 Welcome to my seminar. It's called Fake Economic News, and Joe Salerno puts this down so that I can sort of talk about anything that I want. That's in the news and there's a lot of stuff in the news, so I'm not too constricted. I'd like to start off by thanking Jeff Deist and Lou Rockwell for leading us here. Joe Salerno put this together. All the donors that made it possible and all the staff of the Mises Institute. So let's have a round of applause for that group. The topic that I've chosen is free trade and tariffs because our man, Donald, he's our only president and he's a protectionist, so he's pushing for tariffs, so I thought I would talk about that. But economics is sort of dull and I'm a real dull speaker, so what I'm going to do is during all of my talks, I'm going to show you cartoons sort of interspersed. Where did I get these cartoons? I got these cartoons from a book that came out in the late 1980s when NAFTA was being organized or negotiated. And you'll remember that NAFTA started out not with Mexico, U.S. and Canada, but just Canada and U.S. and later on Mexico was added. So here's a book with a whole bunch of cartoons from a bunch of our friends on the left who were bitterly opposed to NAFTA because they thought it was free trade. It's not really free trade, it's just a customs union sort of free trade between two countries, but not free trade with everyone. But what the heck, it was a move maybe in the direction of free trade, maybe not, it's hard to say, but in any case they had this book where they had the vitriolic opposition to free trade in print and then a whole bunch of cartoons to illustrate their view. Okay, in my view all trade is beneficial ex-ante. You all have shirts on, you paid 30 bucks for the shirt. This means that at the time you bought the shirt, you valued that shirt at more than 30, so you made a profit, you dirty profiteer. You made a profit off of the, you exploited the seller. Of course the seller exploited you because he valued that shirt at less than 30, otherwise he wouldn't have sold it to you for 30. He had a whole dozens of them, hundreds of them, he probably valued it at a penny. He's glad to get rid of it. So there was mutual exploitation the way the Marxists see it and the way we see it. Austrian economics is there's mutual benefit. Now here's the way our friends on the left see it. Notice the Canadian kid is very small, the American kid is very big, and the Canadian kid said, I got two marbles and oh, let's trade. What do you got? Maybe some toy. And the American kid bashes him in the head and takes his marbles. Well, that's the way these people see trade. Can you imagine? I mean, this is perverse. This is weird. This is crazy and yet that's how they really feel. They feel that trade is exploitative. The big fat guy is going to beat the little guy and exploit him. Not only is free trade beneficial ex-ante in the sense of anticipations, but it's also usually beneficial ex-post. Very few people regret the shirt they bought. Every once in a while you get a lemon car, you regret it, but usually 99% of all trades you don't regret. Trade saves us from self-sufficiency. Now, self-sufficiency you might think is a good thing and in psychology it is because if you're not self-sufficient in psychology, you're sort of dependent upon other people. You're a wuss, you're a worm, whatever. You should be a macho man, you know, man up and be self-sufficient. Okay, that's psychology. In economics, self-sufficiency means you produce everything you need and you don't trade with anyone. Time for another commercial break. By the way, this is going to be frontal nudism. Not well frowns upon this, but I'm going to do it anyway. So for those of you who are squeamish, avert your eyes. What you have here is Simon and Peter. These were the NAFTA negotiators. And you'll notice that the Canadian is naked, always got his maple leaf on his private ports. And if you notice quickly, carefully, the American has got two suits. One is a striped suit and the other is a gray suit. So what a negotiation for free trade or free trade between the countries means is that the Canadian is going to lose his clothes and the American is going to take his clothes, eat his lunch, take his clothes, what have you. Imagine if we couldn't trade, if we had to make everything ourselves, everything, food, clothing, shelter, whatever, you couldn't trade with anyone. 99% of us would die and maybe 100%. I'm not sure of my numbers. I'm a theoretical economist, not a statistical one, so I'm not sure if it's 99 or 95 or whatever. Most of us would die because our very lives depends upon trade. So what are we going to say about people who try to squelch trade? They're moving us in the direction of death. When we libertarians take over, we're going to have a Nuremberg trial for these people. And I don't say what the results will be, but the people who are pushing death on us are bad guys and we have to deal with them. Here's another cartoon. This is during the era of Ronald Reagan. He's eating the free trade turkey and Brian Moroney has a very big chin. He's also Irish, big chin, and he's the dog going off, off, off. Please give me some of the free trade turkey off the table and Ronald is eating all the turkeys. That's just another way of looking at it. Why is the US so prosperous? Why are we a very wealthy country? Why is there some benefit in the EU? The reason the US is so prosperous despite taxes regulation is because we have a gigantic free trade zone. Every once in a while, yes, Missouri or Wisconsin tries to put a tariff against California wine imports and happily the Supreme Court, Judge Napolitano will be happy with this, squelches that so they don't get away with that so the Californians can export wine to Missouri or Wisconsin or Massachusetts or what have you even though it ruins the Massachusetts wine industry of which there's not much anyway. But imagine a different law. I come from New Orleans and the University District. I teach at Loyola University how our pineapple industry sucks. We don't have any pineapple industry. We import pineapples from Hawaii. So what we should do if I become governor and I'm a protectionist is say we're going to have a gigantic tariff against the importation of pineapples. They're taking our jobs. Remember that from South Park? They're taking our jobs and those Hawaiians are taking our jobs, our pineapple jobs of which we now have none. And those Texans, those dirty rotten Texans are beating us at football all the time. But they're exporting cattle to us and this has got to stop because they're taking our, you know, our cattle jobs. Okay, the next cartoon is there's a little guy from Canada and a big fat guy from the U.S. and the U.S. guy is saying the game is five-card free trade poker. Everything is wild, six-card drawer. It's my deal, my cards, my rules, my game is to stay with your money. So it's just another way of saying, you know, how evil free trade is. Not only is Texas in Hawaii bad but I'm from New Orleans and next door to us is a town called Mettery is a suburb and they're taking our jobs. We've got to stop imports from them because, you know, they're taking our jobs so we shouldn't trade with Mettery either. And also, I'm in the garden district, the university district, downtown where they have jazz and they have a lot of hotels. They're taking our hotel jobs and our jazz jobs so we shouldn't trade with downtown either. Where am I going with this? We shouldn't trade with the next block. We shouldn't trade with the next house. Namely, we should get to self-sufficiency. So the whole idea is sort of dead from the neck up. Okay, here's another way of illustrating free trade. Now I have to explain to you that the U.S. symbol is the eagle. The Canadian symbol is the beaver. And notice the beaver has got a hole in him. And Ronald Reagan or the Americans are what free trade means is shooting an apple off of the beaver's head and you hit the beaver. So this is just another way of illustrating the evils of free trade. If tariffs against other countries are justified, then it's justified against other cities and states. There's no difference economically between France and Texas if you're concerned between California and Texas. They both export wine. So you shouldn't think that well since it's a different political jurisdiction, somehow it's okay to have tariffs against people from those countries. Okay, now here is an argument in favor of tariffs. It's one of the most powerful arguments in favor of tariffs. I'll offer it to you and then try to refute it. The argument is from national security. If we don't protect the steel industry and China is going to make low-cost steel, they're going to export steel to us at a very low cost without tariffs, protective tariffs. And we're not going to have a steel industry and then if we get in a war with China, guess what they're going to do? They're going to stop exporting steel to us and they're going to win the war. There are problems with this. We're never getting in a war with China nowadays. That war will be over in five minutes, 10 minutes tops. So we're not going to need any steel because the war is going to be over. However, we libertarians, we Austrian economists want to make the case for freedom not only in any one epoch, but in any other epoch. So let's suppose that we go back to 50 or 100 years when the wars were not over between major powers. You do have wars. I mean, we're in Afghanistan. Lou tells me not to say we're in Afghanistan. The US military is in Afghanistan almost 20 years now. So you can't say the war is going to be over in five minutes. On the other hand, the only reason we have wars with smaller countries or the results of those wars, they just go on and on because the US doesn't seem to want to win. But the point is that Afghanistan is not likely to corner the steel market. So we don't have to worry about, you know, the Afghanis will cut off steel and then, you know, we'll lose the war to the Afghanis. The whole thing is really silly. Okay, here's another cartoon. This is the free trade horse. We're all familiar with the Greek mythology. You know, you bring in this, what kind of horse is that? Trojan horse. And, you know, somehow all the soldiers will get out of there and they'll overrun you. So the way they see free trade is a sneaky way to conquer the country. I mean, isn't that the testable that adult people would think that free trade is like bonking the little kid and taking his marbles? It's just preposterous. I had a full head of hair before I saw this and look at me now. It's just horrible. Okay, one argument against this is to reduct the ad absurdum. It can apply to anything. So we shouldn't, we should have a, what do you call it, a tariff against steel, but we should have a tariff against food because if we import food from France and we get in a war with France, they're going to cut off our food supply so we shouldn't, we should have tariffs against the French food or everything. So it's a reductive ad absurdum. Namely, this argument proves too much. It says we shouldn't trade with anyone. Well, if we shouldn't trade with anyone, well, then, you know, this sort of undermines the whole point. The second refutation, I think this is even more powerful, is you don't really need, assuming now that we need a steel industry because we're afraid that our enemy will cut off the steel, you don't really need a thriving steel industry. All you need is a mothball steel industry. Got it? A mothball where you have steel plants, they are oiled, there's a corporals guard of people that make sure that the thing works and you have iron coal next door. So if ever the enemy is going to cut off our steel, we can get going right away. So you don't need to have the tariffs to stop the imports. And also, if the Chinese or whoever the bad guys are, the Hitler of the day, are going to give us free steel or not free steel, but cut rate steel, we're going to be richer. And if you're richer, you're much more able to fight the war. Usually richer countries beat poorer countries, other things equal. So this sort of undermines the idea. Okay, let me move along now. I want to introduce two concepts. One is called absolute advantage, and then I'll do comparative advantage. But before I do that, I have to show another cartoon. And here's the other cartoon. I don't know if you can see it, but right here it says free trade. And this is Sandy Beach and here is Moroni with his big chin. And the waves are going to come and knock out free trade. So this is just another way of saying, you know, how evil free trade is. Okay, here's absolute advantage. What's going on with absolute advantage? Is this good? Can everybody see that okay? Okay. So what you have here is two countries, Canada and Costa Rica. And I'm assuming two seasons. And I'm assuming that bananas and maple syrup units are additive. I'm making simplifying assumptions to illustrate what absolute advantage is. So if there's no trade, how many bananas can Canada make in a season? How do you make bananas in Canada? Canada is a cool place. At one time in Alberta, it was colder in Alberta than on Mars. It's cool. It's very cool. How do you make bananas in Canada? Gigantic greenhouses, you know, those window houses, whatever. How do you make maple syrup? Well, maple syrup, you know, it's sort of like Jack in the Beanstalk. You sort of put a maple syrup there and you pull back because the maple tree grows. So I'm assuming that the Canadian GDP with no trade is a 10,000 in five. Yes, I'm adding horizontally. Anyone with me on this? In Costa Rica, they can make bananas up the wazoo. The bananas are easy to make in Costa Rica. So they can make 15,000. How do they make maple syrup in Costa Rica, which is a warmish place and maple syrup needs cold weather? Gigantic refrigerators? 300 feet high and 300 feet wide. Be expensive. So the GDP of Costa Rica would be 15,020 with half of their people in one year and we have a two-year period make bananas of 15,000. Half of their land, labor and capital make 20 maple syrup units, which is very silly, but with no trade, they want maple syrup too. They don't just want bananas. Okay, so with no trade, we have how many bananas in existence? Well, now you add vertically. You add five and 15,000 and you get 15,005. How many maple syrup units do you get? 10,000 plus 20 or 10,020. So what's world GDP? World now consists of two countries, Canada and Costa Rica. 25025 and you get this either adding up horizontally or adding up vertically. Everyone with me on this? Any question about that? Okay. Now we introduce trade. Well, which should each country specialize in? Which should Canada specialize in bananas, in which case it can get 10 bananas and Costa Rica specialize in maple syrup, in which case it can get 40, because now it's specializing, it's being self-sufficient, so you double the numbers? No, that's silly. Rather, what happens, is that each country specializes in what it has an absolute advantage in. So, Canada can make 20,000 maple syrups and Costa Rica can make 30,000. I'm doubling the 10 and the 15,000. And now the world GDP goes up to 50,000. Virtually a doubling. If we each specialize in what we do best and we trade, that's great. If we don't, then our GDP is 25025. Now, you might say, well, maybe the big country, I don't know which is bigger, say Canada's bigger, they'll take the lion's share of that gain. But the point is, the Costa Ricans can't be made any worse off because they've made any worse off, they refuse to trade. So what you have is an increase in world GDP of 24,000 and 975, and that's going to be divided between the two countries. Okay, now I want to get to comparative advantage. But before I do, I have to show you another. Now, this is also a pornographic film here. So, a virtualize, if you are a wussy and, you know, a sissy-ish person. Here is Brian Moroney. Isn't that disgusting? I hate to do pornographic stuff, but, you know, I have to. So this is another way of depicting the domination of the United States of Canada. If we Canadians dare trade with the US, we'll just lose our shirts, we'll lose our pants, we'll have to kiss, we'll get shot in the stomach with a bullet and all that. Okay, the next one is comparative advantage. This is the doctrine of comparative advantage. And what's the doctrine of comparative advantage all of that? Well, now again, we have two countries and two products. But instead of Canada and Costa Rica, I've got Canada and Japan. So, assuming no trade, that's the first two rows, no trade, how many wheat units can Canada make? 35. How many TVs can it make? Three. Therefore, it has a 38 GNP or GDP. Notice that the Japanese are better than the Canadians in everything. The Japanese are super-duper people. And what I'm trying to do is refute the idea, okay, it's okay for Canada and Costa Rica to trade. Each one is better than one thing. The other country is better than the other thing. They trade. Even the die-hard Canadians aren't... They really can't get their hatred up for that. Even Donald Trump wouldn't go there. But then the argument goes, well, suppose that the other people are twice as good as us or that the Mexicans, maybe not twice as good as us productivity-wise, but they work for much lower wage, so they'll eat our lunch, they'll take our clothes, whatever. So I'm trying to refute that one. Okay, so the Japanese, they can make 70 wheat units, namely they're twice as good as the Canadians in wheat, but they can make 100 TVs, so they're 33 times better at making TVs, and their GDP is 170. Everyone with me on the numbers? Okay. So now we have no trade and how many wheat units do we have in existence? 105? I'm adding vertically. How many TV units do we have? I'm adding vertically again. 103. And you can add either vertically or horizontally, and you get world GDP of 208. It's just an illustrative example that puts numbers on the issue, so maybe some people will see it this way, other people see it with equations, so I'm trying to do it in different ways. Okay, now we have trade. Well, which country specialized in which? Well, the Japanese are 33 times better than us Canadians, we're Canadians now. They're really stupendous, so they make the TVs, and we are fully half as good as those super-duper Japanese, and we specialize in wheat. So how much wheat can we get? Well, we double our wheat, and we double their TVs, and now you get 270. So the GDP of the world, consisting of two countries, goes up again, maybe not double, but it goes up appreciably. And now we can share the difference between 208 and 270, which is 62 extra units of TV wheat units, I'm assuming they're additive for simplicity. Okay, another cartoon before I get into the next bit of statistics. And here is Brian Moroney, and he's up in the air, and notice he's got parachutes, but the parachutes aren't working, there's nothing attached. So another way of depicting free trade is you've been just dropped out of an airplane and you're hoping for a parachute and a little parachute and you're gonna die. Just another way of illustrating this. Okay, the last one is another numerical example where we have a lawyer and a typist, and we assume that for every day that the lawyer works, he has to type a day in order to fulfill his obligations. So if the lawyer doesn't trade, and he's got two days, how much money does he get? Well, in one day of lawyering he makes $2,000, and in the day of typing he makes $150, and therefore he makes $1150 in two days. Now suppose he trades. Well, if he trades, he can work two days as a lawyer and makes $2,000, but he has to pay the typist who is as good as him at typing, or he's as good as her or whatever, and he has to pay a $300, namely twice $150 a day, and now he makes $2,000 minus $300, or he makes $1,700 in two days, and $1,700 is better than $1150. So again, trade pays, otherwise people wouldn't engage in it. Here's another way to depict free trade. Brian Maloney is on crutches, and the free trade crutches are undermined by Ronald Reagan, who's on this little thing, this machine, and he sort of knocks him over. So just another way of illustrating this. And I've got one or two others. Here's Brian Maloney. He's trying to... This is the elephant, the U.S. elephant, and this is Brian Maloney, and he's trying to train the elephant, and you can see he's not doing too well. And here's another one. He's being hoist by the pitard of the auto-pack. This is against Canada. I've got a few more cartoons, but I'm going to... Here's another one. Ronald Reagan pulls an eagle out of the hat. Brian Maloney pulls a rabbit out, indicating that the eagle is stronger than the rabbit. So that is pretty much what I have to say about free trade. The next topic that I'm going to broach with you is the minimum wage, because I think that also is in the news. It's part of what do they call it, fake news or something like that. So let's talk a little bit about the minimum wage law. My man Bernie Sanders, you millionaires and billionaires, you know? By the way, I went to high school with my man Bernie. We were on the track team together. He was one of the best runners in the city. I was sort of mediocre, but I had the same views as he did, and I got converted later by On Rand and Murray Rothbard. He was very charismatic as a high school kid. He was a nice guy, too. So he's got something going for him. Not economic theory, but he's... Malcolm X used to say to his people, you've been fooled, you've been bamboozled, you've been took, you've been hoodwinked, you've been led astray, you've been run amok, you've been hoodwinked, you've been had. Well, Bernie Sanders is trying to hoodwink people into thinking that we should have a minimum wage law. Now, what is it that determines wages? Why is it that LeBron James makes, I don't know what he makes, 50 million a year, something like that, when you take into account what the basketball team pays him plus all of his other activities, and a well-paid professor makes, oh, 200,000 a year, something like that, and the guy who asks you if you want fries with that makes $10 an hour. Why is it? Why is it that some people get high wages, other people get medium wages, and other people get low wages? There's one explanation, and it begins with P, and let's see if I can write it down in a way that everyone can see it. It's called productivity. That's why, and more technically, it's marginal revenue product, but productivity. LeBron James can put tens of thousands of rear-ends in seats. He can put a few hundred people's rear-ends in a seat, and the people who make lower wage can make less. Okay, so suppose that we have a person whose productivity is $10 an hour, and let's suppose that his, this is his productivity, and let's suppose that his wage is, oh, a dollar an hour. Is this a stable situation? Is this an equilibrium situation? No, because profits equal the difference between productivity minus wages, or $9. So what would you do if you were a businessman and somebody was making a dollar an hour, and you knew that if you had them on your shop or in your store, your receipts would go up by $10 an hour. You're a capitalist pig, ink, ink. You have cash register for a heart and dollar signs on your eyes. What are you going to do? Offer $2? No, you're no capitalist pig. You're a wuss. You're too generous. That's different. A dollar and one cent. A dollar and one cent. You don't want these people to get up at E. You give them $2. You double their wages. You don't want that. A dollar one. And now you make, instead of nine, you give them $8.99. But you can see where this is going, because the next guy's going to offer $2. The next guy's going to offer $3. The next guy's going to offer $4. Where is it going? It's going toward $10. Does it ever get to $10? An equilibrium will get to $10, but whenever we're in equilibrium, we're always moving around. But it moves toward $10, and it might not even get to $10 if there are costs of fining them. This is why the growers in California go down to Mexico with buses and trucks and bring people back up and pay them, you know, $2 an hour, because $2 an hour is more than the $0.10 an hour that they're getting down there. So this is a wage push up toward their productivity level, which is higher. And then you get Cesar Chavez, the Mexican union person who was going to say, oh well, you're not giving him hot and cold water. You're not doing this, so let's keep him out. The Mexicans are saying, what? You're going to pay us $2 or $3 an hour and we're making $0.10 an hour? You're our man. We're happy to come. But the Chavez type unionist doesn't want the, what do you call it, competing labor. Suppose I hated left-handed red-headed people. Just hate them. Anyone left-handed and red-headed here? No, good. I just hate them. What I would do if I had the power is say, they've got to make $50,000 an hour. Anyone going to pay them $50,000 an hour? No. So they'll never work. How is it helping? The minimum wage law is a racist law. It was initiated early in the 1940s in an attempt to keep black people out of the labor market because black people were making lower wages and companies were coming down the runaway firm leaving Massachusetts coming down south. It's a racist law in the very bad sense. It's an evil law. It doesn't help the so-called beneficiaries of it. Look, we know that demand curves slope in a downward direction. This is sort of a praxeological law. Demand curves slope in a downward direction. There's quantity. There's price. There's the demand curve. So when you raise the wage or you raise the price, whether it's a wage or a price, it doesn't matter. Whoops. Wage equals price. How are we doing here? You're going to buy less of it. If you raise... Look, when people don't want people to smoke, what do they do? They raise the taxes on it so that people will not smoke as much. Even Bernie Sanders would do that. If he wanted people to smoke less, he would raise the price. You want fewer plastic bags to be used and in California and other places, they're now eliminating straws and plastic bags and stuff. One way is to eliminate it, pass a law. The other way is to raise the price of it and people will use less of it. You want fewer abortions. Raise the price through additional requirements of licenses for doctors and hospital associations. This is sort of endemic all throughout the society. If Bernie Sanders wants people to have more fruits and vegetables, what is he going to do? Is he going to raise the price? No. He's going to lower the price. And when you lower the price, you get more quantity used. This is sort of basic and elementary. Nobody can really dispute that. So wages are determined by productivity. You know, we have other theories. Other theories as to why wages are determined. One of them is, well, it's employer generosity. The reason that LeBron James makes a lot of money is that the Cleveland Cavaliers or the LA team now that he's going to is just more generous. This is intellectually obscene. That's not why he gets more money. The reason he gets more money is his productivity. A lot of our friends on the left, they love foreign aid. Peter Ballard did a great job in showing why foreign aid was wrong. But do you ever hear a lefty say, let's stop this foreign aid. Let's just tell the Bangladesh and the poor countries, just raise your minimum wage. They never do that. They're logically inconsistent. I mean, if they really believe this minimum wage crap, instead of telling countries we're going to give you money, they would just say, hey, we've got a great idea for you. Just raise it. Then you get the problem of why is it, why just 15? Why be so cheapskatey? Why not make it 150 an hour or 1,500 an hour? I mean, if through the legislative pen, Barack Obama said he has a telephone and a pen, and through a pen, he could just raise everyone's wage. In Zimbabwe, the wage is higher. I don't like to brag, but I have a trillion dollar bill from Zimbabwe, and their salaries are probably 200,000 a minute or something like that. But they should be higher. And if they're higher, then no one works. Okay, so I went through this case where I talked about this person with a $10 productivity. The productivity was 10, and now the wage is going to be 15. And now the profit is going to be minus 5. So if a person's productivity is $10 an hour and you tell them that you've got to pay him 15, you're going to lose money. You might hire one or two because you're a good egg, but if you hire a lot of people like this, you're going to go broke. So the whole thing is going to fall apart. This is not going to help. Who benefits from the minimum wage? Sometimes, right now I've been talking about the effects of it, but why do we have it in the first place? Who benefits from the minimum wage? Well, what is the effects of the minimum wage? The effects of the minimum wage is to unemployed people with low productivity. Remember I said if there were left handed redheads that I hate, I would raise the minimum wage for them, I would unemployed them. Well, if you have a $15 or even a $7 an hour minimum wage, who gets hurt? The people that get hurt from a $7 minimum wage are the people whose productivity is $5 or $4 or $3. Who are the people like that? Well, young people have lower skills. This is why black people have lower skills for various historical and other reasons. The unemployment rate of black teens is quadruple. The unemployment rate of white male in their 50s. Quadruple. Whereas before the advent of the minimum wage, there was no difference in unemployment. There was virtually no unemployment. I mean, there are other sources of unemployment beside the minimum wage. There is the business cycle, there are other sources. But before the advent of the minimum wage, there was no difference between the various cohorts. There is such a thing in economics called compensating differentials. The deer is a very helpless animal, except that it can run fast. If it didn't have that compensating differential, the deer would be toast. The skunk, well, we don't have to go into its compensating differential. The porcupine. By the way, how do porcupines make love? Very carefully. The porcupine has a compensating differential. You know, the spears or the spines or whatever it is, the needles that come out of it. If it didn't have that, it would be a helpless animal. Unskilled workers also have a compensating differential. What's their compensating differential? Their compensating differential is the ability to work for a low wage. There was this Horatio-Alger story and nobody would hire him, so he went to the employer and said, hey, look, let me work for you. I'll work for you for free for one day. And if you like me, you can hire me. What would happen to a person now, you people, your employer, I come to you and I say, I'll work for you for free, just give me a chance. What would happen to you if you gave me a chance and paid me zero? Go to jail. You get arrested. I would too, because I'm disobeying the law, but I'm being exploited, you know, I'm the worker, so it would never happen. My favorite politician, Nancy Pelosi, I thought that was a good joke, but I guess... Maybe people think I'm serious. What is he? He lost his mind here. Somebody was interviewing Nancy Pelosi, a buddy of mine, Randy, and as it happens, and he said, do you have, what do you call it when you work for the senator for free as an intern? He said, do you have unpaid interns? I said, yes, of course, I want to help people. He said, but isn't that against the minimum wage law? Well, it is against the minimum wage law. Somebody's working and you're not paying them, you're violating the minimum wage law. And then he said, you know, shouldn't you be put in jail for that? You know what Nancy Pelosi's answer was? I'm going to call the cops on you. Seriously, it's on the web somewhere. Go Google this. And he said, why call the cops on me? I'm interviewing you. I'm not, you know, violating your rights or anything. I'm, and she walked out of the interview. The point is that if you were serious about the minimum wage law, you would have to say, you know, no more unpaid internships because an unpaid internship is even worse than $3 an hour. These $3 an hour is $3 an hour. Unpaid internship is zero. So we got to get rid of all unpaid internships. Okay, now I've got a sort of a trick for you. Let me pull this trick on you. Here is supply and demand. Here's the quantity. There's the price of the wage. And this is, what is it? This is $5 an hour. And this is a thousand workers. And now we're going to raise the wage to seven and we're going to have 900 workers. Everyone got it? We originally would, everyone was paid $5 an hour and we raised the minimum wage to seven and demand curve slope leftward or downward sloping so at the higher wage we're going to hire fewer people. And I'm going to get to the monopsony argument against this in a minute. But what is the wage bill? What's the wage bill is the amount of money times the number of workers. Well, what's $5 times a thousand? $5,000. What's $7 worth times 900? $6,300. So the minimum wage law sort of looks good. It's true that a thousand people, rather a hundred people will be unemployed. Everyone following us? But together all the workers will get more money. Now we're going to assume something contrary to fact conditional. We're going to assume that the workers are all brothers and they're all buddies and what they say to each other is look, I'm fair that a thousand of us are unemployed. So every 10 weeks one of us, a hundred of us are going to be unemployed but we're going to share all the money with all the other people. You got it? So everyone gets paid out of the $6,300, right? And what do they get? What do they get? Where are my math whizzes here? $6,30 is right. Namely you divide $6,300 by $1,000 and you get $6,30. Now, $6,30... Oh, I did it wrong. Is my handwriting too horrible? Is everyone following what I'm doing? Namely all the workers together are getting $6,300. There are a hundred of them. It's true only 90, 900 of them are working at any given time but they share it. So you divide $6,300 not by $900 in which case they all get $7,000 but they get $6,30 which is better than $5,000. So isn't the minimum wage law a good thing? What did I do wrong? Where did I make my error? Now, students in my classes in law don't tell anyone because I've done this in my labor economics class. Anyone see the mistake I've made? I'll give you a hint. Anyone got it yet? Elasticity. The elasticity is all messed up. This is an inelastic demand curve. Namely, as wages go up the total revenue is getting higher. Let me give you an example. At one time the minimum wage law in around 1937, 1938, I'm not sure exactly, I don't have my notes on that, was 40 cents an hour. They raised it to 70 cents an hour. This was the highest percentage raised of the minimum wage law ever. During that time if you went into an elevator there was a guy standing there. He wasn't a pervert. He was the elevator operator. You young people don't know what a typewriter is. You don't know what a telephone box is. You don't know what a manually operated elevator is. There was a manually operated elevator. You remember people of a certain age, vintage can remember this. You go in and you say I want the 15th floor and the guy goes like this and like that. The elevator is just a little bit off because in those days, and he said wait, I can do it a little bit better. And then he says step up or step down because you can't do much better than that. How many elevator operators got fired the next day after they raised it from 40 to 70? None. They can't fire any manually operated elevators until they get automatic elevators. See they had the technology for automatic elevators at the time. It's just that at 40 cents the manually operated elevators were able to out-compete the automatic ones. But at 70 cents, no more. But look, if you have a department store or a high-rise apartment house or a hotel or something like that and you have 12 elevators and they're all manually operated and you fire one and now you have only 11, you know what's going to happen. All of your clients are going to come and say hey look, we're paying rent based on 12 elevators and now they're only 11 or 10, we want a reduction in rent. So you've got to keep those elevators going. So what happened is that over the next few years one by one in dribs and drabs all the elevators were converted to automatic. And then all the elevator operators were unemployed and yet you'd think that they were very happy because their wages almost doubled. So there you had like a very inelastic demand curve. It was like this. Here was 40 cents. Here is 70 cents. There's wage, there's the quantity. This is the demand curve for that waiver. So the wage bill, if this is a thousand people goes up from 400 to 700 and nobody gets fired and it really looks good. But the point is that as time goes on the elasticity of all demand curves gets flatter and flatter, more and more elastic because it takes time to adjust and what elasticity is is the quantity adjustment to a price or a wage change. Okay now, see what I'm trying to do is I assume that there's a lot of heterogeneity in the audience. So I started off with those numerical examples about apples or what was it, weed and TVs and stuff. It was sort of easy stuff. Now I'm going to get into a little more advanced stuff because I figured I'll sort of cover the bases this way. Wait, I have to stop now? Oh, bitch. What I was going to do is the monopsony argument. A very specific argument trying to show that the reason you shouldn't raise it higher than 15 is because of monopsony. The monopsony argument, I have one more minute so I can make fun of the monopsony argument. It only works in places like Hershey, Pennsylvania where one company hires pretty much everybody. If you're interested in this, email me. I'm at wblock at loyno.edu and I've got several arguments, several publications trashing the monopsony argument in favor of the minimum wage. Thanks for your attention.