 So what we're going to do is take a few of the main objections or common objections to capitalism. And I am using the term capitalism here, which some people have objected to. They say, well, I prefer that you use the term free market. And I understand that because sometimes when people think of capitalism, they think of crony capitalism, which means that you've got a business that is using the government to somehow squelch its competition or gain subsidies from taxpayers or the like. And so we're not talking about crony capitalism here. We're talking about capitalism in the way that Ludwig von Mises used the term, which is to mean free markets. And I do understand that the idea that the term free markets is one that has perhaps less ambiguity. So that's good. Well, let's, without further ado, go into the first of the objections. Capitalism exploits the poor. And you've seen this before. This is standard fair in history classes from middle school on up about how the Industrial Revolution impoverished urban dwelling families and led to children working in coal mines and textile mills and grievous injuries in the meat packing plants and so forth. This is the kind of thing that you can expect from capitalism, that it makes the poor worse off. I think that the problem here is a little bit of a memory problem, that we forget what life was like before the Industrial Revolution. We forget what life was like, in other words, before the market economy began to be predominant in Europe and then eventually elsewhere in the world. We do see that the poor are much better off in countries that have a higher degree of market freedom. Matt Ridley in his book The Rational Optimist says, today of Americans officially designated as poor, 99% have electricity running water, flush toilets in the refrigerator, 95% have a television, 88% a telephone, 71% a car and 70% air conditioning. Cornelius Vanderbilt, one of the wealthiest men in the world a century ago, or a little over a century ago, had none of these. If you want to make the poor better off, then free markets are the way to go. Now, what about the share of income that goes to the poor? We see a lot of attention given to inequality. Frankly, I think that's because that's one of the only hooks that the anti-market crowd has left. If you look at the percentage of wealth that the poorest 10% have worldwide, it is not that much different from the least free quartile of nations and the most free quartile of nations. This is from that same Economic Freedom of the World report that I mentioned earlier. You can see that no matter what level of economic freedom the poor have about 2% to 2.5% of the income earned in the country. However, 2.5% of a small number is a lot smaller than 2.5% of a large number. If you look at the income level of the poorest 10%, you get something very different. On the right, you see the most free quartile of nations that are indexed in that Economic Freedom of the World report. Not all countries made it into that report. For example, Cuba is not there and North Korea is not there. I could guess which quartile they'd show up in. You can see that if you are in the poorest 10% in the most free nations in the world, your income is likely to be about $11,400 a year. Whereas if you are in the least free quartile of nations, it's more likely to be about $1,200 a year. Big difference. Here's one that I have heard frequently, including from some close family members of mine. Socialism works in Europe. You heard this during the presidential campaign this year. You've seen a lot of talk about how great it is in Denmark and how great it is in the Netherlands. They're socialists and therefore we should be socialists too. Well, again, I'm going to go back to that Economic Freedom of the World report. Here are the top 30 nations out of I think about 160 or so in the world that are indexed in that report. You can see that there's the United States, number 16. You see a lot of European nations that are in that top group as well. The Netherlands is there at number 30, Germany's 29, Norway and Luxembourg 28 and 27 and Denmark's number 22 and so forth. So that puts these European nations well within the top quartile of Economic Freedom. And what we really see is the difference between the European economies and the U.S. economy is the kind of socialism that is there and not so much the level of socialism. The United States on the 0-10 score of Economic Freedom has a score of 7.73. The Netherlands is 7.48. Denmark is 7.58. And within that aggregate number, I really shouldn't use the term aggregate number in an Austrian economics conference but I guess I did. But the Netherlands is number nine well above the United States on their legal system and property rights. They're number 15 on their monetary system. They're number eight on the freedom to trade internationally. Now they're very low on the overall size of government. They're actually number 155 out of 157. So the Netherlands has a very large government, a large welfare state but that is offset by some of the salutary effects of other areas of relative freedom. So the United States, by comparison, is number 29 on the legal system and property rights, number 38 on the monetary system and number 74 on the freedom to trade internationally. So it's a matter of style more than substance as far as how the United States differs from these other countries. So for a presidential candidate to say that socialism works somewhere else, well that's not quite accurate. And if you look at the lowest group within the same index, you see a lot of countries which would not be very high on my list of places to immigrate if I ever left the United States. Number 157 in the last ranking goes to Venezuela. And if you haven't heard about what's going on in Venezuela, apparently the socialists there have managed to create food shortages, which takes some doing but they've managed to do it. Also Syria, Chad, Libya and the Republic of the Congo make it to the bottom of that list. You don't see a lot of European countries there. I think there's one on the list if I remember correctly. Ukraine, yes, tied with Ghana. Ukraine has made very little economic progress since independence from the Soviet Union. Georgie Itte, who's the chairman or president rather of the Free Africa Foundation, says Africa is poor and you see a lot of African nations represented here. Africa is poor because she is not free. That's sort of his motto for explaining the African situation. Africa is improving a great deal, much more so than many people recognize, but the reason for their poverty is not some sort of lack of foreign aid. It is a lack of free markets. So number three is capitalism is unjust. First of all we have to decide whether we're talking about inequality or the well-being of the poorest fraction of the society. As we saw in one of the previous graphs, the poorest 10% get about 2 to 2.5% of the income, regardless of the level of economic freedom, but the 2.5% of a large income makes the poor relatively well off in countries that have more economic freedom. This is, as Hayek said, due to the fact that when a nation gains economic freedom, the new production that takes place tends to be directed at satisfying the desires of the masses. If you were to go back to the period of feudalism in Europe, we found the top .01% living with a great deal of wealth, a vast majority of people living in what we would clearly see today as poverty, but as the market system began to take root in Europe, the real beneficiaries of this were the poor in the middle class. Once the rise in the position of the lower classes gathers speed, catering to the rich ceases to be the main source of great gain and gives place to efforts directed towards the needs of the masses. Those forces which at first make inequality self-accentuating thus later tend to diminish it. Now, we do see some increased inequality. For example, there is increased specialization, global trade, and so forth that leads to a kind of superstar effect. So, if you look at, for example, a microcosm of that would be the payment of actors. There are a few actors at the very top of their profession that make very high incomes, and then there are a lot who are waiting tables while they're waiting for their big break. There are very few that are playing Major League Baseball and earning huge salaries, and many, many who are laboring in the minor leagues waiting for their big break. And what we see is a kind of bifurcation of incomes as some people manage to sell their services to a very, very large audience. There's increased immigration. Immigrants tend to have lower incomes, and if you have a country with increased immigration, you're going to tend to see more inequality from that factor alone. Also, we see some, I hesitate to use this word, but sociological effects as well. High earners tend to marry each other more than they once did. One set of my grandparents was comprised of a college graduate and an eighth grade graduate. You don't see that nearly as much anymore. College graduates tend to marry college graduates and so forth. However, we do see some evidence of decreased inequality in some cases. IQ score spreads are shrinking as the low scores are rising. Matt Ridley points out that British aristocrats were six inches taller than the average height in 1800, and today that class is less than two inches taller. And then there's more data. I mean, this is not the only pretty thin evidence, but there are a lot of other data that I don't have time to go through here that indicates that in some cases inequality is decreasing in some important dimensions. Tanner and Hughes pointed out in 2013 one of the problems with welfare systems, which is that it creates more inequality in some cases. It discourages people from earning income. In 35 states, welfare pays more than a minimum wage job, discouraging people from taking minimum wage jobs. We could talk later about the minimum wage. I think we've got one of our speakers devoting an entire 45 minutes to that subject, so I won't dwell on it. But in 13 states, welfare pays more than $15 an hour. And so for many welfare recipients, especially the long-term dependence on welfare, there's a disincentive to work. One of the most interesting graphs that I've come across in the last couple of years is this one here. What I want you to pay close attention to is this thick, dark line here, this stair step here on the bottom graph. What these researchers did is look at the percentage of your income that you got to keep net of lost benefits. So if you look at the tax rate, that's the pale blue line here, and of course the tax rate is progressive, and it goes up as you earn more income. On the horizontal axis here, you've got the earnings, and then you've got the implicit tax rate here. The pale blue is the actual income tax, and then as you earn more income, if you're starting down here at the low end, as you earn more income, you're going to lose some of those welfare benefits, which from the perspective of incentives creates a disincentive to earn more income. So if you earn an extra dollar, you get an earned income tax credit, which acts like a negative income tax, and so that's offset and more so by lost benefits. As you earn more income, you lose some of your eligibility for these programs. So that creates a hump here where for a certain income range between about $17,000 a year and about $20,000 a year, the implicit tax rate, your income tax plus the benefits you lose mean that you get about three cents better off for every dollar you earn. So if you're someone who's sitting down here at this level of income, basically you're looking at a tremendous increase in earned income that you'd have to make before you would become appreciably better off. And so the upper diagram here shows, with this dark line, shows how much your disposable income would be as you earn more dollars of income, and this is for the United States. So between about $10,000 and about $22,000, this line is almost flat, which indicates that if you double your earned income, you go from working 15 hours a week to 30 hours a week or something like that, you double your earned income and you're not really appreciably better off. What that does is accentuate inequality by discouraging people from earning more income. So you have a group down here that's discouraged from hurtling this mountain here and others who are on the other side of it who have a stronger incentive to increase their income. So governments themselves are increasing inequality by the incentives they create. I had another question to ask you, and the Plickers thing was not cooperating. I'm still in amateur with it, but you see some of this, and this was a complaint a few years ago and still it seems to recur when the Occupy Wall Street group was complaining about the payment to CEOs and so forth. And you see graphs like this, which indicate that the ratio of pay between CEOs and workers is very high, and it looks like at the time this was produced, the ratio was about 300 to one. So CEOs were earning about 300 times the average worker pay in the 350 publicly owned firms with the largest revenue every year. And so this sort of thing makes it into the media quite often. However, there are a lot of misconceptions on CEO pay. First of all, this is the 350 publicly owned firms with the largest revenue every year. So of course that's going to tend to be higher. And you do see this trend is up. Matt Palumbo last year in a Mises Daily article pointed out that firms are getting larger. The average size of a company on the S&P 500 is getting larger. And according to another study by the NBER, the increase in CEO pay between 1980 and 2003 is about six times, and that's consistent with about a six-time increase in market capitalization of large U.S. companies. So it should not be surprising. What is surprising for a lot of people because they focus on the large firms and the CEO pay of those large firms, these are kind of superstar CEOs to go back to that superstar effect, people forget that that's not the typical CEO pay. Now I'll ask you what my software wasn't allowing me to do in a high-tech way. I'll just ask you in a low-tech way. What do you think the average CEO in the United States makes every year? 300,000? 250? 100. Okay. This is not an auction. A reverse auction. All right. Well, 178,000, so you're very close. That's very good. A little more than dentists. Okay, so most CEOs are not working for those 350 largest firms and the pay is not exceptional if you look at other highly skilled individuals, doctors, dentists, orthodontists, and others that we know they have a comfortable living, but we don't think of them as being the super rich. And so that's important to recognize. Moving along, what about this argument? The capitalism doesn't promote real happiness. Now, this is largely attributable to a study that appeared about 1972 or 73 that seemed to indicate that the higher-income countries did not have happier people in them. And unfortunately, that led to a myth that has persisted to this day that high-income countries are full of people that are on various kinds of antidepressants because they are generally unhappier than people who are much poorer in a material sense. Two much more recent studies, I think they were both done about 2008, and I can provide you with the links or details on that if you like afterward, showed that, in fact, that's not true. The earlier studies were flawed with very small sample sizes, and I know using the term sample size, I'm two strikes now, so. But they had very small sample sizes, and the actual fact is that we see a correlation, a positive correlation between GDP per capita and what these researchers are calling mean life satisfaction. The size of the bubble here indicates the population of the nation, and you can see that there's a pretty clear positive correlation there between higher GDP and higher mean life satisfaction. This should not be terribly surprising. If you have higher incomes, that means that you can more often resolve painful illnesses. You can alleviate distress of many kinds. Infant mortality goes down. When people's children don't die in early childhood, they tend to be happy about that. And one of the positive effects of higher GDP is that we get better mother-baby care and we get other medical interventions that allow people to survive who otherwise would not and allow people to survive with less pain than they otherwise would. They get to communicate over long distances with their loved ones, travel to see their loved ones with greater frequency and ease. Many, many things that allow people to have greater life satisfaction as their incomes go up. So this kind of argument that people are less happy in more free market countries does not seem to hold water. I hear this one quite a bit. This number five here is that capitalism is aesthetically obnoxious and environmentally irresponsible. Mises in his book The Anti-Capitalistic Mentality said only romantic pre-possession can induce an observer to ignore the fact that more and more citizens of the capitalistic countries live in an environment which cannot simply be dismissed as ugly. And I had an article I published some years ago, had published some years ago on the coastal areas of South Carolina and North Carolina. And I just came from a family trip to the coast of South Carolina and of course if you draw near the coast you find that there are a lot of retailers and fast food restaurants and condominiums and other things. And there are many including myself who enjoy seeing natural landscapes, palm trees and beaches and fewer people. I mean I would like to go out on a beach that has not 50 people per square meter but has more space. I enjoy those empty spaces. I went out kayaking recently in some of the salt marshes of South Carolina. I enjoy the silence. Got within a paddle's reach of a great blue heron. All of that is something I enjoy. And people somehow have this idea that capitalism is going to lead to less of that. I can point you to the article I wrote on this which indicates that no, that's not in fact what you would find in a more free market society. And in fact you see a lot of this kind of thing here in societies that have fewer free market characteristics. Now beauty is subjective. So I'm not arguing for some kind of objective standard of beauty. I will simply share my perspective on this which is I think these buildings are ugly. You are free to think otherwise. You may look at this and say isn't it wonderful that we have low cost housing? And yet I would contend that even low cost housing in free market, more free market economies tends to be less unattractive. Well a few years ago you may remember we had an oil spill in the Gulf of Mexico and every so often there will be some environmental catastrophe of that sort that leads people to complain that capitalistic economies don't protect their environments. I think this is one of the problems that millennials face in trying to understand what the connection is between the environment and markets because they don't remember as readily the environment of Eastern Europe under communism. The little Lada cars and I can't remember the other Ladas were very poor quality, smoky, polluting vehicles but they were approved by the state, built by the state and Germany and some other Eastern European countries were environmentally crisis zones after many years of the state running things. I don't think it's fair to say that the state is some kind of friend of the environment while the capitalist is the foe. That's simply not the case. Now looking at the BP oil spill in particular, Matthew Novak pointed out that the government passed laws that gave the oil companies incentives to drill further offshore where the risk is higher where if you have an accident it's much more difficult to deal with it in thousands of feet of water than to deal with that in shallow water. If you look at the percentage of oil production in the Gulf of Mexico from depths greater than 200 meters you see that between 1995 and 2003 that share for crude oil went from 26.4% to nearly 70% because the tax rate on deep water oil extraction was far lower than the tax rate on inshore shallow water production. So the state sort of set the table for this kind of catastrophe by encouraging deeper water, higher risk kinds of oil extraction and then too in some cases where there's high risk of environmental catastrophe the state implicitly or explicitly ensures the private firm against that kind of catastrophe. So for example nuclear power plants, if they have a catastrophe they're limited in how much financial liability they have. The government is standing behind these firms making sure they do not have to bear the full cost of the potential catastrophe. What about this one? Corporations are full of scandal and extortion and I'm not going to say a lot about this I'll simply mention war, government-induced famine, genocide, corporate welfare, political scandal, bribery, corruption, police brutality, deadly regulation, fascism and more war and so on. I think this might be, is that Dresden or is that, well the fact that I have to ask which city is this indicates perhaps part of the problem. This is not the result of a tsunami or an earthquake. I think this is the result of a firestorm induced by heavy bombing, by the state. And so I was on the Facebook page of my homeowner's association recently and I was looking at some of the comments of people who were complaining that somebody cut down a tree without notifying the neighborhood and they're not cleaning up the river path as much as they would like or they didn't get approval from the community before they decided to do X with some piece of the community property. I started thinking homeowner's associations are such petty organizations in some cases. I mean they just, somebody cuts down a tree and people get up in arms about it. And then I thought, well that may be but my homeowner's association is not going to tax me to go invade some neighboring homeowner's association or I don't have to worry as I'm walking around the neighborhood that I'll be accosted by some representative of the homeowner's association who is eager to extract something from me. The worst thing they can do to me is put a lien on my house when I try to sell it if I have not paid my very modest homeowner's association dues. So there's a vast range of difference between this sort of micro-government that we might call a homeowner's association and the kinds of things we normally think of with the state. People tend to think of private firms as being extortionists and I ran across this a couple of years ago when Uber decided to charge, I think it was an extra dollar per fare as a safety fee to account for certain regulatory constraints that they had to deal with. So this website complained about this, I'm not sure exactly who Pando.com is, but they said it's entirely possible that people will recoil at Uber's deployment of the well-worn libertarian strategy of forwarding the costs of compliance with regulation on to customers as though that's a libertarian strategy not just an inevitability of imposing costs on firms. This is regulation imposes costs on shareholders, the firm's owners, it imposes costs on the customers, costs on the suppliers, and so forth. It's not some sort of secretive libertarian tactic to try to get people to object to regulation. Of course in the last two years since this was published, Uber has done very well, it does not appear the customers are recoiling in any way. I'm running out of time, so I'll be quick with this argument that capitalism is racist and sexist. Now in a free society, people are allowed to have whatever taste and preferences they like. If you prefer those Kazakhstan high-rises, then that's fine. You can have whatever taste and preferences you like. But ignoring productivity in order to favor one group over another may come at a cost. So if you decide you don't want to serve a certain demographic of customers at your restaurant, you're going to pay that cost as an entrepreneur. You're ruling out a group of customers whose money is just as good as the others. And so that will come with its own penalty. In contrast, government intervention can shield people from the real economic consequences of those kinds of discriminatory actions. So if you, for example, put a price control on rent and prevent people from... prevent building owners from raising the rent on their apartments, then you have many people who are willing to rent the apartment for every available spot. And the landlord can then pick and choose which potential tenant the landlord wants. And that is right for a kind of discriminatory practice. Whereas without rent control, there would be far fewer potential tenants for every available apartment. And it's much more likely that a discriminating landlord who's discriminating on some characteristic that has nothing to do with the quality of the tenant would then have a vacant apartment and lose revenue because of this. This is a picture from about 110 years ago of a street car, or a street, rather, in Jacksonville, Florida. There's an article by Jeff Jacobi on Kathy Hayek and another by George Leaf. I can give you the links on those later if you like. Jacobi writes that the owners of municipal transportation systems like these street car companies, their private companies, actively resisted segregation. Now, they may not have had some kind of lofty commitment to equality or integration, but segregation cut into their profits. It hurt their bottom line. And so the manager of Houston's street car company complained to the city council in 1904 that the street car companies were being forced to haul around a lot of empty space because the city government had this rule that whites and blacks had to be separated on street cars. So in many cities, also the segregation laws are promoted boycotts or provoked boycotts of street car companies which further cut into their profit. So in an article in the Journal of Economic History by Jennifer Roback in one southern city after another, she says private transit companies tried to scuttle segregation laws or simply ignored them. In Jacksonville, Florida, a 1901 ordinance requiring black passengers to be segregated went unenforced until 1905 and then the state legislature mandated segregation statewide. This was passed against the opposition of the street car companies. There are many other examples of this kind of thing as well. In fact, the company's hostility, the street car company's hostility, the segregation was so well known that when a group of black citizens challenged the law in court, their attorney said, we're not associated with the railroad lines in Jacksonville. We're doing this on our own because it was so well understood the street car companies, private firms did not want to segregate their own street cars. And there's much more of this. I will leave it to you to investigate these works on another criticism of capitalism which is that capitalism is prone to bubbles and panics. You will hear about the Austrian business cycle theory this week and the argument that the state is a promoter of bubbles and panics rather than a guard against them. I'm also out of time on this idea that capitalism won't pursue important projects. On the way up here, though I will say one thing, I was listening to a book by David McCullough on the Wright Brothers. And one of the interesting things he points out is that the federal government through the Defense Department was supporting a competitor for the Wright Brothers, Langley, and an airplane which you can see there on the, well, I call it an airplane, it's in the process of crashing on the upper left there, which he called the great aerodrome which was produced right about the time when the Wright Brothers were producing their aircraft. This cost the taxpayers of the United States about $50,000. The Wright Brothers plane over here, which you see in flight, cost about $1,000 of their own money and they managed to do the project while operating a successful bicycle business in Dayton, Ohio. They refused government assistance and in fact, when they pointed out to the federal government that they had developed a useful aircraft, the federal government sent them a form letter in response and said, no thanks for not interested. So anyway, I will stop here since I am out of time. Thank you very much for your attention.