 Well, good afternoon. Let's go ahead and begin this this talk on free trade and its enemies We'll divide the material into two parts first part We'll just make make a quick overview of the case for the market economy. So, you know, what do economists say? What's the basic reason why we should have laissez-faire? So we'll do that first and then we'll narrow the scope of the argument to also make the case for why one country within a world of Interventionist countries why that one country should still maintain laissez-faire what what the art what argument could be offered in that respect? So that's what we'll do at the beginning and then in the second part we'll take the we'll take the enemies of free trade or the enemies of laissez-faire and You know the it's impossible to give an exhaustive list of all the enemies, right? It's just like their name is Legion and so So I've just picked out some of the some of the more prominent ones and it covers the history of thought So I you know some are being advanced now and some some are old arguments and So that's how we'll proceed and maybe in the you know later in some of the We have the panels this afternoon that you know questions could be asked about other items that I you know passed over Now let me also make one Clarifying remark before we jump in and this is on the phrase free trade this phrase is ambiguous in the literature There's free trade in the narrow sense and this is the way you would find it stated most often in the economics literature free trade just means the unimpeded movement of goods across political boundaries, right? Whereas capital and labor seem to be immobile that they don't move between countries That's the kind of classic Ricardian case of what in the literature is called free trade I'd like to use the phrase free trade in the broader sense of just meaning free free free trade right free movement of you know all all things across Across borders so so in particular in other words, it would be not just goods, but also investment capital movements for free in In a free trade regime. So so I'm going to use that more expansive definition Okay, so let's quickly rehearse the case for the market economy. This will be I've been developing throughout the throughout the week And what you've you know read about and studied about and so on and the Austrians have a particularly I think convincing Argument that you won't really find Least not emphasized in the mainstream that centers around as we talked about on Monday this concept of economizing in Society we want to be able to economize the use of resources. That's why we have an economy We want to be able to direct the resources toward the higher-value Consumptive ends and we want to arrange the production processes in the Lowest cost way given given our situation and the way we value things and so Following Ludwig von Mises the argument is that this economizing decision-making about the use of resources can only be done in a market economy Because if we don't have a market economy then we're stuck with the problem of the impossibility of interpersonal utility comparisons And this week we simply cannot do and and so the socialist economy is literally impossible In its pure sense as Dr. Salerno explained in an earlier talk so in the market economy then we we have We have the entrepreneurs arranging the division of labor by making economic calculations of profit and loss for the different lines of producer goods and economic calculations of equity net income and from Investing in particular combinations of assets. That's how they know what assets to bring into their organization and and own or which to disperse right and sell off How each entrepreneur combines the assets into an organization and so both of those things can be done through appraisement by the economic calculations of net income and net worth so so this is the basic thrust of the argument So the market economy then if we have a pure market economy if we have an unhampered market economy then this process Proceeds to the greatest extent possible and then if we have any government intervention the problem with this of course is that government intervention moves the Control over resources away from the economizing decision-making the entrepreneur and into the hands of bureaucrats who can't economize All they can do is make decisions on on some political basis some other basis, right? And so we lose the economizing attribute of the use of those resources They come outside of our control right as consumers and they go into the control of an elite who is sheltered from the from our Consumptive demands dictating what should be used with those things And so they're used inefficiently according to our consumptive demands, right there They can't be used in an economizing way anymore So this so this is the basic argument for the for the market economy And then and again, I said we can make this very quickly and so then then let's go on to this a little bit more difficult question Well, what if we then don't have one like gigantic world unhampered market economy that would be the ideal? social arrangement of course From the economist viewpoint it would economy allow us to economize resources to the greatest degree possible But what if we had different countries different polities Right, and each polity then has its own Political decisions about interfering with this market process well It follows directly from what we argued before that The best policy for all of them to adopt if they all adopt the same policy the best policy for all of them to adopt Is complete laissez-faire right they should just do what what would be done if they didn't exist anyway as States, you know just leave You know let the private property order develop along the lines of the entrepreneurial innovations and then our ratification of these These lines of production and investment according to our demands And then then again, we'd get the same economizing result as if we had a world As we started at first with totally unhampered right we had no No central economy at all. So again, that's not a very difficult The point to arrive at the more difficult Point is this question of What should we do in the real world in our country when we're surrounded by by other countries that are Belligerent and the states are belligerent right and they're intervening both domestically and maybe then with with us in our country Is we try to trade or with them or invest in their country or allow Investment right of their citizens into our country and so on and so forth. What about that? What what should we do then should we retaliate should we you know, should we go to autarky and right these would various options that we have now Hopefully again, it doesn't to take you too much imagination to see that even in that world The best policy for us is laissez-faire the best policy for a for a country in a world of You know status Countries is still laissez-faire That's still the best thing that we can do because again, it means that Given the restrictions that have been placed on us by state intervention from the outside and given the natural restrictions, of course That always exists on human action If we adopt laissez-faire, we're still able to economize as best as possible Right, so so there's this is a generalizable argument. There isn't again a lot of work to do here theoretically This is just the same argument. We would make with respect to a domestic intervention in other words of the government intervenes and they create You know, they subsidize electric Vehicles and this then creates, you know a Suppression of the production of innovative activity in in internal combustion engines Like Volkswagen's great development of diesel powered cars something like this You know professor Terrell drives Volkswagen's diesel Volkswagen's He he has a little Passat He drove up the South Carolina told me he got 51 gallons miles of the gallon 2015 Volkswagen that was the year they were banned, right? He picked one up right before the you know, they got into all the big problems, okay? So so so we wouldn't say, you know, hopefully you can see right away that it would harm us if we then said Well, because you know because domestically we've got this This waste as we see it right as subsidies of the battery power cars that we then you know also Let's say subsidized diesel Engine production right this is that would be doubly bad that would just mean now that we have two sources of Interference with the economizing activity of of the government instead of just one Right it would to give you an even simpler kind of illustration if I'm running a farm let's say and I'm You know one of my suppliers cuts me off You know he says look we're not going to trade with you anymore because whatever you're too bourgeois You know, we don't like the way you dress or you know, whatever it is We're you know my my proper reaction to that would not be because this would just harm my interest right to Retaliate so to speak by saying well if you're not going to sell to me. I'm not gonna sell to you You know, I'm not gonna sell you my pigs anymore. So forget you right? This is hardly conducive to my own economizing You know, I would only do that out of out of psychological spite or something. This is the point is that this would not be a favorable to my own material Activity right so so we can see this fairly readily. So of course we shouldn't retaliate. We should just be We should maintain laissez-faire in the face of this now Maybe if this by the way if this claim doesn't seem obvious to you that that's the point of going through the Counter arguments, right? That's that's the point of going through the arguments for protection You know, maybe one of those guys or gals who made arguments for protection comes up with a you know a good Rebuttal to this claim. So so that that's kind of the path that we're going to take Okay, so that's the That's the framework that we started out with okay, so now let's give a strict definition to what I mean in the talk by protectionist policies so the state in one country coercively interferes with market activity between people in that country and people in other countries so they You know they tax imports right They're sold by the by foreigners to people in the country or they put quotas on on goods that could be exported or imported This kind of thing and then as I also mentioned we want to include Capital controls they might place they might restrict investment from foreigners into their country No, no, no, we you know, we don't want any Chinese factories, right Chinese owned factories We don't we don't want that to Kia plant over in Georgia, you know, whatever right? We want that to be American owned That that would be the idea And and the flow of money too, right? We could have we could have controls on state intervention on the controls of money so this is what we mean by protectionist policies and as we we we're getting a first-hand experience with this of course With the Trump administration, we know that we know the rhetoric of this is always we're gonna by doing this by imposing these protectionist measures We improve our own citizens well-being And again anyone trained in any Economics whatsoever Knows that that seems not quite right at the beginning, right? It seems like something like this would only would initially at least only help one group And then would harm another that that again is pretty easy to see right But it doesn't seem like society overall is made better off by these kinds of impositions You tax imported cars or whatever and now you can see how that would help domestic producers, but the consumers How does it help them? Right? And so, you know, so you have to weave these apologetic arguments right you to weaves protectionist would have to weave some sort of Additional claim with respect to how this benefits society at large. This is the typical thing again as we've seen in several talks today Dr. Klein and And Dr. Newman You know oftentimes this is just rhetoric They know full well what they're doing and that they're ripping us off and and so on but you know We need to as intellectuals we need to penetrate We need to see the truth of it right the truth of the matter and not concern ourselves at least primarily with with the The give and take of the interests that are pushing one way or the other. I mean that that you know Professor Rothbard of course was great at that but that was sort of a secondary thing That was sort of his hobby right to write about this progressive stuff and history and that was you know Made him laugh and what gave him fun in life was to smash all those people But but the actual intellectual work was to do the economics right to do the economics or to do the political Philosophy to get the get the truth right we want to get at the what's really real and and so on so So this is this is our approach Okay, so anyway, let's jump in If we want to start with the historical case at least in the Western world we'd start with mercantilism And this has been mentioned a few times And as Rothbard points out mercantilism which was the policy of Royal absolutism in Europe From about the 16th to the 18th century is what the British classical economists overturned Quite dramatically with with their work and will mention their arguments here in just a minute and the the protectionist element of this came in the wake of the success of the Spanish Mercantilists who you may remember Exploited the gold and silver mines of the New World by conquering and enslaving the natives And they had this steady production of gold and silver coin going into Spain From the New World right you had this money inflow and It was coming a court since this was a government production operation Slavery and right and the the ships were all owned by the state and they took the stuff or contract subcontracted By the state and they took the gold back and silver back to back to Spain. There's the crown got to spend the money Whoop-de-doo that seems great right and then they built their armada and this didn't end well, right the Spanish the Spanish You know they had this empire and Where have they been lately? I mean But when this was going on it looked great to the other countries I had to France to England to the to the monarchs of these countries now Spanish had already gotten the mines Okay, so they probably couldn't replicate this very easily this this particular system, but they thought hey look we can just arrange International trade we can just interfere international trade to create money and flows. That's not that's not hard to see how to do that Right. So so this is where we get a protectionist policy That's designed to do what the inflow of money was doing for Spain to enrich them to generate a boom at least Temporarily so all you do is subsidize your export industries right and tax imports And then you'll be able to render a favorable balance of trade as professor Salerno was talking about Which means that money will flow in and then well you're you know, okay? So this is this is We can replicate what's the prosperity of the Spanish crown by doing this And so that was probably the first sort of protectionist mercantilist doctrine Now as I mentioned this was smashed by the British classical economists And leading the way here was David Hume if you remember Studying anything about the the anti mercantilist Points that were made by the British classical economists Hume was just fantastic on money and Adam Smith was just terrible on money But Adam Smith was really good on other stuff or other anti mercantilist stuff, right? But not very good on money. It was and maybe this was just because Hume had already done this work But but what what Smith should have done of course is said Okay, here's my little section on money see David Hume, right see David Hume's pamphlet on money Now this says it all that's but he had to go his own way and invent some crazy stuff but anyway Professor Salerno has already explained this about the the so-called price-species flow mechanism If you artificially create an inflow of money that isn't being demanded by people in your country It's you're not bringing in more money because money demand is greater by people in your country than it is in other countries But you're just you're just skewing exports and imports through protectionism As soon as people get the new money in the country, they'll spend it They'll drive prices up when they drive prices up then your exports will fall right because they become more expensive and Imports will increase and and so it's self-reversing This this is the first example. Well, maybe it's not the very first, but it's a very prominent first example of a self-reversing process the state intervenes in some way and then it It actually sets in motion a dynamic that reverses the The effect of the initial intervention the business cycle is another prominent example of this, right? Governments, of course, can maintain certain physical expenditures Right so they could prop up a big, you know military industrial complex. It's just by taxing us and spending the the money the tax revenue on Airbases and so on and so forth. Well, we know this right we see this ongoing. That's not self-reversing That that's a government intervention that can be sustained right at least in some degree But here's one that's actually self-reversing nothing the government can do about this as long as they allow trade They don't shut trade off completely that this process will in fact occur and it's just itself Refuting it's there's no point in doing this even from the perspective of the government officials Hume also added a second argument here where he pointed out that Money is not like any other good in at least well a couple respects, but in this one respect If we have more labor or more Usable lands area in society or you know more and better capital goods or if we have more consumer goods That's socially beneficial this convey, you know, some people will be better off and none worse off You know depending on how the new goods are distributed, but if we have more money in society It conveys no overall general benefit to people in society to put the point a little bit differently Any amount of money is sufficient to perform The entire medium of exchange function in society at any moment in time, right? So if we had twice as much money, we'd make exactly the same number of trades It's just that prices would be twice as high if we had half as much money We could make exactly the same trades it as long as prices are half half as high And so you could see right away that having more money doesn't really convey any improvement in the social function of money as it does with other goods and so so Hume is cutting undercutting this argument that hey if we bring in more money through this protectionist policy It'll benefit society No, no, no, it won't benefit society because any amount of money is sufficient to perform the entire social function of money And so we can't you know, this is a this argument doesn't get started Very well The other thing to point out here is we'll spend just a little bit of time reviewing Balance of payments accounts. This is an important point in this been stressed by Professor Salerno in a couple of articles not not so much in the international trade area, but He's even shown that this is a the application Can be extended from international trade where this idea arises? It can be generalized and applied to other areas So as he points out if we think about aggregate aggregates of spending like all consumption that we do together or all investment we think in the Keynesian way about You know total consumption spending and so on as he points out these are not causal factors in the real economy These are effects of what's already happened in the cause-and-effect chain Right, so what happens is we we have a you know our property ownership and we have our social Arrangements and right our division of labor and so on and then we we make expenditures we have demand and we buy things and The effect of our buying is an expenditure Just like it's a revenue for the Entrepreneur right and so on So everything has to be kept in the in the proper cause-and-effect sequence To see what the cause-and-effect character of expenditures is They're not they're not the first step in the causal chain, right? Expenditures do not cause the array of production We have to put them in the right Place in the chain of reasoning this is what Salerno has pointed out so it's the same with balance of payments accounts So let's just quickly think this through Let's suppose we receive goods This is in any setting we receive goods from the sale of thing or if excuse me funding from the sale of things So we sell something and we receive Funding in exchange then what are our options in terms of? Dispersement of this income that we've earned by selling something Well, we can buy goods and services from other people with our income that we've earned We could buy real assets to buy a house to a farm, right? We could buy financial assets So we could buy bond stocks And so on or we could just hold the money So these are our options, right? Categorically these are our options and then as we engage in the particular actions that we prefer I go out and I buy let's say I buy Matt McCat I mean Patrick Newman's new book I'm I don't need to buy Matt McCaffrey's new book because I get a free copy So I probably I may not buy one one of those but yeah So anyway, you know, I buy that right by that and then and then I that would go You know, then when I'm sort of doing my personal finance I put that under my consumption expenditure. Hey, I spent whatever $75 on books and Then, you know, I spent a hundred dollars on gas last week or you know, whatever it is, right? I can keep this journal of my expenditures and I could do the same thing on the income side, you know I don't uh, the the action that I take is I prefer the job that I have I prefer the prefer the compensation I get to the job that I have right so I take this job That's my choice. That's that's the primary thing. I have a preference that I act upon it And then as a result I earn income Right, that's part of what's going on, but it's not the primary thing, right? It it moves in a chain So so this is the idea of doing a balance of payments accounts So the first thing to notice is a balance a payments account is like a journal of my expenditures, right? It's not a form of economic calculation by which I, you know, do appraisements and make make decisions about production or or You know buying things in particular or something like that You know, I'm not claiming that it's vacuous. I'm not claiming that I don't use it for anything that it can't influence my decisions I'm just saying it it influences my decisions at the end of the after I've done all this stuff You know, and then I've tallied the result then I can reassess by looking at this bottom line I can you know say oops I Maybe five thousand dollars on books this month was too much And we had a read, you know reassess the particular things I'm doing me That's yeah, I drew the bank account down a little too far or something like this, right? So you get the basic idea. There's a there's a sort of logic to how these things Proceed and then how we use them in decision-making So what so the main use we have of you know The main use you would have of a ledger of my expenditures or of a balance of payments accounts would be they reveal something about our preferences You know, so you look at my ledger of expenditures and you know that I like books, you know relative to other things You know, I'm I'm I'm weird or geeky in that way, right? Compared to a what other people's journals would look like my skewed heavily in this way and you know not in that way So did it reveal something about my preferences? So so this is the idea The other thing to notice about balance of payments accounts and this is the same about income and expenditure accounts, right? They always have to balance these are these are accounting devices that always have to balance, right? So that's what we call it a balance of payments accounts is a balance of payments accounts So if we're you know, if we have a merchandise Deficit in our balance of payments, we have to have a capital account surplus to balance it out, right? And the difference between those two things isn't arbitrary or you know Doesn't it's not a bad thing to have it one way or the other just reveals our preferences That's the idea. So if we run a bounce Payments surplus with I mean if we run a merchandise trade surplus with the Chinese We import more from them than we export to them in goods That just means that we we like their goods Relative to our own domestically produced more than the Chinese like their investments relative to ours And so they invest more in our economy than they invest in theirs and that that's what So it's always in balance, right? The monetary sums are always in balance So there's nothing there's no way that the balance of payments account should look They just reveal our preferences. There's no good or bad way in which they should look So so that's the idea any more than we would say, you know in consumption You see the journal of my consumption that it's it's good or bad We're not speaking about in an ethical sense. We mean for for my sustaining my activity It's not good or bad that I spend a lot on books. That's just my preference Okay, so this is what a kind of stylistic balance of payments account would look like There's the current account, which is as it sounds, right? It's a short-term things immediate or short-term transactions cash related kinds of trades and then there's a capital account, which are investments and You can see in this example this country has a merchandise A trade imbalance right the merchandise trade deficit. They're importing more than they export So Trump would say wow, I got it, you know, let's quit with it Importing so much is awful. Let's put a protection as barriers against these rotten Chinese and keep them from selling their stuff We got to get these jobs to the we'll get to the jobs argument in a minute We got to get these jobs back to Americans. It's good American jobs, right? He would say that's a terrible thing What economists say especially Austrian stress this it's not it's not a good or terrible thing It's just our difference in preferences Now again in our world if this were a real balance of payments, of course in our world So this is all messed up by various government interventions, right and then we'll try to grapple with that problem too as we go Okay, so if we if we add up all the rest their service Services that can be traded and they have to be balanced and investment income that's paid right. These are cash payments Unilateral transfers But on the capital account side Whatever imbalance exists up here this 200 imbalance has to be balanced the other way with errors and omissions, right? It's balanced the other way So if there is this Trade in merchandise imbalance there has to be a capital inflow And so once again, we don't think on the face of it that it's bad for our economy It's bad for the you know system of the division of labor that we have a Korean owned auto factories or right or You know new new new plans for Mercedes to build another factory in in Alabama or whatever We don't think it you know how is that harmful to the operation of the division of labor doesn't seem like that It follows somehow that just because the person has a different Location where they live or something that that that makes a difference to the rest of us with respect to the economic activity Okay, so this is the idea Okay, so let's go on to the Employment argument. So this is the one that Trump harps on quite a bit, right? Let's subsidize exports And then and then we'll you know, run it this will be good for our domestic workers, right? We'll generate more employment domestically and So so we'll cheapen our exports, right? We'll we just like giving subsidies to Tesla and so we'll make the price of the Domestic we produce good go down and maybe foreigners will buy more and they'll stimulate, you know These good jobs among Americans and will tax imports, right? And that helps employment also domestically the argument runs because then domestic Producers will have to step up and you know produce, you know She will shift our demands toward domestic producers and they'll have to step up and they'll provide jobs and so on Now again, this is a very old argument against free trade at the classical economists dealt with and In sequence it went to this way Adam Smith first pointed out that no no no wait a minute wait a minute If we want to get a social benefit out of production, we need to have production done by the efficient producer Doesn't do any good to have production done inefficently, right? That's not that's not helpful for you know The success of people's real incomes if they're producing things, you know, we give them jobs, but their production is inefficient That would not seem wise policy. It would be wasteful This is what Adam Smith, of course was focusing on in the wealth of nations, right? He said look the wealth of nations is in real Production it's in the real production processes in the real consumer goods that we enjoy It's not in the monetary sums, right? It's in the real things and yeah, okay, so that's a good first step here Ricardo came in and then strengthened this with his with his law of comparative advantage where he says We can go one step further than this Not only is it the case that we should have efficient producers doing things, but we can show that Each person or each area would have you is the efficient producer of something So so we can't so one country could never you know put all people out of work in another country just by being physically more Efficient in all the production processes that the two countries engage in even that is is incorrect So this was the law of comparative cost or comparative advantage that Ricardo Advanced and then and then Ludwig von Mises made one more Advancing this on this line and what he called the law of association Where he showed that this is actually a law that applies to each individual person And each individual factor of production if we could apply the law or do the analysis for Capital goods or land sites or what have you but if we want to do it for persons then we see that applies to every single person and Then Mises adds this other so in other words every single person is the efficient producer of something and So can find a position of employment and So you're not really changing overall employment when you impose these protectionists Measures you're shifting employment around and as Ricardo said you're shifting it from efficient producers to inefficient Let's you know give another four point nine billion dollars to Tesla Right this is the size of the subsidy so far This is supposed to be healthy for the overall account, you know, it's good for Elon Musk It's good for his workers. They get high wages, right? But they're but they're not efficient and so we shouldn't it's not good social policy to do this It doesn't it doesn't help the social order to do this right even though it's just a it revolves down Just then to a special interest Okay, so that's the that's the employment argument and then Dr. De Lorenzo dealt with this the infant industry argument which was advanced by Alexander Hamilton these again are sort of 18th and 19th century arguments. They're still repeated today, right? Economist work is never done but but they're old arguments and This one is of course the protection permits, you know infinite these new emerging industries to mature Otherwise it'd be squashed by the greater productivity of the the foreign producers So, you know if the auto industry starts in the US And then we become, you know, big and efficient before the Japanese Let's say start an auto company or the Koreans then they could never they could never compete with us Right the government has to step in and shelter them By the way, there's wrong on many levels. Hopefully you see already that with my example that that doesn't seem quite historically plausible, right but anyway, the the the points that economists have made against this of course are that Only entrepreneurs Can use economic calculation that is can be efficient in the selection of what industries to to You know invest in and which one's not right only they can tell when a emerging industry is going to be viable Not government bureaucrats government bureaucrats. I think Dr. Klein gave a few examples in one of his earlier lectures about this it had to do with whether the government back in the late 70s or early 80s would have subsidized Bill Gates in his garage right would they've done this You know as opposed to IBM, of course not, right? They're not going to pick Winners and losers so to speak places to invest in in a economizing way Now the other thing to point out here is that world, you know, sometimes the argument is made that well You can never have a new auto company because the capital requirements are so vast to be efficient It can never happen. This is just nonsense. This is like nonsense on stilts, right? What where example exactly does the capital funding come from? For for any investable project and the answer is world capital markets How big are the world capital markets? Well, the latest figures from these are from 2011 If you add up the GDP of the whole world In dollar terms, you know, I wouldn't put too much stock in the accuracy of the number, but it's a rough approximation, right? 70 trillion dollars if you add up world capital markets all the bond markets all the stock markets all the Derivative markets all the bank loans the capital value of all that 216 trillion dollars Now I dare say that any particular business can have adequate capital. There's no lack of capital funding, right? There's just lack of convincing the capitalists that you got a good project. Yeah, that's okay Well, that's a problem. That's it. But that's a problem every every entrepreneur has right if they go to the capital markets They're all in the same position They have to be able to say to the capitalists lend to me not to those guys because I can generate this great product earn this rate of Return, you know oftentimes the you know, they talk a lot in the economics literature about the first mover advantage But in a lot of industries, it's the late comers that have the advantage Because the newcomers have 20 year old technology and you're coming in Right with brand-new technology and you're gonna push them all out again on Do a little bit more bashing on musk? I've read and I don't know anything about the technology of this So it could be just bogus, but I read a story that oh, no, it must have been true because it was in the New York Times Sorry. Oh, yeah. Yeah, so this has got to be gospel truth. But anyway, the story said that by the time Tesla's Giga battery factory gets actually producing The battery technology for doing the assembly process where those batteries will be antiquated That there's already just a dinosaur and and he's going to be put You know, he's going to be pushed aside by the newcomers who come in the next five years with this new technology Or how you assemble it's much more efficient apparently. So whoops Right, it's not again. This doesn't seem to be much here in terms of the argument Of course, we could point to numerous examples already alluded to this in the auto industry of infants developing without production Protection is a famous example of Honda in Japan. That was not only not subsidized They were a little tiny motorcycle company when they first got started in the late 50s But they were expressly told not to go into auto manufacturing by the by the government cartilized You know Japanese system which favored Toyota and yet Honda is one of the great car companies of the world, right? So so it's easy to replicate these examples What about the level playing field so protection can allegedly level a playing field so that the benefits of free trade can be kind of Evenly fairly distributed or something of this sort As Mises points out the market economy is not a game This is the basic point. It's not a game. There's not we don't need umpires We don't need level playing fields. We don't need you know rules or whatever of playing a game We're not what it's not a contest. We're trying to outcompete the other person and you know winning a trophy or you know Showing that we're faster or it running or you know stronger at wrestling or whatever that that's not that's not it The competition that exists in the market is always Competition to cooperate with other people to satisfy their preferences more fully than your competitors are cooperating with other people Right the market is a system of social cooperation as Mises like to emphasize. There's nothing is nothing like Gamemanship in it at all except in the psychological sense. That's fine, right? So in the psychological sense people can think of it this way but the actual reality of what the market is is Categorically different from a game and so obviously we don't need level playing fields whatever that might mean, right? We don't need fair rules or whatever these terms might mean Because it isn't a game and so it doesn't make any sense to apply these terms these like concepts to social cooperation So so this is the first point and then as we've already alluded to Even if we think of it this way it's kind of a game where we're losing out because the other country is doing things that are unfair to our You know, they're subsidizing their producers or whatever We've already seen that even if that's true the best policy for us in our country is still laissez faire Why because somebody, you know punches you in the nose. Why should you break your own arm, right? I mean what what's the sense of this we right? We shouldn't injure ourselves just because someone else injured us So this is the idea Here's another one that it I don't think is this one is it's There's some literature on this but actually We hope there's going to be some new literature on this So dr. Engelhardt and dr. Block and I are actually writing a paper currently on this very question of whether Whether laissez faire country can be relatively insulated from international booms and buffs so but the common view that the sort of standard conventional view is that if you if you If you have a country and it's embedded in other you know an international economy with other countries They're engaged in monetary inflation and credit expansion then you you want to put up protectionist barriers to prevent that From you know prevent the business cycle from being imported into your country You want capital controls and controls on Trade movements so that you don't experience get integrated into this right Now there are a couple of arguments that Stand against this and one of them has to do with this Pointing in that professor Salerno was talking about what if we had a gold standard country? What if a country stuck to a pure gold standard? that the argument will run would Insulate that country from certain dimensions of the boom bus cycle for example There could be no domestic credit expansion and therefore the at least this country would not get caught up in its own domestic Version of the international credit expansion Since it's a gold standard country the the foreign Currencies would devalue in exchange Markets against the sound money country and again this would provide some degree of insulation of the sound money country to To the booms and busts generated in other countries and then finally we another point and we're not quite By the way, we're not quite finished in thinking through all the arguments here This is a pretty complicated question, but another area where we're making a claim is that The the actual distortions then that will begin to come into a sound money economy will be Specific to the assets along the lines of the Cantillon effects of the boom in the rest of the world So if you had a country is producing producing let's say lithium they had lithium mines And let's say there was a big boom in battery production from credit expansion in other countries Then lithium there'd be a lot of interest in investing in lithium mines Right or buying lithium in this sound money country, but it's precisely because the the Business cycle effect comes along the line of particular goods that entrepreneurs in that line can sort of identify roughly that they're in a boom and Then they can just hold back right They don't have to mal-invest the price of the the price of the lithium is going to go way up And they're gonna learn a lot of profit in the interim without Over-expand you know mal invent opening up new mines that go bust later on this just becomes then an entrepreneurial question That perhaps they can deal with at least better than they could in other countries that don't have sound money So this is not particularly at least we don't think this is particularly problematic By the way, I should say it's just for full disclosure. We're not saying that no effect would occur, right? We're not saying that Certainly there can't there will be you know some distortion in the sound money economy saying to a large extent it can be avoided There's the national security argument So, you know if we integrate our production with other countries and we become dependent upon them and then whoops Now we got a problem if we go to war they'll you know Black male us and withhold their supplies again This seems like a problem on the face of it, but when you think it through in a general sense you see right away that this there This is not very This is not very convincing Because this is just a sort of speak general problem that we all have when we interact with each other in the social Nexus, right? We all rely upon each other. I don't grow my own food I'm I'd starve to death if people quit selling to me You know what why don't I just you know protecting it when I put up barriers around my house so that I become Self-sufficient in these things. Why isn't that my right reaction? Well, no, this is not the right reaction Of course we can depend upon each other because there's mutual advantage in these arrangements and and this creates a kind of Reliance some degree of reliance then that we can have upon the Plethora of other people who will supply us if one of them becomes our enemy right and says look I'm not going to give you your food, but there are other grocery stores in town Also free trade of course does not mean that people Well, it means that people are free to use their own judgments with respect to who is reliable In other words what we want is for entrepreneurs to do this not government officials Because when government officials do this is we're seeing played out in the Russian sanctions and so on this all just Resolve itself down to petty disputes personal grudges Right intrigue politics as to who our enemy is and who isn't and who we align with and where we get our supplies from and so On and so forth entrepreneurs don't make their decisions in this fashion They judge the reliability of their different suppliers and then they won't deal with these people I think are unreliable especially in times of trouble. They'll know how to switch They'll stockpile goods if they think you know they're gonna be disruption in the market They know how to hold inventory and so on and so forth. We just think it as economists We think it's a better way to deal with we don't deny the problem We just think it's a better way to deal with the problem to leave the market open And then let me say at the last this last point about politicizing, you know if politicians were really concerned about national defense Well, don't you think they'd be a little bit more efficient in the production of national offense I mean, what is the biggest boondoggle industry in the in the whole economy? It's the military industrial complex, right? and other government, you know big government projects like road building and infrastructure and so on the very things that Trump is Trumping right and should I say trumpeting trumpeting. Yeah, he's trumpeting all this stuff that we well We know it's super inefficient. I mean if they really if they really cared about us, wouldn't they you know? At least strive to be a little bit more efficient. It would seem that this would be You know some strike against giving up laissez-faire into the hands of Government government officials. Well, I had a few more of these but I've already gone over time So sorry about that. We'll quit here and then I take a break