raising the minimum wage to $15 an hour makes middle-class Americans feel good. But it destroys the ability of young inner city youths to get their first job and therefore advance in life. It destroys their ability to ever have a job and to ever find work. And it's true the economy is not growing as fast as I believe it could be growing. And that is because we suck so much capital out of the economy in the name of redistribution and regulate and control businesses to the extent that we do. And finally it's true that there's cronyism and cronyism is a very bad thing. But cronyism is a phenomena of big government. It is a phenomena of a government that is trying to manage and run our lives. It's a phenomena of statism, of placing the state above the individual and allowing government to take on more and more and more responsibilities. It is a phenomena of unlimited government. So if you care about any of these issues, the solution is the exact opposite solution of what those claiming that inequality is a problem offer. The solution is more freedom. The solution is more limited government. The solution is getting government out of our lives and letting a free market reign, a true free market where your value is determined by the real economic value, your value from an economic perspective, where your real economic value, the economic value you get is based on the economic value you produce. Let me make one final point. I think I got two minutes. There is only one sense in which equality is a legitimate concept because the fact is that in terms of outcome, which is what we're talking about, income is an outcome. In terms of outcome, inequality is an impossibility. Equality is metaphysically impossible and equality is a disaster when it's attempted in terms of outcome. There is no such thing as equality of outcome. You just look around the room, it's hard because it's dark, but I can still tell that all of you are different. You have different skills, different abilities, different characters, different interests, different motivations, you're different. And if I leave you free, if I don't try to manage and run your lives, if I don't use force on you, if I don't curse you to be a particular way, it is not shocking that if you're left free, you're all gonna produce different amounts, different things. You're gonna have different outcomes. And because life is not just about money, it doesn't really matter that those outcomes are different. We've chosen to be teachers, knowing that we're gonna make less money. That if we'd gone to Wall Street, we're both pretty smart. I think we both would have done okay on Wall Street, but we've chosen to take less money because we love teaching. We are gonna make different choices. That's great. That's wonderful. That's what life, you know, life is so rich because of the kind of division of labor that results when people are free and people are different. There's only one sense in which equality means something politically. And that is equality of rights, equality of freedom, equality before the law, political equality. That is the kind of equality we should fight for. We should fight for the idea that the government does not have a right to discriminate between people. We should fight for the idea that we all have the right to life, liberty, property and the pursuit of happiness. Each one of us as an individual, no matter what economic circumstances of our birth, no matter our skin color, no matter our gender, no matter anything like that, that kind of equality is what I think this country should be about, and that's the kind of equality I think we should be fighting for, but you have to realize that that kind of equality necessarily results in income and wealth inequality because when you leave people free, they produce different amounts, they produce different things. So I think we should celebrate inequality when it's in a free market because we should celebrate freedom and inequality is just a feature, it's not a bug, it's a feature of freedom. So given that inequality is a feature of freedom, I'm all for freedom, thank you. I'm gonna start by talking about something that is not at the center of our conversation today, just to acknowledge it because it's important and then I'm gonna move on to the central arguments that we've just heard. The first thought is that there's a difference between inequality and poverty and how one thinks about poverty is a separate issue. There's a lot of poverty, including in a rich country like this one and there's good reason to think and we could have another discussion about it, that the appropriate moral response to poverty in a decent person and a decent society is to relieve it, that human need states its own unanswerable claim. At the same time, inequality is different from poverty in the following sense. One can have a large gap between the rich and the middle without there being very many poor and in fact, historically in the United States over the past 50 years, poverty has diminished, nevertheless remaining at unacceptably high levels, even as the gap between the rich and the middle has exploded and we're called together today to discuss that gap, whether that gap is warranted. Now the argument in favor of the gap that we've just heard has a very simple structure. People deserve what they create and when people capture the economic value of what they create, it's better in general because more of value is made. Both of those claims are mistaken. They're not just morally mistaken, they're mistaken as a matter of the description of the world that we live in and of the relations in which people act. Now let me talk about dessert a little bit and then I'll talk about the others. Dessert can mean a couple different things. One thing that it can mean is that I am in some way responsible for being in the position in which I now am. We all recognize that there's all the difference in the world between finding the pot of gold yourself and being led to the pot of gold and bending down and picking it up. The second person is not someone who deserves what she gets. So it's important to try to understand what makes people get ahead in this society here, now. And if you introspect, people in this room have mostly gotten ahead. One thing you'll see is that there are lots of little instances in which you had an advantage by dumb luck or maybe even by something like smart luck but the smart wasn't a fair smart. So we began here, some people said about my degrees, story about when I was a sophomore in college, I was falling in love for the first time, my head was not in my books, I did not study for my mathematical economics final exam, I failed it abysmally. Professor called me into her office, said what happened? I said I didn't understand the material and couldn't answer the questions correctly. She looked at me and said you're a pretty smart guy, right? I said well maybe, so you get an A. I walked out of the class with an A which was essential to my having a record that enabled me to get subsequent advantages. Now at the University of Connecticut, I do not get an A if that happens. The University of Connecticut, I get an F. There is no question about it. Now ask who ends up at a place like this university? Well there are more children whose parents are in the top 1% of the income distribution than in the entire bottom half. There are six times as many children whose parents are in the top quarter of the income distribution than in the next quarter, not in the bottom half, in the next quarter. A university like this one overwhelmingly is filled with children of immense privilege. Who undoubtedly work and work intelligently when they're here, but are sitting atop a mountain of privilege that's unimaginably high. Moreover, when they get here, an amount of money is spent on their education and then on promoting their careers which is incomparably greater to anything that is spent not just on children from poor households but on middle class children. Furthermore, the rich children don't actually pay for what they are getting spent on them. At the richest universities in the United States, the average student pays only 20 cents out of every dollar that's devoted to her education. At the poorest universities, the average student pays 80 cents out of every dollar that's devoted to her education and the kids who don't go to university pay 100% of every dollar that's not devoted to their education. Moreover, those arrangements are facilitated by collective decisions which favor the rich over everyone else in society. If I ask people in this room who are students that yell to raise their hand if their parents went to college, 85 to 90% of you would raise your hand. And if I asked you how many went to a pretty fancy college, 60 to 70% of you would raise your hand. Now a university like Yale manages to make ends meet because it has a business model which relies on its not-for-profit status. Its endowment grows without being subject to taxation and alumni can donate out of tax deductible monies. At Princeton University in a recent year, 81% of its total budget came from those sources and the endowment alone generated over $400,000 a year per student. All of that is tax subsidized. In a world in which the children who are at those universities, the students, are the children of graduates of those universities, the tax subsidy doesn't represent a public good, it represents a club in which the elite has managed to get everybody else to pay for the goodies that allow its children to continue to advance in the world. This is not a world in which anybody who runs through these institutions is entitled to the results of their education. None of that is to impugn an individual person's morality. None of that is to impugn their effort or their diligence. It's just to say they're entering into a system that is rigged in their favor. If you want a sense of the extent of the riggedness, if you took the difference between what an average family in the top 1% of the US distribution spends on its children's education and a middle class family, the median household in America spends on its education, just money, don't pay attention to time or expertise or connections or all the other things that we know also advantage those who are born lucky, just money, and you took those sums and you put them in an investment account and invested them in the S&P 500 and gave them to the children on the death of the parents, that would be $10 million per child. Now I picked that experiment because the way in which the old elite perpetuated itself dynastically was by giving bequests of money to children who just happened to be lucky to inherit. The way in which this elite perpetuates itself dynastically is by giving equivalently enormous lifetime training grants that enable the children to get ahead. And there is no conceivable world in which that is fair. Now, there's a second part of this argument that we've heard that simply is mistaken, which is that people deserve what they produce because the market values it. There is no morally neutral sense of the market. Let me give you an example or a series of examples and we can talk them through. I have a friend who is an extremely successful woman, a one percenter uniformly thought to be brilliant, capable, effective in the world. I was once in the woods with her and an anthropologist and we were throwing a boomerang and he saw her throw a boomerang and he said to her, Mira, in a society of hunter-gatherers, you would be a gatherer. The point is what skills you have and what is valuable isn't a natural relation. It depends on what everybody else is doing on how the society is organized. In a society which values certain forms of work effort and intellectual and analytic ability, certain people do well. In a hunter-gathering society, other people do well. Now add that we live in a society in which who does well is conditioned by inequality. We live in a society in which the fact that some people are very, very rich determines whose skills are valuable. Let me give you an example along those lines. At the moment, if you look at the 20 richest people in the world, 14 of them owe their fortunes either to dealing with the super rich or to dealing with the struggling poor. These are people who are in types of businesses where they sell luxury goods or they sell goods on terms that only people who are economically struggling would buy. 14 of the 20 greatest fortunes in the world are dependent on inequality. If there were more equality, if there were just a middle class, those people would not be rich because the things that they specialize in would not be valuable. That's a difference with J.K. Rowling. J.K. Rowling is rich because she serves the middle class, but most rich people do not. Take a look at the professions and the jobs that make people in the United States members of the 1% today. If you look at finance, management, including management consulting, law and elite medicine, you account for half to two thirds of the 1%, just numerically, counting jobs. Those are all businesses which have at their financial core and their business model that they serve antecedent wealth. Finance is a nice example of this. Finance at mid-century until about 1975 was neither more highly paid nor more educated or more skilled than the rest of the economy. What happened? Well, what happened was the United States won the space race and they talked what the Russians occurred and we had a surplus of physicists produced by our universities. They went into finance. The first people in finance who started developing derivatives and marketing them were called rocket scientists. The reason is they were rocket scientists. They restructured the way in which finance operates. Since that time, fewer and fewer people work in finance, they are more and more skilled and each of them makes a much, much higher income. At the same time, the efficiency of the financial system has gone down. If you ask the question how much fundamental risk stays with the individual, it is more today than it was in 1975. If you ask what are the costs of raising money, they are as high today as they were in 1975. This is what economists who are no enemies of finance say. So what you have is a financial sector which has been restructured around enormous wealth and now makes people rich. But if we had a more equal economy, those people with those skills wouldn't get paid as much. Other people would get paid. That's the story that we are living right now. Let me close with a parable. Imagine a society in which there are warriors and there are traders and the society lives at peace with its neighbors and both the warriors and the traders do pretty well. Then one day one of the warriors starts a skirmish with a neighboring society. The skirmish is reciprocated, there's a war, the warriors choose a path of aggression. Soon there are more and more border wars. Eventually the society is in a constant state of war. Now that the society is in a constant state of war, the warriors claim all the wealth, all the power and all the privilege. And when asked why they deserve it, they say it's because we are essential to our society's protection. There's nothing for you traders to trade and our cunning and strength are necessary for everyone to do well. To which the traders can answer, if you hadn't started the war, we wouldn't be in this position. And that's the position that the middle class is in in the United States today. Elites have, by concentrating training in their children and producing a class of workers who have a very particular set of skills and then in gross and in fine, restructuring the economy and the way in which things are made and the way in which people are paid so that precisely those skills are valuable. Created a class of workers who make enormous sums of money and can then do the same to their children and the cycle continues. So who deserves what? That's not a well-formed question. The question is, what is a kind of society that we can have in which we all live freely, respectfully and flourish with dignity? And that's the society in which education is more equally distributed, in which the forms of work that require enormous training are reduced and there are lots more jobs for mid-skilled people, and in which people engage one another on equal terms. Not identical, of course not. That's an absurd thought. Rather, on terms of rough equality so they can each imagine the other's lives and so they can treat each other with respect as equals. Now, in the conversation, I hope people ask how we get there. I have thoughts about that, including concrete ones, but I've said enough for now. I know. Good, so we disagree on pretty much everything. Let me try to take some of the arguments sequentially. Yeah, if I work hard and if I dedicate a lot of energy to trying to create some wealth for myself, I want my children to get a good education. Absolutely. One of the reasons some of us work hard and some of us try to make a lot of money is to be able to maximize the opportunities for our children. It's one of the things that motivates me and I think motivates many parents in trying to achieve more. Now, I agree that the system, to some extent, is rigged. The whole tax structure and the whole way in which we finance education in the United States today is rigged in all kinds of directions that benefit all kinds of ways and all kinds of people. And I would love to see the government get out of the business of financing and rigging the educational system so that education can be a free market where in education you have real competition and real innovation and where prices can actually come down in education rather than accelerating upwards like in any field that the government enters, prices accelerate upwards and this is what's happening in education. So yeah, the system is rigged by too much government intervention and I fear that the solution is always more government intervention. But yes, there are gonna be differences in education always. It's part of what motivates you in life to strive and succeed. But it's also true that just because you get a Yale education doesn't mean you're going to succeed. Some of the richest people in the world, and by the way, the 14 out of the 20 richest people in the world, that is true because many of them live in countries that are not free where they are complete cronies and where they indeed are exploiting the poor and exploiting other people in order to do that. Not true. Then I challenge your statistic, it's just not true. If you look at the top 20 American billionaires, that is simply not true. Almost all of them are dealing with the middle class and indeed what did doctors, lawyers, and everybody else do? Well, we'll get to the finance in a minute because I actually happened to know something about that. People from every realm of the income distribution and for every university, as somebody who never went to a Yale into an Oxford, I don't feel as privileged, I guess, but the whole notion of privilege, privilege in a sense that somebody gave you a favor, privilege assumes kind of an aristocracy, kind of a government favor that you got. Yes, your parents worked hard so you could get a good education. And you know what? If you screw up your life, if you take that education and don't do something with it, you're not going to be as successful in life. It's your life and then you still have to do something with it. There are plenty of billionaires out there, many of the billionaires in the top 20 who never went to school or who dropped out and they made the money. So the fact that you're at Yale doesn't guarantee you entry into a successful life, into a flourishing, prosperous life. People at the end of the day are responsible for what they do with their own life. And yes, some people have more advantages than others. That's obvious. That's kind of obvious. Some parents are more loving, some parents are less loving. All of that is part of reality. The question is, at that point, what do we do with it? Are we free then to pursue our own values? Are we free then to make the most of our own life? Or are we gonna have force used in us to tell us what profession's acceptable and what profession's unacceptable? Are we gonna force not to be able to go to Yale, even if we can afford to go to Yale and be forced into a different school because somebody else believes that that's what's good for society? I don't believe in force. I don't believe in coercion. I don't believe in forcing people. I believe in leaving people free. And as I said, we're gonna be different. We're gonna have different opportunities. We're gonna have different starting points. We're gonna have different ending points. But the idea that some central planner has a better knowledge of what values we should pursue as individuals is insulting to us as individuals. I'll just say the story about finance is, in my view, science fiction. Finance today primarily serves the wealth that exists in pension plans and is primarily serving the middle class. Most investors in hedge funds and private equity funds, the so-called, you know, is middle class wealth. It's pension plans. So it's not as if these little clubs only allowed in if you're some gazillionaire. Financial markets today, given globalization, given the amount of risk that exists in the world today, the financial markets today are far more efficient, far more productive, far more capable. The amount of production, the amount of innovation, the amount of creativity today in the financial industry, or at least before, you know, what's his name, Dodd-Frank, before Dodd-Frank, is just mind-boggling. Those physicists who created derivatives did amazing work for all of us. We benefit enormously from what they did. It's no accident that Silicon Valley and the progress made in Silicon Valley came when it did in the 1980s, when finance was robust and effective and productive and managed to reallocate massive quantities of capital from industries that were failing to industries that were rising. Let me make one last point. 300 years ago, and certainly in the hunter-gatherer societies, we were all poor, all of us were poor. I mean, there was a little bit of aristocrats up here who, relative to us, were still poor, but relative to their own societies, were rich. 95% of humanity, 95% of humanity, lived on $3 a day or less. We were subsistence farmers, we had nothing. It is the division of labor society that's just been criticized, that made it possible for us to rise up from that poverty. It is the freedom and the capitalism that started with the Industrial Revolution that made it possible for us to even have a middle class. There would be no middle class, if not for capitalism, if not for robust financial markets, if not for entrepreneurs, if not for the non-existence of massive redistribution of wealth schemes. It is economic freedom that allowed us to rise out of poverty so that today, only 8% of the population in the world lives under $3 a day, 8% from 95% in 200 years. Capitalism, the kind of system that creates these professions is what has allowed humanity to rise up from the ashes, is what has allowed humanity to rise up from subsistence farming. It's what's more than double life expectancy, it's what made life so amazing, even for the poor in America, relative to what poverty looks like anywhere else in the world. So, to be critical of the kind of division of labor society, we have today, and to compare it to a boomerang, yeah, you could, you know, different people succeed in a boomerang society than succeed today. Thank goodness we live in the society today, because all of us, including the best boomerang throwers in the world during hunter-gatherers, live a gazillion times better today on minimum wage than they did back then under hunter-gatherers societies. So, a way for the capitalism to the extent that we've had it over the last 200 years. Thank you. The boomerang is a joke, not an argument. And as a general matter, to reject one extreme isn't to affirm the opposite extreme. Nobody is talking about central planning, collective ownership of key industries. Rather, and I'll say a little bit about what I am talking about, it's talking about a thoughtfully managed mixed economy that serves the common good. Now, there are a couple things that I just want to correct. For example, the richest 1% in the United States today own, depending on how one counts, between 26 and 42% of all the wealth in the country. They own over half of the equities in the country. So, it is not true that finance principally serves the middle class. In a literal sense, it principally serves the very rich. Second, it is of course true that one can have every advantage showered on you and you can still screw it up. That's not the question. The question is, what are your odds of success if you don't have the advantages showered on you? And at this moment, for example, 86% of the partners at the most profitable law firm in America went to five law schools. The elite investment banks, five to eight of them, recruit only at Harvard, Yale, Princeton, Stanford, and Williams. You don't go to those places, you're not getting in. That's not a question of, oh, it's a little harder, or no, that's the equivalent of a no. It's an unfreedom. It's a constraint. If one adds up those kinds of advantages all throughout the system, one produces massive, not just economic difficulty, but unfreedom for most people in the society. Here's an example. At the moment, the gap in SAT scores between children whose parents earn over $200,000 a year, that's the top 4% of the distribution, and the median child is over twice as big as the gap in SAT scores between the median child and a child in poverty. That's because the rich get their kids private teaching. And you can't get ahead in a competitive academic system without the private teaching. Finally, this is not a system that serves even the rich, and that's important to say, too. It is true that you can get every advantage and still screw it up. It's not only true, it's a constant fear among the rich because the competition has become so stiff because the inequality has gotten such a spiky fine point that in a world in which 86% of the partners at the most profitable law firm in the country go to five law schools, and that law firm has five to ten times the profits per partner of the 25th most profitable law firm. The difference between going to the seventh-best law school and the first-best law school over the course of your life is literally $100 million. And so you're a privileged kid, and you're in second grade, and you're wondering what to do, and your parents, maybe you're in one of these, and they know this, and so you're made unfree too because the inequality has become so extreme that everybody at every level can fall off of what seems to them a cliff. Now, there's an honest response and there's an ideological response to this. The honest response is to say, hey, wait a minute, something has gone wrong, and what's gone wrong is that we are differentiating people in damaging ways, and we're worshiping something that's not actually valuable because all it does is make a few lucky people rich rather than make everybody flourish. And the ideological response is to double down on the idea of meritocracy, to insist that because it's so hard to get something, it must be valuable. That's the ideological response. And then to pursue it, all get out and blame those who don't have it. And that doesn't serve anybody's interests. Thank you very much, Professor Merkel. And thank you both for the spirited discussion. And so at this point, we're going to move into the Q&A portion of the event. And so if I could have a couple of people move the microphones into the middle of the aisles and turn them on. And if you have a question, please line up behind them. But I did want to start off with a question for both of you, and with most of these questions, we'll try and give both of you an opportunity to answer so long as you have something you'd like to say. But the question I would pose to each of you is you both have theories of inequality and you think that things in America right now could be better and things in countries around the world. If you were going to implement two or three policy suggestions, ways that society could change in ways that you think would make lives better, what would those be? Thank you. Two or three, huh? So I would go back to education because I agree. I think one of the ways in which American society today is turned its back on poor people in this country. One of the things that I think is a disgrace is the quality of education that many people in our poorer neighborhoods get. I mean, if you look at the kind of education you get in the inner city of New York, it is, and it's not an issue of money because they spend a huge amount of money, $15,000 a year per child in the inner city of Chicago on education. And yet the quality of education is abysmal. It is beneath anything that should be acceptable in a civilized society. So I think the most important thing that needs to be addressed is education. Now, I think on that point we'll agree and then from here we won't. I believe the solution to that is to completely and utterly privatize education, particularly at the lower grades and throughout the K through 12. I would love to see entrepreneurship, innovation, competition. I'd like to see the next entrepreneur instead of thinking about how to make the next stupid little Andy Angry Birds app for the Apple, think about how to start an educational institution where at a cheap cost can provide a great educational product. I'd like to see real competition and real innovation in the field of education. I think education is way, way, way too important to leave to politicians, to students, to teacher unions, to governments. I would love to see the market do what it does in technology so well, do in the space of education. And I think when you do that, all these advantages that the... And rich kids do get advantages because they can go to private schools. I'd like everybody to go to private schools. And therefore I think we need to privatize education completely and create the kind of financial incentives that make that feasible. I think the, what do you call it, tax credits, a good way to do it. There's tax-saving accounts that have been proposed that are an excellent way to do that so that everybody can be able to afford to do that as long as we still live in a mixed economy. There are a lot of different ways, but if there's one industry that needs to be taken away from government, it is education and would have a profound impact on the issue of poverty and the issue of the ability of poor kids to rise up and to improve their lots. And middle-class kids, because everybody would get a better education. So I'll just give one in the name of... So I agree about education as important, but I disagree with you. Education is really hard. That's the first thing to say. The reason it's expensive to do it well is not that people don't innovate and don't know how to do it, it's that it's intensive. If you look at, for example, the charter schools that succeed, the KIPP schools, for example, they succeed by lengthening the school days, shortening vacations, reducing teacher-to-student ratios, intensifying training, and effectively reproducing the kind of hyper-intensive training that rich people give to their parents privately in the school. So it's not easy to fix education, particularly at the bottom or even at the middle, first point. Second point, I believe government has a very powerful role in education for two reasons. One is ideological and I'll own up to it. I believe that education is training for citizenship, not just for private life, and government provides that. The second is non-ideological. If you look at the societies that are most effective in education, Finland and Singapore, now a lot of free market in education in those societies. Those are governments that are producing these educations. Now, you can't, and the Finnish Minister of Education, when he travels around the U.S., says this all the time, says don't think you can just follow our education policy and get our results. You have to follow our social structure if you want to get our results. And I'll say something about that in just a moment. With respect to education, it's also important to emphasize the top end and massively to democratize the elite. So if there's one educational reform that I could embrace, it would be requiring, and I can talk about how to require it, all private educational institutions to double their class sizes and to take all the new students from the bottom half of the distribution. How would you do that? You would say if you don't have two-thirds of your students from the bottom half of the distribution, or if you want to be a little bit more relaxed half your students from the bottom two-thirds of the distribution, you lose your tax exemption. Because after all, the tax exemption is meant to be there because you provide a public good. But if all your kids are from rich families, you're providing a club good. You don't deserve the tax exemption. So if you want it, you have to economically diversify. And you bet these institutions would take more students, especially if there were a state subsidy for their taking more. And don't let them say this is impossible. Expenditure per student in the Ivy League today is twice what it was in 2000. So if the Ivy League doubled its student bodies, it would be spending the same thing it spent per student in 2000, which was a pretty good education. Now, the other reform that I would make is to change the labor market to favor middle-class jobs. At the moment, in fact, the labor market disfavors middle-class jobs, and it does so on account of regulation. Middle-class labor is the highest taxed factor of production in the economy. Capital is barely taxed because of delay in capital gains. Elite labor pays a slightly higher income tax than middle-class labor, but because of the cap on the Social Security wage tax, on the payroll tax, elite labor over $127,200 a year pays 10% less than the first $127,000. So get rid of the cap. That would produce an immediate incentive to shift out super-skilled workers in favor of mid-skilled workers. Right here now, you hire one person at $2 million a year. You pay roughly speaking $80,000 in payroll tax. You hire 20 people at $100,000 a year. You pay roughly speaking $280,000 in payroll tax. So there's a $200,000 penalty on the middle-class jobs compared to the elite jobs. So get rid of that. That raises immediately $200 billion in revenue in steady state according to the Congressional Budget Office. It raises 1.1% of GDP in revenue. You spend half of that revenue on subsidizing education for the middle-class and spend the other half on a wage subsidy for employers to hire middle-class workers. And you will, at a stroke, rebalance the economy to favor mid-skilled work, not by creating distortions but by eliminating existing distortions, and rebalance education to give literally millions of middle-class people an opportunity of the same kind of education that rich people now have. May I see a question on the right side of the room? And just so folks know, the Q&A will end at 8 o'clock, and that's when the event will wrap up. So go ahead on the right, and then we'll go on the left after that. Thank you so much for your arguments. You know, in both your arguments, you focus on individuals as individuals. Maybe rich, maybe poor, but just diving deeper into that, what about group identities? If I'm a single mother, let's talk about historic groups that have different historical experiences. I'm a single mother. I'm a Christian. I'm an atheist. I'm a black family with one hundredth the wealth of a white family, for example. How would your arguments change, if at all, if accounting, would you account for historical differences which persists to this day between different social groups? Because we only talk about people, but people don't exist as islands, and they exist in groups. So how would you account for that? She's thought this time. I think I have two things to say. One at the high end of the distribution and one at the lower end of the distribution, although these are not the only things that could be said. The first is that the existing regime with enormously skewed income places enormous social and economic pressure on elites and especially elite women not to work outside the house. Because the way in which elites get these massive salaries is they work. They work all the time. They work as a group of the top 1% of the income distribution, works 20% harder now than it did in 1950. At law firms, average hours have doubled. It is simply impossible for a couple to have a family and have both people work those hours, and given prevailing gender norms and discrimination, it is undoubtedly the women who more often get pushed out of the workplace. And that's something important. And notice, if you reduce income inequality, you reduce gender inequality. And that's true actually across civilizations. It turns out, if you look at countries, the best reforms to produce an equal division of domestic labor, to embolden and empower women and women's rights is to diminish economic inequality. You see that in places like India and you see it in places like Sweden. So very different societies. So that's one important thing. The interaction between race and class is enormous right now. For reasons that nobody really understands, African-Americans are getting relatively less wealthy compared to white Americans over time in dismaying and shocking ways. And if you intersect that with the size of economic inequality, you get absolutely atrocious outcomes. The rich, poor gap in education right now, in educational achievement in the United States, is greater than the white-black gap was in 1955. That's the year Brown against Board of Education was decided. So economic inequality is reconstructing apartheid. And that's an essential thing to combat. Redistribution will help, but it has to be redistribution done with the separate axis of racial discrimination and racial hegemony in mind. So that's one of our precise detailed policies, which we can talk about if we have more time. So I think part of the problem in the world today and part of the problem in our society today is that there's way too much, that there's any really discussion of group and group identity. I think group identity is a road to primitivism and it's a disaster. I think it's a backward way of thinking. We spend way too much time talking about race and what group you belong to, what subgroup you belong to and who's in a power structure relative to an intersectionality today and all this nonsense. I think this is destructive to what freedom really means. And to me, freedom is freedom from coercion, not freedom of limited, not the issue of how many opportunities you have, but whether those opportunities are limited to coercion or not. And the idea is to maximize freedom. It's to limit coercion, it's to eliminate coercion, to get government coercion out of the way so that we can flourish it as individuals. And I don't think it's an accident to take one group, if you will. I don't think it's an accident that the rise in black middle class has slowed down significantly since the war on poverty has begun and since affirmative action and since all of the welfare programs that were instituted in the 1960s, I think welfare is destructive to the ability of people to rise out of poverty. I think it is a way of institutionalizing people into poverty. I think it is a horrible way to treat people going back to education. I think, of course, education is part of the reason why people don't rise up. But this in general, I think, is the way we treat poor people in this country. We treat poor people in this country horribly. We treat rich people horribly as well, in many respects. We treat poor people horribly. We treat the poor person who is ambitious, who wants to rise up, who wants to be successful. We create roadblocks upon roadblocks upon roadblocks. Education is not about money. We'll disagree again. In the same city of Chicago where they spend $15,000 per child, the archdiocese spends in exactly the same neighborhood, $7,500 per child and gets better results. All of the public schools in Chicago and hire the archdiocese to educate all the kids and save half the money and get a better educational product. This is not purely about funding and about money. This is about the way education is provided in a top-down kind of manner that does not place the child at the center as we would if it was privately run. But I think the whole group identity stuff is is bad for this country. I believe in individualism. I believe in treating people as individuals based on their character, not paying attention to the color of their skin or to their gender unless it's relevant. Not paying attention to those factors and treating people based on character and in economic terms, treating people based on their level of productivity and that people should get compensated based on the level of productivity. Thank you. Before I ask my question, which is directed primarily to Dr. Brooke, I want to make sure that I'm understanding two presumptions that you're making. The first is that you presented Steve Jobs and J.K. Rowling as two examples of individuals who produced and earned wealth and because they produced it themselves and the market, a free market, has valued it. They're entitled to reap all of that. And the second argument that I've heard you making is that the government should stay out of production of wealth because they inherently mess it up and they make it more difficult. So I guess I'm wondering, how do you square those two things when both J.K. Rowling and Steve Jobs owe a significant percentage of their wealth to the fact that the state guarantees intellectual property rights and that the state is actually taking a very active role in ensuring that those two individuals' intellectual creations are given value in the marketplace rather than able to be appropriated by other manufacturers, other authors, other publishing services. And so how do you square intellectual property rights, which is a collectivist state decision about what we want to value in the market and this idea that these individuals have generated all that wealth by themselves? So I don't buy the basic premise of your argument. I don't buy the intellectual property rights any different than any other form of property rights. Indeed, most property rights are fundamentally intellectual. It is what intellectual property rights are protecting is the rights of the producer, the rights of the creator, of the rights of the innovator and it is a property just like any other property and the role of the government, indeed in my view, the only role of the government in the realm of economics is the protection of property rights and intellectual property rights are a right just like there to protect your land from somebody squatting on it or somebody stealing your purse. Intellectual property rights are just like your purse and just like your land, indeed, there are more property in some senses than your land or your purse because intellectual property rights can actually show that you have produced them. Now, intellectual property rights are because reason is the source of all that creativity, everything that we produce, the rights of the purest form, a manifestation of that reasoning capability. So, three things. Two, I just don't want to let go because this is really serious and one has to get things right. First, it is simply not true it is simply not true that the poor have gotten worse off since the war on poverty. The poverty rate fell by between half and three quarters when the administration of the war on poverty in 1975. It has been roughly flat since then as after the Reagan administration the war on poverty was pulled back. That's a fact. First of all, second of all, on the intellectual property point, the reason JK Rowling is so rich isn't just that she has intellectual property rights. It's also that there's a middle class which can read her books. The middle class was created intentionally by government policy starting in the United States in particular with the schools movement in the 1890s through the 1920s which were government run in fact public schools from the Puritan area earlier. But it is a striking feature of the United States that as recently as 1920 the Europeans thought that US American public schools were wasteful because they gave an education also to dumb and lower class kids. And that was a commitment in the United States and that's what produced the middle class that buys the books. And that's government. A final thought on intellectual property rights. When you say intellectual property is a kind of property what you mean among other things is that the government will use its power to prevent people from taking it. Now notice that's true for money also. Money is not a thing it's a relation of constraint and freedom. If you had a series of sheets of paper and on the slips of paper it said a $5 sweater and if you went and you had the slip of paper and you got the sweater you could have the sweater and if you tried to get the sweater without the sheet of paper a man with a gun would come and put you in jail. Nobody would say that the slip of paper is a thing they'd say it's an accounting mechanism for telling how the government uses force against the citizens. Now money is just a sophisticated accounting mechanism for telling how the government uses force against its citizens. Moreover because money is fiat money and central banks make it and when they set interest rates they set the price of money money is an overtly discretionary and political form of coercion. And in the last 30 years if we had more time I could go through chapter and verse to illustrate how that form of coercion has been intentionally and self-consciously deployed by the government in ways that are known to enrich the elite and to make the middle class less well off. This is not a question of trying to get the government out of our lives it's a question of acknowledging that the situation we're in is the consequence of government policy and that free markets are the technique of coercion that the government is using. Thank you both very much. So my question is about the relationship between ambition and drive and human flourishing. So Professor Markowitz please correct me if I'm wrong but the way I understand your model is that there would be sort of less of a premium on ambition and drive. Do you think that's sort of a longer term issue as far as cementing the divisions that exist under your system because then people will be less likely to move? And you know I take the point that a lot of us at Yale Law School come from elite backgrounds but many of us, myself included are children of immigrants or come from poor families so I think that's something that would be good to hear more about. And from Dr. Brooke do you think that capitalism and this sort of endless drive to create the next big thing can actually reduce human flourishing? There could be artists or poets or statesmen and things like this. So sort of thinking about what drives people to be their best human beings how do you both think about that? Sure I'm happy to. That's an interesting question but it's capitalism that creates the wealth that makes it possible for us to become consumers of history and art and music. It is no accident that the 19th century saw a huge flourishing of art. Beethoven was the first composer ever to be able to actually make money off of his music and wasn't dependent on some aristocrat or church leader because he could put on a concert and sell tickets. That is what capitalism made possible. My children both went into entertainment because I told them to follow their passion and part of the reason is that there is such a rich culture that many, many, many, many people are going to go into entertainment because we have so much money and so much leisure time to be able to consume that entertainment and those arts and those things. So if anything capitalism and the arts go hand in hand it is the wealth creation that makes possible the flourishing in the arts. I do have to comment on the three points that you made earlier quickly. In fact, if you look at poverty rates in the United States, they were declining way before the beginning of the war on poverty. They had started declining decades before and continued to decline through the 60s. The momentum sustained itself to 75. 75 is when the welfare state, the war on poverty really kicked in its negative incentives and since then it has been flat. But if you hadn't had a war on poverty poverty rates would have declined and continued to decline in the last 70s and 70s. The first 1975 fiat money. Fiat money is not a feature of capitalism. Fiat money is government intervention. Fiat money is the mixed economy. I'm against fiat money. I would like to see money privatized so that money isn't just an accounting. It isn't just a piece of paper but actually reflects real value creation like it was when we had a gold standard or some other kind of real wealth standard. It was a mix economy distorted distribution of wealth and benefited to some extent the people at the top because they owned so much stock and the money has flowed into the stock market and driven stock prices up. But that is a feature of the state. That is a feature of mixed economies. So capitalism does not produce fiat money. Capitalism produces bank based gold or some kind of standard based money or some kind of real value creation. Let me say something about the ambition point which is a very hard point and one wants to be thoughtful about it. And the reason it's hard is one has to distinguish between being ambitious for something that is actually worthwhile and being ambitious in light of the system of economic reward that exists and it's cheap to say it's totally different. That's not right either because it's worthwhile to serve ends and interests that other people care about and when you do that you sometimes get rich. But at the moment if you look at where our system of inequality channels people's ambitions people who have a very good sense for very short term risk can get extremely wealthy people who can get extremely wealthy people who interestingly have the capacities of the individual cardiovascular surgeon or brain surgeon can get extremely wealthy. But notice this about medicine we can transplant a heart or make an artificial heart. Here's something we don't know the answer to what's better for your heart health in the long run. An hour of exercise twice a week two hours of exercise once a week daily. We don't know the answer to that question. The reason we don't know the answer to that question is that if you are a cardiovascular surgeon because of the way in which you produce your good you get your marginal product which is your average product you get a very high share of the social good you produce. If I figured out the answer to this other question I wouldn't be rich. I can't get intellectual property in fact about how much you should exercise and how much you shouldn't exercise. I don't think it's a problem it wouldn't be practicable. Now inequality is the cause of some of these differences and so it's partly something that drives us to be ambitious and that's not to be neglected but it also channels our ambitions in ways that produce great private return and take away from the public good. And if we had less inequality we would reduce the incentive on the one hand but increase the accuracy on balance I think we'd all be better off. One more question? Do you have time for one more question? Okay so we have one time for one quick question and then we'll end with just a couple of minutes for each of you to sum up your remarks. So go ahead. Sure so I've got a question kind of aimed at both of you. Dr. Brook I'm curious under your system I think one of the concerns would be that those at the very lowest levels of society would have to work so many hours that they wouldn't have any opportunities to advance and you talked about how in modern society there is an issue with the poor being able to rise up so I guess I'm curious how you think that these issues around poor people being able to rise through social strata could be resolved in your system. Professor Markowitz I guess my question for you is I agree with a lot of what you said about problems in society but it seems to me that the issue here isn't actually income inequality. The issue is cultural. The issue is that we put so much value on making $500,000 versus $60,000 and living in a middle class neighborhood in a home with the white picket fence. So is the issue that our country facing actually this cultural misappropriation of what we value rather than someone being happy pursuing their own goals that the United States is buying whether it be a yacht or a mansion? Do you think it's a cultural issue or is there something inherent about income inequality? Thank you. Professor Markowitz Remind me of the question. What would happen to poor people in my system because they would have to work all the time? I mean the fact is that the only system in human history to bring people out of poverty is the free market where poverty is one of the most underreported stories in the world is the fact that somewhere between 1 to 2 billion people have come out of poverty not because of redistribution of wealth not because of charity but because some countries have made it possible for free people to actually go and work in a division of labor society whether it's China, whether it's India, whether it's Thailand, whether it's the whole area of Asia and even a few pockets in Africa that the productivity of labor rises as it rises they get compensated more and more the ones who are more ambitious and who learn faster get to management jobs and there's no limit to how far they can rise within their economic sphere the only way in which to allow poor people to rise up and to the ones who want to and to become middle class and to become rich you know we talk about this you know the advantages you have if your family has wealth but a lot of entrepreneurs I talked about and a lot of entrepreneurs if you look at that list take out the Walton family if you look at the list of the 400 richest people in America many of those people did not come from wealthy families including Steve Jobs whose father was an immigrant from Syria he would probably be banned by Donald Trump from entering but you know an immigrant from Syria and didn't grow up particularly wealthy and so on and indeed if you look at the people who go to Silicon Valley if you look at the people who succeed in Silicon Valley which is an industry that is still relatively unregulated still where the government has stayed out of you see people succeeding from all walks of life and you don't have a limitation in terms of where your parents went to school or where you went to school the standard is not whether you go to not like the law firms in New York whether you can program or not even if you didn't go to school you can get a job so I think the only way to allow poor people to rise up in a way that not just gives them money because I don't think life is just about money but also grants them the ability to create self-esteem and pride and have the kind of human flourishing that I think all of us are capable of producing is by them working in a free market increasing their productivity increasing their economic value and making there for more and more and more money and that is the history of capitalism every way you look and it's the history of capitalism in the 19th century in America which is what really created the middle class after all Carl Marx was writing about the middle class in 1850 there had to be a middle class in 1850 before public education there was a middle class in the beginning of the capitalism there were people rising up into a bourgeoisie into a middle class environment Carl Marx writes about this in Das Kapital so you know from the Marxists even that it is capitalism that produced the middle class I mean Marx bemoans exactly that fact the question of ideals and ambitions and culture is a hard one one way to think about it is this about 100 years ago 15 years ago now Torsten Veblen wrote a book called The Theory of the Leisure Class in which he observed that in that social order leisure made somebody high status and what the rich sought were conspicuous forms of useless activity falconry, jousting knowledge of ancient languages Veblen who was an immigrant thought English spelling he thought because that way you could show by knowing how to spell that you didn't have to work for a living the whole idea was to show you didn't have to work for a living now in that regime an economic transformation starts happening and at that moment what a bunch of idealists think is that machines and technological innovation are going to come and they're going to relieve the middle class and the working class of the need to work industriously and to work hard and then the middle class and the working class are going to get leisure and they're going to get dignified, status conferring useless activity Karl Marx's son-in-law writes a pamphlet called The Right to Be Lazy about exactly this idea and Keynes makes a similar argument what in fact happened is that as the technology came and as elites started training their children and as the cycle that I described earlier got going in which rich parents give super educations to their rich children who then work even harder and become even richer based on their elite labor leisure ceased to be a sign of status and busyness industry became the badge of honor so as everyone in this room knows a typical answer when you're asked how are you in an elite office or hallway is oh so busy that would have been a sign of self-disgrace 120 years ago but now it's what you show off to show how busy you are, how important you are how much industry you have, how much your time is desired and what's happened is that the middle class because how we make things has been transformed doesn't have jobs machines and rich people are doing all the work I'm exaggerating but that's the structure and the lack of jobs means that instead of getting leisure middle and working class people are condemned to enforced idleness which is a form of degradation and what the middle of the country wants is not a handout or just money what they want is meaningful work which is exactly the same thing everybody in this room wants but we've set up a kind of inequality which makes there be no meaningful work for people in that position because the people in this room are taking up all the work and that's why something that expands education it's the labor market away from super skilled labor to mid skilled labor is what one needs to get the jobs to come back so that then people can do the work and get the industry and get the status and become once again the charismatic center of the American economy and the American society which is exactly what a just order requires thank you both and thank you both very much and so as we wrap this event up we'd like to give each of you a chance in just a couple of minutes to talk about any final thoughts you have or share any final ideas that you have at this point and so Dr. Brooks you went first we'll let you go first now and Dr. Markowitz we'll let you finish things off for us so just to feed off the last few comments there is no shortage of work in the world today indeed there are more people working today than ever in human history what many people unfortunately in the middle of this country want is to have work which requires them to move and have no competition from people working very hard in China and other places what they want is for the work to be provided to them on a silver platter at their convenience where they are if you go to north-west Arkansas there's plenty of work in north-west Arkansas there's plenty of work for welders in California there's plenty of work in lots of places not in southeast Ohio so get in your car and drive to where there is work they used to be what Americans did but it is this claim that you should resent the rich and you deserve and you're entitled and your need justify that we provide you with stuff it is the entitled mentality of much of middle America unfortunately which is driving them to sit on their butts and to wait for the work to show up for them on their doorstep doing what Americans always did which is get up and create the work or go to where the work was and this is I think what has happened in this country since the war on poverty and even really since before that we have generated because of the welfare state because of massive distribution of wealth and because of the expectation that the government will meet every need and that it is morally obligated to meet every need of the people we have created a mentality that is today driven more by envy of success than by ambition for success more driven by resentment than by love of work and ambition and as a consequence we're getting the kind of politics that we're getting and we're getting the kind of mentality I think that is a real problematic a static mentality that never existed before in America let me just say what concerns me at the end of the day is individual freedom is individual liberty is the ability of the individual to live his life as he sees fit without a coercive government a government that tells him what he cannot do what he needs a license to practice to open a nail salon they have to pay $20,000 to open a nail salon or to get a license from the government to shampoo hair in California you want to help the poor you want to help ambitious people everywhere the solution is to get the government out of our lives and to really change our moral code instead of waiting around for our needs to be fulfilled by others instead of morally expecting demanding that our needs be fulfilled by others we need to return to that individualism that was I think much made up kind of the American character which was to have personal responsibility over one's own life personal responsibility in the deeper sense to make your own life your own moral responsibility to live your life to flourish as an individual human being no matter what your background is through your own effort your own energy your own skill, your own ambition to live as a human being to live as an individual let me say something about work and then something about imagination so it's bread and roses with respect to work I went to an urban public high school a couple years after I graduated the police station was put into high school I had a lot of friends in high school still friends with them now who got married or joined the military right after graduation did not get a college degree many of them are struggling none of them is lazy they want work on the other hand they reasonably want jobs that will allow them to live the kind of life that in a free and equal democracy a respectable stable family lives that's not an $8 an hour job just isn't an $8 an hour job leaves you below the poverty line even though you're working if you look at what the economy has been providing over the past 30 years employment and wages are going up in the bottom tenth of the distribution of the skill and wage distribution and they're going way up in the top part and they're going down in the middle because those jobs are jobs that are being replaced by machines and computer algorithms that are being designed by the people at the top of the distribution and so the jobs that people want are not there that's the first point and when they're not there the lives that people not selfishly or childishly or lazily but reasonably would like to have in the same way in which all of us would like to have lives like this are not available and then the question is what to do now my diagnosis is that the reason those jobs are not available is that elites are changing the way we work and make things to their own advantage and that those jobs could be available should be said they're available in a country like Germany where for example capital deepening in an industrial sector including in finance is associated with wage compression so when German companies invest in more machines and computers what they do is they invest in technologies of production that hire mid-skilled workers and there are more middle class people we don't do that we hire super skilled workers and there's a reason this is a choice that we make and it's a choice that we can un-make by changing the way in which we educate people and by changing the way in which we regulate and organize and tax production and labor that takes me to the last point which is about imagination the system that we have now has a dangerously seductive character in an old form of inequality in which rich people were born into rich families who have been rich forever and owned lots of land and inherited the land and led lives of dissolution and idiocy it was easy to see what had gone wrong but in the society we have now in which rich people are trained to within an inch of their lives from birth and work all the time and are drilled constantly insecure of not getting the grade and not getting admitted to the next place and then work all the time as adults and are not made happy by all the material wealth they have because after all at some point the money doesn't get you anything but the freedom would get you a lot it's very easy for the elite to say well I must deserve this because I've sacrificed so much for it and so I must be entitled to it and those who don't have it must be resentful or lazy or trying to usurp me and this is a system that makes nobody well and produces massive inequality and so the first imaginative leap is for both sides to see for the elite to see no you don't deserve it it's true you worked for it but you don't deserve it because you worked for it under circumstances that were not of your own doing because you get it in a system that harms other people and then for middle class people to see the rich people aren't individually evil or venal they're in this system too and they're as much being ground up by this mill as we are it's just you know they're exploiting themselves and so they they're ground up and then sleep an Eider down which is a much better thing to do but still doesn't mean you're well and that's the point at which a political movement can change the way we make these decisions and the way in which we structure education and labor and produce the kind of society that in fact people on both sides of the divide want and would thrive in thanks very much for coming Gus on behalf of the Yale Law School Federalist Society Dr. Brooks, Professor Markovits thank you very much for joining us for what was a thoughtful, engaging conversation for those of you here in the audience tonight thank you very much as well and for those of you watching at home thanks for joining us