 OK, I guess we'll begin this talk on free trade and its enemies. I mentioned in my first talk on Monday that there are certain issues, especially where neoclassical economists and Austrians are in sympathy with each other. They hold very similar views. The mainstream also understands the principle comparative advantage and use this and talk about the division of labor and so on. In this sense, the Austrian view goes beyond what the neoclassical economists do with their models and so on. And we have a more robust analysis than they do. But we're not really saying things that would shock them or they would say, oh, there can't be a division of labor. That's just comparative cost is crazy or whatever. And it's the same with free trade. You'll find, in fact, that it's seeming paradox that neoclassical economists tend to be in favor of free trade. Free trade is understood now as trade between nations, free trade, free movement of goods and people and capital between nations. Much more than they are domestic free markets. So even guys like Paul Samuelson tend to be loosely speaking of free trade. It's sort of strange, right? You would think if they held this view, they could see the logic or the ill logic of saying that we ought to have all these domestic, each state should intervene and control domestic trade. But between states, we ought to have almost entirely free trade. Because it's a classic reductio ad absurdum for economists to point out that free traders don't argue that Pennsylvania should erect trade barriers against California. Everybody can see, or at least those who accept free trade can see that that would be a bad thing. And therefore, we shouldn't have the state intervening domestically to create barriers of trade between the natives of that country. So it seems to just kind of follow out. It seems like this is a gigantic conflict, almost contradiction to hold. Domestic intervention is a good thing while simultaneously free trade is also a good thing. Anyway, what we want to do in this talk is just very briefly outline the case for free trade, exactly what additional theoretical work we have to do to get to this argument for free trade. And then we want to spend the bulk of the time talking about the objections to it, the arguments for protectionism and against free trade. OK, so let's start for just a quick review of the case for the market economy. And remember, up to this point, we've made this case only for a single territory. So I don't think any of the talks up to this point have at least focused on what if we have different political territories in the world. So we've just said, hey, we have an economy. We have a market economy. And there's private property and contract. And there's sound money, market-provided money. And then through this, there would be economic calculation. And the advantage of this is that we're all able to more efficiently arrange the division of labor because entrepreneurs can use economic calculation to determine the efficient arrangement of things. And then we can all self-select according to monetary incentives into the different occupations and the different things we buy and the different lines of investment and so on and so forth. And the same argument about capital accumulation. So here, the market gives full outlet to our time preference desires to save and invest. And then the entrepreneurs can direct that investment, the capitalists and the entrepreneurs, direct that investment to valuable lines of the buildup of the capital structure. And so we get economic progress and higher standards of living over time. And again, it's not that faster growing standards of living are better than slower growing standards of living. It's that the market gives us what we prefer. So if we have a society with high time preferences, well, we want present gratification, then that's what the market will give us relative to the future. So the market operates in this fashion. And any imposition, then, of the state, of course, of power of the state, would simply interfere with this process and slow it down, muck it up, make it less effective. So that's the basic argument, the basic ground that we've covered up to this point. Now, what we add when we move to the issue of free trade is this question of different political territories. What if we have not one single political economy, if you will, but a multiplicity of political units in the world? Then that opens up another question. It isn't one has to do a little bit more theoretical work to see what should be the policy of any one polity within a world of different polities. That would be an interesting question to think about. Well, again, we're not going to go elaborate discussion of this. I'm just relying on your general knowledge of this area. It's not rocket science to make the application here. We want to spend most of our time with arguments in favor of protectionism. But anyway, the basic argument about different polities is that the economy is that people interacting in the division of labor economy knows no geographic territory. We have a world economy regardless of political territories. The economy would extend throughout the world. And therefore, it follows from that that if we can extend the economy throughout the world, one system of economic calculation and entrepreneurial decision-making in production and the self-selection process, if it could be extended to the whole world, then we'd get the benefits that we've been talking about across the whole world that we've been talking about just as implicitly as one single political territory. So the best policy for all political territories is to adopt free and open trade. So that doesn't seem like too much of a stretch of our theory to cover that case. Because all we have to do is recognize that the economy, regardless of political interference, there's just one world economy. We're all integrated into the same economy, or will be, unless the state coercion prevents us altogether. We would just do this. So we would integrate the Chinese into our production in the division of labor and our consumption and the Malaysians and the Germans and so on and so forth. OK, so that again is not, hopefully, that just seems straightforward application of our previous case. But now we get to the case at hand, the case that we need to pursue, which is what if we have a world, though, that's configured in different polities where not every government of every other political territory accepts free trade? Then what do we do? Then what's the best policy? What if the Chinese put barriers to trade between Americans and Chinese, or vice versa? What if the Americans put up barriers to the Chinese to trade with other Americans? What if that happens? What then would be the best policy for a given state? Given that other states are interfering with free trade among the citizens of their territory and the citizens of this country? OK, well, again, we're not going to spend much time with this. Hopefully, again, you can see that this is a fairly straightforward application of our previous discussion. The best policy for any, economically speaking, the best policy for any state over one territory in a world of states that are interfering with free trade is to have free trade. And again, the argument is very straightforward. It's just that, OK, so if the Chinese government is interfering with, let's say, American sales of automobiles in China by having tariffs on cars that are imported from the US, and this lowers our standard of living to some degree, as we talked about before. Any time the state interferes, it reduces the extension of the division of labor and makes us physically less productive, less efficient, and therefore, our standards of living are lower. It doesn't help citizens of the country being affected by this. If it's state, then does the same thing, lowering standards of living again, for erects its own trade barriers, let's say, against the Chinese. And then, in another area, like agriculture, we get this illusion of the division of labor even further. So if one person comes along and cuts off your right hand, it's not a good policy to cut off your left in response. OK, so this is the basic argument. And again, the nuances to this that we won't go into, it just seems like a pretty straightforward application of the basic argument for the market economy that we've developed throughout the week. And by the way, let me just reiterate that if a person can't accept this, if they have some sort of nativist bias or they're nationalist, prejudice, or whatever it is, it's always helpful to use this reductio out absurd among them. Well, OK, so if you think it's a really good idea for the state to erect barriers to trade between the evil Chinese, because they're evil and they're taking over or whatever, then why don't we erect barriers? Why isn't it good to erect barriers? Good for us, Americans, to erect barriers between ourselves, right? Why doesn't Pennsylvania secede from the Union and erect barriers with everyone? Or if Washington erected barriers between trade of people in Pennsylvania and California, we wouldn't think it a good idea for the Pennsylvanians then to erect more barriers to trade with people in Ohio. That just doesn't. So hopefully the logic of the case becomes exposed when you do this kind of thought experiment. OK, so now let's move to arguments for protection. And here, for clarity, let's just list out the categories of what we'll call protectionist policies. So protectionist policies, the state in one political territory, so the federal government in the US, would coercively interfere with market activity between its citizens and citizens of other political territories, right? And typically, this literature is divided into barriers of the movement of goods and services. So there are tariffs and quotas and so on and so forth. So the American government erects sanctions for trade with Iranians, right? It's illegal now for Americans to sell to Iranians or they would be thrown in jail for doing this sort of thing. So that's one kind of a protectionist policy. And then the other would be capital controls, right? And this is just a kind of arbitrary distinction, right? It's useful just for the purpose of doing analytical work, but it's not like a logically necessary distinction between the two. But then there are capital controls. So the Greek government right now won't permit people to move funding out of the country. In fact, they won't even let them take their funding out of banks, right? So there could be that kind of a protectionist element. There could be a protectionist impulse behind that sort of a thing. So they're trade barriers and they're capital controls. That's how the literature divides the different types of protectionist policies. OK, so with all that as background, let's jump into some of these. Let's start with the mercantilism. Most of you know that the mercantiles were the first, well, at least a Western European sort of systematic protectionist policies. And this began with the Spanish in the 16th century. And if you remember the history here, the Spanish conquered Mexico, what's now Mexico, right? And they enslaved the natives and put them to work in the gold and silver mines, extracted the gold and silver, minted it into coins, and then shipped the coins back to Spain. And this led to a huge largesse for the Spanish government. They were running this production system. So the money would come into Spain and they funded the Big Armada and all this, all these lavish expenditures for the crown and what have you. And all the other governments of Europe, and they were moving, remember, into this period of what we call royal absolutism, strong central governments, wanted to mimic this. Well, it was very hard to mimic it in the same way that the Spanish had done by conquering some territory where there was gold mines and then enslaving people and producing gold. They tried some of that, but it didn't really pan out very well. So they thought, well, maybe there are other ways in which we can arrange our interaction, the interaction internationally, the economic activity internationally, so that money flows into our country. And then we would get the benefits, just like the Spanish, right? We would get these benefits. That's how they were thinking about this, right? And so that's what they began to do. They would subsidize exports and they would tax imports and try to create an imbalance in trade, an artificial imbalance in trade. So that was really maybe the first prominent in Western civilization, at least the first prominent use of protectionist measures as we've defined them. OK, well, the classical economists were up to the task of criticizing this. In fact, just the work of David Hume was sufficient to smash all of this, right? And Hume pointed out the following arguments against this. First was his famous price-species-flow mechanism where he pointed out, wait a minute, think about this. This is a great economic mind at work, right? He's thinking like an economist. OK, you do this, and then that causes this effect, and then that effect causes this next effect, and there's a whole chain of events put into motion by this policy. So you create this policy that artificially stimulates the inflow of money. And remember, David Hume is writing in a period where there was a universal money, a worldwide money, so gold and silver were the worldwide monies, right? So we didn't have distinct monetary regimes in different countries like we do today, different fiat monies. And so, OK, so all this money, all this money flows out of one country and into your country, and then the question is, what happens next? Well, what happens next is prices are bid up in your country, right? And prices are bid down in the country where the money is flowing out. But that means that your exports become more expensive and imports cheaper, and so the policy is reversed, it's self-reversing. And so it only works temporarily to do this. And then people will re-equilibrate. And so the price-species flow mechanism, a brilliant response to this policy. He also, as an adjunct to this, he pointed out that no social benefit accrues by having more money. Any amount of money can perform all of the exchanges that people want to perform in society. So there's no social benefit, it doesn't enhance the medium of exchange function of money, to have more of it. It just means that prices will be higher, and if we have less of it, prices will be lower. But we can make all the exchanges that we want to make, regardless. And so you see what he's doing, right? He's saying, therefore, since there's no social benefit here, there's only benefit to certain groups at the expense of other groups, right? What the money inflow does, what money inflation does, is create wealth transfers. And so then you can ask the question, who gets this money first, and who's benefiting the state and who benefited in Spain when the money came in? And the answer is the Spanish crown, and then the producers who catered to their demands for things, the shipbuilders who built the Armada, and the tapestry weavers who made the tapestries in their castles, and so they all benefited. But then the other people were harmed, right? We're just shifting wealth. Since having more money doesn't create wealth, it just makes the price structure move up and down. Well, up if we have more money and down if we have less. So again, an excellent response. And then finally, the classical economist also pointed out that the balance of payments accounts upon which this policy depends, creating a net inflow, the merchandise trade surplus in the balance of payments accounts. They pointed out that really these balance of payments accounts are not fundamental to economic activity. They're really just sort of ancillary to that. So let's take a minute to look at this. The balance of payments calculations come about in the following fashion. So we could do this for any person or any group of people. We could calculate the balance of payments. So it would go in the following way. A person has goods and services to sell to other people. And so he exports these things to other people and then he gets paid. He gets paid in money. Then he takes the money and he does one of these four things, right? He can buy goods and services from other people. He would be importing the goods from them then. Or he could buy real assets from other people. Or he could buy financial assets from other people, right, claims to the value of the assets. Or he could just hold the money. So these are the options that any person has or group of people have when they participate in the market, they sell things in the market, then they get funding and then they buy things from other people and so on. And if we wanna keep track of the summary of this, it's quite obvious that these four options exhaust the logical possibilities, right? So that's why this is called the balance of payments. So if we add up the four, the sums of the four, I'll give you a numeric example in a minute, but if we add up the sum of what the person does with the income that they earn from selling things into these four categories, it must add up to their income, right? That's why it's called the balance of payments. So it always balances, right? That's a critical feature of this. Okay, so here's what we would then say as we think about the logic of this, the meaning of the balance of payments accounts. First of all, is to point out the balance of payments accounts are not a form of economic calculation. They're not an aid to decision-making about what to do. Let me just give you again a reductio ad absurdum example. I run a huge balance of payment deficit with Amazon, right? I import everything from them, all the goods that come to me, and I just pay with money. I export no goods or services to them whatsoever. I just pay in money. There's a huge balance of payments surplus. Now, the fact that I run this balance of payments surplus with them doesn't enter into my decision to buy from them at all, right? I never think, oh, you know, I better not buy from Amazon today because I'll have a balance of payments. I'll increase my balance of payments surplus. This might injure my situation somehow. Now, of course, I might say, look, I don't have enough money to buy, but that's different, right? That's a different. I don't need balance of payments to know that. I can see that just on my checking account, ledger, my bank balance. Okay, so that's right, so we can see this. To give you to extend the example, I run a huge balance of payments surplus with Grove City College where I work. I export my services to them. I don't import any goods from them at all, hardly any. Right? Bias, whether at the bookstore or something. And they just pay me money. So, and I don't say, oh, hurrah. You know, this is wonderful. I'm gonna keep doing this because it's a balance, because money is flowing in, you know, it's a balance of payments. No, I do it because I just have a preference for this, right? I don't need to know about my balance of payments to make a decision as to whether or not to sell my labor services to Grove City College. I don't need the balance of payments. The balance of payments is just a ledger account. I'm not saying the balance of payments is meaningless. I'm just saying I don't need to know it for making economic decisions. I can keep track of my, the decisions that I've made in the past, I keep track of with the balance of payments. You see, that's a different thing, right? I don't need to, you know, with economic calculation, what we're doing is, Joe Salerno explained, is appraisement. We're using the accounts to make anticipations of the future so we can act efficiently into the future. But balance of payments, I don't need to, I don't make any expectations about the balance of payments in order to act efficiently into the future. I just say, you know, be better for me to work over time, get a little bit more cash because I've got this, you know, preference for, you know, making this transaction. I have this anticipated use for the cash or whatever. I don't need to know anything about my balance. I don't need to say, oh, I need to increase my surplus with Grove City College. You know, that's just superfluous. I'm just sort of keeping a ledger account when I do this. And then maybe some reason for me to do this, but again, it's not essential for my decision-making. I can dispense with it. Okay, so let's, I'll just throw up real quickly this example. We've spent too much time with this, but this is a nice numeric example of what the balance payments accounts would look like for one country in a year. Now notice they have a merchandise deficit, right? They're importing more than they're exporting. This is the merchandise trade balance. This is what the protectionists tend to worry about. We'll see why in a minute. We'll see their argument in a minute. And services, they're also running a deficit in services. They're importing more than they're exporting, right? So it's a debit item and a credit item. And then the current account would also include investment income that comes from investments that one has made. Foreign investments and then the income comes. That's part of the current, what's called the current account and unilateral receipts are gifts. So if I had a Chinese friend and this friend, you know, just sent me a Christmas bonus or something, you know, that would be a unilateral receipt. And then the capital account will always balance out the current account, but it has to because these are the offsetting money flows to the goods flows that are in the current account. So here they're long-term borrowing, short-term borrowings, there's the movement of money. And the same way we can land, right? Long-term, short-term, and then the movement of money. And so everything, the sum of these always has to balance for any two trading partners or any two groups of people that are trading between themselves, you know, let alone any particular group of people and everybody else in the world. They're just, again, ledger accounts. Now what they do, the one thing that, these balance of payments accounts do tell us that we might not know otherwise is the kind of pattern of people's preferences. We sort of see in the aggregate what people's preferences are. We can see in this example to take this case that the foreigner, whoever this is against, the foreign trading partners, value the goods produced by these people more highly than these people value the goods produced by the foreigners. That's why they export less than they import, right? And the same thing about the capital account. These people have higher time preferences, right? Because the foreigners are lending to them. Okay, so we can see that in the balance of payment. We could see that, by the way, with other statistics. We don't need balance of payments to know this. We could just look directly at lending and borrowing or directly at purchases of goods and so on. But okay, so the balance of payments are useful in that limited sense. Okay, now let's go on to the argument about the merchandise trade imbalance that protectionists offer. And this is that the protectionism can boost domestic employment. And it works again by subsidizing exports. So if the government subsidizes exports, then it'll stimulate production of the exports and we'll sell more to the foreigners. And then we can tax the imports. And that also has the benefit of stimulating domestic production because now domestic consumers will have to turn to domestic producers. So we tax the import, we tax the importation of Japanese automobiles and that would provide employment in Detroit. That's the idea. And notice again, we're running a big budget surplus. When we do this, we're increasing the budget surplus. The merchandise trade imbalance. And the argument here is not, it's not the mercantilist argument that we want money flowing in. The argument here is this helps employment. And so it's a different goal that the protectionist has in this line of argument. Okay, so what does economics say about this? Again, the classical economists were up to the task of debunking this claim. Adam Smith and his law of absolute advantage pointed out that, you know, if we do this, if we have a free trade, then the division of labor will arrange an efficient use of all the different workers. And so any interference of the state in this would mean that we're replacing an efficient foreign producer with an inefficient domestic producer. And this is not socially beneficial, right? So Adam Smith was up to the task of showing the basic error here. Ricardo went one step beyond, remember in the idea of comparative advantage, he said, this would always be the case for any two countries trading. It would always be the case, in other words, that one is efficient in one thing, that they're selling to the other country, and then the first country is more efficient in something else, and that's why they're selling it to the second country. And therefore it couldn't be the case, in other words, that one country is more efficient in everything, and therefore it would be a good thing to keep out the inefficient producers from foreign lands. He said, that can't be the case, one must be efficient in one thing and the other efficient in something else. And if they're already engaged in a free voluntary trade of these goods, then that's evidence of who's efficient in what. And so if we interfere with this again, all we're really doing is replacing efficient producers with inefficient ones, replacing efficient foreign producers with inefficient domestic producers. We're sheltering consumers from the efficiency of the Japanese auto manufacturers in order to subsidize the inefficient Detroit manufacturers. And then finally, Mises comes in with the law of association also on this point saying that in a market economy, everyone can be employed. It's just a matter of the wage, right? The less productive will have to accept lower wages, but they can be employed. Precisely because they're willing to accept lower wages, they can out-compete other people who are more productive, who command higher wages to do the same job. And therefore protectionism doesn't change the total amount of employment, it can't. All it does is shift employment again from efficient to inefficient producers, just the opposite of what the market is doing. Shifting, market is always shifting employment from inefficient to efficient. So again, there's no social justification for this. It's obviously just a special interest at work. Okay, so now let's go on to the infant industry argument. This was famously offered by Alexander Hamilton. You can boo and hiss if you'd like at this point. But here the argument is that there could be comparative advantage all well and good. This is great and so on and so forth, but it might just be the case that there's a kind of dynamic that the market wouldn't account for. There might be industry that's just getting started in the US and maybe if it had a little bit of help, subsidized help, it could grow into a comparative advantage, right? But if we don't give it this artificial help, the evil foreign competitor will kind of strangle it in the crib, that's the infant industry, right? That's kind of the polemic picture that Hamilton's trying to paint. Okay, well the economist's response to this of course is first of all that only entrepreneurs are in a position to ascertain the future with respect to different production processes. They're the best at determining which industries will in fact develop and which won't. So the infant industry argument, remember, requires, it assumes that after a period of nurturing the infant through subsidies, that the infant will in fact grow into a mature adult industry. Well, how do government officials know this? Why would we think that they're good at predicting this, right? So since the argument relies on anticipating the future, one proper response by economists is well, that's the job of the entrepreneur. And that's what entrepreneurs do. Now on this other point, some retort to this argument by saying, well, well, that's all well and good, but part of the problem is, or the remaining problem is that the entrepreneurs will be too reticent to funnel capital funding. They won't capitalize the infant just because it's too risky or whatever it is. And so the government doesn't have to be concerned about risk, right? They don't have to be concerned about earning return on their investment so they can just tax us and provide the capital funding. So there's a problem of capital funding. The argument shifts to capital funding. But here, again, just standard economics has the answer to this. It's just not true that capital funding is inadequate in the market. The capital markets are enormous. The latest figure that I could find for the size of world capital markets comes from 2011, so it's a little bit dated. But the total size of all financial markets, all capital markets, bond market, stock markets and so on, $212 trillion in 2011. Now, the whole U.S. economy is only 17 trillion. So you could easily, 10 times over, you can fund the entire U.S. economy from the world capital markets. Of course, you could fund some industry then, right? And that's just, so it's just a silly example that, or argument that people give because they rely on our ignorance about the size of world capital markets. It's just a question of whether your idea for the investable project is appealing to the capitalists or not, right? Whether you can persuade them to back you or not. There's plenty of funding. So again, this is not a barrier. That's the job of the capitalists and the entrepreneurs to allocate this funding. So if you have a good idea for a startup, then you can get the funding. By the way, I'm glad to say that this argument was a lot harder to make for people to accept, say, 10 or 20 years ago. But today, you guys, right? You have no problem with this, right? Crowdfunding and all this stuff. We're so, as society becomes wealthier and wealthier, these arguments for protectionism become less and less persuasive, right? It's just, really? We can't get funding. That just seems like you're living in a different world. Most people, most young people, you recognize right away that, no, no, that's really not a problem. And we can point to numerous examples of infant industries who obtained funding. One of my favorite examples is Honda. So the Honda company started as a little motorcycle company in the 1950 after the war. And the Japanese economy was, of course, heavily cartilized. So the Japanese didn't favor Honda as an auto producer. They favored Toyota and connected the cartilized industry. And Honda fought all that and became the company they are today, right? A very prominent auto company. They got the funding, even though the government was against them doing this. So it's certainly possible for other companies to do that. You may remember that Apple Inc was a dying company until Steve Jobs came back the second time, right? They got plenty of funding. Just a matter of, do you have good ideas that people will fund? Okay, so that's not, again, too difficult. Well, how about the level playing field? This argument is often brought up. The protection can level the playing field and that's what we need in order to provide good economic outcomes. And despite what the Donald says, the economy is not a game. You know, it's not a game show or a game where one person is negotiating and then better than another person. I'm not saying there's no negotiating in economic life, but the economy itself is not a game. It's social cooperation. It's not a game. And so it has none of the characteristics of a game in that respect, right? We're not playing a game. We're not out competing. It's not that Donald Trump can be a better negotiator against the Germans or whatever and get to better deals or the Chinese or whatever he's saying, right? That's not really the nature of the economy. And so we don't really have to worry about that. I mean, the whole notion of a level playing field in playing a game sort of dissolves. It's just not applicable to economic activity itself. And then, again, we would point out this other, that main point that we made before that even if one dispenses with the game metaphor and just says, well, but they're still engaged in helping their own industries, then we're just back to the original argument we talked about before. Yeah, it's true that if other governments engage in protectionism to help their domestic industries and they injure then people in both political territories, it's not a good policy to follow that up by injuring our people even more by setting up additional protectionist policies, right? That just doesn't even make sense. The whole argument rests upon the claim that the protectionist policies are helping us domestically. But, you know, okay, so if they're not, then this argument again sort of washes away. By the way, let me also deal with the ancillary point. I don't have it on the slide, but some people say kind of the ultimate expression of this unfairness in trade, not playing the game fairly, is dumping. So what happens if foreigners dump products on our economy? Isn't that bad? Shouldn't we be wary of this, right? So if the Japanese just gave us their cars for $1,000 or something, then shouldn't that concern us? Wouldn't we want to stop that? And aside from the obvious point that at least in the short run, this would be a good thing for our consumers, the more general point really is this one, that it's really the job once again of entrepreneurs to anticipate exactly what the future configuration of production and consumption will look like in any market situation, in any situation whatsoever, no matter how the states are interfering with it. So in other words, it would be entrepreneurs producing automobiles in the U.S. who would say, hmm, you know, here we've got these competitors and they're dumping these products, and I think they're just gonna do this temporarily and then they're gonna raise their prices, you know, if we all go out of the industry, you know, in the later, it's up to the entrepreneurs to decide that. And then they would say, okay, if I think they're gonna do this in five years, I'm just gonna hold on to my factory. I'll just mop all it. And when they stop dumping, I'll be in a position then to take the market. We don't need the state, right? To sort of counteract pernicious dumping. This is just one other entrepreneurial problem that the entrepreneurs solve. This happens all the time in markets, right? The people are competing in various ways and the entrepreneurs are adjusting. It's no big deal. It's not theoretically different than the regular problem of entrepreneurship. Okay, how about insulation from booms and busts? What about that? You know, again, if we have a world where other countries have a monetary inflation and credit expansion, then don't we need protectionism, capital controls and so on, to keep that from spreading to our country? Would that be a justification for protection? But here again, we can see hopefully fairly readily that if we had a complete market economy in one country, we had a gold standard or some commodity money and 100% reserve banking, then that country would be in fact insulated from fiat inflation of other countries. What would happen, of course, is the economic calculation within this country that has hard money would be unimpaired. They would just continue to engage in economic calculation with the sound money and the foreign money would devalue. So it isn't obvious that there would be any transmission of this boom process to the sound money country. There'd be no lowering of the interest rate or credit expansion. You could have 100% reserve banking. So I'm not saying that there would be no interconnectedness that might lead to certain malinvestments, but there's no systematic boom bus process. Again, it's an entrepreneurial question as to whether or not, let's say we had a mining operation in the sound money country and mining prices, commodity prices go way up because of the boom and the bust and the adjustment isn't fully accounted for in the movement of exchange rates. Presumably it would be, but let's just assume for the sake of argument it's not. And so the commodity price is elevated above the cost of production. Then again, it's just an entrepreneurial question as to whether or not the entrepreneurs who are mining in the sound money country over expand or not, it reduces down to the same old entrepreneurial question because the interest rates are not being affected in the sound money country. They're not involved in a boom and a bust. They're just involved in judging whether or not this temporary increase in the price of the commodity is sustainable and that they can do. They're not being sort of misled into the malinvestment process. Okay, so that's the argument about booms and bust. How about national security? Don't we need protectionism to keep us safe and make sure that we have trading partners, reliable trading partners to keep us safe from, again, a country, say Japan, would sell to us certain components for military use and then it would be the sneaky policy that they have of getting us to depend upon them and then they would cut us off. And the next day they declare war and we'd be caught short with no means of repairing our equipment or whatever because we become dependent upon them. Well again, the standard response to this, to the first bullet point of course, standard response to this is free trade means that we have open trade with all trading partners, right? So we can find another trading partner. That's the advantage of free trade. We don't become completely dependent on one supplier. We could have a supplier in Norway or a supplier in wherever, China, who would sell us the same or a compatible product. But beyond that, again, this is an entrepreneurial question, it seems to me. In other words, in a perfectly free economy, if entrepreneurs judge, they're the ones who have to judge whether or not they become too dependent on one particular supplier. They do this all the time. It's just a normal business activity of theirs, right? So it wouldn't be any different if this was a war, potential war situation. It would be exactly the same. Conceptually, it's exactly the same, right? They would just have to say, do I think that this producer is reliable or unreliable? Should I produce this good myself? What would the cost structure be like? Should I find another trading partner in another country to sell me this good and so on and so forth? So again, this doesn't seem to present any particular problem. By the way, this last point, I just want to make as a kind of ancillary. You know, if the government were really, really, really concerned about national security, do you think they would waste all of the money and resources that they waste on national defense? I mean, if the Huns were really at the door, do you think that they would have all these boondoggle projects? You probably read about the F-35 fighter jet that doesn't fly, you know, the can, it doesn't fly right or whatever. It's the most expensive weapon system ever in history. You think they would do this if the, like the Soviet hordes were pouring down from Canada upon us? No, this is just a gigantic scam, right? Of course, they're not interested in national defense. I mean, sort of vaguely interested in national defense, but they're really interested in pork, because that's what they're producing, is pork. So yeah, really, we should be concerned about this, about the free market, not providing us with this. Okay, well, let's do, this, well, I'm sort of running out of time, let me skip this one and go to one that's more common. This one is the idea that free trade, you know, makes some people better off, but not everybody. Free trade wouldn't leave everybody better off. That would be the claim, you know. Let's say if we have a configuration of protection and we remove the barriers, then some people would wind up with lower incomes and so on. But remember, laissez-faire means that each person benefits to the extent that they benefit others. That's what the principle is. We earn income to the extent that we serve others' satisfactions. That's the principle behind it. And over time, of course, laissez-faire does raise the material standards of the living of everyone. And again, think of this in comparison to the state. Protectionism also harms some people and benefits others, right? So why is that better? You see the logical problem? And then in the long run, of course, protectionism actually injures everyone's standard of living in the long run. If it's extended far enough, right? It would suppress our standards of living in the long run all around. And so that doesn't seem like a better option than laissez-faire. And then finally, let me end with this one. You hear this sometimes, right? That the free trade or the free market would not obtain for us our non-material goals. But once again, we have to do a comparative analysis, don't we? If we have non-material goals to attain, let's say for example, we have a group of Christians and they want to evangelize people. They have this like a spiritual goal or they want to give charity to the poor, whatever it is. Can't we just organize in voluntary associations to provide these non-material goals? Do we really need the state to coerce us in order to provide this non-material goal? Again, it doesn't seem like that's a very correct general principle. It seems that again, if the state coerces us to provide non-material goals, what they're really doing is just forcing certain people who don't agree with those goals to fund them, which doesn't happen in the free society. Here, we fund these voluntary associations voluntarily. So again, it doesn't seem like the state's intervention here is very justifiable. All right, at this point, I'll stop. Thanks.