 Good morning ladies and gentlemen. Mark Thornton here. We're going to be talking about economic inequality this morning but I wanted to do a little advertising for my really short podcast called Minor Issues. It's really insignificant stuff that you're not interested in. It's not really important. Please don't share it with your friends or anything like that. Don't retweet me or anything like that. I'm not really interested in an audience at this point. I've already got you. So this is a huge topic. It's a major issue. Everything about what Washington DC is trying to do to us is infused with a lot of different policies but economic inequality is the major sledgehammer over which the socialist and the progressives, the Democrats and Republicans are beating the productive classes over the head with that we're being unfair, that we're being unjust, that all sorts of nasty things, people aren't getting enough food, people aren't this and that and the other thing and basically what this lecture explains today is that that's all a bunch of bologna. Austria and you're gonna see the upside-down nature of this thing. For the first point is major, it's fundamental, it's foundational and that is Austrians love inequality. We love the fact that we're all humans and a lot of the lecturers and quotes and stuff refer to man, this and men, that. That's just a very ancient way of referring to all humans, male, female, children, past, present and future but we love economic inequality, it's a vital, important and we're gonna see a really necessary and very beneficial thing about us is that we are fundamentally, we have inequalities amongst us. Some people are taller for example, hasn't done me a darn bit of good except I have to wear funny sizes of clothes that aren't available in the stores or even online sometimes. There are many different types of equality and inequality and the socialist and progressives use that confusion to their benefit not to ours and basically they want to use coercion to address this so-called problem of economic inequality and basically what I'm gonna show is that it's basically a bunch of distortions and a bunch of lies, outright lies and basically what we're gonna do is use reality history and in theory to explain why that is the case and I want to start out with a quote from Murray Rothbard, if men were like ants there would be no interest in human freedom. If individual men like ants were uniform, interchangeable and devoid of specific personality traits of their own then who would care whether they were free or not? Who indeed would care if they lived or died? The glory of the human race is the uniqueness of each individual. The fact that every person though similar in many ways to others possesses a completely individuated personality of his own. It is the fact of each person's uniqueness. The fact that no two people can be wholly interchangeable that makes each and every man irreplaceable and that makes us care whether he lives or dies, whether he's happy or oppressed and finally it is the fact that these unique personalities need freedom for their full development that constitutes one of the major arguments for a free society. So this is fundamental. Now there are various aspects and definitions of human inequality. Some of the things that Rothbard was referring to, you know, they're basically through all aspects of humanity. There's the physical and biological differences. There are our individual tastes and preferences. People have test out on IQ test differently. They have different interests, hobbies. They have different talents, different education and training and experience levels. Your experience is different from mine. Your education is different from the person next next to you. We have different tastes for labor and leisure. Some of us are go-getters. As a matter of fact, I'm assuming that most of you are go-getters and that you're not couch potatoes. As a matter of fact, the only thing that you all have in common probably is, you know, a few weeks ago or a few months ago, you probably all experienced pretty much the exact same thing, which is when you told your family or you're told your friends that you were going to Alabama for a week in July and then after that they didn't hear anything. They were just like, why? You're going to say, why? So that's something we all have in common. Risk-taking, you know, I'm a wimp when it comes to risk-taking. I've got entrepreneurial ideas but I don't have the risk-taking entrepreneurial spirit to accommodate that. So there are entrepreneurs that do and most of us prefer to be employed by somebody, getting a regular paycheck, right? A lot of us like that security rather than the uncertainty of the direct possibility that you might fall on your face, okay? Now, we've known a long time more than a couple of hundred years, according to the law of comparative advantage, that despite all these differences, everybody has a comparative advantage out there in the economy. Everybody can fill a hole. Everybody can play a part in serving each other's wants and desires out there, whether that's being a school teacher or an electrician or doing some kind of bookkeeping or working on computers or writing articles or whatever it is, everybody's got a comparative advantage that's recognized in the marketplace. Now there are also a lot of dubious forms of equality that really don't hold up. They're not true. They're obviously wrong. Inate equality at birth is obviously wrong. Every baby is different. Every baby is precious. Every baby is unique and it's great. Equality by birth is obviously wrong. These are things that more or less everybody agrees to. Equality of opportunity has been advocated. It's been tried. You can't force equality of opportunity. Equality of result has also been advocated and tried and failed. And very often the attempt to create equality of result creates a lot of unintended, unforeseen harm to a lot of different people. As a matter of fact, those attempts can backfire and in the extreme of pure socialism with equality of everything you can possibly come up with, including equality of result, has the possibility of destroying civilization. Economics or the marketplace recognizes this reality and demonstrates the benefits of all of this inequality. Now there are also a lot of systems of equality and inequality that are talked about, that are written about. There's natural law and the rule of law which provides some types of equality and justice. I'm not saying it's their perfect systems, but they do create some levels of equality and some amount of justice. Whereas theocracy, monarchy, democracy, dictatorship, socialism and progressivism are all basically caste systems. They create classes in society, the haves and the have-nots, the rulers and the ruled. And obviously there's going to be a lot of injustices, economic and otherwise in these systems. There's also greatly reduced economic mobility. In other words, even if you're, you know, if you're not in the favored class and you're just with all the rest, your opportunities are going to be reduced. You're not going to have the same mobility that you would in a capitalist, a pure capitalist or in a narco-capitalist system which maximizes economic mobility. And economic mobility just means opportunities are maximized and opportunities taken often allow us to be economically mobile. So you might be born poor, but if you have enough opportunities and you take advantage of some of them, you can get ahead. Okay, that's the, that's what America is kind of one of the founding stories of America is that people could come here dirt poor without anything and do anything that they wanted to basically. If they put their minds to it, if they put their backs into it, they could achieve great things. Some people could achieve great things. And as part of that development story, we have to recognize as a matter of policy, let's say, reality of this diversity that nature imposes upon us. Bon Mises said, quote, the diversity of nature which does not repeat itself but creates the universe in infinite inexhaustible variety. Okay, we have to recognize that. We have to recognize and then accept it of this diversity. Freedom is obviously going to be a critical issue in human development, despotism of all sorts, stymies, our creativity and our humanity and especially our productivity. That's what history is all about. A story of either freedom or despotism. Development means rising above nature, rising above subsistence. And in the last couple of hundred years, the miracle of humanity is that we've gone from more or less an animalistic stage 10, 12,000 years ago and about four, three hundred years ago, we entered a phase of human economic development called the Industrial Revolution. Fundamentally changing humanity, fundamentally moving us beyond the level of subsistence, moving us beyond the level of, say for example, Malthus' population doctrine, which said, you know, if we ever get above subsistence, we're just going to have more kids. We're just going to be able to support more kids, more mouths to feed and ultimately, there's going to be a die-off down the road. There's not going to be progress. We can't rely on a super abundant nature. There may have been a Garden of Eden, but it's not everywhere where you get a super abundance of everything. So that doesn't really exist. You need something else. And economics explains that. The specialization and division of labor, taking advantage of comparative advantage, our uniqueness and increasing our productivity, even Adam Smith recognized that. And it's at that point where we get this increased productivity, where wages rise above subsistence and when wages are less than consumption and people are actually saving money for the future, where they're creating those people who consume less than they earn and save it for the future, they're creating the raw materials for capitalism, machinery, structures, tools, hammers, nails, threads, needles, machinery, all of the stuff that makes us more and more productive. And so we have a system of economic growth that we can take advantage of. It relies on savings and savers. It relies on the capitalist who accumulate those savings and direct those savings. It relies on entrepreneurs to create a flourishing capitalist system. And we'll get into income distribution in a free society, but I'm talking about it now. Capitalists are paid interest to contribute these savings. This capital, today it's stocks and bonds. But it wasn't always that way. Whether you start with Robinson Caruso or however where you want to go in the history of human development, capitalists are paid interest to contribute that savings into the productive process. So they're willing to forego consumption and their willingness to turn over that savings to entrepreneurs or to work with entrepreneurs hand in hand is what puts all of the resources together into a capitalist mode of production. And guess what? If capitalists weren't paid to save, they weren't given interest or some kind of return on their money. They'd be far less likely to save. They would certainly be far less likely to turn it over if they weren't going to get anything in return. And guess what? If you tried to steal that savings and say, we need it more than you do, you've already got so much, so we're just going to take it from you. Well, not only are you going to discourage that one capitalist, you're going to discourage all capitalists and you're going to end up right back in subsistence. You can do that through socialism. You can do that through socialism. That's what socialism, that's one of their main goals is to kill off, is to take what they have, what the capitalists have, and generally they like to kill those people off as they're just troublemakers. Entrepreneurs borrow in order to pay labor for their work. I mean, labor has to be paid at the end of the day, the end of the week, two weeks or a month. But very often what the labor is working on doesn't actually get sold until much later. And so who funds the ability of businesses to pay labor now when the money isn't coming in until much later? Savers or capitalists. So the entrepreneur is very important as well. They bear uncertainty. They work with capitalists. They may be capitalists themselves, obviously. Every role in the economy is very often a lot harder than it looks. And I go through the division of labor and how amazing that is in terms of our standard of living, our population, our life expectancy, really even the equality of results and achievements. We all serve everyone else to our mutual benefit in capitalism. The population of the world is much greater today than it was a hundred years ago or a thousand years ago. And the world, the globe can support a much larger population. And guess what? With a much larger population, you know, the commies, the socialists, the progressives, most of our intellectuals think in terms of a zero sum society, that if there are more people eaten off the pie, that means much less for everybody else. And that's not true. By and large, the more people we have, the more uniqueness we have within our population, the much greater we are to do wonderful and amazing things. You know, Elon Musk is always in the news. And you can tell the guy is a little off kilter. I mean, even I can tell that. So, you know, a hundred years ago, 200 years ago, what would have, what would Elon Musk have become? So we, you know, we take up about 2% of the planet. So there's a lot of planet left. We can grow tons more food, especially with technology. The idea that there's some kind of resource constraint is ludicrous. Okay, so everybody in this process, you know, you've got to, you've got to do something. You've got to be actively participating. You've got to, in a sense, be contributing based on your self-interest. But what you're contributing to really is also the standard of living of the person sitting next to you, or people you'll never meet, or people you'll never know. So I didn't have time to really come up with a good graphic for this. But incomes in the free market, of course, they're direct. Okay, labor earns a paycheck. Capitalists get dividend checks. They get, you know, interest on their savings. Entrepreneurs get profits. Okay, so it's more or less a direct system. Labor contributes its labor time. And it paid wages for that time. And they're paid up front, essentially, in the production process that you actually have to work before you get paid. But you get paid more or less. I mean, a long time ago, you get paid at the end of the day. And then it was at the end of the week. Now a lot of paychecks come after two weeks or four weeks. But you're more or less getting paid simultaneously with your effort. So you don't have to wait for your money. Landlords or resource owners, the terminology in economics sometimes is a little old fashioned. So back in the day of Adam Smith and prior thinkers, you know, there was really labor and land. Prior to capitalism, there was labor and land. And you had to farm. You had to hunt. You had to fish. You had to grow. You had to, you know, do all of that. And you only had land and labor, really. And so the resource owner was traditionally called the landlord, the person who owned the land. Nowadays, the landlord owns the apartment buildings, such as the delay in economic terminology. But the landlord provides resources like land, but other resources like oil, coal, forests, so on and so forth. And they collect rents. And that also is a little bit of a dated term. But basically, the landlords get paid at the end of the season, at the end of the harvest, you know, that sort of thing. So they're more or less paid pretty much simultaneously. The capitalist who provides savings is paid interest on that savings for foregoing, first of all, to accumulate the savings and then foregoing consumption and then turning over these savings to others for productive purposes. The capitalist only gets paid over time. Okay, so the workers get their money immediately. Resource owners get it a month or two or three after the fact. And capitalists get it over time, but in a delayed way. And then entrepreneurs, who the socialists and the progressives, everybody hates entrepreneurs, where anybody with any common sense and any experience in the economy realizes that entrepreneurs are the people who bring forth all of the neat toys, all of the great medications, all of the things that advance our standard of living. But they only get paid after the fact, and after everybody else gets paid. And the entrepreneur may not get paid at all. Okay, so these are classifications. And in fact, people in the economy are very often a mixture of this. So I may be working a job, I may be saving money, I may have a side hustle. So I may be little bits and pieces of all of these categories. And in fact, we are. Misa says that even the worker who's choosing a profession is undergoing uncertainty about the future because we don't know what the wage rates in that profession are going to be. So that's the reality. This is how the market, independent of any government, that's where income is generated. So income in the marketplace is not distributed, like manna for heaven, randomly just coming down, falling into people's pockets. Labor generates an income. Landlords generate an income. Capitalists generate an income. And entrepreneurs may or may not generate an income. Most entrepreneurs, especially if you consider the time involved, especially if you consider all of the work as labor that they do, especially if you consider the fact that they have to manage the company, they have to make decisions, they have to bear the responsibility of uncertainty. The return on entrepreneurship, I know we've all heard stories of Musk and Gates and all of these people who have billions and billions and billions of dollars or their children have their billions and billions of dollars. But most entrepreneurs don't make it. And a lot of them that do are working hard every day. They have the managerial responsibility. They have the decision-making responsibility. It's a pretty rough road. And if you're a wimp like me, I'm not willing to do it. Okay, this is pretty important. It's a point that's been raised, Professor Fagley lectured on socialism, how that it was inefficient at best in its weaker forms and impossible in its pure forms. And when Mises was vindicated in the 80s when the communist countries fell, threw off most of its socialism, the socialists decided to accept their fate. Robert Heilbruner, who was a very famous economic writer at the time, he was actually a senior person in terms of economics and economic journalism. And a socialist said that Mises was right and that socialists must now turn our attention to, instead of the economic stuff where we're not so good with, let's turn it our attention of society to equity, equality, and ecology where there's not enough facts, there's not enough evidence to really prove anything. So we can go about our business destroying society and taking power and imposing our will on the population and we can get away with it because nobody knows what's going on. So in terms of equality, they want to redistribute wealth, they want to redistribute income. Thomas Piketty, who's been writing a lot of famous big selling books. I still haven't met anybody who's actually read the books. I had a friend who reviewed the book and I wrote him and I said, you got to really tell me what's really going on in this book. He said, well, I didn't really read the whole thing. I took him off my list of reviewers, by the way. Turns out that I like book reviewers for the quarterly journal of Austrian economics, which we produce here at the Mises Institute under Professor Salerno's leadership. We do like our reviewers to read the books. And then in terms of ecology, global warming, climate change, blah, blah, blah. And you could throw in technocracy and the vaccines and COVID and all the rest sort of fit into this discussion. But just with ecology, global warming and climate change, the idea that they want to regulate every little aspect of our daily lives down to the smallest, minutest detail, because they think they're going to change the weather. So government can't do anything right. They usually screw up even the smallest little details. And so now their proposition is, if you give us complete control over your life, we'll control the weather for you. Let's hope you didn't, you haven't bought into any of that. Okay, now what does bias income incomes in the economy? Well, there are three main things that I want to talk about and mention today. They all work along the same lines. So this is easy to remember. It's easy to take notes. You can put it on a post note, put it on your forehead, and walk around your campus and maybe people will put you away someplace. Government itself is a bias towards income distribution. Politicians and bureaucrats gain while taxpayers and citizens lose. I mean, I've studied government, I've been in government. I know what a government job is like. And basically, if you take their pay, you take their benefits, you take their job security. And let's just say they're doing basically the same job and the same work effort, toil, strain, all that kind of stuff. People in government get paid, again, taking pay, benefits, job security, and other features, like when I was talking about the minimum wage. You know, the minimum wages are not a two-dimensional thing. They're a multi-dimensional thing. So recognizing that, people in government make basically twice the amount of money as people doing a similar job under free market conditions. So politicians and bureaucrats gain taxpayers and consumers, citizens lose. Likewise, with government-created monopolies, government is the creator of monopolies. Government is the creator of monopolies. And it's not surprising that the monopolist gain as a result of a government-granted monopoly. So the classic example is a patent. The patent holder can make enormous gains, but everybody else is cut out. So they have to go to a lesser desirable situation. So if you wanted to be an electrician and you need a license to be an electrician and you can't get a license to be an electrician, even though you know how to be an electrician, then the licensed electricians make a lot more and electrician's helpers or wherever you happen to go is a lesser desirable benefit and wage package than if you were in the free market on a level playing field. And obviously we've talked about that. So that the losers, those people get kicked out because of the monopoly. They lose and also consumers lose. And of course, the central bank, you know, we're going to talk about that this week too. You know, there are favored class of government, government contractors, banks, large corporations, which benefit from the Fed can take advantage of their low interest rate. Everybody else is left out to dry. So there are winners and losers, but it's almost entirely due to government. Now, I'm going to talk a little bit about the actual state of income distribution because you've been bombarded by the mainstream media and everybody else that the rich are getting richer and the poor are getting poorer and that's wrong. The government statistics that all of those stories are based on are untrue. They fail to count for the total number of welfare dollars given away by the government. They don't account for 100 cash based welfare programs at the federal level. So they account for a few, but they don't account for even the majority of welfare programs. So the statistics you're hearing about leave out a whole bunch of government giveaways. It also, these statistics don't take into consideration all the taxes paid by the productive classes. The second, third, and highest income quintiles pay all of the taxes really. The lower quintiles, the lower 20% categories of income pay almost no taxes, earn very little income, and engage in very little work effort. So it doesn't take income redistribution from taxpayers to welfare recipients. The majority of it is not taken into account and much, much more than that. But I want to get to the results which are reported in a new book called The Myth of American Inequality, How Government Biases the Policy Debate. It says forthcoming, but it's out. And there have been a couple of other newer studies which confirm these results. So this is not just a bunch of crazy economists doing this, statisticians doing this. And actually the people within government, within the Bureau of Labor Statistics, they realize that the statistics are fundamentally flawed. But this book looked at the last 50 years, and they recalculated incomes across the quintile. So there's the lowest 20%, the next highest 20%, there's the middle 20%, there's the fourth quintile, which is upper middle class income, and then there's the fifth quintile, the top quintile, the top 20% of income. This graph from the book looks at basically the calculation of incomes, and it looks at especially sort of the standard distribution, which is what's reported is this is what the highest incomes get, and this is what the lowest incomes get. So this is what's being reported to you. This is what's written about in all these op-eds and stories is this is how much the poor get, and this is how much the rich get. But because they're not taking into account welfare benefits, the majority of them, and taxes, the majority of them, once you do that, the income of the really rich falls from this level to this level, and the income of the poorest people rises from this level to this level. And guess what? One major reason why so many Americans are pissed off is because they're working right here. This is the middle class. They're working, and they're paying taxes, but they're not much better off than the people who are sitting on their chairs. Also, here's another enlightening figure from the book. The U.S. poverty rate over the last 50 years, okay, before we had a war on poverty, after World War II, the U.S. poverty rate fell from 35% down to, I think it was 14.7% right before Johnson's war on poverty began. And ever since Johnson's war on poverty began, the government has been adding one more welfare program after another, and it's not surprising. And so if you're adding these welfare programs and you're distorting income and consumable income statistics, what's actually happened to the poverty rate since they put the war on poverty in place is that it's essentially been flat. It goes up and down with the business cycle, employment goes up during the boom, poverty goes down. In the bust, jobs go away, people go back into poverty. But if you adjust those figures for taxes and welfare, the poverty rate in the United States, after all of this redistribution falls to about 2%, one of the best poverty levels in the world. Now, I really have been rushing through this, and I actually have enough time to mention this very important thing, and I think it was a friend I was eating lunch with, was it Nick who reminded me, he didn't bring up the point, but our discussion reminded me of something that's very important to this whole week. And that is the equality depopulation connection. Okay, so a lot of you have expressed frustration with this dehumanizing form of socialism that has been imposed on us, that they don't care if we die from vaccines or, you know, that all sorts of crap where they just don't seem to care about people. You know, Bill Gates and some of these technocrats and ultra-rich people, they want to depopulate the world. They want to kill off people. They want to reduce humanity. They want to shrink us back, I guess, into the dark ages. And then there's the whole equality business that is unrealistic, to say the least, but is disastrous in and of itself. There is a connection between these two, and that is disasters do create economic equality. So if you wanted to engineer economic equality, one of the things that has, one of the only things that's worked in human history is disasters. And there's a book by a guy named Walter, something, look it up under Walter, not Walter Block, where he points this out, that every time there's a natural disaster or human disaster, man-made disaster, economic equality improves. So the first example is the Black Death, the plague in Europe. It depopulated, it killed off half of the population. And guess what happened? Wage rates went up. Not much of a consolation prize. I mean, there was all the capital and houses were around. The land was still there, but they only had half the people. So wage rates rose. Everybody had a place to go. Okay, but that's not much of a consolation. If everybody in your entire, in village is dead, and you're left, you're the only one left to bury the bodies, but you got paid well to bury the bodies. Okay, so that's disaster and equality. And the other big one that Piketty and others emphasize is post-World War II America, when the worker improved and got a middle-class income and blah, blah, blah, good, high-paying, stable jobs. Well, that only comes after the world almost destroyed itself. World War I, 50 to 150 million people died on a much smaller population. I don't know what the figure of World War II and related is, but it's in, you know, like 120 million people. Of course, we had the Spanish flu after World War I, which wiped out tens and tens of millions of people all around the globe. And then we had the Great Depression. Family formations were way down, all around the globe. Population growth was almost non-existent. And everybody was poor. People weren't getting married. People weren't having kids because they could barely eat. Okay, so if you're interested in getting married and having kids, that's great. But eating is kind of a prerequisite to that. Okay? I don't know much about marriage and childbearing, but that's one thing I do know. Eating is essential. So disasters depopulate. Wages go up. There's a relative abundance of labor and, excuse me, not of labor, but of land and capital. And so labor share of total income goes up. And there's more equality for labor, and it increases economic inequality. So, you know, as the socialists and progressives and commies hurl us in the direction of global disaster, you know, the silver lining to all that is, you know, we're going to be a little more equal as a result. Thank you very much.