 Today, I have this fun, yet informative overview of four things the state is not. Now, that's nothing scientific about that number four. Just as easily been set. It was just four, I thought of, by the time they reached me. So I want to start off with an example that I guess you guys will be familiar with, I hope, by this point in the week. And then as we go along, they'll get more fun. We start off with the most technical one, then we get more fun. And then at the end, we'll try and figure out what the state actually is. But we're all misled into thinking that it's something else. From the time I was in, I guess, elementary school, I was given the impression that the state is a public service agency that is committed to carrying out the common good, implementing the will of the people. And it is populated by selfless crusaders for justice who want nothing more than to say, now, people are cynical already. Can you believe that? We are only at Thursday. They're not buying this. But what you will buy is my contention that that is what we're told this thing is. And of course, we need to be told that in order to engineer our consent to it. I mean, what kind of an ingrate wouldn't consent when a bunch of crusaders for justice are just trying to help them? But I'm suggesting that it's not that and it's not a lot of other things that people say it is. So for instance, every four years, we are subjected to somebody claiming that government is or ought to be run like a business. We get that in the presidential elections. There will always be somebody from the business world who will say, I'm from the business world and if I could get in power, I would run this thing like a business and it would be in tip-top shape before you know it. Yes, we've all heard that. We've all heard that from a certain person from 2012 whom I am afraid is threatening to come back again for 2016. We won't mention that person's name. But it goes back 20 years anyway. We heard this with Ross Perot. But so many of you are too young even to know who Ross Perot is. I can't believe this world that there are people who don't know Ross Perot. But he was a businessman and he was claiming that that would give him some special insight into the problems of government. But it is not and cannot be run like a business for numerous reasons. Only a couple of which I will give you here. And of course this is the thesis of Mises book bureaucracy. For one thing, the government is not actually a firm producing goods on the market, so it doesn't have any genuine sales revenues. The revenues, if you want to call them that, that it earns are earned coercively. They're not voluntary payments for goods and services that people thereby indicate they desire. And if they have no genuine sales revenues then, the decisions they make in terms of resource allocation are arbitrary. A private owner is not arbitrary in his resource allocation because he can calculate profit and loss and he can get some feedback from the general public about what they like, about what he's producing, what they don't like. Whether he's producing his product using inputs that are too expensive or that are more urgently needed in other lines of production. All these things he can calculate thanks to the profit and loss system and the price system of the free market. The state does not have this. It does not have that type of feedback mechanism. So it doesn't know, is it supplying something the public wants? Is it supplying the most urgent thing the public wants? Is it supplying it in the proper quantities? Is it supplying it with the proper inputs? These things are completely impossible for the state to know. Now I often have given this example, example of customer service. Think of a private business trying to figure out how many resources should we employ in customer service. Now at first, the superficial observer may be inclined to think, you can't have too much customer service. But in fact, you can. If every customer service agent followed one customer around and just kept pursuing that person, constantly giving the person massages, reminding that person of important appointments coming up. I mean this would be too much, no one would want that. But likewise if your entire customer service department is an answering machine, that would be not enough. So somewhere, somewhere in the middle there is the right amount of resources. But how can you know? Well you have to use the profit and loss test. You have to see on the one hand, the public wants some customer service. But on the other hand, any additional resources you employ in providing customer service, and here's the key, have to be withdrawn from somewhere else in your business. So it's a trade off. You can have more customer service but you have to have less of this. There isn't a supply of infinite resources whereby I can expand customer service and everything else. When I expand here, I have to withdraw from there. Does the state face that constraint? Of course not. It can expand everywhere. It does not have to withdraw from anywhere else. When it withdraws, it's simply withdraws from civil society, not from itself. Now of course the way the state normally handles this is not by giving us too much customer service. It's by, you know, you got three people at the post office even a week before Christmas, they can't, it doesn't occur to them. Could you have two more registers open or something? Usually they do that, or you get a lot of customer service but the type of service is more or less like, I'm sorry sir, I'm just here to monitor your thoughts, just go about your business. That's a separate matter, not demanded on the market, as it turns out. So it can't be run like a business, and of course, because you can't figure out well which things that the state is doing are things people want. And which things should we cut back on? Which things should we expand it on? The only way that that can be resolved is by privatizing it all, by turning it out, by making it into a legitimate business, by seeing if it could sink or swim in a profit and loss system. All right, so ain't no way it's a business. How about this one though? This one's my favorite one. Number two here is my favorite one. The state is a public service agency. It is seeking the common good and it has no interest of its own, right? It has only your interests at heart. It does not have interests of its own, distinct, separate interests of its own. All right, believe it or not, I'm going to dispute this claim and I'm going to dispute it in several ways. The first way is by making reference to a phenomenon Tom DiLorenzo points to quite a bit, the so-called Washington Monument Syndrome. Now, I talked earlier today, I did a show of hands. How many people had heard of Gabriel Colco? And it was maybe 20%. Now, don't raise your hand just because of peer pressure. There is no shame in not knowing the Washington Monument Syndrome. In some way, it may be you've been a happier person not knowing about it. How many people are familiar with this concept? Okay, good, this is your lucky day then, you're going to learn all about it. Okay, your lucky day where you're going to be made even more miserable and you are now. The Washington Monument Syndrome is so named for a situation years ago in which the Department of the Interior was threatened with budget cuts. Now, think about what a private firm does when it has to cut back. It thinks what is the least necessary thing we do that we can therefore afford to cut back on? The state is just the opposite. It thinks what is the most necessary thing or the thing that the public perceives to be the most necessary that we do and will cut that first so that the public will do our work for us. The public will say, hey, hey, wait a minute. Look, they're cutting this thing that I love so much. You better restore that whole budget before you know it. The budget is restored. So the Park Service said that they were going to close down the Washington Monument. They couldn't find a single pencil sharpener to sell off. They had to close the Washington Monument and so tourists were all up in arms. Hey, whoa, whoa, we wanted access to the Washington Monument. What's going on here? That's their first thought, is what will cause the most visible pain to the public we cut there. And then people were up in arms and before you know it, the budget was restored. Now, there's perhaps an even more illustrative example of this. During the Cold War, the US government had a defensive position against any Russian attack through Germany. There was a front line covered by a cavalry regiment with light, fast-moving vehicles and good radio interception equipment. And that line was there to give the first warning of any attack. Now, at the same time as this, the US government's military also had military marching bands. And to this day, the US government spends $500 million a year on military marching bands. All right, so the Department of Defense is threatened with budget cuts. Now, on the one hand, they've got this line of defense to keep an eye on whether the Russians are going to attack Europe through Germany. On the other hand, they have military marching bands. Now, which of these do they first think to cut back? The marching bands, they are the safest, I mean, if you want to be in a military marching band, there's no chance you'll ever be fired. Precisely because you are the least necessary thing, they'll keep you forever. The first thing they said was, well, I guess we're going to have to get rid of this. If the Russians sweep into Western Europe, we won't even know it's happening because of you people who want to cut back on the budget. An odd priority. Now, it's not that I'm a big fan of the US military or whatever, but if you had a private firm keeping an eye on the Russians, probably they'd cut back on the marching bands first. That's the Washington Monument Syndrome. Now, related to this is one of my favorite empirical examples. Back in the 1980s, there was an economist with the Brookings Institution, slightly left of center think tank. And out of curiosity, he wanted to know how many bureaucrats worked in the central office of the New York City public school system. So he gets on the phone, the first half dozen people he talks to have no idea what that number is. The second half dozen people he talks to do know what the number is, but they're not authorized to reveal it. The 13th person both knows the number and can reveal it. And the answer was 6,000 bureaucrats in the central office. So he thought, all right, well, I don't know what to compare that to. Let's see if we can compare it to something. Let's call the Archdiocese of New York. Now, they educate one sixth as many students, so they should have 1,000 bureaucrats, calls them up. First person answers, he says, how many bureaucrats work in your central office? And the woman says, I don't know. And he thinks, here we go again. But she says, wait a minute, let me count. The answer was 26. Now, what does this have to do with the Washington Monument Syndrome? Whenever there'd be some budget cut in New York City, first thing they would go after would be police and fire. Your house is burning down and somebody's trying to murder you. Well, normally we'd be there in an hour and a half to help you out. But now, this time, ain't no way that's happening. Let me note, by the way, I'm sure the judge can attest to this, but just one small aside, when I was doing my graduate work, I was once visited by an old friend and we went, had dinner, somewhere around 112th and Broadway. And when we came out, his car had been broken into. Now, this sort of thing has happened to me very, very infrequently. His car had been broken into and his stereo system had been removed and some music had been taken and it so happened a policeman was driving by. So we thought, what the heck, we've been robbed. Let's see what we're getting for our money. So we flagged him down. We said we were just robbed, all this stuff has been taken. And the policeman, this is absolutely what happened. He told us what an awful shame that was and he drove away and that was it. Now, again, imagine if a private firm did that. Hey look, you're living in New York City, what do you expect? We would be up in arms about this. There'd be investigative reports about it, corruption. But we just sort of figure, well, that's just the way the state is. Can't expect them to do everything. We let them off the hook in ways we never let the private sector off the hook. You go clothes shopping, there's one little thread out of place and you let that salesman know all about it. But meanwhile, somebody just stole your stuff and you're going, well, hey, nobody's perfect. Or the TSA is actually, there's a hand going into your pants and you're going, that's just keeping me safe. Now, look, I'm all in favor of holding the private sector to high standards. Because I know the private sector can meet those standards, but it is worth noting that we have this double standard. But my point is, at what point in New York do they say, we better go after the 6,000 people in that central educational office doing heaven knows what. Doesn't even, those are sinecures. Those people will be there forever, doesn't even occur to them. Not even remotely, on the radar screen. By the way, one more New York anecdote. John Kenneth Galbraith, a very prominent left wing economist for many, many years, famously said there was nothing wrong with New York that a doubling of the city budget couldn't solve. Then they tripled the city budget and everything got worse. And so of course, Galbraith came forward and apologized to everyone for, no he didn't, you know that doesn't happen. I can't believe you fell for that. Apologize, these people don't apologize. Or what about something like the war on drugs? Now, I talked at the Mises Circle in Houston this year. We have this event every year in Houston in January about the war on drugs. We were talking about the police state, and I pointed out that the war on drugs, like all government programs, is not just a matter of winning an intellectual argument. You can't say to yourself, look, I was the captain of my high school debate team. So you just wait till the country hears my argument against the drug war. It's gonna be over the next day. It's more than that, because there are people whose livelihoods are at stake here. It's not just a matter of dispassionately weighing the pros and cons and saying, you know what, on second thought, maybe prison rape isn't the best solution to drug abuse after all. It isn't that, it's that people begin to subconsciously associate the common good with their own personal good. And their own personal good is, I get a salary from prosecuting the drug war. So the bureaucracies to which the drug war gives rise become self-perpetuating. And they're just gonna go on forever. So when the budget cuts come along, they'll make sure that police and fire get cut, but these things continue. So it's not just the DEA and the military, but it's also the State Department, the Department of Agriculture, the Bureau of Indian Affairs, the land management. They all get money from the drug war. The money is everywhere. Tens of thousands of people work full time on the drug war. That's what you're up against. You're up against that type of vested interest every single time you try to overturn something. Now remember what this number two point was, that government is a public service agency with no interests of its own that are separate from the general interest. But here as we've seen, the state is a group of fiefdoms, self-perpetuating fiefdoms who want to expand their power and their budgets. And that is an interest that is at odds with the interests of the general public. Or what about the military? Now here, I mean surely, this is where the government does its best job. It keeps us safe. There's no other way we could be kept safe so we have to take the good with the bad here. Well, when we look closely at the functioning of the military industrial complex, it turns out that it's really a lot of abuses. How about that? I have a chapter on this in my hideously titled book Rollback. I have a chapter on the military industrial complex. I'm very happy with it. It actually began as a paper at the Austrian Scholars Conference of the Mises Institute, which is now the Austrian Economics Research Conference held every March. Well, just one of the points that I noted in there is that you notice that the military industrial complex has kind of a reputation for being wasteful or for developing some weapon system long after everyone has concluded that either it doesn't work or the enemy they were designing it for went to put 20 years ago it just carries on, it carries on. No private firm could get away with that, producing a product that no one would voluntarily buy and yet it just goes on and on. How does this happen? You know, I mean, you might be against it, but you've got to be curious. How do they carry on this racket? And it turns out they have two primary methods that reinforce each other. The first one is known as front loading. This is a term that is used in Pentagon circles. They all know what it is. Front loading means that when the firm makes the initial description and the promise of the particular system, it does so in a way that overstates what this system will be able to deliver. All this thing is going to be great, it's stealthy, you can't see it, won't show up on radar, and don't worry, it costs like 15 bucks. Well, all right, we'll take a hundred of those, good sir. Okay, you think, all right, Woods, I don't see how that's going to last forever. Eventually they're going to realize, well, it's not stealthy at all. I mean, it's all over the radar screen, it has a big Hello Kitty sticker on the side, at some point, it's not going to work for them, or they're going to realize it costs a million dollars, or a billion, or whatever. But that's when the second plank of the strategy comes in. This is how once they get the taxpayer's spigot open, they keep it open. And it never closes. The second one is called political engineering. This is when you make sure that you divide the jobs and the profits across as many congressional districts as possible. So, so many congressmen now have a vested interest in keeping that project going. You especially want to target congressional districts where the congressman is a committee chairman, where he's really influential. Then this thing will never be stopped, never. It just goes on and on. And you think, now here, this is the most fundamental task associated with government. People who are monarchists will say, I agree with the libertarian, anarcho-capitalist message all the way up to a point. But I know for security, we need the state. So here is its most fundamental task. And even here it has interests of its own. Even here it is not just dispassionately looking out for what's best for the rest of us. And then meanwhile, of course, the Pentagon in the US is not subject to audit. So it's not that they fail the audit, it's that there is no audit. And you wind up with all kinds of cases where there's a trillion dollars missing since 9-11 to 2010, there's a trillion dollars missing. Their budget increased by two trillion, and one trillion of it they cannot account for. The other trillion went for the wars, but there's a trillion dollars. And it's not like, well, the Navy bought a lot of ships. It didn't, the Navy actually declined during those years. Et cetera. You look through the armed forces that doesn't seem to account for where the money went. Oh, well, you know, can't win them all. Can't please everybody. It's a standard that we would never think of holding the private sector to such a pathetically low standard. But when it comes to this, when it comes to the state, we've just been taught these are wise public servants doing their best. And that leads to this naive result. All right, let's go on to another thing that the state is not. I got a whole bunch of these here. I picked four at random. How about a problem-solver? Right? The state's just trying to solve our problems. And ingrates like us won't just sit back and let them do it. All right, so let's look at some problems. Problems solved by the government. You know, it's one of the world's shortest books, you know? Problems solved by the government. All right. Well, we have two different categories of problems solved by the government. Number one, problems that solved themselves or weren't problems to begin with. And secondly, problems the government created and then pretended to solve. That's what it boils down to in case after case. So let's see. What should we talk about first? We'll leave depressions to the end. I did monopolies to some of you guys today. I'll repeat some of that for those of you who weren't here. But let's start talking about poverty. Because today it's very fashionable to talk about inequality and inequalities at the end of the world and all that. Even though when you look at the Gini coefficients, which are used sometimes to give a rough estimate of inequality, you look at the Gini coefficients for the 25 freest economies and you look at them for the 25 least free economies. And it turns out there's less inequality in the freest economies than there are in the least free. I wonder why that would be. Because it turns out that, for example, in the Soviet Union, which was committed to Marxian notions of equality, yeah, they got rid of some class designations and replaced them with others, the ruling class versus everybody else. And there was a yawning chasm there. I mean, even the cemetery you'd be allowed to be buried in was distinguished by whether you happened to be in the nomen klatura or not. But let's think about poverty. Now, there's been tremendous advances against poverty over the past two centuries. And the past two centuries have seen the greatest liberalization of economies in the history of the world. And this is not a coincidence for reasons I've talked about elsewhere. I have a talk on YouTube. I've tried to tell you guys that I'm the worst title person in the world, and you think that's just false modesty. No, the title of that talk is Applying Economics to American History. I mean, that's one of the worst of all time. And yet it has like 60,000 views, so it must be good. Like with a title like that, people still watch it. But in there, I explain why and how the free market yields us rising living standards over time. What I want to do now is just look at the figures instead of explaining the logic behind it, because I do that over there. When you look at the figures, it's absolutely astonishing what's happened and that most of this happened before there was any welfare state of any significance in the world. And certainly in the United States. I mean, FDR brings about a very, very modest expansion of a welfare state. But it is a pittance, it's nothing compared to today. And what you see certainly in the United States is the percentage of people in poverty consistently going down until the late 1960s when they really start spending money on it and then it levels off. And more or less after trillions of dollars spent, the amount of poverty and percentage terms that's been alleviated is like a rounding error. It's of no significance at all. And I often say, I realize this argument is not definitive, but just imagine if the situation had been reversed. Imagine that there had been government spending all along on poverty alleviation and poverty had been falling and falling and falling and then, you know, the terrible people in this room took over and we defunded those programs and then we stopped making progress against poverty. You know what they'd say. You wicked selfish jerks. We were making all this progress against poverty and then you defunded the programs. But the exact opposite occurred. There were no programs and we were making progress against poverty. Then they funded them and the progress leveled off. And so what do we hear about that? Crickets. Nothing. No acknowledgement of this at all. Now, if you were to ask the average person on the street, how do you think we're doing in terms of poverty around the world? I mean, you think we're making advances. You think we're retrogressing. How do you think we're doing? I would be willing to bet. And maybe someday I will test this. I should do that. I have a microphone and a camera. Why don't I do this? I bet you at least seven out of ten people will tell you poverty is worse than ever. Worse than it's ever been, right? I bet you they would say that on the basis of what they're learning in sociology or whatever. I bet they would say that. And yet the truth is so absurdly the opposite. We've never seen this type of success against poverty. So the figures, pardon me if you've watched a lot of my YouTubes, but I was telling Joe Salerno before, the age of YouTube, it's hard to repeat yourself. But sometimes you have to say the same thing. And in this case, the numbers are just so overwhelming. When you look at the percentage of people around the world living in what economists sometimes call absolute poverty. A level of poverty that in the United States we can't even imagine. I mean, everybody in this country is living like a king compared to what we're talking about here. That figure was at 85% in the year 1820. And it had been brought down by 1950 to 50%. By the 1980s down to a third. And by the 21st century down to 18%. So from the early 80s to the early 2000s, that 20-year period. And by the way, these are these figures you can easily consult. They're almost anywhere. Or you can write, I can give you sources for stuff. But in that 20-year period, we saw both the percentage and the absolute number of people in poverty decline. This is an unbelievable, astonishing thing. More progress against poverty in 50 years than in the previous 500. You'd think people would say, hey, that's pretty good. Hey, let's have one acknowledgement of that. Nothing. Like no one even knows that. And as I've argued, this is not a coincidence. This is what happens when people are allowed to keep the fruits of their labor and invest their profits, plow them into buying capital equipment. There is no shortcut, Mises said. If you want to increase the standard of living, there is no shortcut to increasing the amount of capital per worker. This makes the workers more physically productive and we wind up with all these goods in the economy that are now correspondingly less dear for us. I have to tell you about the American statistics, though in the year 2011 is the most recent stats I have. Now in the United States over the course of the 20th century, the figures are variable, but we see that the purchasing power of the lowest quintile of income earners increased anywhere from 10 to 20 times. Amazing, right? It's absolutely astonishing to see something like that. So as of 2011, and by the way, let me say as a caveat here, that my wife grew up in a very, very poor situation and had to struggle quite a bit and my own father grew up in very challenging circumstances. So I'm not trying to make light of their situation. I'm not trying to say, hey, look, you have a flush toilet. What are you complaining about? I'm not saying that because people do have a lot of challenges to me. I simply want us to, instead of constantly criticizing the system that made it possible for us to live at the standard of living that we live at, to at least be grateful for it, okay, the ingratitude theme. We've got to be grateful for what we have. So for instance, 97.8% of people who are poor in the United States have refrigerators. You think, ah, refrigerators, now you're really stretching woods. Everybody has a refrigerator. Yeah, I know, that's my point, right? Yeah, I know, that's what I'm saying. But you say, oh, that's no luxury, but it is. It is absolutely is a luxury. I mean, consider that at their vacation home, the Habsburgs in the early 20th century didn't even have flush toilets. I mean, yeah, they would have taken a refrigerator. And also, now some of you guys, even I'm too young for this, but I watched the reruns of The Honeymooners. Ralph Cramden, now we all know that Ralph Cramden was a cheapskate. But it was at least plausible that in the 1950s, a household could still have an ice box instead of a refrigerator. Now, so for your ice box to work, there was a guy who came to your house with a giant ice cube regularly. Yeah, that's how they did it. It was a big ice cube. And that was considered normal as recently as the 1950s. They had no telephone. They had to use the Norton's telephone. Now, again, that was unusual, but again, not preposterously unheard of. Today, if we had a TV show where somebody didn't have a phone, it would just seem stupid. But it was at least plausible you might not have a phone. You borrow your neighbor's phone. Today, 80.9% of the poor in America not only have phones, they have cell phones in addition to their landline phones. Cell phones that are like 500 devices in one. 96.6% have gas or electric stoves. 96.1% have televisions. 93.2% microwaves. 83% have some type of DVR. I mean, could you imagine somebody from Kenya? I don't know why I picked Kenya. That was at random. But suppose somebody came from Kenya just visiting the U.S. and we explained to the person what DVR is. They would not say, well, you must be really poor if that's your only method of entertainment. 58.2% have computers. And of those who don't, 100% have a local library that does. That's amazing. We've never lived at a time like this. Now, it's not to say that material things are all that matter. Friendship is the most important ship of all. I know that. But, you know, I'm happier with a refrigerator than I would be without it. I'm happy being able to cook things in my house than I would be not being able to. I mean, to some degree, it's a lie to say money can't buy happiness. Yes, it can. To some degree. It can't make you non-lonely, and it can't buy you a real friend, but it can make you more comfortable. I mean, tell somebody who's sitting in Auburn, Alabama, when it's 110 degrees out and they can't afford air conditioning, well, that wouldn't make you happier anyway. I think I'd punch that person in the face. Yes, darn right, it would make me happier. All right. And then look at, in the case of foreign aid in the United States. The United States has given away an enormous amount of money in foreign aid. And the consequences have been terrible. Almost everywhere it's been tried. Terrible. Free market economists, a handful of them, primarily Peter Bauer, warned that this would happen, and explained the logic of these programs, and said, no, no, no. What these people need are, well, private property rights and all the sorts of institutional aspects that we associate with a prospering economy. That's what they need. They need the cultural mores that are compatible with this, and they'll be fine. And sure enough, Chile took off after foreign aid was cut off, South Korea likewise, Hong Kong likewise. So this problem of poverty solved itself, by and large. Solved itself. It was not the government. Solved itself. All right. I'll do monopolies quickly because some of you heard my presentation on that today. But this one, though, I mean, this one, your teacher really lets you have it, right? Just in case you were going to be sympathetic to the free market. Oh, no. No, no, no. The economy was dominated by guys with cigars in their mouths with an evil cackle. You know, and a gold tooth and a monocle under laissez-faire. You know, you can't have that, man. We need competition. Whatever, whatever, okay? But then I went through with you guys and I gave you some references and we looked at some actual people and actual industries where the accusation of monopoly has been the most frequent over the years. And we saw that actually what they did was they increased output and they lowered prices dramatically. Andrew Carnegie overwhelmingly reduced the price of steel rails by about 90% in just a quarter century. That has ripple effects through the whole economy. That's more than any government has ever done ever in terms of increasing the standard of living because, yeah, the government can take your stuff and give it to another person. Yeah. Any idiot with an IQ of 50 can do that. But when Carnegie lowers the price of steel, this makes everything cost less. It's the purchasing power of everybody. And now you have more left over to go buy more stuff and to make your life more comfortable. So he does that Rockefeller when it comes to kerosene when it comes to oil refinery prices dropping dramatically. We talked about the figures there. By the time the government dragged him into court his market share had already dwindled just through normal market competition. Cornelius Vanderbilt in steamboats and steamships. First, he was up against an outright monopolist by the real definition of the word. Robert Livingston and Robert Fulton had been given a 30-year monopoly on steamboat traffic in New York by New York state and so he was undercutting them illegally by shipping passengers at low fares and not getting caught. Finally, that was overturned and he goes into business and he's all over the place. New York to Philadelphia, New York to New York City to Albany, New York to Providence, to New Brunswick. And every one of those fares is cut in half, is cut by 7 eighths. Some of them are cut 100 percent. He actually cut the fare from New York to Albany to zero and just said, you know, I hope you're hungry while you're on board. I'll try and sell you some food. And that was how he prospered against the competition. Then later on, he had subsidized opponents by the 1840s. He crushed them completely. This free market guy. And in fact, the New York Evening Post said that he was the greatest practical anti-monopolist in the country. Correct. Correct. He was not a monopolist in any sense of the word that would be in any way meaningful or helpful to advancing our understanding. So you have examples like that. You have James J. Hill on the railroads. Doesn't get any subsidies and yet he prospers. These other railroads go bankrupt in the panic of 1893. They're begging the government for low interest loans and he is saying, no, the government should not provide capital to these companies to compete against certain railroads, which I wonder who that would be, him himself, that managed to accomplish this with no government aid whatsoever. Oh, you can't build a railroad without government aid. Well, who are you going to believe? That claim by your teacher or your own eyes because you have James J. Hill in front of you. Or the great example of Herbert Dow. Again, I went through this today. I gave you the long version. I'll give you the short version here. Herbert Dow, the chemical manufacturer. I talked about his work with chlorine, but here I'll just do bromine. Some of you know this story, but long and the short of it is Dow's a great innovative chemical man in the U.S. And he wants to sell bromine abroad, but the Germans dominate in Europe and say, well, does all the sales of this chemical in Europe? And they actually visit his office and say, we have evidence that you have been selling bromine in Europe. Well, yeah, as a matter of fact, I'll just tell you right now I've been doing it. No, no, no, you don't do that because we're selling it and they're selling it for 49 cents per unit and he was selling it for 36, so they gave him a visit and he just ignored them. So they thought, well, we'll just drive him right out. And he suddenly drives out all competitors. So they're going to drive him out by selling bromine in the U.S. for 15 cents and that will destroy Herbert Dow. But his response is, well, they're going to sell it that cheap. I'll buy it. So his purchasing agent buys up enormous quantities and then repackages it and sells it in Europe at 27 cents. Now the Germans have got to turn a profit in Europe to make up for the loss they're making in the U.S. And they cannot figure out what's going on. So they say, oh, we'll show them, we'll sell it for 10 and a half cents. Even better. Well, and he gets another visit, by the way, and he's threatened that they're going to keep on doing it, like that's some threat. They're going to keep on doing this and he says, I just don't care. And as he leaves the meeting, this representative of the German cartel is screaming threats at him as he's walking away. They don't know what to stop to. But they don't really know how to stop this. They don't really know what to do about it. And they finally just give up, basically. They give up the fight against it. So I have an article online that I'll refer you to on the general subject of monopoly and so-called predatory pricing. Predatory pricing is this claim that somebody can become the sole supplier of a good by lowering the price of the product below cost. Competitors can't compete at that price. You drive all your competitors from the field and once they're gone, you then raise the price and enjoy so-called monopoly profits. So I have an article on that because I went through the reasons, even though that sounds superficially plausible, it really doesn't work. I went through that in my talk earlier today, but you can also read it in an article of mine called The Misplaced Fear of Monopoly. You just Google that. That article will be the first thing that comes up. So let's go on to... I'll say one quick thing about depressions. I wrote Meltdown in 2009, so I more or less refer people to that, but I wrote that book because I knew that the Paul Krugman version of events was going to ossify into the conventional wisdom if there wasn't at least some attempt to challenge it right away. And so Meltdown was actually the first book on the market that dealt with the downturn of 2008 and also covered the bailouts. There was one book that slightly beat me on the downturn, but it was too early for the bailouts. So we rushed this thing out like crazy. I was a complete lunatic and mental case at that time, but we did it. It got done. To my amazement, it spent 10 weeks as a New York Times bestseller. I mean, you know the economy is bad when people want to read about business cycle theory that much. It was a wonderful moment for me and I think it was nice to see that happen. But my point is that in that book, I give I hope a reasonably compelling case that this was not a matter of the government and the Federal Reserve were just innocent bystanders, carrying out their usual efforts to bring about the common good. And then one day out of nowhere, a housing bubble burst. It occurred on their watch, but as usual they were just innocent bystanders. And that's true of everything with the US government when there are military attacks or whatever. It's always because they were just standing there and they're just so awesome that the rest of the world is envious of them and these things happen. Well, I dispute that in there and I go through and show the role of the Federal Reserve and all this and the role, the subsidiary role that was played by various forms of government intervention into lending. And you get this claim that the problem wasn't involved enough, you know. As Lou Rocco would say, if only they could have cracked some more skulls they could have solved this problem. But on the eve of the crisis it turns out that there were on the state and federal level 115 federal or federal and state regulatory bodies tasked with the function of overseeing and regulating financial markets. 115. So the apparently what we're hearing is that if we had had 116 then we could have stopped this crisis. But only 115? But then when you look at these 115 or you look at the Federal Reserve itself which is supposed to be the chief regulator of the whole banking system it's not like they saw a problem coming but their hands were tied by laissez-faire George Bush. I mean none of that statement is correct. To the contrary none of them saw a problem. I mean Alan Greenspan was saying things were fine go out and get your adjustable rate mortgage while you still can and the fundamentals look okay and the housing market doesn't seem to be a bubble and all that. I mean you know you've all seen the YouTubes where they put together all the well with Greenspan the tricky thing was finding a coherent statement by him but when you patch one together it tends to be pretty incriminating. This whole crew hadn't got any idea at all what was going on. In fact I had Bob Murphy on my Tom Woods show not too long ago and we were talking about Janet Yellen the current Fed chair and she's being portrayed as the great prognosticator and yeah compared to Bernanke and Greenspan she was a great prognosticator in was it late 07 December or was it 08? 08? Of course yeah right because 08 got bad. Yeah so here's the thing at one time when others are saying well everything looks good and I mean Herman Cain who was at one time with the Kansas City Fed he was saying the economy was fine in September of 08 like one week before Fannie and Freddie went under everything's fine it's just a liberal media plot against the president to say there's anything wrong so Yellen in December 2007 was saying well you know I mean it's possible things might happen to you guys think and yeah because it turns out the NBER had already identified the U.S. was in a recession at that time and she's kind of doubtful you know I mean it could turn and that makes her a great prognosticator compared to them so in other words as Bob says far from being able to predict a situation she couldn't even post-dict it so it's again it's not like well everybody knew what was going to happen but you know deregulation or something they couldn't do anything about it the deregulation that did occur I don't see is relevant to what happened because what happened basically was that banks made a lot of rotten loans and that's a traditional function of banks to make loans and they made a whole lot of rotten loans so the question should be why did they make a whole lot of rotten loans and it's not like all the features securitization and all that these were old features of the system that didn't matter but this wasn't something that just suddenly occurred five years earlier so there are a lot of there's meltdown and then I have a chapter in rollback that further develops the argument about why deregulation is a red herring on this but here my point is that I have made a case that it would be a little bit rich for the federal government to take credit for solving a problem number one they have not solved and number two that they caused they were the cause of and saying well you know I early on I saw there was going to be you know housing had been given artificial stimulus yeah because in 2001 he said you know what we need is artificially low interest rates to spur housing and then later he says you know housing has been artificially spurred how does he do it is it tarot cards is it tea leaves how does he figure this out alright so now finally number four the fourth thing that the state is not the indispensable provider of services right we need there are certain services we need and only the state can provide them now I will grant you that there are some tough ones that I will not cover here so I'm not going to be able to consider every possible objection but that's what we have Bob for right Bob will answer the rest of your objections I want to take a few of the relatively easier ones and think for example about let's think about safety we need the government for safety now I'm not talking about safety from terrorists that's a separate question I mean safety so that when you plug in your toaster you're not instantly electrocuted that kind of safety or you turn on your computer monitor and it doesn't blow your limbs off like that's what I mean by safety alright so let's let's consider that first let's think about an office called OSHA occupational safety and health okay this was started around 70-71 and what they'll say is this institution has yielded us fewer work place accidents and fatalities just look at the graph and it's true you look at the graph those things have gone down since OSHA was established but you know what they don't ask at what rate were these things going down before we had OSHA I mean just out of curiosity wouldn't you want to have some baseline of comparison like as a society becomes wealthier it becomes easier to make provision for safety so let's just look well it turns out as usual government is taking credit for an already existing trend in fact in the previous 25 years before OSHA the decline in accidents and fatalities had been 70% faster than under now that doesn't mean that OSHA has actually increased has actually made it harder to deal with fatalities but the point is that this was apparently something was making this happen and there are a variety of explanations there are wage differentials between different types of jobs that some jobs are more dangerous so they pay more and because they have to pay more that gives the firm an incentive to try to diminish the danger so they can reduce the wage premium there are all kinds of ways that you can deal with this but the government will take that sort of credit for things or you know what here's a funny one the seatbelt thing now I don't really get up in arms about the seatbelt thing I have too many things to worry about I wear my seatbelt probably makes sense I wear the seatbelt it's better than the airbag which will kill you but the seatbelt seatbelt is probably okay but they're claiming we have to do the seatbelt because that will save lives and yet Sam Peltzman at the University of Chicago drives them all crazy with I mean he he was getting threats about his research scholarly research and what he found is that actually contrary to what you would think the seatbelt law has not diminished the number of fatalities out there in traffic related all it has done is changed the composition of those fatalities and what he means by that is that there are fewer deaths among people sitting in the car but because and I know this is hard to accept it was hard for me to accept it first till Bob talked me through it and then I got it it turns out that with the seatbelt without realizing it people drive marginally more recklessly so you have the same number of fatalities except now it's the sucker on the bike who gets killed not the guy safely in the car but it's the same number overall now this is not to say that the government couldn't figure out some way to make us all perfectly I mean they could lock us all in our homes you know and take the electricity off I mean whatever like they could figure something out but the point is that you can't just automatically assume that because something is done in the name of safety therefore it leads to safety I mean after all we just had something passed called the Affordable Care Act I mean by now we know what these Orwellian titles mean it always means the opposite of course we're many of us familiar with the underwriters laboratories example of a private certification agency for electrical devices you have the UL logo on the box this means we're pretty sure you're not going to be killed instantly when you use this product now what happens though if you are killed instantly when you use that product now the reputation of underwriters laboratories suffers oh in the age of Facebook and Twitter they would be mercilessly swattered in memes and everything else that would be like blood dripping from the UL a guy with a noose hanging from the letter L or something it would be awful they'd be finished but suppose the United States Department of Electrical Safety has this problem that kills everybody imagine what would happen then maybe this isn't the right institutional structure maybe the incentives are off no we would double the budget instantly right so you see there are divergent incentives that are at work the matter of oh no I was going to talk about occupational licensing but because my time is limited you all know that you probably know something about occupational licensing this is an area where Milton Friedman is very good but no I want to just say something about that I find this fascinating the National Highway Traffic Safety Administration founded in the 60s this is to make traffic safer right and they say look we have made it safer because in the 25 years after we got that the rate of decrease in fatalities per mile traveled was 3.5% a year hmm but again the question is well what was the rate of decrease in fatalities per mile traveled before they had this again just to have a baseline to compare it with would you believe 3.5% a year hmm how about that I raise these because I don't think these examples get brought up a whole lot but they do shed a different sort of light on questions like this alright what about other things and I'm running out of time so I'll wrap up but I think I have a good six seven minutes so I'm going to use those babies how about art there's no profit in art or you have to really really work or have a niche to make a profit in art and in fact during the modernist period it became very fashionable among modern artists to be so contemptuous of the public first contemptuous of the public because they're too stupid to recognize how profound my art is so of course they're not going to voluntarily hand over their money and secondly I'm entitled to their money I am entitled to be funded by government funding that was the attitude in the art community and the argument would be that why would there be there wouldn't be enough art if it weren't subsidized but here this is refuted simply by experience because what is the budget of the national endowment for the arts I don't think it has ever exceeded $100 million in a year and yet private donations to the arts amount to billions of dollars per year and I bet nobody knows that they think yet without the national endowment for the arts where would we be there'd be much much less urine in our art maybe there would but maybe that's what the public wants I don't know but again to think about what the public wants is to just violate every standard of decency in the modernist community my wife and I are on the mailing list of a theater in Kansas where we live and it's called the Colombian theater in Wamego, Kansas this is where the Wizard of Oz Museum is located so all of you who have been restraining yourselves not telling me Wizard of Oz jokes this week I appreciate that don't ever go to the Wizard of Oz Museum by the way it's all replicas there's nothing authentic in the whole thing they have a display with Ruby slippers and you say oh are these the slippers she wore and you look at the thing and it says Judy Garland wore slippers like these in what am I doing here I could have a Wizard of Oz Museum in my own house with anyway the Colombian theater sent us an email because Sam Brownback the governor of Kansas apparently has cut the Kansas art whatever it is you know where they were subsidizing the arts he just cut it we don't have the money for it well try and substitute private funding for it but that's it and they wrote us this email they were so outraged at this because they were going to be out $5,000 for an entire theater they're out a mere $5,000 and they haven't got the slightest idea of what they're going to do what is that three bake sales or you go to your hundred biggest donors and you say look we're going to we're going to go out of business I know you gave us 10 grand last year could you just hand over another 50 that's all they would need I would actually if I seriously thought that was the difference between them being open and closed I would just write them a check I mean like I'm sure there must be other people like me in the world but they are so accustomed to this that it makes them all intellectually lazy and morally lazy I might add the gun in the ribs is the way we're going to put our plays on well they you know maybe there's another way to put on a play maybe people might want to come see it you could charge for tickets you could then ask for donations but they had no idea how they were even going to deal with $5,000 in fact I guess back in New York I was giving a talk at a church once had nothing to do with economics at the end of the talk a guy in the audience asked me a completely irrelevant question he said the Social Security Administration has just abolished the $250 death benefit that people used to get who were on Social Security what are people going to do without that $250 death benefit now he's standing up in a parish hall full of 300 parishioners who would come to hear me and he has no idea where they would possibly come up with $250 to bury someone in the church he thinks they couldn't raise $250 per person to buy a coffin to substitute for that missing $250 he thinks that even in that church if he went up and asked somebody the person would say let's see a dollar versus a dignified burial for my friend this is a tough one like no conception of what society is supposed to be you know I mean it really brings to mind that George Costanzo line you know we're living in a society that's what I wanted to say to him as a matter of fact I think that is what I said to him or maybe I thought to myself that we're living in a society that was the line and I drove back to that's the jerk store line that's a whole different line but it makes you we get into this by we I mean to exclude all you good folks but people in general we get into this lazy mode because we think that well the government is the provider of these services in life any other way I do have a section in rollback on the subject of science and science funding and I'll close with this I'll just give you some suggestive thoughts on it but I'll tell you that the key book on this that you'll love because if you're like me you like books where you're learning something on every page I don't want a book where it's all witticisms and I don't actually learn any new data but this book by Terrence Kealy the economic laws of scientific research will blow you away every page is refuting preconceptions you didn't even know you had about science, how it works and how it's funded and it turns out that actually the private sector as a percentage of GDP was much more generous with the sciences in terms of funding than the public sector has been and there are a number of reasons for this but people who say that there's no profit in science therefore you won't have it or you can't capture the profits from a discovery because everybody else will have public access to that discovery and the profits will be dissipated it turns out that although these sound plausible it turns out that when you look at well in the 19th century you look at Britain which spent zero dollars on government funding of science it vastly outperformed the Germans and the French who spent hand over fist money on the sciences because it turns out that science grows not so much by arbitrary experimenting in laboratories as it does from developing existing technology and adapting it to current needs but even basic science in laboratories is more generously funded in free societies than by government for reasons that I explained in there so even things we think well surely we can't be unreasonable we need the government for this it turns out we don't so what is the state after all is exactly what Rothbard tried to tell you it's exactly what Oppenheimer tried to tell you and Albert J. Nock tried to tell you that you got the old two ways of acquiring wealth you got the political means where you loot and exploit people by means of the government and you got the economic means by which you provide something some good or service that your fellow man wants there are only two ways of acquiring wealth in this world and the state is the path of the political of people who rather than try to help their fellow man just want to grab stuff and then we wonder why does this institution attract such sociopaths ladies and gentlemen I believe we have our answer thank you very much