 All right, thank you. Hello everybody. So Jeff said that he was going to be very brief in his introductions of us and In my case I thought he went a little bit too long at the beginning of this session because he said the economist Dr. Ben Powell if he had just shorted it to Dr. Ben Powell given today's seminar topic you all would have thought I'm the type of doctor who could help people instead Now the gig is up. You know, I'm an economist, which I'll tell you what I do in my day job Then I'm a professor at Texas Tech University where I run a group called the free market Institute where we train people To become professors and talk about ideas about free markets and Austrian economics and such and I tell you just briefly where I come from on this Because it's relevant with our host today When I grew up around here I did my undergraduate at UMass Lowell and I didn't have any single free market professor there as you might imagine But I stumbled across the writings of Ludwig von Mises, Mario Rothbard, Frederick Hayek while I was there became interested in these ideas and learned that there was something called Mises University down in Auburn and When I this is late 90s when I was an undergraduate I started to think maybe I'd like to become a professor one day And I went down there and spent a week with them studying Austrian economics seeing the passion of the professors that they had And I left that week knowing exactly what I want to do the rest of my life So I'm always appreciative of the Mises Institute and and happy to be able to speak for them Not particularly happy to be able to speak for them here in New Hampshire because I can flip back into my native Merrimack Valley Cadence of speech and you all don't need seatbelts to keep up with me Versus when I go down and visit Auburn with some people are online and slow it down for all them all So it'll feel more comfortable today So my topic is a little bit different than other people here I'm gonna be talking about the pandemic and how it relates to economic science and the rationale for regulation So people told us this last year follow the science and when they did they always seem to mean listen to Epidemiologists or medical doctors, but that's not the relevant science That's just measuring one type of outcome that has to be weighed against other ones I know a science that deals with weight weighting values against each other when we have scarce resources It's called economics. It's the economic science People need to listen to to figure out if there is a rationale for a type of government regulation during this pandemic And if so what that looks like and I'll tell you what it does not look like is Lockdowns or any of the policies that we got over this past year. So to start with knowing You guys nice, but you're gonna slow me down so If there's going to be a case for regulation during this It doesn't come because the disease is deadly or any other physical characteristics as lots of things in the world That can be deadly or bad for us But that doesn't mean that human interaction needs to be regulated by a government or anybody else If there's going to be a case from it that case has to come from the science of human interaction or Economics so if our is going to try to make a case for it based on economic science The case has to come from something we talk about as externalities or spillovers where one individual's decision-making where they weigh cost and benefits to themselves Results in spilling over some of those costs to other people because if it's all internal to yourself And there's a dangerous disease out there make your own choices if you get it you get it It's a bad outcome But you rationally weighed the cost and benefits what mattered was not your life expectancy But the subjective value in your mind of doing the activities That's why I've simply the deadliness of something does not matter Where the case for the regulation would come from is that my putting myself at risk spills over risks onto other people that they then have To account for when making their decisions about what risks to take on Incidentally note the other thing people have got sidetracked on this Economists are known for measuring this economists are really popular Measuring the statistical value of life and putting a dollar figure on people's lives And then some people have been trying to weigh the costs and benefits of dollar value of lives saved first No, that's the wrong calculation to not even in mainstream economics. Do you get that answer? The externality is the extra cost people take on themselves Because of the increased cost to them of risks other people are taking that number is a whole lot smaller than the statistical value Of lost life to start with so if we're going to be thinking about this then we have to be thinking about how would regulations regulate us spilling over some of these risks on to others and make us account for them more so that we when we make our own Calculations engage in the kind of optimal amount of risk-taking When we account for not just our own but everybody else's so first off We have to realize these things are partially internalized anyway first actually something That's not even on the slide to the extent that the news scare mongers everything and people overestimate their own risk I've seen no shortage of young people who way overestimate their own risk To the extent that they're doing that their internal cost-benefit calculations from themselves Probably brings them closer into line to what they should be doing to caring about other people who are more at risk Second to the extent that it makes you care about grandma or somebody else who might be at more risk When I think we probably all know people who contracted that contracted their risk-taking activity at particular points over the past year when they were new they were going to Interact with somebody that's of higher risk. That's taking account of other people. You don't need regulation there I just social norms do that part of it finally and interacting and this is what this is about in places of business a Lot of this is all internalized to our behavior already Not because we intrinsically care about the other people in the business But because the owners of the business have to care about the people in their business caring about other people spilling risk Over on them. So this is the exact same. Well at step one. It's the exact same as smoking regulations There is no people talk about smoking is like air pollution that spills over and other people don't Like it so you're not taking account of them. Well, not if it's in a restaurant or bar the restaurant or bar owner has to weigh the benefits smokers get from being able to smoke with the The cost of other people not liking that smoke and then has to set policy accordingly in a world where owners are free To choose in the years past this look like smoking in non-smoking sections some restaurants that were smoke free most bars That had smoking now over time those were changing because market forces Dictate that the owners respond to it. I live in a city that still has smoking freedom. Believe it or not Lubbock, Texas allows bar owners to decide for themselves And there was a case a couple years ago where people were trying to get an ordinance that would make the whole city Non-smoking there and they said well look it's all going that way anyway And I'm like well the point is you don't need the regulation then Because as norms have changed over the last 20 years and more people don't like smoke and fewer people smoke More and more bars went non-smoking. This is market regulation. Don't snuff it out at the few places left for the rest of us So this is an internalizing of the extra night because the business cares about the profits and those profits have to care about the Preferences of both the smokers and the non-smokers Ditto during COVID for people who want to be in a social environment Some place more of a value than others on being spaced out on having masks on having plexiglass Whatever the various mitigations are and each business owner has to decide for himself What his optimal policy is how much extra safety should we be doing? Based on the wishes of my customers both who want to interact and who want more distance So the spread within a bar or a restaurant is not a spillover. It's not an externality now It might happen, but just because it happens doesn't mean it's not an externality It doesn't mean excuse me that it is an externality It's something that's a bad outcome of something that was rationally chosen not an externality So what remains so it's not completely like the smoking story because the smoke from one bar doesn't spread into the smoke from to The next bar imagine you're sitting on Bourbon Street and who goes to Bourbon Street and goes into one bar not me Maybe some of you do you go from one to the other to the other right? But that means any thing that you catch in one you then bring into the next that you go into into the next that you Go into etc. So that means one bar is optimal risk mitigation is contingent upon what the risk mitigation is going on In the other bar and similarly from there to your supermarkets to your all the other places that you interact So that's the remaining Externalities so it's partially internalized so a big part of the rationale for regulation has been taken away but there is a piece of this that remains and For our finer points for I know this fans of Mises Institute who come to lots of Austrian things here Externality within Austrian economics. You can't really value it. It's not traded on the market So we don't have a demonstrated price for it. The concept is still there Maria Rothbard talked about it in law or property rights and air pollution in the early 80s article that he had did But just because you can't derive it from that doesn't mean that the concept's not there It just means we're not gonna be real precise with trying to measure this thing But we can kind of get a scope on a hand on what the scope of this is as we think through this so Next step then okay, so some externality remains that means there's gonna be some inefficently too much amount of spread and by the way, I'm taking For the purposes of this talk at least taking as given that the spread of it is a negative externality there is a positive aspect to it, right if Young people transmitted among themselves who aren't at greater risk. It helps build you closer to herd immunity That's a positive externality just like people get in a vaccine is a positive externality So to some extent that's mitigating it's against that negative aspect as well I'm just gonna take as given that if it remains that there is a net negative of the transmission So if there is we know with COVID and we knew really early on that it varies significantly by age and health status as an oversimplification the old and infirm have very high risk from it the young and healthy don't have very much risk from it So the spread the value of that externality between young health people. It's really small Probably not worth doing anything about the concern has to be more about does their activity then spread it to people who are at A much higher mortality from it So what would a regulation like that look like well, we also know that externalities are not unidirectional So if a tree falls in the woods and there's no one there to hear it. Did it make any sound? Well, if there's no old and infirm people to spread COVID to there is no externality from the young people towards them Which means the existence of old and infirm people is itself an externality on the younger people if you contract their activity This is both directions If we don't have people at risk from it then the people who aren't at risk don't have to bear a cost But that means if we impose so we have to decide then how are we going to allocate these rights? Do we allocate the rights to the young and healthy or do we allocate rights based on the preferences and characteristics of older and infirm well I've got a picture of Ronald Kos up there, which means if Walter Blockworth is here today He had bouncing in his seat saying Kos is a commie but But with this idea for I like Kos and I those aspects of my life And it's a very relevant insight that he has here both on the reciprocal nature of an externality a spillover and then If you care about overall efficiency, how to assign the rights And what you say is you assign the rights thus that the least cost of order is the one who bears the consequences Least cost of order bears the consequences Well young and healthy people are trying to get their education Work and provide a livelihood for their families older and infirm or disproportionately Retired and not doing as valuable or activities. This means step one would be allow the young people to interact and say older people You're gonna have to severely Contract your activities if you're worried about the risk in order to mitigate it You try to put the mitigation effort on the person who does it more cheaply It seems in this case lockdowns get it asked backwards They lock everybody down contract very valuable activity While doing that to slightly lessen the risk for an older group that otherwise could be a lower cost of order So governments just following by the way not unique Austrian points on you just straight up normal economic price theory Got it asked backwards Now that doesn't mean a normal mainstream economist will then take from that and say next up Okay, so we should do nothing what they say is lockdowns get it backwards. So how should we regulate? Did say well, we should do something to make them contract activity on the margin that will reduce some of this spread Now what did we actually get once lockdowns and stay at home were done we got command and control So here's one example of it. Como is unnecessary obligated menu options with your freedom fry or Como fries for $1 This is when in order to order a beer you also have to order a meal So if the bars are serving $1 meal meals my personal favorite in my town of Lubbock a bar brewery to remain nameless Started impose it because they have to have 51% of the revenue come from non-alcohol in order to qualify as a restaurant and be open So all of the sudden each beer was half price But each beer came with a tasting fee equal to the price of the beer and the tasting fee was a non-alcohol revenue Which I thought was fantastic so When you're doing command and control regulation like this your regulators would actually have to know the subjective valuations of the mitigation costs that they're imposing the subjective valuations of the cost to the businesses doing them and to the People who are jumping through the hoops and doing the song and dance to comply with their command and control regulations Something as simple as wearing a face mask. What is the cost of wearing a face mask? It's not just a monetary cost It was in Joe's remarks at the beginning of today's and how great it is to see everybody's face It's the last in value people have to not seeing each other's face when they enter an act and wanting There's no way some regulator knows the cost of that for every different people Person that can calculate the optimal amount of that. That's simply not there or the optimal amount of Spacing in the restaurant or an epidemiologist don't know the subjective trade-offs or the subjective costs of all of the mitigation Which is what it would be necessary to know if their damn rules were actually the optimal ones for regulating this now This isn't rocket science to economists or even normal mainstream economists either We've known about this for pollution for instance for a long time If there's a carbon pollution that goes into the air and you want to make factories account for that We could do command and control and tell each factory exactly what production process used to use which scrubbers to install to decrease their pollution or They can set a tax equal to the value of the externality and let each firm figure out for itself How to mitigate that in order to lower their tax rate or to keep polluting and pay the tax Or for some firms who might get rent of it all together and other firms don't know mitigation at all and pay it That's if you could set the tax equal to what the value of the externality is which as of already said We don't actually have a precise number on it because it doesn't fall out of market-based choices for the central plan Is but at least that's how you'd start approaching it not Locked down not locked down light of command and control But something that gives a price for people to internalize so concerts still can happen But there's an extra tax on their tickets depending how many you sell some people who live their lives going to bars I mean I don't know any Who really value that maybe that's a really high value activity Even if there's lots of transmission and they should just pay a penalty to account for them spilling it over to other places But still be able to do it because they get so much value You got to leave people more freedom to choose if you're going to find the lower cost ways to mitigate this while leaving The more valuable activities still happening because no planner knows what those actually are So that's what an economy a mainstream economist would say about kind of getting to optimal regulation But as a guy who does comparative analysis, I look and say if you give the power to the government to do this What are they actually going to do they're not going to follow the advice of some economist in a lab coat What they're going to do is they're going to base their policies on politics Just like we've seen over the last year and this means that policy is going to be driven by fear and news media and Hyped fear in a population Interest groups that want to get revenue from themselves or shut down other businesses where mom and pop stores have to close But big box retailers can stay open You're going to get policies that the demagogues use to keep themselves in power and get more power for themselves going forward And of course, this is exactly what we've gotten but I have been Embarrassed that my fellow account of my profession has been so quiet about this Numerous people have talked about the unemployment effects and other things But not about just the logic of there is no logic for this regulation instead I've seen lots of economists debating the epidemiologist statistics and other things and I'm like you guys are missing the boat It's your bread and butter where you need to be talking even to get the conversation to where I just got it Never mind to get it to this next part about what's political economy going to give us So instead, I mean if they ever did get to that point Just like what we've seen in the stimulus bills and what spending goes to the taxes would be Set not based on externalities, but based on what businesses they wanted to contract first Which ones they wanted to favor more and then the revenue allocated from it would also go to the favorite interest group So that you pay off teachers unions who haven't worked in a year Who don't want to go back to work because that's the one that Biden wanted to support in that instance And if it was the Republicans, it would just be somebody else who is getting the payoff This isn't a R or D type thing So what I'd say that is In light of what political economy we get you even if there's some spillover that remains What's a better date way to deal with it say first look and this pits more with the theme of a lot of what the other speakers have To say in this conference first look at things that would lower the value of this externality meaning making this less deadly and more manageable Which means freeing up existing regulation and health care that made health care not as good at dealing with this as it otherwise could So deregulate to remove barriers to medical competition and innovation So doctor and physician licensing the state-based nature of this the telemedicine things that we've seen Temporary rollbacks from various states during the pandemic more of this widespread all around so that the market becomes more flexible It can deal with places where there's a surge and when there's not a surge by actually Reallocating medical supply across lines that politicians draw on maps for no good reason Then things like we saw warp speed and people talked about what a great development this was warp speed They developed the first vaccine almost as soon as they had sequenced the virus Then we waited nine ten months for the FDA to get around to approve it That's warp speed at government speed How about the first time the scientists figure that out you get the right to try Anybody who wants to use it go ahead and use it it doesn't work out well for you you had the cost and benefits It was your risk you took it, but guess what you had provide actually a positive spill over because what I'll learn from you And that would help us better understand it going forward of which ones work and which ones don't that would be warp speed It's just freeing innovators to offer their products to consumers who are free to try Did oh we saw it of course with the government's botched testing And for that matter thinking about the once vaccines did become available the government being a monopoly purchaser of it And then having command and control regulation of who's going to be able to get it and where it's going to be distributed to And by the way would they say it's obvious just older people first. It's not obvious to me Yes, mortality is higher in them, but if we're talking about people undertaking mitigation to reduce risk to others There's one strategy for reducing risk to others Contract activity. There's another get the virus. Excuse me get the facts Well, I guess that's what is one way but get the vaccine and then go out Who's the lower cost mitigator the government central planners don't have who's the lower cost one? Who should we get government central planners have no knowledge of who that should be instead? You needed a market for it sell the damn things let market prices dictate where early doses should go Heck if you wanted to then take the revenue you got from that and then pay people to get the vaccine Who don't want to get it later? If you're really concerned with spill overs instead We had the botched command and control version of this now I think the good news of this is Over time the value of the externality gets smaller and smaller and smaller and the optimal strategy even in an unconstrained Political economy world gets closer and closer to nothing Because as more people have vaccines or natural immunity via infection transmission goes down and it becomes More like a normal disease spread rather than what we had seen at times during during this past year so Even in a market where you did not do any regulation and you just let it play out its course My main point is business mitigation and civil society take care of a good chunk of this And then the longer it goes the closer we get to actually the that being the optimal policy anyway Instead of course what we got was hygiene socialism or foshism if you want to make it sound like fascism So that's our lockdown. That's our command and control. That's our government speed of warp speed Ed What I'll say is that what worries me the most is the dangerous Higgsian racket so ratchet So Bob Higgs who's done so much great work and spoke many times at the Mises Institute Talks about the ratchet effect and the growth of government and government scope scale power and we have a crisis it takes on extra powers when the crisis is over it lightens up a little bit but not back to where it was before and This has certainly in my lifetime probably in all of our lifestyles been the greatest encroachment on our liberties Domestically here in the United States that the US government has done. I believe 9-11 was a big deal, but a lot of that intervention went abroad As a proportion of it. It was much smaller of what we lost at home This has been entirely here and America's liked it. They're not going to give those powers back easily so I'm Worried that our fellow Americans are afraid to be free and that there's government bureaucrats who are all too happy To oblige them in that and keep these powers and try to regulate us going forward for much less serious things So I'm gonna wrap up there But with that for some of you that are BC's Institute veterans and have been to a number of talks You will have noticed without Tom Woods here There is considerably less same shameless self-promotion of selling books So I promised Jeff that I would pick up the slack for him a little bit So I did bring about a dozen copies of my latest or one of my recent books called socialism sucks Two economists drink their way through the unfree world Which is it's kind of an Anthony Bourdain style first-hand travel account as my co-author and I Bob Lawson went around the world drinking in these countries that mixes instead of you know Anthony Bourdain and food it's Economics and history being explained in between beers So we go from beer drinking to block quotes of Ludwig von Mises as seamlessly as possible and I'd be happy to Sell anybody a copy for 20 bucks who wants one and then instantly devalue it with my signature so that you can't resell it I'll say one last thing on the book did very well It made it all the way up to number five on Amazon overall best sellers But I was more pleased and this is the part you like that for over a month It was the number one best seller in the category of communism and socialism because Some books some books are more on more equal than others and also simultaneously the number one book in the category of beer So very pleased with that. Thank you all for your time today