 Good afternoon. I'm Ryan McMakin, and I'll be speaking on intervention. They brought me in as the political scientist. Much of my graduate work was in political science, so in intervention, we'll be looking at really the relationship between the state and you, the state and market forces, how individuals act on the state and how the state works on individuals. It's different than what we've been talking about so far. We're leaving behind some of these topics where we're talking strictly about market transactions. That is where it's just two people peacefully interacting, deciding to trade things with each other, and moving into a realm where the state is interfering in those transactions and essentially coercing the people involved in those market transactions. So Franz Oppenheimer's book on the state had really identified two different types of action. We have violent action, coercive action, and then we have voluntary action. That is action in the marketplace. We have to really take a good look and try to understand then what are the different types of state actions, what are the effects that these state actions have on the marketplace, and what are the long-term and short-term effects that we can expect from them. So there are two resources we'll be using in this. In your syllabus, it is listed Mises' work, Middle of the Road Policy Leads to Socialism, but also of very useful in this is the final section of Man Economy and State, which I would recommend you use as well. And that's the last 150 pages or so of that book. It's a section titled Violent Intervention in the State. And it's not Power and Market, which is often on the end of Man Economy and State in some of the newer editions. It's the end of Man Economy and State proper. So you might find then that final section would be very helpful where Rothbard really creates a typology of intervention and then also has a lot of useful little sections on intervention and what it means and what effects it has. So let's have a look at intervention then. We live in a world where the prevailing ideology is one of intervention. That is, we have rejected for the most part this idea of total market socialism, but we've also rejected the idea of a totally laissez-faire market. And part of that just comes out of historical development. And when Mises refers to interventionism, he's often referring to that specifically, this idea of a third way between communism and total free markets. And so historically, of course, there was laissez-faire, there was liberalism, there was this idea of totally free markets, which of course was never really implemented, but was nevertheless popular among many. And then surely there afterward Marxism came in and began to claim that what was really necessary was total control of the marketplace. And what happened though over time is that people really started to figure out that total control of the market wasn't really quite working out as they might have hoped. And even worse for the Marxist was the fact that Marxist predictions weren't coming true. So what we found is that in the 19th century, people were looking around, even people who were sympathetic to Marx were finding that the workers weren't getting worse off as Marxism predicted they would, that they were in fact having a rising standard of living throughout the 19th century, that these people who were working in factories weren't becoming poorer. Their lives are actually getting better compared to the drudgery that they might have experienced in the late Middle Ages and so on working in an agricultural world. They were having larger families, they could live in larger living spaces, they had access to more leisure time and so on. And so the socialists realized, well, we have to revise this theory, so we'll come up with this idea that, okay, we don't want total market control, we just want partial market control and that's what Mises often refers to as interventionism. There's this idea that there's this sweet spot somewhere between totally free markets and totally controlled markets. Now, of course, Mises argued that no such thing exists, that really the farther you get away from a totally free market, the worse off you are. So if we imagine then an axis in our minds, we're at one end, we have totally free markets and at the other end, we have completely controlled economies as total state communism, that the idea of the interventionist is that somewhere here in the middle, you can figure out just what that right amount of intervention is and that'll be a properly managed economy. That'll be what Mises calls the hampered economy as opposed to the unhampered marketplace. And in reality, though, both Mises and Rothbard would tell us that if this ends the totally free market, the farther you get from that, the less able you are to become wealthier and happier and to have a more efficient and productive economy. So this American idea, of course, we want moderate stuff, we don't want to be on these extremes, right? But there is no golden mean in terms of making a choice about what is the most useful type of marketplace between communism and a totally free market. We don't want something in the middle, we want something over on the laissez-faire end because that is what will help us accomplish our goals. The goal, of course, being a higher standard of living, a happier life, a longer life and just generally things being better, given the circumstances. That we are put in. And so when you read Mises, be aware that he's referring to a specific idea that he calls interventionism and it's that idea of the third way, which is still very popular today, we hear about it all the time. And of course, in the realm of public policy, people are always arguing for a new public policy, a new tax, a new regulation. They're not going to argue for total state control of the economy, they just want this little regulation to set something right that wasn't going well in the economy. And if we can just get this one more little tax, if we can just get this one more little regulation, then people will be much happier. In truth, however, for every additional regulation you get, for every additional tax you get, your economy becomes less efficient, it enters into a state of greater disarray, it becomes more chaotic and then you either have to repeal those interventions or continue enacting more and more regulations which eventually leads you all the way down to a state of totally controlled economy. And so how do we avoid that then? Well, of course, part of the purpose of the Miesen Institute is to explain why those interventions in the marketplace are bad. And so spoiler alert, we think intervention is bad and we're going to explain why in a little bit more detail while providing a few examples of different types of intervention and how we can distinguish among the different groups. And so in man economy of state, Mies's really pulls out three different types of intervention. And the three are autistic intervention. This is where the state acts upon a person directly, compelling that person to act in a certain way but only on that one person. So an example of this would be a prohibition on you from committing murder. So the state says, you cannot murder anyone. You cannot steal from people. And these are the sorts of things that we might consider to be moderately legitimate in terms of what the state is doing. These are the hardest things. This is where the real people get really hung up when you talk about stateless societies and so on, as we want the state for these autistic prohibitions, the prevention of thievery and so on. But of course, this can include other things as well such as prohibitions on ingesting certain foods and doing things that just involve your one person. This is not to be confused, by the way, with purchasing certain foods from another party. That's a different type of intervention. So there's autistic intervention, which is just you and the state, and it's just a transaction that's you yourself. The second type is binary intervention. And that is where the state compels a transaction between you and the state. And that would be taxes, for example, where you normally wouldn't have chosen to enter into this relationship with the state, but the state decides that you owe them a certain amount of money every year, a certain percentage of your income every year. And then there are other types of binary intervention as well that don't necessarily involve cash payments. The state can extract resources from you in other ways as well. This could include mandatory jury service, for example, where you have to give up a week or two of your time in order to serve the state in that capacity. And then, of course, in an even more draconian fashion is conscription, that is, if you are drafted into the military or some kind of national service, where every day of your life is essentially, you have to give all of your labor and time to the state in those cases. So your wealth doesn't have to be extracted in terms of dollar amounts. They can just simply take your freedom away and force you to do work for them as well. But those are all binary interventions. It's just you and the state. And then there are triangular interventions. Those are the sorts of things we probably encounter on a daily basis outside of taxes that is the state prohibiting you from buying or selling things to other people, such as, say, what are deemed to be illegal drugs by the state, but also far more subtle things in many cases. You're not allowed to, say, hire a person at a certain wage rate in the case of the minimum wage, or you're not allowed to sell a house that has been constructed in a certain way. Perhaps there's a partial prohibition on something. There's full prohibition, where I'm not allowed to sell you, say, marijuana of any kind in some states. But there might be a partial prohibition, such as rationing, where you're only allowed to buy so much of a good or service before it becomes illegal. Or licensing is another type of partial prohibition as well. So you could cut my hair. Well, not my hair, but like hair on somebody. But only, you can only cut hair in that case if you have a license. And so only certain people are allowed to cut hair. And the overall effect of this over time is, of course, to greatly limit people's choices in the marketplace. And it has the cumulative effect of making us all poor. Because we're out there trying to live our daily lives, making a variety of decisions that maximize our utility. But everywhere we turn, we're not allowed to actually enact what we would prefer to do. And so, as explained earlier by Bob and by Lucas in the earlier talks, let's use Bob's example first. I want to, I have an apple. I purchased an apple somewhere. And that was legal. But I decided I didn't feel like eating this apple. I wanted to give the apple to a squirrel. And, but the state says, no, you can't feed the animals. That's, we need all the food we can get. So apples are only for human ingestion, plus apples are bad for squirrels, they might decide. And so now, whereas, as explained earlier, what maximized my utility in that case, or what my first preferred usage of the apple was, has now been deemed illegal. So I can't do that. I have to go down and use that apple in such a way that I prefer less. And so now I'm less happy than I would have been otherwise. The other case, of course, being Lucas's case with the chocolates and giving the chocolate to his wife, his most preferred usage of the chocolates is to give it to his wife. But the state has intervened and said, well, men giving chocolate to women really perpetuates the patriarchy and so on. And so we don't really want you doing that. And so no more shall you be allowed for men to give chocolates to women. And so this, of course, then would have an effect on the overall demand of chocolate. Now you might say, oh, well, big deal, right? We can't give chocolates to people or I can't give an apple to a squirrel. But an important aspect of this is that it permeates outward from this initial prohibition or from this initial regulation. So it's not just me who is being affected by being unable to give chocolates to people. It's everyone who marketed that chocolate, who packaged that chocolate, who sold that chocolate. They're all now taking a hit as well and becoming less happy all the way outward to the guy in West Africa who grows cocoa beans. And so he could be severely impacted then, perhaps lose his entire livelihood then if the demand for chocolate falls enough. So while these are seemingly very micro types of examples that don't affect a lot of people in actuality, every time you intervene to stop what is seemingly a very nothing type of transaction, it can end up having very significant effects as we move outward into the larger economy. So we'll start to use a few examples then here to get a better sense of what are these different interventions and who do they affect? How much can they in fact be damaging to the economy? And then also that larger point that Mises made, one of Mises' great contributions to this is the fact that when we intervene, because we're preventing people from doing those things that they prefer the most, and they're the only ones who know what they can prefer, another estate agent cannot know ahead of time whether I want to give that apple to a squirrel or eat the apple, they can't know ahead of time what I want to do with that chocolate, they can't know ahead of time if someone's even going to like chocolate, maybe my wife hates chocolate and I really was buying the chocolate for something else. These are all things that the state cannot know and the state cannot calculate on its own. Each of those decisions really has to be made by the acting person who is carrying out that decision, who is demonstrating their preference with each action. Without those actions for us to know and to set prices in the marketplace through these private sector actions, we cannot simply manage the economy, it's just it becomes impossible as Mises' great contribution to this. And then so once we notice that, we can also extrapolate from that and understand that without this ability to calculate and to know what it is that is of most valuable to people, we can't actually accomplish the goals that we wish to achieve by enacting these interventions in the first place. So if our goal, of course, is to make this certain group of people more well-off or that certain group of people wealthier or happier, what we will find is that we will enact these interventions but eventually we find that we affect the economy in ways that we could not predict and actually ends up making the economy overall more dysfunctional and people less well-off. And so what happens as people enact these interventions and they realize that they're not accomplishing the goal we want them to accomplish, we then come back to them again and again saying, well, we need to revise this, we didn't do enough of that, we didn't regulate the sector enough, we didn't spend enough tax money on this project and we're left now with more poverty or more unhappy people. So the next step will just simply be another round of intervention and that's, of course, the central point then of Mises' work on why middle-of-the-road policy leads to socialism is because once you start down that road, then you just keep enacting more and more interventions. Now, of course, that doesn't mean that once you have a few interventions, you're automatically going to end up with total state communism very soon. There are, of course, ways that people can push back against that. You can always start to repeal those rules. People will often only tolerate tax rates at such and such a rate. People will only tolerate so many regulations. Mises himself says in liberalism that the state can only get away with as much as the people will let it get away with, a short of revolt and true opposition, whether democratic or outside a democratic system. And so we're not saying that every intervention is necessarily going to lead to communism, but what we are saying is that every intervention will make us a little bit less well-off and at the same time will lead many people to conclude that the intervention simply wasn't going far enough and the next thing we know, we have more and more until we find ourselves quite a bit worse off and noticeably more impoverished than we were originally. So let's use some examples then to get a sense of what are some real-world ways that this plays out. Now, before this job, I was an economist in the housing industry, so I'm going to use some of these housing sector examples just because I'm more familiar with them. But of course you can use them in a variety of sectors, especially healthcare, for example, employment and so on. Now, there are Mises or Rothbard identifies under triangular type intervention and that's where the state is regulating your interactions between two non-state actors, so you and another person not from the state. Price controls are a major subsection of that. And so what's an example of price controls? Well, there are maximum price controls and there are minimum price controls. Minimum wage is always a great place to start when we're talking about price controls. It's a price floor and we've of course covered this in numerous articles at MisesDaily on Mises.org. Should you ever wish to look? And people, of course, might come together and an employer wants to hire a person at a certain wage. And of course, even if that person wishes to work for you for $3 an hour in this country, you would not be permitted to hire that person because of the minimum wage laws. They set a certain wage. Now, of course, as a person, as an employer, you're not, you simply cannot afford to hire someone who's significantly below the minimum wage if that's all the productivity that they can provide. So I'm someone with no work experience. I'm not very good at working and I've never held a job before, so I'm only going to produce about $3 worth of productive output per hour. But since my employer is required by law to hire me at $14 an hour, whatever the minimum age is now, soon to be $15 an hour, sure, in many jurisdictions, then I'm simply not going to hire that person. So we see immediately what the outcome of that price control is. Is that we have fewer people getting hired due to a price floor being set. But we can also see this in other places as well where a price floor is being set. We can see this in housing, for example, in many jurisdictions, you cannot build a house unless it has certain minimum square footage. So we can't build a tiny little one-bedroom in many areas anymore. And so that sets, of course, effectively a price floor for that structure because it has to be of a certain size, which means it has to be of a certain cost in many cases. Similarly, we might think of laws where buildings are required in some jurisdictions to have a certain amount of its exterior be in the form of brick or masonry because that looks nicer, it makes it seem like it's a classier neighborhood and so on, may even have some advantages of longevity. But of course, it's very expensive to put bricks on the exterior of a house and so that essentially ends up setting an effective price floor for those houses as well. And so then what the consumer is faced with is a housing stock that has higher prices and they're then unable to purchase those homes. And so what we have done effectively is price many people out of the market via this housing price floor while seemingly it was all justified on the grounds that we're going to make our community look better and this is going to keep, of course, for you existing homeowners, this is going to keep prices higher. So forget about anybody who doesn't own a home yet. We're going to set the home prices higher so that all of you voters here in this town who already own homes will like me more as the city councilman and will just proceed from there. Now, of course, then what happens once we do that, once we raise the price of homes? Well, the next thing we hear now is that there's not enough affordable housing and so then we need to, of course, create subsidized housing or we need some kind of tax breaks or some other government intervention to help more people afford homes. Another case, of course, in how this affects the price of housing is let's go now to a case of binary intervention, taxation. We all know that renters effectively are taxed more than homeowners through the home loan interest tax deduction that many homeowners get. Now, notice, I don't phrase this as a subsidy of any type to the homeowners. The homeowners aren't receiving a subsidy. That's not the intervention in this case. The fact that some homeowners pay less in taxes is not an intervention. What is the intervention is the fact that renters are paying more in taxes in this case. And what is the effect of this then? Well, it drives then renters to want to be homeowners more because it's more economical for them. They're going to pay less in taxes in order to own a home rather than rent. So the overall effect of this then is to push more consumers in home ownership rather than renting. This drives up the price of home ownership and drives down the price of rentals so that the people who are landlords who own apartment buildings actually make less money. It punishes them. And meanwhile, people who are selling homes or people who are developing homes make more money. Well, at the same time, yet again, raising the price of some types of housing. And the next thing we know we're hearing that we need some sort of program to provide down payments to people and we need to help people get into a first-time home buyer situation and so on. So every little intervention begets another intervention and it never actually seems to make housing more affordable. It never actually seems to give people what they want because, as Mises noted, you cannot predict the ways that those will actually affect individual persons and we have to then fix each intervention with a new one. Some other examples, of course, with taxation are the ways in which taxation affects us both coming and going. So with taxes, they get us both with the extraction of the tax as well as the spending of the tax. This was something that Rod Bard was very concerned with, is the fact that many people who discuss free markets and so on, they focus only on the taxing side of things. Well, they extract money from us and that's bad. Well, certainly that is true. But the economy also can be greatly distorted by the way that the government pays out those tax funds. And again, with the housing example, and we could use Timothy's example about the bailouts, right? Bankruptcies serve a very important entrepreneurial function. But the bailouts functioned to prevent these certain firms from being bailed out or from going into bankruptcy. And so what happened there? Well, okay, so I'm a taxpayer and I get taxes extracted from me, whether in the form of an inflating currency or in terms of the income tax or any other federal taxes that I might pay. So I'm poorer because of that on the front end. But then the next step when it comes to spending that money on a bailout, I made even worse off because now that money is being spent on inefficient firms that bought up a bunch of homes that ended up losing value, these firms were run into the ground like Wells Fargo, JP Morgan Chase and so on. And so rather than letting those firms go into bankruptcy, which would have led to a lot of the homes in their portfolios, and of course I'm simplifying, but we allow the bank to go bankrupt, the homes that they own then are auctioned off and then people are able to buy those homes at lower prices. So had those firms been allowed to go bankrupt, there would have been a lot of homes entering the market, the price of housing would have gone down, we would have also been rid of ourselves of firms like Wells Fargo and JP Morgan Chase, which would have disappeared and been replaced by more efficient firms. And so it's a win-win in that case because the tax money wasn't used to support inefficient firms, it didn't drive up the price of homes artificially by preventing them from being auctioned off in the market at lower prices. And also we now have more efficient firms in the marketplace and that could have been made better, of course if we hadn't been taxed in the first place, but we can see how once that tax money is acquired by the state, it then progresses to ever increasing levels of distortion in the market, where once again now we're left with more expensive housing and yet again we've got to do something about that, we've got to keep interest rates low, we have to intervene in the market in a variety of ways just so that we can get more people in housing. Where if we had just left the economy alone in that case, we would have found ourselves with a wide array of affordable housing in the marketplace that wouldn't have existed before. And so these are just a few examples of the types of ways that states can intervene and how it leads to a cry and a political call for more and more intervention. But if we start to look at what might have happened, had we not intervened in the first place, we find that a lot of these problems wouldn't have been created at all. And in a certain way, we're lucky that we have the interventionist point of view. I mean, the alternative was total state communism. So we gained a little victory by getting people to admit that private ownership has its advantages. But we certainly have a long way to go, however, in terms of really illustrating that even these little interventions can lead up to big, big problems for people in terms of being able to have a living wage, which of course we're told the markets that the government should set, but really that can be achieved much more easily by allowing goods in the marketplace to fall in price and which would reflect much more the desires of people in free exchange situations than what we get now. And so I do recommend then for more on this, the final section of Man Economy and State by Rothbard, in which he will really provide a lot of helpful information understanding the different kinds of interventions and then a bit-by-bit brief examination of each type, like we've done a little bit here, but there's quite a bit more that I think you'll find useful there. So thank you very much.