 Aloha and welcome to Ehana Ka Kō. We're here every week on the Think Tech Hawaii Broadcast Network. I'm Kili Iakina, president of the Grassroot Institute. Wherever you are in the world, whether in beautiful paradise, Hawaii, or somewhere on the mainland or across the world, you know that the economy is always top of mind. We live in an economic world. Money, scarcity, all of these things are realities with which we deal and we moderate an economic life. Well, how should we think about economics? Very often here in the state of Hawaii and throughout the country, economic issues are seen disconnected from one another. We have a problem such as individuals who can't afford housing or who live on the streets, and so we set about trying to solve that particular problem. Or the price of electricity is high, so we try to solve that problem. Rarely do we sit down and look at the entire economic system, nor do we ask the question, how should we think economically? That's why I am so delighted today to have a dear friend of many, many years who truly understands what economics is all about. He's a professor of economics at Hawaii Pacific University, and he's a scholar in economics at the Grassroot Institute of Hawaii. We benefit much from his scholarship, and more than that, from his wisdom as he takes a look at contemporary problems and gives an educators point of view. Please welcome to the program today Ken Sculland. Ken Aloha, good to have you back on the program. Aloha, Ken. Well, you and I have been talking for years and years about the economy. Have we fixed it yet? No, we haven't had their ear yet. You know, you actually were what we'd call a working economist at one point. You worked for a government organization, and yet you've moved into the role of educator for the past couple of decades at least. Tell me about that. What calls you to the profession of professorship? Well, thank you very much. I started off as an international economist in the International Trade Commission. At that time it was called the Tariff Commission, then the Commerce Department, and then the Office of Special Representative for Trade Negotiations in the White House. So you've had a lot of nuts and bolts experience in economic policy as it's being applied in the world. Yes, and like making sausage I saw how unsavory it was in the production of policy, and how much as a bureaucrat I got in the way of people, and that's when I decided to leave Washington DC and go up to Alaska first to teach economics, and then come here to Hawaii. You said getting in the way of people. That must have been a little confounding to be in a profession that you love because you want to help people, and you want to help the world, but you find the governmental administration of economic matters to be something that gets in the way of people. What do you mean? That's right. I felt that so much of what bureaucrats were doing was around their pompous, trying to control people and intervene in their lives, but I realized they knew better what they were doing than I did as an official in Washington, and the kinds of surveys and interventions that I would do just were huge burden on their time and energy and often giving favors to some at the expense of others, and it was counterproductive if I wanted to really help people produce. The best thing I thought was to leave them alone, and that was essentially this philosophy of the early lazy fare economists. The best thing to do is to leave them alone, and they can find their own ways without the guidance of government officials and politicians. Well there's a certain philosophy that you have been espousing, and I hate to use labels. You know better than I do those pedagogical charts that have all of the names of schools of economics, and it can be really baffling to the non-economists. Actually it's baffling to economists. I mean we have Keynesian, we have monetarists, we have the term free market, but I think that there are some basic principles that you go back to that would be incumbent upon anyone who does good economic thinking. Give me one of those principles. Well I think that basically we shouldn't be advising officials in government or people in general society be doing things that we wouldn't do personally. If it's not right for me to steal from you or to control your life and to shoot you or things like that, I shouldn't be asking government officials to do it on my behalf. And I think that ethical behavior starts by applying generally to government what we find is as reasonable and ethical between ourselves. Well you know that's quite fascinating Ken because I would have expected from an economist an answer that had something to do with dollars and cents that had to do with scarce resources and their distribution to competing ends, but you start to talk like me, like a philosopher. You talk about ethics. Where do these ethics come from? I hear strains of Confucius in what you have to say who said do not do unto other people what you would not have them do unto you. There seems to be something rather traditional in this philosophy of reciprocity. Well I think most societies have moral advocates who are advocating a kind of good society that we would all want to agree with. It's just that as soon as we get into the practice of actual life we are so often rationalize immoral behavior because it gets us what we want to have as a shortcut. And so people often say well it's not right for me to steal from you but if I can just rationalize the government stealing from you so that I can have what I want then then it's okay. And amazingly I find in my surveys of students would they take a bribe? If they were a politician would they take a bribe to use the power of government to steal from some to give to others? In order to accomplish ends that they consider to be good? Or even bad ends? Just to raise the price of bread you know would you be willing to take a bribe to raise the price of bread for everyone in the country one penny a loaf but would you take a bribe of a million dollars? And even though everyone says that should be illegal for others to do almost everyone in my survey say they would do it themselves if the money was enough you know and then they rationalize it well it's only a penny a per loaf of bread. If I don't do it somebody else will do it or yeah it's wrong but a million dollars is really nice I I mean they can always or I'll use the million dollars for good causes you know people will always rationalize good outcomes for it but in fact that the means of accomplishing this is something that they would never want other people to do and they want it illegal for other people to take bribes but if they themselves have the opportunity they do it. Well isn't that fascinating willingness to be pragmatic willingness to be rather relativist in terms of values with no absolutes but at the same time as you point out the ability to look at others and say that's wrong I don't want that to to be done do you think that that may be the anchor we have in our society for some kind of moral sense? Yeah I find that when people actually there are some who stick to principle and moral ethics regardless of the payoff in other words we're the million dollars absolutely secret no legal penalty still they won't take the million dollars to do something that's wrong and I asked them well why and they said well because it's it's wrong and those people serve as an encouragement for other people to guide to look at ethical principles and that's why some countries are a lot better at reducing corruption than others you know because in many countries there are there are very few people who who are willing to to say no to temptations like that but we're fortunate that we do have a few people who set the the principle the guideline and a lot of people follow along with it. Well I distinctly remember my first day in class as an undergraduate at Northwestern University studying economics Robert Eisner's macro economics course in Keynesian economics lesson number one supply and demand learning that point at which the supply curve intersects a demand curve equilibrium we didn't start off with ethics but but you you teach your students from ethics you've written a textbook for economics called The Adventures of Jonathan Gullible and it begins with an ethical principle that you own your life tell us a bit about that well every chapter in that book it's 40 pages and now I'm pleased to say it's published in 83 editions in 53 languages around the world so it's available all over the world yeah it's used in school systems all over the world that's right at the university level and at elementary school is it used in the hawaii school system not yet actually that was offered sam slum offered free copies for the for the department of education and and they they kept putting it off and putting it off I think we're convinced that probably it'll be accepted in North Korea before it gets accepted in public schools here well and so that very first principle is you own yourself why is that an important ethical value for any economic system uh what does that mean by the way because to deny to deny that is to presume that somebody else owns your life and can control your life your liberty and your property and this is a very fundamental principle in this country but don't we let a very big brother control our life our liberty and our property all too often but we remember that our our declaration of independence started off we hold these truths to be self-evident it's obvious to everyone that all men are created equal that they are endowed with their by their creator with certain inalienable rights of life liberty and the pursuit of happiness those were the fundamental principles of the country but then very soon they got away from that and and of course rationalized all forms of of controls by government of everything when they when it should have been just protecting people's life liberty and property instead it came to be controlling every aspect of people's life liberty and property with the Keynesian philosophy the socialist philosophy many philosophies that rationalize it for you know a greater good than than you having your own your own life and decisions but how do we organize ourselves economically we need roads we need fixed rail systems we need we need works public works we need welfare systems we need a medical insurance system and all of that i mean how do we get these goods without the government taking from us our harder and goods and money in the form of taxes how does this take place i mean isn't this part and parcel of the way the economy works i think to many people there's no alternative i know and because that's what they've been taught in the government schools throughout almost all of their lives well and even our teachers i mean every year for the past several years there's been a big bill that has come to the hawaii legislature sponsored by the teachers union that says we need more of this more of that and more of this in order to help our kids because education is number one so let's increase the taxes on everybody so it seems to be formulaic that the way we get the economy running the way it should run is we take from people and use that to produce the economic goods we want there's that fundamental point of do you own your life or does the government own your life and actually that was a sort of a beginning point when i first asked my mom as a kid you know what's what's the difference between one party and the other and at one point she said well this political party wants you to control your own life and this party wants you the government to control life for you i came in to believe that both the major political parties were both doing the same thing later on that they were both trying to control my life but i think that people in this country have become great and successful and prosperous because of the degree that people have been allowed the freedom to pursue their own interests without the controls of government and that's throughout the world if you look at the economic freedom of the world index countries that have the greatest degrees of freedom in economic freedom not necessarily political freedom but in economic freedom they have the greatest prosperity and the greatest civil liberties the greatest opportunities for political expression the greatest environmental results the lowest corruption all of those things come along with the higher degrees of economic freedom because freedom produces so much more wealth and prosperity than controls and governmental dictates now this is not just a philosophy the the economic freedom of the world and its companion the economic freedom of north america use rigorous empirical data looking at every economy on the planet and identifying through very clear markers where freedom the kind of freedom you're talking about where where the government minimally takes from you your life liberty and your your pursuit of happiness where that is high and takes a look at the outcomes in society and where that is low looks at those outcomes and we see where there's great freedom there's actually greater prosperity and fewer social ills and where there's a lack of that freedom we have more social ills so do you think that the government itself the the strong kind of government we have here in the united states which compels a great deal of our income through taxes is actually responsible for many of the economic ills yes most definitely in what way well i i i'd say the very slow growth the high taxes take care in particular in in hawaii you mentioned at the outset about the issues and homeless in hawaii well i'd say that that the government has prohibited some of the lowest cost kinds of housing that could be available has been available across the mainland is illegal here mobile homes they're very low cost could easily be brought in and but the barriers the prohibitions against these things make it so that it's not available the land control only five percent of the land area of the island of of the Hawaiian islands are zoned for all commercial and residential use and this tremendous constriction on the use of land has tremendously raised the cost of land if they loosened up on the usability allowing people more freedom and how they are going to utilize the lands how they are able to provide housing even such things as bring in shipping without the jones act controlling the the importation and the exportation of products from hawaii to the mainland these things could tremendously lower the costs of of all of these things in hawaii well it sounds like you're giving us a freshman lesson in supply and demand if the government is able to keep the supply low and the demand continues to grow the price of the product increases incredibly we see this in land use we see this in shipped goods and so forth when we come back from break tell us more please yeah especially about how we can find some solutions through what you call free market economics my guest is ken scullander professor of economics at hawaii pacific university and a grassroot institute scholar don't go away because in a minute we'll be right back and we'll talk about some of the principles for building a solid economic understanding i'm kelly akina grassroot institute we're watching a hana kakou on the think tech hawaii broadcast network aloha my name is reg baker and i'm the host of business in hawaii with reg baker we're a show that broadcast live every thursday from two to two thirty we highlight success stories in hawaii of both businesses and individuals we learn their secrets to success which is always valuable i hope to see you on our next show aloha thank you for watching think tech i'm grace chang the new host for global connections you can find me here live every thursday at one p m where we'll be talking to people around the islands or visiting the islands who are connected in various aspects of global affairs so please tune in and aloha and thanks for watching hi i'm chris leetham with the economy in you and i'd like to invite you each week to come watch my show each wednesday at three p m welcome back from our break this is a hana kakou here every week on the think tech hawaii broadcast network i'm kelly akina president of the grassroot institute where we like to say a hana kakou which means let's work together let's work together for a better economy government and society and our hats tip to the think tech hawaii broadcast network jay fidel and wonderful staff and team who produce about 35 hours of high quality content every week broadcasts from downtown honolulu now my guest today ken scullin understands what economics is all about he's been a working economist but more than that he's been an educator of young minds that have gone on and now are somewhat older minds people who are filled with ideas as to how to bring about solutions to economic problems and we're going to talk a little bit about that now as we explore a bit about free market economics my guest again ken scullin ken you know that term free market economics is often misunderstood what would you consider a good definition of free market economics simply allowing the innovative entrepreneurial talents of human beings in society to come up with solutions and they do remarkably you remember some years ago before we had these things when there was a single long line of a telephone into your house that was the only communication you had for for everything and i remember i was making a call up to alaska in the early 1980s before they broke up at and t and of course ten dollars a minute for me to make a phone call to a friend up there but then when they broke up at and t and they said where we're going to have competition and allow people in the innovative spirit of the of the of the world to to bring about better communication they came up with not just better communication you can call anywhere in the planet virtually for free even with a face in in mind but with all of the other thousands of apps that allow us to do so many other things that's the the the inventive and creative spirit of the market that we don't have under the the lack of vision through governmental controls and monopolies that are handed out to this favored group or that favored group so the a free spirit really is at the heart of free market economics the creation of wonderful ideas that meet the needs of humanity so there is a product there is a demand for that product and when the demand for the product meets the product itself we have a free market yeah sure except where government comes in the middle and intervenes for yeah what kinds of ways does the government intervene that that are not productive one way that's been very harmful to hawaii over the years beginning in may of 1940 the public utilities commission outlawed all competition with the bus and we had many competitors providing better service lower cost friendly the rosecrans bus company and some seven jitney companies were providing tremendous transportation for people around the island of oahu and public utilities commission was trying to give a favor to the one largest bus company and saying well we're gonna issue a cease and desist order against all the competition the public could come out largely in favor wildly in favor of all the competition leave the competition they're great it's better service lower prices but no they put them all out of business and since then we've had declining service we've had now heavily subsidized monopoly service for over 60 years 66 years and actually 76 years and because of this very very poor service of transportation now they said well we're going to solve that with a 10 billion dollar 20 mile 20 mile railroad that's twice the cost of the the second Panama Canal zone and we could simply make that unnecessary by allowing competition with the bus allow people through all of their innovation now you see you see government is playing favors to different parties so minimizing the level of competition what are the virtues of competition when when it's allowed to serve the economy the best thing is innovation then second you get better service and you get lower prices as a part of as a component of that all of those things happen as what is essentially factor x that's the enormous inventive spirit of the human beings when they are allowed to compete with each other tremendous things that you'll notice just disappear in under government monopoly now some people may argue that competition is fine and well when you live in a big place like the mainland of the united states but when you're in an island in the middle of the pacific surrounded by water competition it doesn't work out so well because our resources are so scarce our people are so few and besides that we like each other and don't want to compete with one another have you heard any of this before ken well good yeah good service is the best way to make good friends in relations with lots and lots of people it's when you can't compete that you get people angry angrily fighting over power in the in the legislature because they they're upset with what they're what they're given through electricity or through land or through shipping and transportation but look at hong kong it's a small a small place and you know confined it's a and yet it's the fastest growing economy in the industrial world now richer than most all of the countries of europe just 50 years ago or about 60 years ago it was one of the poorest countries on the planet and yet they were the most free market they allowed people to come there from all over the planet they were allowed to start businesses and innovate and they produced an enormous amount of prosperity so that they weren't expecting their children to grow up in the poorest country in the world now they have the opportunity to offer their children and grandchildren the richest country the greatest prosperity and it happened because they were simply allowed far more economic freedom than than almost any other places on the planet now you mentioned earlier the economic freedom of the world report which is produced by Fraser Institute that's right in Canada and according to that report as well as a companion report produced by the heritage foundation hong kong ranks always one or two year after year in economic freedom in terms of the minimal amount of invasive participation by the government and they've even fended off a good deal of that from the communist government since the return what's the relationship between that and the growth of the gvp of Hong Kong the rise of the quality of life for people the high levels of employment and the opportunities for capital investment and entrepreneurship well Hong Kong and Singapore have always ranked at the top so it's not a measure of political freedom because Hong Kong's never really had political freedom right it's economic Singapore you can't spit on the sidewalk civil liberties occur when you when you've got the economic freedom you come more prosperous and you can move around the planet as you choose but the third on that on that list is New Zealand now I consider that a stellar example of before and after governmental controls were lifted on New Zealand after World War II was the slowest growing economy of the industrial world with high extremely high controls of the taxes and trade barriers and regulations and various state operated enterprises but 1984 under the labor party the socialists of New Zealand they undertook the most radical free market reforms of the 20th century and they they ended the trade barriers they cut taxes in half they sold off most of their state operated enterprises they they tremendously deregulated their economy and it became the fastest growing economy of the industrial world providing astounding prosperity one example was the the farmers they were the most heavily subsidized farmers in the world heavily subsidized by borrowing from all around the world but finally when they ran out of credit they had to cut off the subsidies and they ended the subsidies in three months and the farmers then became the strongest advocates of getting rid of everybody else's subsidies saying if we can do without it so can you and before long they there were farmers were earning five times as much income on less land than ever before because they were farming smart instead of just farming to what the government was subsidizing. Well what lessons would you give and we'll close with this to our state legislators if they pointed you to a position such as economists to the legislature what are some things you might say? Well I don't know I'm I think the biggest battles would be just persuading the congress the legislators of what needs to be done I'd much rather persuade the population because the politicians will follow the popular the popular will later but as long as the popular will is to give up so much control and power to the legislators they'll just gobble up all that power. You mentioned earlier your book The Adventures of Jonathan Gullible of Free Market Odyssey and you and I have had many conversations over chapters in that book tell everyone where they can get a hold of that book. You can get a copy on Amazon or you can contact me at Hawaii Pacific University the bookstore has copies at HPU but it's available in 53 languages all around the world you can just last month I received the the Malaysian edition which just came out and we'll have new editions in Berber, Arabic, French, Thai, Kemmer, Burmese coming up in the in Poojambi. Well wonderful. In the next and we've had it produced as a play in across Africa and in Eastern Europe and a musical production in Kazakhstan. That sounds good. Well Ken thank you so much for being with us today. Thank you very much Kelly I appreciate it. My guest today Ken Scullin professor of economics at Hawaii Pacific University and grassroots institute scholar we'll be back next week on Think Tech of Hawaii's Ehana Kako and Kili'i Akina signing off and saying aloha.