 All right, so why don't we get started? So now let's introduce the speakers. Obviously, first, you know, we have both Mr. Brooke and Professor Frank. Mr. Brooke is the host of the Yar on Brook Show, a renowned best-selling author and a world-class speaker. His podcast, The Yar on Brook Show, can be heard on Spreaker and on YouTube. Mr. Brooke was born and raised in Israel. He served as a first sergeant in Israeli military intelligence and earned a Bachelor of Science in Civil Engineering from Technion Israel Institute of Technology in Haifa. It's like it's got my long bio. Yeah, it's abridged a bit, but yeah. So in 1987, he moved to the U.S. in where he received his MBA and Ph.D. in Finance from the University of Texas at Austin. He became an American citizen in 2003. For several years, he was an award-winning finance professor at Santa Clara University. And in 1998, he founded BH Equity Research, the Private Equity and Hedge Fund Manager, of which he is founder and director. Mr. Brooke serves on the boards of the Ein Rand Institute and the Clemson Institute for the Study of Capitalism. He's a member of the Association of Private Enterprise Education at the Mont Perelin Society. And next we have Professor Frank. Professor Frank is the H.J. Lewis Professor of Management and Professor of Economics Emeritus at Cornell's Johnson School of Management. His economic view column has appeared in the New York Times since 2005. He received his B.S. in Mathematics from Georgia Tech, then taught math and science for two years as a two-score volunteer in the Rural, in the Rural. So I think it's okay to start. Unless... All right, can I ask you all to mute please? If you're not speaking. I don't know if it's in back, but thanks guys. Jenny over there is not muted. Let me see. Jenny's muted now. For me, today, for you, it's another page. And hopefully, you can use it. Okay, sorry about that. Where was I? Professor Frank received his B.S. in Mathematics from Georgia Tech, then taught math and science for two years as a two-score volunteer in the Rural, in the Rural. He holds an M.A. in Statistics and a Ph.D. in Economics, both from the University of California at Berkeley. His books have been translated into 24 languages. He's received a Critics' Choice Award. He was one of his books was named a Notable Book of the Year by the New York Times. It was included in Business Week's list of 10 best books in 1995. So I wanna thank both speakers for taking the time to come out and speak with us. And obviously, thank you to the audience for coming out and listening. First, I wanna hand it over to Mr. Brooke to deliver his remarks, and then we'll switch over to Professor Frank. True. Thank you all. Yeah, thank you all for inviting me. It's a real pleasure. It's a little unfortunate that we can't be in person. It's always a lot more fun to deal with three-dimensional human beings rather than two-dimensional human beings. But I think we'll manage. And my past visits to Cornell was always a lot of fun. Capitalism, you know, capitalism is a term that is often used and rarely defined. So let me define what I mean by capitalism. I certainly don't mean what we have today. What we have today is a mixed economy, elements of capitalism, and a lot of elements that are not capitalist that involve the state. For me, capitalism means that system in which the government has minimal involvement in economic affairs, and that minimal is dedicated to the protection of individual rights, primarily in the economic sphere, property rights, but nothing else. So it is a situation in which the government does not pick winners and losers, is not subsidizing, is not providing professional treatment, is not doing all the very many things that governments are doing today. In a sense, the kind of capitalism that I endorse and fight for is a kind of capitalism that has never really existed. We have come close to it, but certainly parts of the late 19th century and maybe early 20th century, maybe Hong Kong during the 20th century, we've come close good, but never quite achieved it. But what is interesting is that to the extent that we practice the idea of private property and defending private property, to the extent that we minimize the role of government, to that extent, economy succeed. There is a strong correlation between economic freedom and economic growth and wellbeing and other parameters of human flourishing that's just that again, to the extent that capitalism is allowed, to the extent that markets are left free, to the extent that government limits itself to the protection of individual rights and nothing else, to that extent, we have economic freedom and we have economic success and we have flourishing and prosperity. And that is true no matter where capitalism is practiced. So this is not something that is only works in the West or only works in Europe or only works in America. It is true anywhere and everywhere from Asia, from the Asian Tigers to China, the elements of free markets that they have allowed in China where real economic growth has survived to anywhere else in the world. One of the fastest growing economies in the world today is Rwanda in Africa, where you have a president that has embraced at least over the last few years although slipped a little bit I'd say over the last year, I embrace the principles of property rights, embrace the principles of limiting government and the rule of law where there are laws, not men who dictate how business is treated. And the consequence even in Africa when you embrace elements of capitalism, you do very, very well. Even within the United States, you can look at various industries. You could look at the industries where the government intervenes more and industries where the government intervenes less and you can see a direct correlation within those industries across innovation, success, growth and prosperity, the US economy. The main engine of economic growth in the US economy is the tech sector. The tech sector is probably the least regulated sector that's changing and it looks like it's gonna change quite dramatically as we move into the future. But since the 1980s, tech has been relatively unregulated and we've seen massive innovation, growth and so on. If you look at airplanes on the other hand, airplanes are heavily regulated. Every generation of Boeing airplanes is actually a little slower than the previous generation of Boeing airplanes and it takes a little longer to get from point A to point B maybe a little bit more comfort but it does take a little longer. The last real innovation in airplanes was the Concorde and it didn't last for very long. It wasn't allowed to develop as a real industry. Hopefully there's some signs that maybe supersonic transportation is coming back. Let's hope you can see the same thing across industry after industry after industry. Where government leaves it alone, where property rights are respected, where voluntary exchange is respected and the government doesn't try to intervene between manufacturers and consumers, between the deals the manufacturers cut, the deals that consumers get, that's where you get the most progress and the most innovation and the most success. In spite of this track record that capitalism has, it is immensely unpopular. Is I think it's a understatement, not just in the United States, but certainly the same is true in Western Europe. The trends are for increased involvement in government in the economy and it doesn't really matter. You know, I'm very, I don't think this matters politically. It doesn't matter if you're a Republican or Democrat, overall the size of government, the amount of government spending, the amount of government involvement, the amount of government intervention, the amount of government regulation always increases. Always increases and that did not, nothing different really happened under Trump in that sense. Government spending went through the roof and government involvement in economy went through the roof and while some taxes were cuts, other taxes like tariffs were increased. So that on that, it's not clear that there was any more economic freedom under Trump than there was under Obama or will be under Biden. The general trend over decades has been that towards a system where capitalism is minimized towards a mixed economy where the role of government is ever increasing and there really is no limit to the amount of increase of government involvement that is being proposed. It's every administration has its own plans and ever expanding role of government. I wouldn't be surprised for example, and we saw significant regulation of technology companies primarily using antitrust, but maybe other means as well to control the industry in spite of its unbelievable successes in spite of the fact that it has benefited all of our lives dramatically. One of the reasons I think that capitalism is so under attack, I mean partially it's I think just a lack of knowledge, but it's also a confusion about what it is. There really is this notion that what we have today or that is the inevitable consequence of capitalism, that is what we have today in terms of cronyism, in terms of the role of corporations in politics, in terms of the involvement of business in writing their own regulations, in dictating and controlling the regulatory state. I think there's a strong belief that that is what capitalism leads to, inevitable. And I would argue that the opposite is the case, that the more power we give, the more power we give our politicians, the more power we give the state to control business, the more incentive there is for business to try to control the politicians. Businessmen have little care, little about politics when politics cares little about them. It is an act of self-defense that evolves into an act of manipulation for businessmen to go after politics and try to manipulate the system for their behalf. A good example of this, one of my favorite stories about this is the story of Microsoft in the mid-1990s. Microsoft in the mid-1990s was the largest corporation by market cap in the world. It was incredibly successful. It had basically been the steward of the computer, personal computer revolution and an incredibly successful, innovative forward-looking company. But it spent exactly $0 on lobbying in Washington. They had no involvement in the writing of laws, the writing of regulations in trying to manipulate the system away from a system of rule of law to a system of rule by men, by power, by pressure groups. Now, this did not please our politicians. So Microsoft was brought in front of a session of one of the Senate's committees, a session by the way chaired by a Republican, Armin Hatch from Utah, who was a young senator back then. And during this session, Armin Hatch got so angry that he stood up and started yelling at the Microsoft executives about how they had to have a presence in Washington, DC. They should build a building in Washington, DC. They needed to start contributing to politicians. In other words, they needed to start bribing him if they wanted to be successful. It was unthinkable to the politicians that the largest company in the world would not care about politics. Famously, the Microsoft executives said to Armin Hatch and the rest of the senators, you leave us alone, we will leave you alone. We have no interest in lobbying. We have no interest in being here. Goodbye. And they off they went back to Seattle. Not many months later, there was a knock on the door at the Seattle headquarters of Microsoft. We're here from the Justice Department and we're filing antitrust lawsuit against you. What was the accusation? What was the action that led to the antitrust action against Microsoft? Price gouging? No, it was the fact that Microsoft had dared to again innovate, move us into what turned out to be the standard in the world of the internet. It had dared to offer product for free. Internet Explorer. Now, probably Professor Frank and myself were the only ones who remember this, but it used to be that you just have to pay to get a browser. Netscape, I think cost $70, you downloaded it and you could browse the internet. Without paying to browse the internet, you couldn't use it. Microsoft bundled their browser with the operating system and therefore provided you with a browser for free. Just as an aside, despite of the fact that Microsoft provides you with a browser for free, how many of you use Internet Explorer today? Almost nobody. It turns out that there's immense competition for free browsers, surprisingly. I use Chrome, other people use Safari, and yet there were probably a half a dozen other browsers in addition. Anyway, this involved Microsoft being involved in a court case for over 10 years. It crippled the company. The company never really recovered. It also involved a government bureaucrat basically having an office at the Seattle headquarters where he had to approve every major decision that Microsoft made for 10 years. Again, killing the company and it's only after that bureaucrat left because Microsoft slowly started recovering its old innovative and productive ways to today. It's again, a successful innovative company. The government basically destroyed Microsoft for a while, came very close to destroying it completely. And what do you think the lesson Microsoft learned from that? How much money do you think today Microsoft spends in Washington, DC? Well, tens of millions of dollars a year. They have several law firms representing them in the district. They even build a building just like Arnhatch suggested. It's pretty much equal distance between the White House and Congress. It's a beautiful glass tall building. I don't think anything gets produced there, but in terms of lobbying, it functions perfectly for their purposes. If the government is gonna engage in telling business how to run itself, then business is gonna get engaged in trying to manipulate those rules on its behalf. And the only way to return to rule of law to get rid of cronyism, to get rid of business involvement at the level that exists today in government is to get government out of the business of business, to eliminate regulations, to eliminate control, to send antitrust laws into the trash bin of history where they belong, and to allow business to function, to create, to build, to make, to raise our standard of living, to provide us with the products that we voluntarily engage with them in order to attain. The essential characteristic of capitalism is that it creates an abundance of win-win relationships, an abundance of win-win situations. Every time a product is sold, the company has made a profit, hopefully if they've done their job well, and the consumer is better off. Every time an employee is employed, that employee is better off than he was before, that's why he took the job, and the company is better off because they're making a profit off of the work of the employee. Every transaction engaged in capitalism that is voluntary, where the government has not stepped in and intervened and controlled and manipulated, is a relationship that results in a win-win situation in everybody ultimately being better off. So if the rule of law means the protection of rights, it means the government dictating laws not through pressure groups, not through trying to manipulate our lives. If the rule of law really means the protection of our freedoms, then what we need is more capitalism. What we need is to get the government out of the business of business. What we need is more freedom. Hopefully, with a better understanding what capitalism actually is, we can start moving in that direction and moving towards greater freedom in markets and in every other aspect of our lives. Thank you. Eric, do you want me to just start in? My audio is in and out, so hopefully you can take it from here and just jump in like you said. So that would be great, please. Okay, yeah, thanks very much for those remarks, your own. There's much I heard you say that I agree with. I'm gonna defend a more expansive version of the state than the one you outlined, but let me say just to force on the conclusion that I often heard about urging us to save more and work under safer working conditions, possibly be a libertarian. The way I think of libertarianism is, there are many schools, of course, but the school I think of myself as a member of is the John Stuart Mill branching. Hello? Somebody's unmuted again. I think of myself as a John Stuart Mill libertarian. Mill was, of course, the greatest champion of the West is known of individual liberty. He wrote in On Liberty that the only legitimate reason the state can tell you you can't do what you wanna do is to prevent undue harm to others. He actually didn't say undue harm to others. He said harm to others, but he must have meant undue harm because you can't do anything without causing harm, real or imagined to somebody somewhere. So the issue is that I think I have a more expansive notion of what constitutes harm to others. That's not the only reason the state might wanna act. I think Mill himself probably had a narrow conception of the self when he was writing. The psychologist today have a more nuanced view of possible conflicts between the 20-year-old self who might do stupid things that would compromise his health at age 60 and have good reasons for wishing the state had prevented him from doing some of those things when he was younger, but set that all to one side. I'll focus only on cases where I think it's a fairly compelling argument that what the state is doing is actually preventing people from causing undue harm to others. I'll say just my background to make credible my claim that I share the impulses of most libertarians. I think it's just the common trait we all have is we just don't like to be told what to do. I'll recount an experience as I was preparing for my first sabbatical. I was invited to go to New York to spend a year in an economic consulting firm. And one of my former colleagues had not gotten tenure at Cornell. He'd gone there. He was very successful in that job. He said, you'll love it. You can explore this in the country and hearings on utility regulations. I had done some of that as a freelancer and had in fact liked it. It sounded very tempting. And the next thing I thought I'd ask Cornell for the year I'd be there. And then he was taking me on a tour of the firm's plush midtown offices in Manhattan. Great views in every direction. And from an open office door, one of the principles were else. And right then and there, I knew immediately I could never work for that place. I didn't do it. I went elsewhere, went and worked for the government. So I'm a fan of Adam Smith. He's an intellectual hero of mine. You can't read a single page in the wealth of nations and not find something deeply insightful to Marvelette. Most of what we've written about in the year since is in there in one form or another. His contribution, of course, was the invisible hand idea. I think many modern disciples of Smith cite it as if to say, just turn self-interested individuals loose in the free marketplace. Let them seek their own ends and we will get the greatest good for the greatest number. That was not Smith's claim. That's not what he believed. His contribution, which is a deeply important one, was that under a surprisingly broad variety of circumstances if you turn selfish individuals loose in the marketplace, you will get good results for society's old. He saw that entrepreneurs would introduce cost-saving innovations and product design improvements, not to benefit society, but to steal market share from their rivals. What Smith saw clearly, I don't think some of his contemporaries hadn't seen, was that the story doesn't end there. Of course, rivals scrambled to recover their lost market share. They copy the innovations and the cost-saving techniques. And in the competitive scrum, once the dust settles, the consumer ends up with higher quality products at the new lower costs and producers get just enough to break even. Going forward, it's a wonderful engine of progress. It's the main explanation. I completely agree for why we're so much wealthier today than Smith was in the 1700s in Scotland. All that's good, but in the interest didn't always coincide. Look at that rational individual action doesn't reliably lead to collectively good results. Just think about the simple example of the familiar stadium metaphor. Everybody stands up to see better. Nobody sees any better than if everybody remained comfortably seated. You're not a fool to have stood if the person in front of you is standing. Your alternative is not to see it all. And yet it's clearly not an optimal result from the perspective of the collective. Tom Shell, he had a more interesting and nuanced example. He asked, why do drivers in the northbound lanes of a freeway slow down to look at the accident and we don't see it there either. When you get to the scene of the accident, if you're driving north, there's the flashing lights in the southbound lanes. You're curious. The question you ask yourself is it worth 10 seconds to slow down and see what's going on over there? The obvious answer from your perspective is yes. Of course, the 10 seconds you take to slow down is 10 seconds added to the trip of all the thousands of motorists behind you. The cumulative delay might be three or four hours but most people say it's worth three hours to get a look at the other side of the highway under those circumstances. They wouldn't do it, but that's not the way those decisions are made. We decide individually, not collectively. I think Charles Darwin had a much clearer vision actually than Smith about the relationship between competition on the one hand and well-being on the other. Many of his examples almost eerily exactly mimicked Smith's invisible hand story. So if you think about why the hawk has keen eyesight, they can see a number in a telephone book at 100 yards. We could barely see that there was a page held up in the telephone book. Why did they see so well? It's because there were mutations, hawks cruising 3,000 feet above the valley floor looking for rodents to snatch. A mutation made one hawk see a little better. It caught more mice. It left more offspring and then mutations accreted. And now suddenly hawks have this incredibly great eyesight. That was an unplanned mechanism. It was an invisible hand guiding that. But Darwin's keenest insight was that life is graded on the curve. It's not the question of whether it's best for all of us that we do something. The question is whether it's best for me that I do something. And in the case of the hawks and the keen eyesight, what's good for the individual hawk is good for hawks generally. But many other examples don't have that properly. So if the property is... If you think about bull elephant seal, why is it so big? It weighs 6,000 pounds. The cow weighs only 1,200 pounds. The bull elephant seal is so big because the seals are like most vertebrate species, polygenus, that means the males can take more than one mate if they can. The if they can qualifier is important because if some males take more than one mate, that means others are left with none. And being left with no mates at all is the ultimate loser slot in Darwin's scheme. So of course, males fight and work every margin to get access to females. And in the case of the elephant seals, they square off on the beach and they do bloody battle for four or five hours until one of them slunks away, unable to continue. And it's the bigger bull that wins those fights and that's why bulls are so big. But it's not a good thing for bulls to be that big. They have to work really hard to acquire the mass and maintain it. That's effortful. They suffer arthritis at an earlier age by being so massive, but most important, they're not very mobile, which makes them much more vulnerable to predation by the great white shark and other predators if they could take a vote and say at the count of three, we all shrink by half. That would be a bonanza for them. They would want to do that. Of course, they can't do that, but humans can take measures like that where we find ourselves in situations where for one, it's difficult to allow ourselves to do because if we are allowed ourselves to do what we would be, we would do things that result in harm to everyone. So that's the general outline. So let's think about that in the context of spending. How much do I need to spend? The important property that I think many economic models have traditionally ignored is that evaluation of everything depends on context. So you're driving your daughter to see her grandparents. She asks you, she's six years old, are we almost there yet? Well, there's 10 miles left. Are we almost there yet? If it's a 12-mile drive, no, we got a long way to go. If it's a 120-mile drive and there's 10 miles, yeah, we're almost there. Is it cold out? It's 60 degrees. If it's Miami where I grew up, it's freezing. If it's a November evening, we wear every heavy coat we've got to go to a football game. If it's Montreal in March on 60 degrees, no. They think you're stupid if you ask. If it's cold out, it's a wonderfully warm day. So does context affect what we feel we need? It would be a strange exception to the general rule that context affects every evaluation. Eric noted that I was a Peace Corps volunteer. When I was in Nepal, I lived in a two-room house. It had no electricity, no running water. It was a magnificent house in that context. If I lived in that house here, I'd be ashamed. My kids wouldn't have wanted their friends to see where we lived and for good reason, that would be a clear indication that you'd somehow made a hash of things if you had to live in a house like that in this context. So that's where the model begins to run into trouble. What we know is that the people at the top of the income ladder have been getting most of the income gains since about 1970. They're not doing anything morally corrupt. When I tell you that they're building bigger, that's what people do at every rung on the income ladder when they get more money. The rich have been building bigger. The middle class doesn't seem to mind that. They wanna see pictures in the mansion, so they like that. The people just below the rich though, that changes their frame of reference in a way that makes them feel they need to build bigger. Maybe the custom now is to have your daughters wedding reception at home. We need a ballroom to host a reception now too. Then the people just below them come for dinner. Now we need a dining room for 18, not 12 at Cascades all the way down. And if you don't refer to that cascade, you can't very well explain why the median new house in the U.S. is about 50% bigger than its counterpart from 1970. The median earner is not earning more than hourly terms. If you ask why, it's because you need to spend as much as other people in your income bracket spend or else you feel your house isn't big enough. Now it might be the best advice to say, if you can't afford that house, just suck it up. But here there's another rub. In every jurisdiction, and I've lived in many, the good schools are in the more expensive neighborhoods. Every parent has a first goal to send his or her kids to the best possible schools. If you're the median earner and your goal is to send your kid to the school of merely average quality, what you must do is buy access to the average price home for your area. And to do that, you've got to match what others are spending in fact. And that's why houses are so much more expensive now than they used to be. And that's why people in the middle are so squeezed. They're working every margin. They're working multiple jobs. Longer hours. They're saving less. They're borrowing more. They're living farther from where they work because land's cheaper on the outskirts. That is not a good outcome compared to the option of spending money in other ways. There's a very large contentious literature on the determinants of wellbeing. The most salient and uncontested finding from that literature is that beyond a certain point, and it's one we've long since passed in the West, further increases in most forms of private consumption serve only to raise the bar that determines what we feel is adequate. So when the mansion's double in size, the people who live in them are no happier or healthier than before. In fact, it's probably, if we had a measure, they'd be less happy because it's more of a pain to manage the bigger properties. The only reason they need a big, big property is because others have one, it'd be better if everybody had a smaller one. So in that way, there are cogent reasons why we might wanna ask one another to engage in cooperative ventures to limit what we do if we could enact a norm that would encourage us to sit down rather than standing up at events, we would all remain comfortably seated and see equally well. But there are many agreements like that that are impractical to negotiate privately or even in groups. And so sometimes it's reasonable to ask whether we could enable elected governments to act restrictions on ourselves that we approve of that will steer us to outcomes. We would like better than the outcomes we get when we're free to do whatever we please. Let me just, in the interest of time, consider one. Milton Friedman says that the state robs you of your liberty to decide for yourself how much to save for retirement by forcing you to participate in the social security system. If that's so, though, why did everyone react so angrily to George Bush's proposal to privatize retirement savings? Here's a plausible interpretation on the John Stuart Mill harm principle lines. If I were free to spend my retirement savings and all parents were free likewise to spend their retirement savings, we would all want to save enough for retirements. Some parents, however, they have other goals as well, would say faced with a choice of figuring out what to do in retirement when the time comes and taking that money out of that account and using it to bid for a house in a better school district, what should I do? Some parents went up for the second choice. If some did and you didn't, your kids would be consigned to the lesser schools, the ones that have metal detectors out front and where other students score on the 15th or 20th percentile in math, you would reluctantly follow suit. All parents would bid more intensively by robbing their retirement savings to bid for houses in better school districts and they would succeed only in bidding up the prices of those houses. Half of all kids would still go to bottom half schools exactly as before. The social security system solves that dilemma in a clean swoop. It's for that, even only for that reason that so many food and retirement now and then before we had a social security system. There are analogous accounts of why rational people who value freedom might decide to regulate safety in the workplace. It's analogous to Tom Schelling's explanation for Hockey, when there's no rule, but then they'll vote unanimously for rule requiring themselves to wear a helmet. Why? Because you take your helmet off, you get an edge. But when everybody takes his helmet off, half of all teams lose the same as before. I think the libertarians who insist that the state has no right to tell them what to do in any way, shape, or form have actually done the cause of liberty a disservice. Why? Because we are bumping into each other much more than in the past. We're gonna get much more in one another's way in the future, the demands for regulation are gonna intensify going forward, not get any lighter. And I think freedom's interest will be served only by people who are able to argue successfully for forms of regulations that are less intrusive rather than more intrusive. Rather than tell you you can't do something if what you do causes harm to others, we should make that thing you're doing less attractive to you by taxing it. Every dollar we raise by taxing cigarettes heavily is a dollar less we have to raise by some other more objectionable tax. And taxing cigarettes made fewer people decide to smoke. It made others more likely to quit smoking. The fact that fewer people started and a few extra people quit, met each peer group had fewer people in it who smoked that meant others were less likely to start and so on. So we've seen now the smoking rate fall from over 50% to under 14%. Nobody thinks that's a bad outcome. Every parent wants his kids to grow up to be non-smokers. My four adult sons, all of them are non-smokers. If they'd grown up what I did, at least two or three of them would be smokers. So our best bet if we care about liberty is to really try to steer the state into regulating with the lightest possible shot touch to achieve goals that I think are consonant with a desire to prevent people from causing undue harm to others. How do you want to move forward, Eric? Sure, well, first of all, we can audience questions if there are any and as those come in but we could also make time for the both of you to respond to each other. I'll just make a quick response. I mean, we could one, I'm sure we could go on for hours debating every one of these points, but I think at the heart of it, there's a philosophical disagreement between us. And that is, and it really is a mill, right? It doesn't surprise me, I guess, that Professor Frank is an admirer of mill because mill is a utilitarian. The standard is some measure of collective wellbeing. And I reject their measure. I don't think that is a legitimate moral standard by which to engage in policy. So, and in that sense, I reject even Adam Smith's view that all these people as individuals are doing this immoral selfish stuff, but if we aggregated up somehow through the invisible hand, we get a virtue. It's good for society. I mean, it doesn't surprise me that nobody believes that because you don't add advices and get a virtue. So, my view is very different. My view is one that is about the moral right of individuals to make decisions for themselves. And if those decisions call harm for other people, then the state, and harm has to be clearly defined, then the state has a role to intervene. So, yeah, so I'm willing to tolerate the non-optimal outcome at concerts. I'm even willing to tolerate the non-optimal outcome on a highway. Although with autonomous cars, we'd get rid of that. And maybe that ultimately will be solution. Capitalism will solve the problem. So, it's, you know, you're gonna get non-optimal solutions. Indeed, the attempt to get rid of those outcomes. I believe almost always, and Social Security is a good example, almost always creates more problems than it solves. And to me, Social Security is a real evil because it takes away the ability for young people to make decisions on how to use precious capital. They have very little money. Suddenly you're taking 12%, it's gone. You know, maybe one day they'll get it back, hopefully if the pyramid scheme survives. But, you know, and instead, they might have used that to start a business. Maybe they would have used it to somehow compete with their neighbors. I don't buy this competition with your neighbor's thing. I don't think it explains really anything. And to extend people do that, then let them, you know, let them suffer the consequences. It's a stupid motivation. If you're gonna buy a big house because your neighbors have a big house, then you should suffer the consequence for that. Housing prices, I mean, it's important to note that housing is not a free market, that housing is heavily regulated, that the supply of housing, particularly in states like California, is heavily regulated so that the prices of housing are going up is not just because of this second-handed kind of, I need to catch up with the neighbors, but it has a lot to do with the fact that government won't let the supply of housing increase. So again, on every one of these issues, we could have an interesting debate, but I think it's a philosophical issues about the individual versus the collective and where you put the emphasis. See, I'm arguing that an individual doesn't have the right to cause harm to other people. That is, as you correctly pointed out, a utilitarian view. Do you disagree with that basic premise? It very much depends on how you define home, right? It very much depends on how you define home. The standard- The standard of my employees, am I causing them harm? The standard approach we take in economics is to use people's own evaluation of how they're harmed by an action. So how much would you pay to avoid something? We don't ask you to say, oh, that makes me feel really bad and you have to take my word for it. You look for hard evidence on how much you would be willing to sacrifice in terms of real opportunities out there in the world in order to avoid this harm. You say you suffer from. If you say you don't like noise, you want a noise ordinance. If we wanted to actually weigh the benefit to you of a noise ordinance against the cost of enacting one, we would try to estimate how much you're harmed by noise. And one way to do that is to compare the value of houses in noisy neighborhoods with otherwise similar houses in not so noisy neighborhoods. Would you say that if a noise ordinance passed the cost benefit test that the government would be overstepping its bounds to enact one? No, I think noise is harm. Noise under certain conditions is harm, but here is the key when it has to define harm and that is not an economic question. It might be an economic question in terms of the actual value of the harm, the size of the harm, but it's an economic question. It's a legal question. It's a question of legal philosophy to define what harm is. If I fire my employee, clearly I've harmed him. Does that mean I should never be able to fire my employee or does that mean I have to compensate him based on some formula the government gives me? And therefore I would hire fewer people because I can't fire them under it. It makes it very expensive for me to fire them. The consequence of these things, once we engage in them, a wide ranging and unintended consequences are massive. And I think the whole orientation is wrong. I consider harm primarily physical. That is harm, noise in a sense is a physical harm. I don't consider you feeling bad. I mean, this is the whole issue about it's not about the athletes right today and like steroids. Are you in favor of leaving that choice up to the athlete? Well, I think he has a right to do it but as a league, as an association of sports owners or whatever, we have a right to set the terms of who comes onto our court. It's a property right or who we hire into our team. And we can say, you can take the steroids which can compete in our competition. Well, then you accept exactly the framework I'm arguing with him. That's exactly the point I'm making. But the government doesn't play a role here. This is a voluntary transaction of validated decisions between the athletes and the owners of the sports teams just like the conditions of employment should be completely voluntary exchange. And if I want to create a personal social security plan where my employer takes money out of my account and puts it away somewhere, I can voluntarily agree to that. It's not, I don't want to be forced to. But if you're free to spend your retirement savings as would make sense for you to do as an individual, this is just a simple case where what's rational for you to do as an individual is different from what's rational for us to do. As an individual, you are not at all unusual or deviant in wanting to send your kids to the best possible schools. And the only lever you can pull in order to improve the school quality your kids have access to is to bid for a house in a more expensive neighborhood. For you it's rational to do that. It's rational however for them to do that too. And when all do that, the effect is merely to bid up the prices of the houses and the better school districts. And nobody achieves this objective that he sacrificed his ability to live comfortably in retirement in order to achieve. Oh, one of the reasons. Why isn't that harm? If my move induces you to do that, why haven't I harmed you? Something I chose to do, I wouldn't have to do that. You don't have to do it. You can just eat the harm. I could move to a city which had cheap housing and good schools that plenty of cities like that in the United States. People choose to live in particular areas. It's choices. It goes back to choices and you're taking away my choices. That's the real harm that you're doing to me. You might think it's doing in my best interest, but let's say I'm a truly, not the rational person who's just competing with others, but I'm looking long-term and I want to maximize the wellbeing of my child and to maximize my savings so that I can retire well. There are choices that I make that you are taking away from me, biting me, make the trade off, which exists. Clearly they exist. You are deciding what you think the right trade off is for me. And that's a very, very dangerous position to put yourself in because who is the we? How do we decide on the we? I mean, that's how you get to the kind of cronyism to the kind of pressure group politics. And by the way, just with regard to schooling, one of the reasons you have this situation where you have to go to America about schooling and actual marketplace of schools where schools compete in regions where houses are cheaper and actually improve the schools there. We actually systematized poor education for poor kids because we don't allow for competition against the failed institutions that the state has created, particularly in poor neighborhoods. There actually is quite a bit of competition in the school market. The private schools are alive and well. The top up, not at the bottom because you can't compete at the bottom with a free product. But if it wasn't free, you could create real competition. I encourage anybody to read a beautiful book, a beautiful tree about schools and slums in Nigeria and India. If you actually give people options, not convenient free options, but real options, people would choose to gain education to get better education. But we've created a system that guarantees failure to certain people within our society. Let's discuss the issue of safety regulation then. That would surely be government overreach in your mind. My own account of it is that it's a solution to this same prisoner's dilemma that if I'm free to take a job that's offering me higher wages because I'm willing to take greater risk, Milton Friedman says that should be my right. Why should the state deprive me of the ability to enter into a free contract like that with an employer who's willing to pay me extra as long as I'm willing to take that risk? What's the gain in preventing me from doing that? My response is that if I'm allowed to do that, I'll feel compelled to do that by the fact that other parents are willing to do it in order to get their kids into better schools. My choice then is either to suffer the harm of not sending my kids to schools as I could. But then again, when the dust settles, it's exactly analogous to the case where we all stood to see better and none of us saw any better than before. You don't serve it with OSHA because what you do now is you've lowered the wage. So I still don't have the money. I don't have the money to go to the nice school. I'm now being paid less because I haven't taken the risk and the companies aren't gonna pay me the higher wage. So my wages come down. You haven't given me the option to make choices and trade-offs for myself. You've decided what to trade-off. Now it'll also add that if you look at work safety, work safety was dramatically improving before OSHA. The graph in terms of accidents and death in the workplace was just as steep before OSHA came into being as it was after because there's a huge incentive for businesses not to have to suffer the work destruction, the lawsuits and all the other issues that relate to problems related to work safety. But if we're arguing that society would be more effective if we didn't have regulations of that sort, then I think it's reasonable to ask why in the competition and the experiments that exist among a whole host of societies that we've witnessed over the course of history, why haven't the successful ones emerged following the model that we don't do safety regulation here. On the contrary, every country, even the poorest country has some form of safety regulation. Nobody seems to think, oh, that's job number one. If we get elected, we're gonna get rid of that. The movement libertarians have a challenge to explain why if that vision of the best society is correct, why hasn't that shown greater tendencies to evolve? Why doesn't somebody make an island nation where all the libertarian principles are put into, and then we see by the successful example and start imitating what you do there. So I wish we could start an island. I think they've been attempts, but they've all, the states will not allow it, right? The existing people in power won't allow it. But look, you've had examples. OSHA is a relatively modern institution. Can't remember the exact date, but I think it comes into play somewhere around the 60s or 70s. Before OSHA, the United States had economic growth rates in the 19th century, far exceeding economic growth rates today and was the most economically, the most successful economy the world has ever seen. Hong Kong has very, very limited work safety regulations to the extent that they have them or had them when the British ruled in the 70s and 80s, and their economy grew dramatically. And note, if we measure successful societies by the movement of immigrants in and out, Hong Kong saw massive numbers of poor people come in in spite of the high risk jobs and the low safety regulations. As did 19th century America. I mean, we see those pictures of the building of the skyscrapers in New York and those guys standing on those metal bars, 80 stores into the air with no safety net, with no line, with anything. And it's pretty amazing, but they built America, they built New York, they built those skyscrapers and they did it instead of today when it takes forever to get anything built, they built it fast, efficiently, effectively, and again, created the richest country in human history. With no safety regulations. Since we're running short on time, I'm gonna make a final plea for the people who care about individual liberty and personal freedom to focus their attention on getting rid of inefficient regulation and replacing it with better focused, more efficient forms of regulation. Not to eschew the attempt to solve collective action problems entirely, except that we have collective action problems. If we're gonna try to deal with them, let's regulate them efficiently rather than haemophysically. And here I completely agree with your own that the OSHA has been a very clumsy agent of the state that there's a passage I'll read to you. It's from their safety manual, 30 double column pages of safety requirements for ladders in the workplace. And it reads, just one paragraph from, the general slope of grain in flat steps of minimum dimension shall not be steeper than one in 12 except that for ladders under 10 feet in length, the slope of grain shall not be steeper than one in 10. The slope of grain in areas of local deviation shall not be steeper than one in 12 or one in 10 as specified above. For all ladders, cross grain knots steeper than one in 10 are permitted in lieu of one in 12, provided the size is increased to afford at least 15% greater calculated strength than for ladders built to minimum dimensions. Local deviations of grain are associated with otherwise permissible irregularities are permitted. You would see that, you would say, do we have any ladders? Get rid of them. We can't possibly do it much better if you think people have too great an incentive to sell their safety for higher pay in pursuit of individual relative advantage. Levion injury tax, let firms pay a fine if they have an injury rate above the norm for the industry in which they operate. Don't hammer them with prescriptive regulation like that is not gonna do any good and will probably only cause harm. I'm a managing partner at a hedge fund and we just received new regulations about what we're allowed to do in terms of marketing. 500 pages of language like that on what a hedge fund is allowed to market. Now we can only market anyway to very wealthy individuals and institutions but they wanna regulate every word we say, every slide we show, every footnote we commit. It's unbelievable that business still gets done in spite of all this. Well, we're past the top of the hour and if anyone has any questions, I think now would be a good time to raise your hand virtually or in the video. And then if not, we can probably adjourn. So does anyone have any questions? Brandon, do you have a question? Hi, so first thank you so much for the really truly interesting conversation. So I have a question from Mr. Brooke. I found your argument that anti-trust be very interesting. I definitely take your Microsoft example but what do we do when businesses don't wanna compete? So when you have something like the ADM licensing example, global conspiracies to fix the prices of commodities, I guess, how should the government respond or should they not and they should be just able to fix prices or? I don't think the government should respond. No, I think the government preempts market solutions and there's a wonderful book about Dow Chemical and how Dow in the beginning faced a cartel of German chemical companies. And the way he competed them out of existence in a sense, competed the cartel out of existence and forced them to break up is truly stunning and amazing and created real, ultimately innovations and advancements in the market. If the government stepped in, it would have distorted everything and at the end, we would have landed up regulating Dow and giving him a monopoly or something. So I would like to see anti-trust laws be scrapped completely. I'll give you a quick illustration of how ridiculous I think anti-trust. Now, this is a simplification. You guys are lawyers so you might quibble with some of this. I think pretty much every business out there is in violation of anti-trust laws, right? If you sell a product for below the market price, you're obviously dumping, right? It's what Microsoft did in Internet Explorer. They sold it, they gave it away for free. So obviously trying to gain market share from the competitors and that's not allowed. So you're going to be sued if you're too cheap, if your product is too cheap. If your product is too expensive, if you really got a high margin and year after year, you're generating a high margin according to macroeconomics, right? That we teach you, you know, monopoly. The only way to achieve that is through if you're a monopoly. So you must have access market share and therefore we want to break it up because you have access, and if, God forbid, you sell your product at exactly the same price as your competitors, well, obviously you're colluding and therefore we should do something about you as well. So no, I, you know, if you look at standard oil that had 92% of all them, they were finding capacity of the United States in the 1870s, anti-trust laws were passed in 1890 and a standard was broken up in 1920s. By the time standard was always broken up in the 1920s, it had less than 25% of the oil refining capacity in the United States, not because of government, but because of competition. So it took a little longer than the central planners would like, but it is a much healthier that those kind of things get resolved through the marketplace than through through every cause. He knew that if he didn't do that, there would be competition, there was foreign competition, there was access, you remember he was in Pennsylvania, and he pushed the industry, pushed the industry so hard to lower prices because he had scale that we made the internal combustion engine viable, which accelerated, you know, everything. So imagine if some government, what were they using? There were no automobiles. So what were they using the oil for? The lights. Now you find me, the regulator who could see that the competition that Rockefeller actually had was that there's always competition, whether you can see it or not. I know lots of venture capitalist funds that are just dying to build the next Google, to fund the next guy who will not Google off their approach or knock some other, you know, one of the other so-called big tech companies off their approach, you know, I don't know if you guys are in in I mean, Facebook is terrified from Clubhouse. Twitter certainly is, because Clubhouse is taking off. There's always competition. I think Clubhouse is terrified of Twitter. We will see. I wouldn't be surprised if Clubhouse lands are buying Twitter, but we'll see. It's gonna be fun and interesting to watch all this evolve. That's the beauty of markets when you leave them alone. Yeah. And for the record, I'll say, I agree with the claim that competition creates enormous benefits all by itself in a whole host of cases. So maybe we can take Craig's question and then I think that should be the last one and then we can release the meeting. So go ahead, Craig. Thank you. I just had a question for Professor Frank and I'm sort of sympathetic to the idea that certain rights need to be regulated for the betterment of all, but I lean probably more to Mr. Brook ultimately because I don't see any incentive within government to actually rework inefficient regulations or get rid of inefficient regulations. And I just wanted to see if you could speak to where you see that sort of incentive in government. Yeah, that's a great question. My first experience in government was to go to Washington to be the chief economist at what was then the Civil Aeronautics Board, which was a big federal agency that regulated the airline industry, often to ill effect in exactly the ways that your own Brooke would have predicted. And it was our mission while we were in Washington, Alfred Kahn was the chairman of the CAB at the time. The Board's mission then was to eliminate itself, to turn the industry free to set fares on roots and decide which routes to serve according to their own best business judgment rather than by government dictate. And largely that experiment was effective. So I think government can regulate intelligently and decide not to regulate when conditions don't adequately exist for regulation, but to get good government, that's the challenge. And I think getting dark money out of government would be a good first step, getting a system where what the people seem to want by virtue of the views they express in polls and other forums gets reliably enacted into law. There are some very deep flaws in our system right now. 90% of people are in favor of background checks for selling guns, the people with the money that drive politics are against that. And so it doesn't happen, but we could take the step of getting money's influence out of politics. That's an option that we face. Thank you. Thank you both for taking the time to speak with us and thank you to the audience for coming. I think it was a really great discussion from the both of you and appreciate you know, the back and forth was really great, I thought. Good, thank you. Yeah, it was fun to get a chance to talk to you. I hope we can do it in person again sometime. Yeah, absolutely. That would be fun. Bye guys. Bye everybody. Thank you. Thank you all. Bye.