 The topic of this this lecture is political entrepreneurship and in the first thing I want to do is to introduce the topic as a contrast between real market entrepreneurship and political entrepreneurship Two different things and and there is some literature in in economics and in the sub-discipline of public choice that talks about Uses the word anyway political entrepreneurship But they don't use it always in the same way that I would because they they sort of try to model political entrepreneurs as similar to Market entrepreneurs real free market entrepreneurs business people and And what I'm going to have to say is that there's a radical difference in fact It's just the inverse as far as the implications for economic performance It's it's just the opposite a political entrepreneur is the very opposite of a market entrepreneur even though every once in a while you could find some very transparent similarities like you might find the mayor of a city who Is fed up with the bad quality water supply provided by the public works department and contracts out to a private company And does something good, but that's the exception that proves the rule that politicians generally are Entrepreneurial in a very different way and and basically, you know market entrepreneur To succeed Basically has to cater to the consumer the consumer is king One of my favorite passages in human action by von Mises is his and his chapter discussion of the consumer Where he talks about us as consumers as hard-hearted and callous He uses those words hard-hearted and callous Meaning if you find a pair of sneakers that is marginally better than the one you've been buying for the past five years You'll dump that brand and you'll take the new brand immediately or if it's cheaper And so, you know, we'll drop that old company on a dime if we can save a few pennies or or if it's you know very tiny difference in quality and You know on a whim and and that's and that's a good thing for the economy And so entrepreneurs to succeed have to be diligent in constantly cost-cutting Product improving trying to find out what we want as consumers and and generally creating wealth Creating wealth. They basically get the inputs land labor capital ideas and so forth and to be successful they have to transform the value of those Inputs into something that consumers value more highly than what they paid for the inputs That's how they that's all value is created in the economy Political entrepreneurs basically are involved in the whole game of rent seeking to use the public choice term and transferring wealth to themselves and power to themselves and To their supporters and so they're basically involved in wealth destruction The whole process of politics of trying to secure a wealth transfer to yourself or to your group under the auspices of the state Is a wealth destroying because the opportunity cost of that kind of behavior is production You know, if you weren't involved in politics, you would be involved in Producing something or other. This is a very old libertarian theme that there are only two ways to make money One produce goods or services for your fellow man And persuading them to buy them from you or two Using the power of the state to force money out of the pockets of one group And into the pockets of your group or of you personally those are the only two ways to to secure money Legally, of course you just secure money illegally But that's and that's the latter form is what Friedrich Bastiat called legal plunder It's a great term legal plunder in lobbying for for special benefits and so When you look at political entrepreneurs, I've done a great deal of research on this over the years I've written several books on that go under the category of political entrepreneurship There's there's a constant struggle to do the opposite of what a market entrepreneur would do A market entrepreneur to be successful has to please the consumer a political Entrepreneur is someone who who works diligently at isolating himself From the pressures that can be put on him by the taxpayers if we're talking politics, we're not talking consumers about Voters taxpayers, you know, some of the literature calls them taxpayers slash voters And so if you're really really good at isolating yourself from any kind of pressure that can be brought on you by the voters You're a successful political entrepreneur As our friend bob higgs once told me The government allows us to have free speech in america because they know it doesn't really matter You know what what we say they've done such a good job at isolating themselves Electrally from any kind of pressure we could put on them in congress, for example But they don't care what we say let us go rant and rave and everything or as gary north once said Uh, you cannot fight city hall, but you can pee on the steps and run away. That's a that's a gary north quote So in some of the but they both expressed sort of the same the same thing And uh, and so one exam i'm going to give some examples of some of the things i've written about political entrepreneurship to demonstrate this I had an article in the review of austrian economics in 1987 one of the second issue of the whole Uh journal on this if anybody's interested in digging it up But uh, I also read a book with james benet entitled underground government And now the the subtitle is the off budget public sector And what this was about was there was a tax revolt in the in the united states in the 1970s And there were dozens of states that um passed referenda To uh limit taxes limit spending and limit borrowing The most famous uh in the news media was called proposition 13 in california Where they limited the increase in property taxes in california But there were several dozen other states that did this in the mid to late 70s When you know government it was sort of a time when government was truly out of control And as well that's what led to the election of ronald reagan in in 1980 But it was a state level phenomenon too as in addition to the federal government being out of control But uh, and so my co-author james benet and I you know, we wrote a book on how politicians Responded to this So the classical theory of democracy would say that the people have spoken They have passed referenda in in huge margins to limit taxes limit spending limit borrowing And the classical theory of democracy is sort of like a perfect competition model of government Is that the the politicians wanting to be reelected will do what the voters want what the median voter wants anyway The you know, that's where the most votes are the median middle of the road voters in terms of political preferences And uh, and so we've documented in this book that no politicians All over the country and in other countries. We even had a chapter on england I was worked in england Did the opposite they would say to the voters. Okay. Yes, we will comply But then at the same time they would continue spending but spending off the books off budget And they devise all sorts of means to hide spending off the books or off budget by creating what we called We coined the phrase off budget enterprises, which we called obe's and in this book And to give you an idea of what they do at the local level of government We had a case study of Nelson Rockefeller who was the the former governor of new york state Who then became vice president of the united states, but as governor of new york state He was a big spending. He was a kind of guy that paul krugman would love He just could not spend enough of other people's money And and there were he wanted to build A gigantic university system that would be superior to california's He wanted to build public housing in every neighborhood He had just grandiose plans for public building of everything and his referenda would be turned down three or four or five times At times because you know to issue debt at the state level They have a kind of debt called general obligation bonds, which means the taxpayers are obligated to pay the principal and interest And so when they have a referenda On about the state level on something like this. That's what they're voting on are you you're voting to tax yourself? to to finance in the future You know the building of dormitories or something like that Time after time they were turned down and so uh, rockefeller hired a man named john mitchell Who would later be involved in the watergate scandal as the attorney general of the united states? But he was a bond counsel who was a bond market lawyer at the time And he invented something called the moral obligation bond And it said the there's no legal obligation of the taxpayers of new york to pay off the principal and interest But they have a moral obligation And and that was sort of a wink wink to the bond market that will find the money somehow If you if you market these bonds for us will come up with the money And so they did they issued these bonds and these are generally are called revenue bonds And those are the two kind of bonds that state and local governments issue general obligation and revenue Revenue bonds do not require Voter approval And so they issued billions of dollars of these things and the end result was new york state was bankrupted It had a federal bailout. There was a federal government bailout, you know long before the bailout of the the You know of the bush obama years The federal government had to bail out new york state because they were they were bankrupt And and rocky as he was known was mostly responsible for it And the the non voter approved debt of new york state was several times I think it was three and a half times the voter approved debt of new york state and so And so all of this debt that was off off the books Finance things that the public hadn't had no control whatsoever over And so it was one big pork barrel Of giving out of contracts to political politically favored companies That would then kick back the money to the politicians And and that's how it works and at the same time when this book came out we got a lot of publicity because The largest bankruptcy in the history of municipal finance in america occurred And it was something out in the western part of the country that was known as whoops This was the acronym washington public power supply system Oh, okay. I gotta pitch. Let me hit the camera here Whoops, um, the washington public power supply system They wanted to build nuclear power plants in the northwest of america And in the same thing happened they couldn't get voter approval So here's the democratic process. We took a referendum And the voters said no, thanks. We don't want five nuclear power plants out here in washington state in In surrounding states So they issued revenue bonds to build it anyway And uh and james ben and i wrote about what a fiasco it was it ended up Only one of them ever being finished the rest of them were almost built and then scrapped they defaulted on two and a half billion dollars And in debt and it was it was it was a big uh a big disaster for everyone involved In the whole thing and of course and of course the reason was that you know government is inefficient inherently to begin with But these were even exceptionally inefficient enterprises because there was no no No taxpayer involvement at all It was all the bond lawyers the wall wall street bankers and the construction companies and the politicians And the voters had nothing to do with it You know at least once in a while they can exert some kind of discipline just by knowing what is going on but and so And so ben and i wrote this whole book underground government to document this type of political entrepreneurship And it's all aimed at escaping control by the uh your agents, you know supposedly you have a principal agent Uh situation here where the politicians are the principals Or the or the agents rather and the voters are the principals They're supposed to be acting in their best interest in theory, but but of course they don't Another another example of this is another book that ben and i wrote Way back when it was called destroying democracy Hold your applause, please And uh and uh where i got the idea for this title destroying democracy was uh a famous essay by james madison his essay number 10 in the federalist papers Where madison said that the whole purpose of the constitution the u.s constitution Was to restrain the violence of faction and by that he meant special interest group politics And what this book is about is uh ben and i got a hold of a large database of a government funding government grants to non-profit organizations of all kinds everything from environmental groups to labor unions to uh groups of lobbied for a bigger welfare state the military industrial complex the whole ball of wax and uh and uh we argued uh and we showed in a big fat book about this thick that um Not only does government fail to restrain the violence of faction, but it finances the violence of faction It would give grants to these uh non-profit organizations With uh ostensibly nice sounding purposes to alleviate poverty to uh to help the elderly find rental housing To cure the heartbreak of psoriasis whatever you know all sorts of nice sounding purposes but then the money would be used to hire lobbyists and to lobby the government for uh for uh for Higher taxes and more spending so the government was paying people To twist its arm twist the government's arm to increase its power in in revenue In other words, so it's kind of a farcical thing, but that's that's what was done and is still being done today and uh And so and so again this was a way in which uh, you know If you think in terms of the classical theory of democracy that says that politicians respond to the will of the people While the will is largely a manufactured will to the extent that this sort of thing takes place that the government is actually funding all of these groups that uh That are responsible for the a lot of the propaganda about government that you hear on the news media And elsewhere You know to understand how this works you have to understand that the american welfare state Is not administered by the government It's funded by the government But the u.s. Government created hundreds of non-profit organizations to administer the welfare state And at the same time it made sure that these groups use uh tax dollars to lobby for An expansion of the welfare state year in and year out So it's not just handing out welfare money That these non-profit organizations are involved in it's they're they're political they're very political about it And they're a very powerful lobbying force for an ever-expanding state And so uh, so once again politicians use this vehicle to isolate themselves From taxpayer pressure and that's that's being entrepreneurial in exactly the opposite way of a real entrepreneur Who has to persuade consumers to hand over their money to uh to uh To get their goods, okay, uh another book that ben and i wrote on this theme And that's basically it's called official lies The subset the subtitle is uh how washington misleads us In and this was sort of a natural follow-up to destroying democracy because uh We wrote you know chapter and verse we documented how the government lies about just about everything I'll just give you a few anecdotes Uh when the government issues poverty statistics about the the distribution of income and how unequal it is The u.s. Government when it when it issues these statistics on On the distribution of income It does not take taxes out of the higher end. It just gives the The gross income of the higher end Income earners gross income And on the lower end of income earners. It does not add government benefits So people who receive maybe 20 or 30 thousand dollars a year versus of cash and in-kind government benefits None of that is counted as their income And the people who pay for it None of the taxes taken out of their income Uh is subtracted When they issue these statistics on how unequal the distribution of income is and so of course it's going to look uh greatly greatly skewed uh and we cite uh An economist edgar browning who did a lot of real good work on welfare state statistics about 20 years ago It's showing for example that um Just in the the poverty rate you might hear the government say well the poverty rate in america is 10 10 percent well the government just arbitrarily establishes a number of what poverty income is i think it's around $20,000 a year this year something like that if you make less than that you're in poverty and uh And so but but they don't count any of the benefits that you get from the government So you can make 19 thousand dollars a year and then receive 35 thousand dollars a year worth of government benefits And you're officially in poverty And but browning calculated that if you do that if you count the government benefits Then the real poverty rate is more like two or three percent and not 13 percent as the government would say We have a chapter on the farm subsidies for example And the image that americans get about farm subsidies is that they help the family farm We talked about we have a chapter that discusses congressional hearings on this and about how uh When the new farm bill was up for Revision at the time we're writing the book The congress brought in as an expert witness the the actress sissy space sec Because she had just portrayed a farm wife in a movie And she appeared before congress and cried, you know tear was becoming she's an actress She's crying about the the poor little family farmer and and so And so but but of course the actual farm programs most of them Grant gives subsidies based on acreage So if you're a large corporate Farm that's in the fortune 500 and you have a million acres You get a lot more money from the government than some some guy out here in east alabama who has a hundred acre farm And might also apply for the same benefit But if it's by acres or acreage So the lion's share of the farm subsidies go to big corporations Who of course then kick back some of the money to the to the politicians who are responsible for giving them the subsidies In the form of legalized bribery called campaign donations. That's what they call it. You know the mafia would call it Something different, but it's essentially the same thing That's that's going on And so that's the sort of thing we did in this book official lies But again, it's the manipulation of public opinion That is out there and the government does have the ability to drown out almost all other voices On when it comes when it wants to because it has so many resources at its disposal And so many court historians and others who echo the government line on things because one way or another they're rewarded for it You know one of my articles on the whole lincoln stuff Was a review for example of a book by doris kerns goodwin Called team of rivals Doris kerns goodwin goodwin was was kicked off of the Pulitzer prize committee. She was kicked off of pbs You know she was a talking head on pbs because she confessed to plagiarism And she confessed to paying the person she plagiarized from a hundred thousand dollars Out of court settlement in one of her books. And so uh, but but when but when you're a court historian, you see she's written A book about how great linden johnson was Another book about how great the kennedy family was And so uh, so she's a real darling of the state She writes books that sort of helped to prop up the state So she was kicked off and sort of disgraced for about three months And then she's back on television And she was given a big book contract to read to write this book on lincoln And uh, steven spielberg is making a movie about it now So if you're if you're a liar for the state, you can get away with anything You can even admit to plagiarizing hundreds of pages of somebody else's work And that's fine. No problem at all. You're back in you're back in getting, uh You know Half million dollar book contracts and and they make movies out of your books But that that's how it works. That's what I meant when I said it's not just the state But it's the a lot of people who benefit from being associated with the state who spread these lies About the state Okay, and so So these are all three examples of what i'm talking about when talking about how politicians work diligently To isolate themselves from the pressure of their their principles Their supposed principles, which are the taxpayers and the voters Now another aspect of this is if you look at the behavior of political entrepreneurs versus market entrepreneurs Another good illustration of this That i've written about also in my research Is um the the the railroad industry in america The very the very first Large-scale funding in terms of corporate welfare of any kind of industry was the railroads in the in the 1860s Okay prior to that there had been some some state governments Had had subsidized the building of canals and railroads But not much not much not much money. In fact, it was such a fiasco In the early 19th century that by the time you get to 1860 on the eve of the american civil war Every state in america had amended its constitution To make it illegal to use tax dollars for any corporation for any purpose Because it had been such a such a fiasco But then that all changed during the civil war when the federal government stepped in and started massively subsidizing railroad building and then created the the central pacific and the union pacific railroads And and there was a nice contrast there because a little later in the 1870s There was a man named james j. Hill Who was the the founder of the great northern railroad? And one of the characters in atlas shrugged is a model that's a james j. Hill He had the iron ran novel, but he was the founder of the great northern And you can read about the best place to read about him. There's a great book a great book on political entrepreneurship by burton fulsome called The myth of the robber barons And there's a chapter on james j. Hill And and this is a real stark contrast between hill and Who was a real market entrepreneur and the political entrepreneurs who ran the the government subsidized railroads? And basically i'll draw you a map here You know, i want to draw i drew a map of the united states for you here to show you what was going on at the time Here's america There and here's um council bluffs, iowa This this was the eastern terminus of the government subsidized railroad And it is also where in 1857 abraham lincoln invested in real estate And then when when he signed the pacific railway act in 1862 Uh, the act gave him the authority to decide where the eastern terminus was and by sheer coincidence i'm sure honest Abe chose council bluffs, iowa And so that's where the railroad started and so the objective of course is to go to the the west coast They wanted a railroad so that all the Commerce from the east could go west and vice versa Travel both ways and the population could go out. They wanted to populate the american west And so so they started building railroads and the government subsidized railroads Took this kind of a route To the west coast something like that And uh, and the reason the reason for that was Since congress was funding it every member of congress even representatives of the territories that were not yet states but who were there in congress And who were going to have political power as soon as new mexico became a state for example They had some influence too. And so every member of congress, uh from that area said to all you'll have my vote for the subsidy But you have to run a line to my city You know in my in my area whether it's economical to do do that or not And so there were appendages everywhere to all these places because that's how politics works and so the political entrepreneurs that ran the the The union pacific and the central pacific the government railroads pretty much built the railroad lines like this very very inefficiently And i could read to you Some of the examples of this that burton fulsome talks about Let's see Yeah, so they built they really did build you know burton fulsome says they said they built wide Winding circuitous routes to collect for more mileage. Well, the subsidies were per mile subsidies And so if you built it like this to go to california, it was more profitable Whereas for james j hill Let's see i'll draw another map There's another map of america I'll call this the hill map is that this florida is texas James j hill's route was pretty much like that Because he was a businessman He wasn't a political hack. He was a businessman And uh, the other way he could make money was to find the most direct route the cheapest route He used the best materials for his rails And so forth and and that's what he did and so hill became legendary. It's it's uh His autobiography is called highways of progress if you if you want to read a really interesting biography By a really a hardcore free trade Enterprises or the 19th century. I would recommend that one He was uh, he brags in the biography that he never accepted a dime in government aid of any kind He didn't accept land grants Unlike the government railroads If he came across Indian lands he did not call in the army to murder all the indians He uh, he bartered with them with uh livestock or money or whatever they could trade for for rights of way Across their land Uh, but it was that the government subsidized railroad that socialized the cost of building railroads And part of the way of socializing the cost that is Forcing the taxpayers ultimately to pay the cost of building the railroads Was instead of paying the indians something Uh, they would just kill them all in fact the the chief engineer of the the the government railroads was a man named grenville dodge Who was a close uh friend and confidant of abraham lincoln's and during the war the civil war lincoln made dodge a general And his job was to kill indians and make way for the uh railroads So he spent his time in the war killing indians and then after the war grenville dodge recommended to the government That they make slaves of the indians and and and make the indians dig the railroad beds from iowa to california Uh, the government chose not to do that. It chose to kill them instead and so If you want to read about it go to the independent review and read my article about it in the last fall issue of the independent review It's not independent.org is the website and you can find that just type my name in there And so uh, but james day hill couldn't do that because he was in government subsides. He competed with these people He competed with them. And so, um, I'll give you some example of political entrepreneurship That uh burden fulsome writes about of how it worked out. Now. Here's grenville dodge the chief engineer Of the railroad. So he's you know, he's a he's a big guy. He's the chief engineer of the government's transcontinental railroads Of which many books have been written He says since dodge was in a hurry. He laid track on the ice and snow Naturally the line had to be rebuilt in the spring so Here they are in the rocky mountains and there's 10 feet of ice pack And they get people to build railroad tracks on top of the ice pack Then when the spring thaw comes it collapses But they make double the money They got to build it again. So they make double the money It's either government like you know dig a hole and fill it up again Dig a hole and fill it up again. That you know is the original public works project And he goes on to say what was worse? Unanticipated spring flooding along the lower fork. Who would who would unanticipate spring flooding in the rocky mountains of the platt river? Washed out rails bridges and telephone poles doing at least $50,000 damage in the first year No wonder some observers estimated the actual building cost at almost three times what it should have been Okay, and he goes on to say the subsidized railroads routinely use more gunpowder Blasting their way through the mountains and forests on a single day Then was used during the entire battle of Gettysburg in the civil war So on a single so if you can imagine that he just blasted their way through through the mountains through the rocky mountains And and here's another classic example of political entrepreneurship One of the one of the real robber barons I mean there were real robber barons. It was these guys. It was Grenville Dodge and another man named thomas durant Who were who ran this they were the political entrepreneurs? James j. Hill was not a robber. He didn't rob anybody. He was a market entrepreneur And here's another passage from fulsome about the union pacific in 1866 thomas durant Wined and dined 150 prominent citizens including senators and ambassador and government bureaucrats Along a complicated section of the railroad. He hired an orchestra a caterer six cooks a magician And then he said he has in parentheses to pull subsidies out of a hat question mark and And and a photographer For those with ecumenical pallets. He served chinese duck and roman goose the more adventurous were offered roast ox and antelope All could have expensive wine and for dessert strawberries peaches and cherries after dinner some of the men hunted buffalo from their coaches Durant hoped that all would go back to washington and client to repay the union pacific for its hospitality So it was winding and dining and lobbying was the focus of these political entrepreneurs And then if you read about what james j. Hill did on the other hand Uh, here's what fulsome says under his direction the workers began laying rails twice as quickly As the northern pacific crews had the other government subsidized railroad He'll passed on his cost reductions to his customers in the form of lower rates because he knew that Farmers miners timber interests and others who used his railroad services Would succeed or fail along with him? His motto was we have got to prosper with you or we have got to be poor with you So he understood that the the farmers and timber interests and anybody who lived out there and worked out there They had to prosper He gave the he gave the farmers free seed grain and even cattle He had contests for raising the biggest cows and the and the and things like that to encourage farmers And and he dropped his rates steadily Burton fulsome writes that james j. Hill quote Gloryed in the role of rate slasher and disruptor of price-fixing pooling agreements So here's the government subsidized railroads conspiring to fix prices and james j. Hill comes along And and enjoyed the heck out of dropping prices and foiling the the attempt to fix prices One more quote about james j. Hill from Burton fulsome He said says hills quest for short routes low grades and a few curvatures was an obsession in 1889 He hill conquered the rocky mountains by finding the legendary mariah's pass Lewis and clark had described a low pass through the rockies back in 1805 But later no one seemed to know whether it really existed or if it did where it was Hill one of the best gradient so much that he hired a man to spend months searching western montana for this legendary pass He did in fact find it and the ecstatic hill shortened his route by almost 100 miles And so that's how we ended up having his route more or less like this compared to The the the government subsidized railroads that were they were built like that okay, and Fulsome concludes that the great northern was the best constructed and most profitable of all the world's major railroads Not just america's but the world's major railroads And so that's the stark difference between political entrepreneurship and market entrepreneurship another element of of political entrepreneurship Comes from another book that I would it's very interesting. I think it's an important book In this whole area Let's see where is it And it's it's written by my old friend fred mccesney and it's called money for nothing published by harvard university press And what this is about is it's a book about the category of government regulation That doesn't seem you can't doesn't seem to have any special interest group behind it But jesney who the last I was in touch with him. I haven't seen him in a couple years He was a law professor at northwestern but There's a category of regulation that didn't seem to have any lobbying group lobbying for the regulation It seems to come directly from congress, but normally when you see any kind of regulation being proposed There's somebody who might have spent years lobbying congress to issue the regulation or the legislation But but there's a category out there that there's no identifiable special interest group And so he wrote a whole book about about this of uh, you know, why why why does this type of regulation come about? And it's essentially political blackmail Uh, he has there are categories of bills that congressional staffers in washington dc refer to as Milker bills milk as in the stuff you drink milk or bills They sometimes call them juicer bills milker and juicer bills And so so what are they milking and what are they juicing? They're they're milking campaign contributions. The idea is the the congress will propose a very onerous and and tax increase on a particular industry or a very onerous regulation price controls and pharmaceuticals for example And uh, they would cost that industry billions of dollars And then members of congress will sit back to be bribed with campaign contributions To to to undo the legislation to make sure that it doesn't pass that the price control law does not go into effect And there seems to be a cycle for this in a mccesney's book that the closer you get to the election the next election The more frequent you see milker bills and juicer bills Okay, you know juicer bills are uh Said called that because they're designed to squeeze cash out of corporate coffers In return for not harming the corporations with legislation and regulation um And we know one example he gives i'll read just one example of what this is about um Yeah, well during the clinton administration. They they proposed price controls on pharmaceuticals And so the pharmaceuticals industry poured millions of dollars into both parties in washington dc And uh, let's see. I think he has three has the amounts here Oh, there's a representative jim cooper who proposed legislation Uh for price controls received nearly one million dollars in campaign contributions just from the farthest pharmaceutical industry in the first four months of 1994 Which was a congressional election year Overall campaign contributions in that year were about one third higher than the previous non-election year And then then of course they dropped it They dropped the proposal after they collected the millions they dropped the uh the price control proposal And so and so that's that's uh what mccesney means about money for nothing You know the title of his book it's it's just extortion. It's a form of extortion and uh and so And that's that's being entrepreneurial in a political sense. It's just the opposite of the market sense You know business people in the marketplace can't do this they can't threaten to sell you poison unless you pay them twice For the hot dog which are going to buy from from them But the government does it threaten to harm you unless you uh, you give them them the politician is more money uh Another illustration of what I mean by political entrepreneurship Is how it is that uh, the congress has created a monopolistic system of government in the us And uh, what this is these are bar charts that show Just what it says re-election rates Over the years the top one is the house of representatives and the bottom one is united states senate and these are kind of small numbers, but But uh, this is right here is 90 percent We're at right right there And so if you look at Since in the first year here, this is uh 1964 Okay, 2010 Okay, so if you look at this whole this time period You know over 90 of all members of the house representatives get get re-elected So for all practical purposes once you're elected to congress Uh, it's it's pretty much impossible To be unseated to lose your seat. You have to be really really really bad to lose your seat um A few of you in the room might remember about about when it was 12 or 15 years ago now uh congressman barney frank Uh, it was then I had involved in a scandal. He's still in congress But it was in the wash the front page of the washington post for a whole week That um his partner uh that he lived with was running a uh a house of prostitution out of the basement of his townhouse in washington dc In congressman frank claimed he knew nothing about it And uh, so so imagine this you live in a small town house You know not a real big giant You know mansion a town house and there are people coming and going all night long And and lord knows what kind of noise they're making in the basement And you know and you know nothing about it nothing about it So, uh, anyway, he'd nothing happen to him So you can even run a whorehouse as a member of congress and still get re-elected Uh, uh, I grew up in western pennsylvania. There was a congressman named flood And uh, he looked just like snidely whiplash in the bullwinkle cartoons If you ever watched his old cartoons bullwinkle and rocky Snidely whiplash had a handlebar mustache And he wore a black cape and he had this big black hat flood dressed exactly like that He had a handlebar mustache with wax on it and he wore he walked around in a black cape And and he was he was convicted of a felony But pennsylvania law at the time said he appealed And until the appeal was decided he could still run again and he was re-elected even though he'd have been He's on his way to jail apparently but he was he was re-elected and I can remember Newspapers interviewing people saying why did you vote for this guy? He's a crook and people would typically say well, they're all crooks in washington But ours is really good at bringing grants back home to our district for you know to build schools and post offices And all that stuff and in my brother-in-law worked for two years building the post office down there and so But it's not just that You know one of the reasons for this and the senate is not much different if you look at the senate There's there's some more dips in the senate, but still it looks like the average is around 80 percent The tendency reelection rate at least 80 to 85 percent Is well one of the things is there's there's a proliferation of subcommittees and each subcommittee the purpose of which is to to dole out Government spending benefits to various special interest groups and so challengers can't compete with that challengers can't promise Farmers and construction companies and the aerospace industry Multi-million dollar contracts, but you can if you're a member of congress because you're on the subcommittee that doles out those contracts And so there's a proliferation of that there's a proliferation of staff members Paid for by the taxpayers who are essentially permanent campaign workers for you paid for by taxpayers Whereas if you're a challenger trying to run for congress You have to come up with the money on your own to pay for people to work for you or to ask them to volunteer to Work for you. So that makes it tough. But another thing that makes it especially tough is gerrymandering this word comes from combination of a 18th century politician named elbridge gerry and the word salamander And and what this is is the drawing Maybe i'll draw my own map first the drawing of districts like let's say i'll draw and say this is the state of alabama And let's say there are there are several congressional districts you could make the districts like this And here's one two three four four congressional districts. So four members of congress Let's say or Here's the state of alabama again You could draw them kind of like this They could look kind of kind of kind of like that So something like that and uh, which what's they actually do? Here's here's the actual map of uh congressional districts in alabama Now like look at this one. I'll draw it in black Is the congressional district Now, why would it be like that? um, well what they do is they find out Every 10 years when the census is taken If if there happens to be a democratic governor in alabama the democratic party gets to redraw the congressional districts on a map And so they'll look at this area and they'll decide well There's 80 democrats in this area this particular area right here. So that's the congressional district And then uh, and so they're you know, this one here is is different. They're all you know different And so so that's what they do and the republicans will do the same thing when they're in And so the congressional districts in america are drawn up so that a republican district will typically have 70 or 80 Republican voters which means Whoever the republican is is going to win and the same with the democrats They'll have 70 80 90 democrat voters in that particular district So it's guaranteed that no matter who the democrat candidate is the answer is going to win in that one And so as and that's one of the reasons why no matter what you do It's almost impossible to lose your seat in congress. And so we have a largely a monopoly government That's why bob hig says things like they let us have free speech because it doesn't really matter You know, they let us talk and they and they they put us on television and all these things But but they they really know it doesn't matter. They don't they don't pay attention to what we do anymore at the federal level And so when people like tom woods and myself make the case for nullification Of federal laws or its secession This is why you know, we've tried all this business of electing the right people and you know, electoral politics But this is why it doesn't work. They've rigged the system so much Over the years through all this political entrepreneurship that we we have a monopoly government centralized monopoly government and they do do whatever they want American presidents can bomb anybody now without asking anybody else. Can't they? do you remember when bill clinton bombed What turned out to be an aspirin factory in the sudan And everybody mocked it when the sui needs it out to the aspirin factory. Oh, yeah Yeah, terry. It's a terrorist training camp clinton said he did that on the exact day That monica lawinsky was testifying before a grand jury his his girlfriend You know if you remember the monica lawinsky scandal So american presidents can lob bombs at an innocent country and kill innocent people Just to divert the american media away from their personal problems And the last monopoly power there and nothing happened to clinton. He got Yeah, he got the higher popularity ratings after that because people thought he was state. He was protecting us from terrorists And they probably still do to this day, but Okay, so that's my other example of political entrepreneurship the incumbency racket And of course there are other types of gimmicks that government plays To to get its way and one is log rolling I'll mention two more gimmicks log rolling Then I might have time for a few questions And uh, I'll give you an example of log rolling Let's see. Let's say is we have three different Groups of preferences a b and c Group a wants more spending on schools but none on hospitals There are two things that a local government is doing education schooling and hospitals Group b wants more hospitals and those school spending So for example people in group a might be young young parents Who want more spending on schools for their kids? But since they're pretty healthy, they don't want to spend more tax dollars on hospitals Group b is people who are older and are more concerned about their health. Their kids are out of school So they don't want to vote for increased taxes on more schools But they'll vote for increased taxes for to add a new wing to the local public hospital. Okay group c wants no more of anything either schools or hospitals And so let's say these are three equally numbered groups in a community same number of voters And we take a majority rule vote on school spending Okay, will we get a majority vote on school spending? Spending more on schools when if we need two out of three No, we won't we only have one out of three That would that would do that you only get you don't only get a third of the votes In the same is true of hospitals if you took a referendum should we spend more on hospitals You'd only get one third. You only you only get This group here and the other two would vote no and so the will of the majority would be No more spending on anything you couldn't get a majority on anything But what log rolling is is group a or the politicians representing group a can cut a deal with group base B saying You know, we don't give a crap about hospital spending But we will vote for more hospital spending today if Next month we take another referendum on school spending and we understand that you don't care about school spending But that's the price you're going to have to pay if you want us to vote for your hospital spending And so that's log rolling or vote trading And so what this means is that even though the the true preferences of the majority Are no more spending on anything The end result is more spending on everything by the government through uh through log rolling Okay, and so this this is one example of what's meant by log rolling or vote trading And the final thing the final gimmick i'll mention when kind of running out of time here Is what's called in the public choice literature agenda control Uh political entrepreneurs can determine the outcome of elections By controlling how the vote is taken how the agenda of the vote You know the timing of the vote and and what it is you're voting on and And what now one example of this I'll give you a real world example that sticks in my mind I lived I lived in Buffalo, New York for one year and that was enough for me It was it it starts snowing in Buffalo around august And snows all day long and all night every day until may At least it did the year I lived there And then there's about a 50 mile an hour wind that goes along with it too at all times And it's very very pleasant sleeping at night because all you can hear is snow plows going back and forth all night long everywhere in the city and uh, but anyway, uh They they uh that one year they they had three school spending referenda that were defeated You know the the county the schools kept proposing spending more money for schools and it kept getting voted down and so They they announced that well if you're not going to give us more money We're going to have to cut out school buses And in Buffalo, New York during the school year most of the school year there are no sidewalks Because there are there's snow eight feet high on the sidewalks And so they're pretty much saying your kids are going to walk the school on the street in the dark in the morning if we don't have If you don't have our tax increase and so they took a fourth vote and of course have passed And so that's that's an example of what is meant by by agenda control in in votes This this kind of trick or this phenomenon is also sometimes referred to as the washington monument syndrome in uh Whenever governments or can't get their way In terms of increased spending The first thing they cut out is ambulance service police garbage collection Whatever will impose the biggest uh biggest harm on the public And it's always unnecessary to do this But that's what they do and it's called the washington monument syndrome because it became famous in the 1960s when the The head of the national park service went to congress and asked for a budget increase and they turned them down And so uh his response was to close down the washington monument Which was the most is the most popular tourist traction in in washington dc Families from each state come on vacation the washington dc And the one thing they want to do is to go up to the top of the washington monument And so members of congress were delus with phone calls from angry constituents Saying you know it came all the way from montana to washington dc for our family vacation Our once a year vacation to see the washington monument and it closed down And so uh that was enough to get the congress to change his vote and give the national park service the money had won it And so uh federal state and local governments routinely do this all the time when they're threatened with not getting their way Is they always try to inflict the most severe punishment possible on the public by not collecting the garbage or letting crime Go run a muck Or no ambulance services. Sorry. You have a heart attack, you know, call your brother-in-law You know don't add don't call us The schools they shut down the schools You know inconvenience all the parents and so and that's a form of agenda control It's a form of agenda control. And so all of this is uh is a way in which uh political entrepreneurs isolate themselves from pressure Of there from their their principles, you know, and uh, i don't peter client probably talked about He will he has another talk on the principal agent problem in economics Where you know with in the corporation The uh the principles or the stockholders the agents or the corporate managers in politics The principles are the voters and taxpayers the agents supposedly are politicians And so uh, but in the corporate world we have mechanisms in the market To get to force our agents to work for us Court in the market for corporate control competition Among firms and so forth, but in government that doesn't exist. You don't have that It's a non-market institution. And so politicians have a lot more leeway Uh to do all these things especially to lie to us As far as that goes, you know in the market if a business person is known as a liar Uh, you don't go back, you know, if they tell you they're going to sell you an all beef hot dog And you take a bite into it and it's a soybean hot dog You don't go back and he goes bankrupt Uh, but if they tell you we have to bomb Iraq because they have weapons of mass destruction. They're going to hit new york city Um, they get away with it. They do it, you know Because we don't have the market mechanism They can they can lie, uh, you know Politicians can generally have a lot more latitude to lie To us than does the most dishonest used car salesman in the world And because of the difference in the institution, okay, and I guess my time was almost up Maybe we'll have time for one question since the man in the front that raises his hand. We have one minute left Fire the part the head of the park service Oh, they have a lot of use for the for the bureaucrats One of the things they do with the bureaucrats is whenever things really do go wrong They hold hearings and they call the bureaucrat up there and they point their finger and they criticize them and they make sure It's on television that he's responsible for the problem, not us And so a lot of what happens is that the heads of these agencies will take the heat For they'll be, you know severely chastised and trashed on camera And you know on c-span in in these hearings But it's all a charade. It's all a political theater and then you'll find out they've got a budget increase But that's their payoff for taking the heat for the problems created by these institutions created by the politicians and so So that's that's one reason also people who have these jobs Usually get these jobs because they have powerful and wealthy supporters who got them a job the job So the members of congress would have to take that person on or those persons on who got them the job in the first place If you're the head of national park service, you're probably You probably have the timber industry and the mining industry behind you because they they lease a lot of land To timber and mining companies on the cheap And so a member in the congress, uh, couldn't just willy-nilly fire that person Without uh, uh, incurring the wrath of the timber and mining industries So there's a cost A political cost involved in doing that But I guess our time is about up then we'll we'll quit there