 All right, ladies and gentlemen, it is time to circle the wagons. Time to come to relative attention. And we're going to talk about economic prosperity. My name is Sean Rittenauer, and here we are. So please go ahead and find some seats. We have seats in the middle. If you have to, climb over people. That's OK. The lecture today is going to be on economic prosperity. It is fitting that it is towards the last of the lectures that you'll have here, for reasons we'll speak of in just a moment. Here is a slide of the relevant literature that I'll be drawing upon. Going to clear back to Bumbawirks, the positive theory of capital, Mises's human action, an essay that Mises wrote the plight of the underdeveloped nations, Rothbard's man-economy and state, David's Osterfeld's prosperity versus planning is a very fine book, a little dated, but it's still excellent. Haces, Water De Soto's book Money Bank, Credit and Economic Cycles, and an essay that he wrote, Dynamic Efficiency. Randall Holcomb's Entrepreneurship and Economic Progress. Suda Chanoise, Towards a Theoretical Framework for British and International Economic History, Early Modern England, a case study, which was her PhD dissertation, has been published by the Mises Institute, that's also well worth working through. And Ben Powell's Out of Poverty, which is also an excellent work as well. There's other works, of course, this is not an exhaustive list. If you want an exhaustive list, I suppose look at the work cited in my book. But nevertheless, here we are. I think it's important we talk about economic prosperity. You talk about, first, what it is. And economic prosperity is the culmination or the result of both economic expansion and economic development. And by economic expansion, some people call it economic growth, economic expansion simply means more goods per capita. More goods per capita. Economic development, however, means a greater variety of goods of better quality. So economic progress or prosperity is not just getting more stuff, but it is getting a larger quantity of goods that are of better quality and a larger variety of goods that allow us to satisfy more of our ends. So things like refrigeration. Refrigeration increases the quality and variety of foods available. Automobiles increase mobility. Books, newspapers, radio, television, police occasionally, provides broader horizons. I won't talk about tic-y-tac. Medicine leads to longer, healthier lives. Tremendous variety of goods produces a different quality of life. And I do want to emphasize, when you talk about economic prosperity, we are really talking about material prosperity. We can't say, as economists, what makes people happy or what makes them unhappy. But when people act to achieve their ends using economic goods, they demonstrate that the goods that they obtain are beneficial to them in the sense that they help them achieve their ends. But we're not talking about psychological happiness per se. Now, in order for us to understand the process by which economic prosperity occurs, we need to recognize that the economics of prosperity requires both analysis and synthesis. And it requires both because economic progress is a historical process. It is something that takes place in time. And so we have to understand that just like doing anything every action takes place in time. And every action requires bringing a certain set of means and using a certain set of means in a particular way to achieve a particular end. It is a historical process. Economic prosperity and economic progress is also an historical progress. And so we need both analysis and synthesis. And analysis simply means breaking down a complex substance into smaller parts to gain a better understanding of it. To look at the complex process and bringing it down into the component parts so we can sort of make sense of what's actually going on here. That painting there is called analysis. That's why I have the painting under analysis. That's what it's called. I assume he is doing some analysis. He's kind of looking away from the test too. But in any event, that's what analysis is. And economists have broken down the process and have identified at least four key contributors to prosperity, four sources of prosperity, one of which is a market division of labor. You may have heard of that. Capital accumulation. You may have heard of that. Technological improvement. You may have heard of that. And wise entrepreneurship. Those four are for contributing factors to the process of economic prosperity. And I would say that the strongest contribution to the economic mainstream is in identifying many of these sources. Even if they don't recognize how important some of the sources are, they've done a fairly good job of saying, okay, well, this contributes to economic growth. This contributes to economic growth. This contributes to economic growth. But one of their weaknesses is the failure to do the synthesis. And the synthesis is the composition or combining parts or elements so as to form a whole. Taking the different parts together and then, or taking the different parts and then explaining how do they all fit together like a puzzle, right? A puzzle. You take all the different pieces and you put the puzzle together. And to illustrate this, as it applies to macroeconomics, I want to give you a quote here from Eugen von Bombovwerk as quoted by Mises. This was noted to be, or what should one say, it was named by Mises as an oft-used quip or something like that by Bombovwerk. And Bombovwerk said this, quote, a theory of the trade cycle, if it is not to me mere botching, can only be written as the last chapter or the last chapter but one of a treatise dealing with all economic problems. And what is true for theory of the trade cycle is true for theory of economic prosperity. Satisfactory theory brings together, a satisfactory theory of economic prosperity brings together production theory, exchange theory and understanding of the market division of labor, capital accumulation and capital theory, the contributions of technology, the contributions of entrepreneurship and how different institutional settings either hamper or encourage and foster the workings of these different sources of prosperity as they work together. We need to understand the institutions that nurture the sources of prosperity and policies that allow prosperity to occur and recognize that all of these sources must work together. And so that's why you have to sort of wait and write about these things at the end of the book. If you start beginning and start writing about, well, what causes a business cycle or what can cause economic expansion without understanding price theory or without understanding the market division of labor or the importance of capital accumulation or the importance of technology and how does technology even fit into the whole thing and the importance of entrepreneurship, if you start wanting to talk about the thing in itself without understanding the parts, you're gonna be making mistakes somewhere along the way. And so you have to understand all of these component parts and then put them together towards the last end of the book. And so that's why it makes sense to have a lecture like this towards the end of the week and not say in lecture one or lecture two. So what are these sources of prosperity we've identified? Well, we've already talked about the division of labor. Here's our friend, James P. Snee, the CEO of Hormel, just to show that he's a real person. I saw a clip of him being interviewed on Mad Money by Jim, what's his name? Yeah, Kramer, yeah, Bouya, that's right. He was on there. I think this was in 2021, they had set sales records for seven years in a row. That's how good spam was doing. So when the economy's down, spam is up. That's the moral of the story. It's recession proof, ladies and gentlemen. You heard it here first, right? So the division of labor, we've already talked about it, specialization of production according to efficiency and the law of association tells us that specializing according to efficiency and cooperative action is more efficient and more productive than isolated action of self-sufficient individuals. And so the development of market division of labor is a key source of economic prosperity. If we want to achieve prosperity, we want to allow for the extension of the market division of labor. Now, this is something that is almost completely ignored in modern growth theory. They talk a lot about the benefits of trade, some of them do, but there's very little actually, little explicit discussion about the, in the importance of the market division of labor. It's almost as if they sort of assume, I guess, maybe that it happens, but they don't really talk about it a whole lot. But another source of prosperity is saving and investment in capital accumulation. We already talked about capital theory as well. Capital, of course, capital goods are produced means of production, tools, machines, intermediate products, and we've already talked about how using capital goods increases the productivity of the user. It allows us to get a greater quantity of output per unit of land and labor. For instance, just take, say, in agriculture, the U.S. Department of Agriculture estimates that in 1830, in 1830, it took approximately 275 man hours to produce 100 bushels of wheat. So we want to produce 100 bushels of wheat, we can do it, but it's gonna take 275 hours of labor. Jump forward in 1987, 1987, so roughly, what, 150 years into the future, it took approximately three hours of man, three man hours of labor to produce 100 bushels of wheat. And so we go from 275 hours to produce 100 bushels of wheat to three hours, right? Now, I would argue that that's not because the farmers in 1987 were working a whole lot harder than the farmers in 1830, right? In fact, you may make the case, it was the opposite, that the physical output, the physical output was probably a greater, in terms of the physical effort exerted, the labor exerted was greater in 1830 than in 1987. Well, what's the difference? Well, the difference is capital. The difference is capital. We have greater capital goods, much more capital-intensive farming now than we did back in 1830. You can also read about that, by the way, in the very first Little House book, Little House and the Big Woods, where Paw Ingles gets to rent a threshing machine for a week and was able to thresh his wheat in a week that we usually would take, I think, like, a month or so. And at the end of that chapter, there's only one chapter he talks about, the other chapter he says, the modern farming suits me just fine, right? No Luddite was, oh, Paw Ingles. So now, in order to accumulate capital, of course, people must be willing to put off present consumption so that they will have resources available to invest in the production of capital goods. So people have to be willing to save. And so, the less present-oriented they are, per se, that lower their time preferences, they will be more willing to save and invest. They will, therefore, be able to accumulate more capital goods, which will, therefore, increase their productivity of land and labor. The increased productivity will allow them to produce more goods. They will have higher incomes. They will enjoy higher standards of living. People will be able to obtain a greater and a larger variety of more goods at lower prices, thereby achieving more ends. That's an increase in standard of living. Likewise, with more capital investment, often comes better technology, because what tends to happen is when we replace old capital goods as they wear out, we replace old capital goods with new capital goods, and often the newer capital goods embody more advanced technology. So it's not always the case that we just replace a one-for-one capital good. We place an older capital good for a newer capital good that often then increases, that embodies better technology. So the capital is even more productive. Now, unfortunately, oh, by the way, as these, and as production patterns change to satisfy consumers, as the demand for one product increases and demand for another product decreases, the production structure can be altered and redirected to produce those goods that are in more demand and away from producing those goods that are less demand. As that happens, those changes occur to satisfy preferences, this economic progress is sustainable as long as it's funded by voluntary saving. This is not an inflationary boom, in other words. The economic expansion that takes place as a result of an extension of the market division of labor and capital accumulation is not part of the business cycle. It's part of sustainable economic progress. If, however, we want to benefit from investment without that pesky saving, in other words, we want to stimulate economic growth through credit expansion, through monetary inflation, as you've already seen, that is not sustainable. That is, that will lead to a business cycle. The boom process that is stimulated will be self-reversing. So it's important that we, in some sense, if we want to achieve sustainable prosperity, we need to do what we need to do, but we need to do it in the right way. We need to encourage saving and investment, but it has to be voluntary saving, not saving or not investment that's funded by credit expansion. We'll talk a little bit about that later. Now, also, saving and investment in capital formation is also somewhat downplayed as a contributor to economic progress, that because of modern macroeconomics using a neoclassical growth model put forth by Robert Solow and others, Solow attempted to try to provide micro foundations for macroeconomics. And the way you're gonna do that, he says, is we're gonna model the entire macroeconomy as one giant short-run production function, one production function for the entire economy. What could go wrong? And so he did this, he says, well, you know, in the short run, if population is fixed, and we know population is fixed, population never changes, but if population is fixed, we can save and invest and save and invest, fine, but then we get, because of diminishing marginal returns to capital, we get to a sort of a maximum point, and then we just hit a stationary state, and more saving and investment won't help us. And so the profession sort of turned, sort of turned away from capital investment as a key source of prosperity, and they said, really, the thing that really allows for sustainable increases in prosperity is technology, technology. Now, technology is, technology is important, right? Technology is not unimportant, right? We've talked about the importance of technology and how different capital goods embody different levels of technology. And this is just a slide I removed from my previous lecture, and I put it up here just to, you know, jog our memories, but it's important to understand that technology is really merely, and I'm saying merely, I said, it is merely knowledge about how to do something, right? It's just knowledge about how to do something. And, but knowledge of how to do something is not unimportant, but we also don't want to go overboard with it, right? Because, because knowledge, technology is basically knowledge how to do something, it's important to note that knowledge by itself doesn't allow us to produce, right? We have to have the knowledge embodied in capital goods or in processes, right? And so technological advance does contribute to economic progress, but it contributes to progress in, so we say, three ways. It contributes to economic progress as it embodies different capital goods. We have more productive capital goods, right? The hand whisk versus the stand mixer. The stand mixer represents a more technically advanced way of beating eggs, right? And so the technology in a stand mixer is, we can say, is more advanced in the technology in the whisk. The whisk was more advanced than a single spoon, right? Or a single fork, right? The hand mixer was more advanced than the whisk, right? Additionally, though technology, technological advance could show up in a more productive arrangement of the production process, a more productive arrangement of the production process. And a good example of that is Walmart's warehouse arrangement. They call cross docking. Their cross docking was something that Walmart developed where their merchandise containers on trucks came into their distribution centers and are immediately unloaded and reloaded on other trucks headed out to the retail stores. And by designing their warehouses this way, they could bring in their products from off the boats, from their containers, from their vendors, and then get them loaded on ships or on trucks to the different retailers and get them out the door right now so the goods spend very little time collecting dust on their warehouses. And that reduces shipping time or reduces costs and allows them to sell their goods at lower prices. This was widely recognized as a technological innovation in management and organizing their business and different firms have tried to copy this but I don't know if anybody's quite done it as efficiently as Walmart. Another way technology helps promote economic prosperity is through on the consumer good side, right? Where we have a larger variety of consumer goods that can serve more of our ends, right? If you think of this phone on the left is the old crank phone from the old party line. This is the type of phone that was in my grandparents' house when my parents were courting, it turns out. My mom would call my dad on a phone just like that and you'd have to ring, ring, ring, ring and you'd get the attention of the general store owner who is also the telephone operator and he would say, yeah, could you ring me? I need to ring the written hours. And so then the written hours would have their own, I think, short, short, long, short, short, long and then the written hours would pick up. Now anybody else wanted to get in on written hours business could also pick up but then they would talk back and forth that way. Well, by the time I was born we had a wall unit like this. You may not have known this but telephones used to hang on walls just like this and they had little buttons like that and there was no screen, right? There was no video that you could be playing. There was no sound. If you wanted music from one of those things you had to dial some business that would put you on a waiting line and you could listen to music. But that was it, right? There is no top 40 or anything. But then of course, today we've got the so-called smarty phone, right? That you can, you have the world at your fingertips as long as you can get wifi or data or what have you, right, a good data plan. But the point is that those represent different types of technology and technological advance that helps better people through the technology that are in consumer goods. And so three sources of prosperity we've identified so far is the market division of labor, capital accumulation and technology. The fourth, and this is still part of our analysis, the fourth source is entrepreneurship. Why is entrepreneurship here? There's some question about should entrepreneurship be included? Entrepreneurship is not like a factor, if you will but entrepreneurship is a necessary action in the production process. In some sense it's the most important action because economic progress takes place in a complex economic order, right? Remember the production structure of the flourless chocolate cake? Remember that? Somebody talked about that earlier this week. Anyway, we talked about how difficult it would be for one person to oversee the entire process, producing all the goods it takes to produce just one slice of flourless chocolate cake for poor Dr. Rittenauer, right? It's very complex, right? And so all of these decisions have to be undertaken and all of the factors have to be produced in the right place at the right time where they're needed, when they're needed and the amount that they are needed in for this process to continue. And so this complex economic order is an economic order in which the sources of prosperity work together in an integrated fashion. They must work together and they do so only as they are coordinated through entrepreneurial activity. And this process of entrepreneurial coordination that results in economic prosperity is what Jesus Huerta de Soto calls a process of dynamic efficiency. It's a process of dynamic efficiency. It occurs to the extent that production in the market division of labor, capital accumulation and technological advance work together for the purpose of increasing the quantity and quality of goods desired by and available for household consumption. Does that mean that nobody makes any mistakes? Is it that type of efficiency? No, right? It recognizes, dynamic efficiency recognizes, as Huerta de Soto explains it, it recognizes that the future's uncertain so that entrepreneurs will make errors. There is entrepreneurial error. But if we have an institutional setting that fosters wise entrepreneurship, we'll have a setting where entrepreneurs will be able to direct resources away from where they're less valued to places where they are more valued so that over time people do enjoy both economic expansion and economic development. But it requires that all of the production be coordinated through entrepreneurship and all of this productive activity that is coordinated by entrepreneurs who make a myriad of specific decisions regarding specific processes of production, of specific goods at specific times, at specific places. So economic progress is enjoyed as its sources, the division of labor, capital accumulation, technology, technological advance as those sources develop together as an economic order. And this is precisely what happens in a free society. A free society allows these things to happen because all of the production in the economic order requires entrepreneurial judgment, right? And that's why Mises calls the entrepreneur the driving force of production. It's the entrepreneur who directs scarce factors toward their most valued uses. It's the entrepreneur that spurs on innovation. He's always looking for newer and better production techniques that will allow him to satisfy the ends of his customers at lower costs. It is entrepreneurs who are always looking for newer and better consumer goods that the consumers will find, satisfy their ends even better. So they have the incentive to produce new and different products in new and different ways. Now, of course, waste of capital is possible, as I already mentioned, because production decisions in the present are based on a forecast of future market conditions. When producers decide to produce a particular product, what I desired, I'm gonna produce a new vehicle, a new car, a new truck. I don't know exactly what the demand's gonna be. So I have to produce now for an uncertain future. And so it's possible that I make an error. If the producer forecast incorrectly, he will use his capital making something people do not want and will not be able to sell his product at a price needed to cover his costs. And when he does this, he'll be a loser. He'll be a loser. So entrepreneurs need to figure out a way to produce the goods that will not make them a loser. To make goods that will be profitable. Well, how do they do this? They do this through economic calculation. So if you think about the things I've mentioned before, division of labor, capital formation, entrepreneurship, economic calculation, these are all things you've already heard of this week. Further emphasizing why to really understand macroeconomics and economic prosperity as a macro topic just like the business cycle is a macro topic, you have to understand all these other things first and see how they all fit together. So entrepreneurs need to use economic calculation if they're to coordinate the economic order by directing factors of production toward their most valued uses. And it is not easy. And again, and here's another thing, the entrepreneur is almost completely left out of the economic growth literature. Instead of all this stuff just happens automatically and that is a fatal, fatal error because it doesn't just happen automatically. Entrepreneurial judgments have many margins. Here is a fairly well known quote from the last novel written by F. Scott Fitzgerald. It was an unfinished novel, The Love of the Last Tycoon. And the narrator of that novel is Cecilia Brady. And she says this, it's about the last tycoon is a Hollywood film producer. I think sort of, it's understood as based on the life of Irving Thalberg, who was the boy genius of the old MGM film studio. And Cecilia Brady says this, quote, you can take Hollywood for granted like I did or you can dismiss it with the contempt we reserve for what we don't understand. It can be understood too, but only dimly and in flashes. Not a half dozen men have ever been able to keep the whole equation of pictures in their head. Now, of course, what she means by the equation of pictures is not actually like a math equation, but the point is she's talking about keeping all of the variables that have to be chosen correctly just so at the right place and right time in your head is a very difficult thing. And as Cecilia put it, only not a half dozen men could ever do this, except one would be the last tycoon and this would be Irving Thalberg. Well, what are some of these margins, right? Well, some of them are the product, margins about the product, decisions about the product, the type of product, the quality of the product, the location where we're gonna sell the product, the scale of operation, how big should our production process be, the time availability, when do we have to have the products ready to go? The anticipated price that the buyers are gonna be willing to pay for the product and are willing to pay for the product. Another set of margins have to do with capital investment. We talked about this just briefly, right? How intense, how capital intensive do we want our production process to be? How durable do we want to our capital goods to be that we're gonna invest in? Should we invest in more specific or less specific capital goods to pull off our production process? How many capital goods do we need to invest in? How much capital do you want to devote to this venture or that venture? On the technology side, technology also requires entrepreneurial judgment, right? What consumer good characteristics do we want to put into the consumer goods that we want to make available, right? How good do we want the photo capability to be in our smarty phone, right? How big of a processor do we want in our smarty phone? Is it gonna be worth it? Are people gonna be willing to pay the extra price for the extra power? What production techniques do we use? Do we use cross-docking in our warehouses or do we get by with the previous traditional way of doing things? What technology do we want to embody in our capital goods? Also, how much research and development in new technology do we want to engage in, right? Because sometimes it makes sense to invest in more research and development. Other times, we don't have, maybe don't have enough money to do it on our own, we're just gonna look and see who else is doing things and use some of the capital goods that they develop, right? So all of these decisions are decisions that have to be made in the production process to produce a good that we hope consumers are going, that the producer hopes that the consumers are gonna demand in the future. Those are all entrepreneurial judgments, right? And so entrepreneurship is huge and it is here that we see the importance of the proper synthesis, right? Because although we have identified four sources of prosperity, the market vision of labor, capital accumulation, technological advance and entrepreneurship, we cannot neatly separate these sources from one another and then identify the single key that explains them all, right? Like this is the one that's really important, like, oh, it's the division of labor trumps everything. Well, no, it's capital accumulation. As we just pour money into the big I or the big K, right? Then we'll get expansion. No, no, no, it's technology, it's the big T, right? And then we'll know it's entrepreneurship, it's the big E, right? No, think about this, the highly developed division of labor would be impossible without the accumulation and use of capital goods, right? So the division of labor and the capital structure are two sides of the same coin. At the same time, the entrepreneur to engage in production must invest real capital in the production process, right? So the entrepreneurship standing all by, the entrepreneur never stands alone. He's never like the cheese, right? The cheese stands alone, but the entrepreneur never stands alone if he's gonna engage in production. He needs to use capital and he participates in the market division of labor. At the same time, capital per se never guarantees a profit. It never guarantees economic progress either because capital must be widely utilized. If the entrepreneur errs and is forecasting the market, large losses will be reaped and his capital will shrink. That's why Mises had that very prescient quote, capital does not beget profit. Just having capital doesn't make you rich. You have to be able to use the capital wisely. Word to Piketty. Similarly, for technology to be productive, it must be bound up in actual physical capital goods. So technology using technology also requires investment. So the idea that we can somehow poor money in technology willy nilly without it arriving out of voluntary saving and investment is going to steer us down a less than auspicious path, right? For someone to benefit from technology, it is not enough to merely know that a machine suitable for the task exists. If I wanna make potato chips with the Nimbus 3000 potato chip system, just knowing that it exists somewhere doesn't help me. I have to have it, right? I have to own it and use it. And so the technology has to be embodied in a physical capital good that I have spent savings on or somebody's savings on to invest in. So without capital investment, we wouldn't get the technology embodied in capital goods without capital investment technology is of no use. And without capital investment, technology will not advance because you have to invest in research and development. That requires savings as well. So the idea that technology is the source of growth apart from saving and investment in capital formation is a myth, it's a myth. With capital investment, technology will advance as entrepreneurs continually seek to use better capital goods. And then likewise, technology also must be utilized economically. It's possible, for instance, to have a process that is, shall we say, that's technologically possible, but we don't use because it's too expensive, right? We have a technology to manufacture water, right? It's not that complicated. You take two H and one O and mix it together and do the hokey pokey and you turn yourself about and you get water, right? But we don't produce water like that. Why? Because it's more expensive than just getting it from other sources, right? And so the point is having the technology doesn't mean the technology's gonna be used. It has to be economically viable. Well, who determines if it's economically viable? Well, the entrepreneur has to make that decision, right? So my point is that economic progress is a process of dynamic efficiency. It is the happy consequence of an expanding, highly developed division of labor taking advantage of an increasing capital structure embodying more advanced technology wisely invested by entrepreneurs. It is the culmination of a process of many people doing many things. Now, because the market division of labor and the capital structure are two sides of the same economic coin, the limits on one constrain the other, right? For instance, we can identify a number of limits on the division of labor which will hold back or limit the economic expansion that we can enjoy. Probably the most accurate statement ever written by Adam Smith is that the division of labor is limited by the extent of the market. And what does he mean by this? Well, it only benefits us to specialize in the production of something for which there is a market, right? So if we have Groucho producing beef and Groucho producing mangoes and Harper producing beef, and then Chico comes along and he wants to specialize in teaching them rocket science. A very simple two person society. And the third person is like, well, you know, we've got mango and beef. What you really need, the third most important good you really need is rocket science. Well, they may say, you know, get away from me, kid, you bother me. No, that is not what we need right now. And then Chico is thinking, well, but I'm really good at rocket science, but I do know how to build huts. How about if I build you a hut? Would you trade some of your mangoes and beef with me if I build you a hut? Well, yes, we need a hut, right? We need a hut. They're in a market for a hut, a living, a better living place than just to sort of lean to that they've rigged up for themselves. And so Chico produces huts. He specializes in hut production because there's a market for it, right? So it only benefits somebody to specialize in something for which you can sell. Now, this just emphasizes the fact that without trade, without the ability to trade, we couldn't engage in the division of labor because we would have to produce everything we want to consume. So we have to be able to exchange, there has to be a market of exchange for the division of labor to expand. Well, exchange, as we know, requires private property. And therefore, in order to take advantage of the division of labor, if we want an expanding division of labor, it has to be, it will only be in a society where there's a flourishing exchange, a flourishing network of voluntary exchange, and that occurs only in a setting of private property. Another limit to the market division of labor is the extent of saving and investment. Because remember, we said the capital structure is the other side of the economic progress coin from the division of labor. Saving and investment, specific tools and machinery is what allows for more specialized production. And so a reduction in saving and investment would limit the quantity and quality of consumer goods or capital goods that would then constrain the amount of specialization according to efficiency. Another challenge that we find in the division of labor is the challenge of production for the market. The market division of labor, remember, is production for exchange. So it's production oriented for somebody else. Producers don't know exactly what other people want, what they really, really want. That's right, they don't know the zig a zig ah, so to speak. But they must make objective production decisions about future subjective preferences of other people. And so they need to engage in entrepreneurship. They need to participate wisely in specialized production of higher order capital goods and that requires a corresponding quantity of other complementary factors. But as entrepreneurs do this, as entrepreneurs do this wisely, as they utilize their saving and investment capital goods wisely, that increases the extent of the market and as the extent of the market increases that allows for expansion of the division of labor. And when the division of labor expands, they become more productive. And as people become more productive, their real incomes increases. And as their real income increases, that increases their purchasing power so they can demand more goods, which expands the market even more. And as the market expands even more than the division of labor is allowed to extend and we're able to invest even more in saving and investment in capital goods so it would become even more productive, our standard of living increases even more, which allows for even more expansion than the division of labor, et cetera, et cetera, et cetera. So we have a seed of a theory of economic expansion and development. All of this has implications for institutions that enable economic progress. And one key institution that I've already mentioned before is private property. We can only specialize in producing certain things if we can trade our surplus, our excess supply to get other things that we want. So we must be able to engage in voluntary exchange which requires private property. Additionally, people have incentive to save and invest in capital only if they have the assurance that they can do with their capital what they think is best. And if they can keep the income and the profits from their wise investments. That only happens in a society of private property. Likewise, people have an incentive to research and develop and utilize better technology if they are free to do so. That occurs in a society with private property. And in some ways, and I wanna say most important, but equally as important, if entrepreneurs are gonna use economic calculation, they need, for the betterment of society, they need to have market prices that actually reflect the preferences of people. Because only if the prices of the products and the sum of the prices of all the factors of production, if only if those prices are reflective of people's subjective preferences in society, to the extent that that is true. When an entrepreneur invests in a certain line of production and reaps a profit, he reaps a profit for doing precisely what other people want him to do, which is serve the customers better than anybody else. And that only happens if he is engaging in economic calculation with prices that actually reflect people's preferences. Well, what prices do that? Do government prices do that? Do government price, did you fix prices do that? Does the minimum wage do that? Does a rent ceiling do that? Does rent control do that? No. Only free market prices are manifestations of people's subjective preferences. And so in order for entrepreneurs to engage in meaningful economic calculation, we must have free market prices, which means we must have private property, where people's decisions to buy and sell are determined not by coercive state regulation, but by their voluntary action. A corollary of private property is sound money. The market prices are monetary prices and they need to be prices that are reflective of people's voluntary value of the goods against the unit of the money. In other words, we need money free from state manipulation. Because if the state intervenes and starts increasing or decreasing the money supply willy nilly, then the price structure will increase or decrease accordingly, and the entrepreneurs will have a hard time figuring out, is this price increased due to an increase in relative demand, or is it just due to monetary inflation? And entrepreneurs can be led astray. So we need sound money. Sound money provides prices that enable meaningful economic calculation. And so in order for the sources of prosperity to work together, the market division of labor, capital formation, technological advance and entrepreneurship, we need to understand that it's not just a hodgepodge of activity. The entrepreneurs engage in production in this economic order that is made possible in an institutional setting of private property and sound money. And to the extent that the state hinders the exchange process through regulation, through subsidization and confiscatory taxation, or through monetary manipulation. Entrepreneurs will be led astray one way or another, and poverty will get us. It'll get us, get us, get us, get us. And with that, I'm out of time.