 I gather this will be one of those lectures that you won't have to know for the final exam, but I hope you find it interesting. The best way I have of introducing myself is to mention to you that I did notice that downstairs there is a Mises Institute book for sale called Economic Controversies, and it consists of more than 50 essays by the late great Murray Rothbard. It includes an introduction, and the first sentence of that introduction reads, it was nearly 40 years ago that Murray Rothbard changed my life. Now that introduction is written by me. I was in fact asked by a rep of the Mises Institute about 10 years ago if I would contribute an introduction to that book, and of course I was greatly honored to do so. You can imagine if he changed my life nearly 40 years ago, that's of course by now nearly 50 years ago. The only thing I can clarify is that while I did meet Murray Rothbard briefly a couple of times, he changed my life through his books, and the nearly 40 years ago occurrence was that I picked up a copy of Man, Economy, and State, and that was my first exposure to Austrian economics, my first exposure to the writings of Murray Rothbard, and then because that was the early 70s, there was no Mises Institute for me to attend. Nothing like the wonderful series of lectures and courses you're taking now, but luckily there was a bricks and mortar bookshop in downtown Manhattan called The Less Affair Bookshop. I visited it virtually every weekend and browsed and bought a couple of copies of books there and read through Rothbard, Mises, Hayek, Haslett, the whole slew of people, so I became typically sort of one of those self-taught in Austrian economics. And I'm very grateful for that and that hopefully will allow you to appreciate the fact that my roots are in this place at the Mises Institute. The last I was here was about 10 years ago delivering a talk, and I do have to say that the place is even better than it was before. I don't know whether to give that credit to Jeff Deist. More than likely what's really happened is that a whole generation of people have grown up with Austrian economics, and that's why you had such a human having, such a rich assortment of lectures from so many brilliant people. I've been sitting here all day enjoying them. Unfortunately, I've got to go back to New York City tomorrow, but I'd love to be. I would love to have stayed another couple of days and listened to all these wonderful talks. Well, I'm going to build on them, I hope, a little bit and say further only that I had a kind of an odd career. I left the academy and went to Wall Street, but then I spent more than a quarter or a century covering the data for Barron's financial weekly during a column. And in fact, I was book review editor and I was privileged to invite a few Mises people to write book reviews for Barron's. But I covered the data, that was my job. And I wrote a book called Econo Spinning, it was published in 2006. How to read between the lines when the media manipulate the numbers that's still in print. Another book that I think is really good on the data is Bob Murphy's book, Contra Krugman. Bob is one of those Austrian economists who I think certainly knows the data, much of the data, at least as well as I do. And I want to recommend to people to you that you may want to take a deep dive, read those two books, take a deep dive into government data. And indeed, of course, statistics, the root of that word is the state. And indeed, so you're really looking at the sinfulness of government data. It's an interesting question to ask, would there be data? Would there be a market for data if there were only a free market? And if the government weren't involved in all in the economy, which is the way things should be, aside from if there is a government, aside from just enforcing contracts and enforcing other violations of the zero regression principle. But if there were not only a free market, would there be data? Would there be a market for data? I think there would. I think the data would be better than it is today, even think there might be price indexes. The only story I guess I could tell on Murray Rothbard, much as I think he was of course the man who changed my life, is that he was a little hypocritical about price indexes. In his book, Man Economy and State, he talks about the impossibility of price indexes. And in a sense, he's right. The difficulty, it's more of an art than a science. And yet, I did notice, and I think it's in his writings as well, I did notice that when he was lecturing on economic history, he had no compunction about using price indexes when they became useful. And so that's in a way how you might approach economic data. Some of it is useful. But I want to walk you through a story that I call the dirty data of labor compensation mess. I'm emphasizing that story because one of my big concerns as a free market person who came from a left wing background, shockingly enough, when I was the age of most of you, I was a democratic socialist having risen from the depravity of being a card carrying, not a card carrying communist. My mommy was a commie. She was the card carrying communist. But I was a pretty enthusiastic Stalinist at the age of seven. I grew up at the age of 10 or 11. But I grew up only by becoming a sort of a democratic socialist. And that's my brief story. But why is it helpful? Well, it's helpful because one of my obsessions is to lecture the left on how capitalism really is on the side of the little guy. My brief answer to many people who ask me, why are you pro-free market? Why are you a libertarian? I like to say because I care about the well-being of the broad masses of people. That's why I'm a libertarian. Because when we talk about a lot of sort of rarefied things, all of many of which are very important, there is this sort of gut level reaction on the part of the left that, oh, well, you're talking about economics for smart people. You're talking about the economics for the few and not for the many. You, innovative, smart people have a lot of fun under capitalism. But how about the ordinary person? How does that person cope under capitalism? Well, I believe that primarily if you could towed up the benefits and other aspects of free market capitalism, you could sort of subjectively declare that its main attribute is that it brings equality. It lifts the living standards of the broad masses of people. That's really its principal magic. And that, I think, is a message that we should tell to them in all kinds of possible ways that we can. But my concern as somebody who knows the numbers has been that there's been a resurgence of this idea that labor is getting shafted. Now, I happen to believe that labor is getting shafted by government. A couple of those ways have been mentioned already by the previous speakers. But two that I would mention very briefly is the rise of restrictive licensure. I'm all for certifying lawyers. But I don't believe in restrictive licensure. I believe that most of us could practice real estate and divorce law. If we worked for a law firm for a few months, we'd learn the ropes. We don't have to go to college in law school to do it. But even more perniciously, about 5% of jobs were under a restrictive licensure of one sort or another about 50 years ago. And now it's up to about 25%. Now, I believe that what that does is it really does inhibit the mobility of labor. Because we're talking about, of course, the focus is usually on being a manicurist, being an assistant to a funeral director. The kind of jobs that ordinary people can get, much more difficult to get, much more costly to acquire because you have to meet all kinds of state requirements. The other one, more subtly, which the progressives missed, is the weird fact that so much migration goes to areas of the country where housing is cheap. That's not where the high paying jobs are, but that's where the housing is cheap. And where the housing is cheap is where government is usually less involved in the housing market. But in the high wage areas, San Francisco, New York City, Los Angeles, in the high wage areas, housing is prohibitively expensive. And this especially shafts people of limited means, ordinary workers. And I do think that you find from the official numbers some gap in equality, widening inequality of wages between the higher paid and the lower paid. And I think that those two factors have a lot to do with it, both of them having to do with government intervention in the marketplace. So that's the best way those progressives can help equality. But by and large, there hasn't been that much change in the way that labor is paid in the aggregate. And I wanna walk you through a few myths about it and try to expose them and explain how they work. While I'm calling it the dirty data of a labor compensation myth, I'll start with a quote from what? From the Press Secretary for Bernie Sanders, presidential campaign, that's Breanna Gray. She said, well, the share of the ghost of labor has gotten less and less and less. What else does she say? While corporate profits have soared, the share of national income, the ghost of labor has declined and it's near as lowest point in almost 70 years. That's a government working paper. And then this is even the Cable Institute, a libertarian think tank, mentions significant declines in the labor share of income. And he thinks that the remedy should be worker representation on corporate boards. The Cato Institute is, of course, a libertarian think tank. And the ghost of Carl Marx is what David Henderson refers to. David Henderson is a very good free market economist. And yet he's written an essay called The Decline of Labor Share of Income. Then in a course he taught, he told the students that although I'm no Marxist, I did find this a little concerning. Well, I'm gonna mention some really established academicians who've written peer-reviewed papers who push the same story. Labor is getting shafted. I'm gonna explain what they say and why it is a violation of Econ 101. But I wanna start with something that we see on Twitter a lot. And I'll walk you through the chart. You see it on Twitter, you see it from the Economic Policy Institute, Leftwing Institute, and it really has not been challenged. This is the official story. The red line tracks the real output per hour of all persons. That's inflation adjusted. And this is from the Bureau of Labor Statistics, directly from them. And the blue line tracks real compensation per hour. That too is inflation adjusted. The outrageous fact is that from late 1940s to the early 1970s, the two tracked each other. But then real compensation per hour greatly lagged real output per hour of all persons. You can see the red line rising, the blue line lagging. And I will tell you the funny thing is that I've seen a number of free market people who connect this with Nixon's lifting of the gold window. A closing the gold window, I should say. That in the early 70s, up until the early 70s, the Bretton Woods Agreement obligated the US government to redeem in gold any foreigners holding dollars. And then Nixon abrogated that. Now that might have caused a lot of problems. But what's interesting is that I've seen libertarians swear by this chart and declare that it's all because Nixon closed the gold window. So nobody doubts that it must be true. After all, both those series are inflation adjusted and they both come from the Bureau of Labor Statistics. And look at what happened. Suddenly, labor was not being paid, it's output per hour in real terms. Well, now let me tell the unofficial story. The red line tracks output per hour of all persons in nominal dollars and the, is that the red line? Yeah, the red line, yeah. And the blue line tracks compensation per hour in nominal dollars. Now, that's also from the Bureau of Labor Statistics. What have I done? Very little. All I did was take out the inflation adjustment from both of those series. All I did was restore them to nominal dollars. No longer an inflation adjusted, just how do they fare in nominal dollars? Now, maybe you don't have to be an Austrian to recognize that business sells its goods and values its goods in nominal dollars. Business pays its wages in nominal dollars and indeed, as any sort of macroeconomist's worth is, sort would say, a nominal versus a nominal equals a real. Nomal divided by nominal equals a real. You're lining up nominal dollars year by year by year and they are in real terms reflect each other. And again, to repeat, wages are paid in nominal dollars, output is sold in nominal dollars and suddenly those two lines are tracking each other. If you calculate them in terms of percentage rises, you'll find that since the 1970s, the percentage rise of labor compensation in nominal dollars has tracked the percentage rise of labor output in nominal dollars. So that's all I did. And when I ran this chart a couple of times on Twitter, it looked like I was some kind of liar or magician. There were left-wingers who decided to block me from now on. How could I possibly do such an outrageous thing as to take away their candy? What they seemingly believed. Well, now, what is the story behind this? Why do you get the two tracking each other if you simply take out the inflation adjustment from both series? What you find is that these numbers have been kept, so to speak, according to two sets of books. The labor compensation number has been deflated by this consumer price index that the BLS also publishes, Bureau of Labor. The non-farm business sector output has been deflated by something called the implicit price deflator. And you find that up until the early 1970s, those two price indexes were approximately tracking each other. But then you find that the CPI took off and the implicit price deflator remained relatively sluggish. And as you may know, in order to inflation adjust a number, you divide that number compensation by the CPI. You divide output by the implicit price deflator. And so it's all in the fact that, which might be a story in itself if you believe these price indexes, that something happened to the prices that were charged for consumer goods and something else happened to the value in real terms of the output of industry. All of that is interesting, potentially. But if you're going to make a point about labor being shafted, about how labor is not being paid according to its productivity, isn't it much simpler to line up the nominal dollars with the nominal dollars and then see what you get? Again, because goods are sold in nominal dollars and people are paid in nominal dollars. So again, this is something if you, I will guarantee you that if you troll through left-oriented tweets, you're gonna find this chart, a chart like this repeated over and over again. It's rock-ribbed fact labor is getting shafted, it's not being paid, it's productivity. All because of a simple error of measurement that I would submit is pretty palpable on the part. By the way, the Bureau of Labor Statistics doesn't really, the nominal number, I had to tease it out. It's easy enough to get, but it's not really readily accessible, the current dollar numbers. But the inflation adjusted numbers are easily accessible. Now, I should even say, by the way, that one of my confirming sources is a guy who was a very high up at the Bureau of Economic Analysis, they put out the National Income Accounts. One of my advantages as a columnist is I got to know these people who covered the government numbers. And this guy, he's now a consultant in different respects and he said, look, it really is a bit of a joke. They think that starting in the early 1970s, labor was not getting its value of its productivity and it lagged and lagged and lagged. So why don't they ask themselves, well, where did all that income go? Profits must have gone through the roof. Profits must have tripled and quadrupled, is what the guy honestly says to me. And of course, you don't find that at all in the aggregate. I won't show you those numbers, but you might be curious to know, my God, the exploitation rate has been off the charts and how could that possibly have happened? Well, it didn't happen. It didn't happen if you look at the nominal numbers. Well, now I want to get into something a little bit more subtle that really arises from the quote that I began with and it begins with the idea of a ratio of labor share. And I believe it's potentially a legitimate calculation, labor share, as long as you accept the broad aggregate numbers of the Bureau of Economic Analysis which keeps the GDP numbers and keeps the broad macro numbers. Labor share is calculated first with enumerator being a measure of labor compensation, including benefits. Now, I saw Paul Krugman cite labor compensation excluding benefits, but benefits are pension contributions, benefits are medical care insurance. And obviously, if you have a job and they're contributing to your 401k or if they have you in a regular pension plan or if they also are paying for your medical insurance, that's something that would be out of pocket. And then most people, certainly including Krugman and certainly including there's another editorial writer at the New York Times who takes out compensation. You'd have to ask them, don't you find benefits are valuable to you? Because if you didn't get these benefits as calculated, then obviously you'd have to spend money out of your wages and salaries on them. So, but most of these calculations except when Krugman runs them are a measure of labor compensation, including benefits. But then there's the denominator. The denominator is a measure of income and output and that's where the problem arises. But now let me get to a quote from, there's something odd that there is a descent from one mainstream economist. I began with quotes from different sources and I'm gonna get to some others saying that labor is not, labor's share is in the, has been declining for the last 20, 30 years. That labor, so somehow or other laborer used to get a certain share of income and now it's getting far less. But the interesting thing is that the only dissenting source that I've come across is a assistant chief economist at the Bureau of Economic Analysis which generates the numbers. He's written a paper in which he has concluded that labor's share does remain within its historical range. I've written him, I've corresponded with him, but what's very clear is that while he doesn't mind publishing this paper, he also doesn't mind that it doesn't get a lot of attention because he doesn't wanna do battle with so many, I would think, that's my best guess, is that he doesn't really want to contradict so many established sources that look at this decline in labor's share and start creating all kinds of crazy ideas about it with respect to, for example, monopsony which was mentioned in the earlier talk. That there's this huge monopsynistic cartel on the part of the capitalist and that's why labor's share is in the pits. They're building all kinds of theories about it based upon, as I'm about to explain to you, based upon bogus numbers that make the same kind of simple, fallacious mistake that the previous set of numbers also made. Now, what do we mean by historical range? He said historical range and that the past 75 years since World War II, which is a reasonable cut-off point for reasonable reasons, with quarterly data starting in 1947, that's the historical range and there's something interesting about that which I'll get to in a moment, but we're looking at the last 75 years and that starts in the late 1940s. Well, what do I have here? Well, I'm gonna start then with the Wall Street Journal since that's not a daily newspaper that's known for its hostility toward capitalism but it did run a major article by this journalist named Peter Kiernan and he wrote in a piece called Despite Tight Labor Market, Labor's Forces Income is Squeezed, Worker's Slice of the Pie has been shrinking confounding economists. Their Slice of the Pie has been shrinking and this is the chart that he ran, although I've simplified it a bit. This chart is labor compensation, that's again wages, all of labor, actually includes government labor. All of labor, including wages and salaries and as well benefits and I've done it as a 40 quarter moving average in order to smooth out the bumps and that's a percentage of gross domestic income. Gross domestic income, remember that and what it shows in consistent with what he has said is that labor share was, it's 40 quarter or 10 year moving average was at 53% and then now it's down to only 52%, it was rising here and then it fell and now I've drawn a red line at 53.02 and showing that it's at pretty much at a 75 year low and that's what he has run and that's what you find in his Wall Street Journal article but now again notice that the denominator is gross domestic income. Now we're gonna do a little Econ 101, now notice something else. This is the same data except the denominator is net domestic income. Labor compensation is a percentage of net domestic income and it now looks noticeably different and I'll of course explain the difference between gross and that domestic income in a moment but examine it and now recognize one thing that labor compensation is now 63.16% of net domestic income and it's a higher number than any number through 1970. It's equal to a higher than any number through 1970 and what we're going to find by looking at other examples is something really rather odd and somewhat embarrassing to progressives. If you think this is a valid measure and it is approximately correct, then what is it telling us? It's actually telling us that over the last 10 to 20 years as conventionally measured, labor compensation as a percentage of net domestic income is about where it was in the 1950s and 1960s, actually a little bit higher. It tells us further that labor compensation into the 70s and 80s, 90s rose and then fell back to the levels of the 50s and 60s. Now why is this extremely embarrassing to progressives? Because they are constantly telling us that the 1950s and 60s are the decades we've got to return to. That's when unions in the private sector represented about one third of the labor force and now it's down to six percent. That's when the bogeyman of competition from abroad, cheap labor from abroad, was practically nonexistent. That was when they were no longer, and now of course they claim that it's the rise of the high tech firms. That's another reason for it. The high tech firms didn't exist. All of the factors that they mentioned that are at fault were not a problem or were working well in the 50s and 60s. And yet the stark fact is that if you take labor share measures seriously, you find that for some strange reason when the bad stuff happened in the 80s, Ronald Reagan takes over and breaks the power of the unions and labor unionization goes into a tailspin. And that's when labor compensation is higher. That's when it's rising. Global competition begins in the 80s and into the 90s, and that's when labor compensation is at its highest. The world turns upside down if you track labor compensation according to this measure. Now, I will now want to explain to you why this measure is the valid one. Now, what is the difference between gross domestic income and net domestic income? Well, net domestic income by the way is the income side of gross domestic product. It is gross domestic product except measured on the income side rather than the product side. And net domestic income is simply minus depreciation. We were given a lecture on capital theory earlier today and depreciation was mentioned. And now let me get to the Bureau of Economic Analysis definition of depreciation because I think it will make sense for Austrians. The Bureau of Economic Analysis in their handbook says that the consumption of fixed capital or depreciation is the charge for the using up of private and government fixed capital located in the United States. It is the decline in the value of the stock of fixed assets due to wear and tear, obsolescence, accidental damage, and aging. Now, let's get to another interesting concept called national income. The Bureau of Economic Analysis defines national income as the sum of all incomes, net of the consumption of fixed capital earned in production, earned in production. Now, what are we really saying? What we're really saying is that any measure of income, if you are gonna do macro measures, I know that Austrians book this, but if you're gonna do any kind of measure for any sector, why do you want to subtract the allowance for depreciation? Because if you don't make an allowance for depreciation, as we were told earlier today, the economy will ultimately sink into oblivion. You have to make an allowance to shore up the depreciation of capital. The income that's left after that allowance is the only income that's really available. And interestingly enough, the Bureau of Economic Analysis and Conventional Measures make an allowance for this by making a distinction between gross and net, gross domestic product and net domestic product, gross domestic product and net domestic income. Now, again, what I showed you was that if you take net domestic income in your denominator, you're gonna get a very different result for labor share. And let me go over that a little bit more. Gross domestic product equals gross domestic income, net domestic product equals net domestic income. And they are the same measures, although they're measured in different concepts, so they're the same. And then what does the Bureau of Economic Analysis say about net domestic product? It may be viewed as an estimate of sustainable product, which is a rough measure of the level of consumption that can be maintained while leading capital assets intact. It's the, you're leading capital assets intact because you are making an allowance for the depreciation of capital that you're shoring up. And now what is the other, why do I get a difference when I put net domestic income into the denominator versus gross domestic income, something else that's gone on in the U.S. economy, which I think is valid, depreciation has been taking an increasing bite out of gross domestic income. So that, again, the net result is that here's net domestic income is declined as a share of gross domestic income. Now, why is that? Yeah, that's because there's been increase in investment in equipment and software as a percentage of private sector capital investment. This is a nominal dollars. And we are looking, in the 50s and 60s, there was an emphasis on the building of structures and they depreciate very slowly. Over the last 30 years, there's been a huge tilt toward investment in equipment and software. Those are also capital goods I would maintain and they depreciate very quickly. And so that is the reason why if you are going to use an historical measure of labor share, you have to use a net figure rather than a gross figure. Because the net figure is the true measure of the income and product available and the net figure has declined so that if you do the math, if the net is lower and lower, then the percentage becomes very different if the denominator, if the numerator rather is the same. Hopefully you grasp that math. Well, what else do I have here to present to you? Yeah, well, again, this is the same guy, actually his name is Bringer and Bridgeman. He says, recent net labor shares within its historical range, whereas gross share is at its lowest level. I removed depreciation since paying for it only returns the economy to the production possibilities of the previous period. Using net production thus only includes output which can be used for current consumption or expanding future production. But the experts still stick to GDP. Now here is a quote from a peer reviewed paper from a group of five economists with huge prestige and they write, the fall of labor share of GDP in the United States and many other countries in recent decades is well documented, but it's causes remain uncertain. They then go on to say that it's all because of the rise of superstar firms. They are quoting, they're using gross domestic product as their measure. They are right, it's well documented. But what these superstar economists have apparently missed is that gross domestic product is no longer a continuous measure for labor share to be put into the denominator. And again, that's because of the new nature of investment and the fact that depreciation is taking an increasing bite out of it. I could send them this chart and their whole thesis about superstar firms would fall apart. This is labor compensation as a share of net domestic product. Again, it tells the same story. Take net domestic product rather than gross domestic product and you're gonna get the same result which is that we are about where we were in the 50s and 60s. So if you're talking about the rise of superstar firms, how comes it that we're doing about as well as we did in the 50s and 60s when there were no none of these superstar firms which of course are Amazon and Google and all these other firms that they clearly think is a problem. They don't, their story falls apart once you use a simple measure. Now let me see how much time I have. I'll cover one other subtle part of this. Yeah, this is a narrower measure and this is for non-financial corporations. And the measure of non-financial corporations is actually the best measure to use for corporations and it's a measure that is run by the Bureau of Labor Statistics as well as the BEA. The Bureau of Labor Statistics will run a measure that looks like this. Labor compensation is a percentage of gross value added. Why do I take non-financial corporations? Because financial corporations used to be about 5% of the corporate sector and they're now about 13% to 14%. As an Austrian, I happen to think that while there's been some good things reflected in the fact that financial corporations are more important than ever, there's lots of reasons to find that to be a problem. For example, there would be no need for foreign currency trading by financial corporations. It's a big source of revenue if there was simply just one currency in the world rather than all the Balkanized currencies. There's lots of reasons to think that these financial corporations are a little bit of a distortion but they make a higher rate of profit and we could have a separate listing for them but what they do is that they distort the number. It's fairly well-recognized but the non-financial corporations that are still about 87% of the corporate sector are still pretty much a good core measure. And indeed, the Bureau of Labor Statistics runs data for them in terms of productivity. They themselves think that it's a good core measure and they run a labor compensation number and the difficulty that I have is that anybody who wants to contradict me about what's actually happened to labor compensation can cite directly Bureau of Labor Statistics numbers because the Bureau of Labor Statistics does not publish any numbers netting out depreciation and they only publish gross numbers and so how can I possibly argue with an August organization like them? So what they run is, for example, labor compensation as a percentage of gross value added, that's similar to the gross domestic product of these non-financial corporations. Gross value added of the non-financial corporations and they do indeed show a precipitous decline in labor share but then if you take labor compensation as a percentage of net value added and the only way to get that number by the way is to go to the BEA's website where they have depreciation figures for the net non-financial corporations and there you find this pretty much the same story. The compensation is now again comparable to what it was in the 50s and 60s and then you also find, as a matter of fact, Benjamin Bridgman of the BEA does another figure which is kind of interesting, labor compensation for non-financial corporations as a percentage of net value added minus production taxes. Bridgman points out there are actually taxes of corporations paid by virtue of producing. This is not corporate income taxes. This is just the taxes that are imposed on the first dollar of production. So if you subtract those out, then you get another figure for the actual amount of income that could be distributed between labor and profits and labor compensation and you find an actually firmer result which is again that over the last 10 to 20 years we've been where we were in the 50s and 60s and let's see what else I have, minus production taxes, okay, what else do we find? All right, now I've anticipated this point but I think it's worth going over. Rounding up the usual suspects. This is in the New York Times. Economists have offered various explanations for why workers are not doing better, the steady weakening of labor unions, the ability of American companies to find cheaper labor abroad or automate further, piddling productivity growth and the rise of superstar companies that are extremely efficient with a relatively small labor force. Well, do I have, I think I have another quote, your Wall Street Journal. Economists cite a number of possible explanations for the change. One is that workers' ability to negotiate wage increases is weakened, union representation has fallen, China's entry and all the rest of it. Now again, all of these explanations become absurd once you actually look at a proper measurement of the trend in labor share. They become absurd because if you ask, well, what was happening to labor share when none of these were operating or when they were operating in reverse when unions were strong, you find that labor share is doing about as well if not somewhat better than it did in the 1950s and 60s. And what else do I have? Yeah, yeah, this is for nine, I guess this is my final chart, the glory days of corporate profits. This is another, this is the flip side of that anomaly. This is again, it's for non-financial corporations because they're a decent series, a relatively constant series. This is a pre-tax profits as a percentage of the actual net value and the real income of non-financial corporations. Well, notice that the profits were highest in the 50s and 60s, that the profits fell in the 70s and 80s and we're now risen a bit, but we're now lower than, we're still lower than we were in the 50s and 60s. That's actually the story of corporate profits because again, you might want to look on the flip side of all this, we began by talking about a labor's shafted because they're not getting that productivity. We talked about how labor's shafted because they're not getting their share and we should be finding that the corporate profits have gone through the roof as a share of the income of the non-financial corporations and we don't find that to be the case at all. I'll tell you something else interesting about this chart, we find that corporate profits tended to be low in the high inflation 1970s and early 80s. Corporate profits as a share of income tended to be low and they were highest in the low inflation 1950s and 60s but that's another story altogether. Well, I'm finishing early and if any of you want to ask some questions we'll make some comments, I'd be grateful. Hopefully I've walked you through a few of the numbers. What I've tried to show you is that if you have your head screwed on right, you read the Austrians, you try to make sense of the numbers, you talk to people who actually run the numbers, you can find some of the most appalling mistakes that the mainstream will make and there's another more complicated mistake that's being made with respect to labor share. What you do find is that while there's one lone voice at the Bureau of Economic Analysis that has blown the whistle on all this, it's difficult to contradict the Bureau of Labor Statistics but this is really just an exercise in economic 101 measurement which shows that a whole lot of presumably sophisticated economists cannot get it right and that the zeal with which they pounce, that the attitude they take which is that I guess that government must do something because labor is being shafted, the mistakes that they can make in the process really do somewhat shock you, I trust because these are fairly elementary mistakes. Any questions? So do you have any like reading recommendations that can like direct us or like resources on how to interpret certain types of data and like aggregate measures? Yeah, yeah, well, I mean, as a matter of fact, I mean, the only, as I mentioned to you the only good titles that I can recommend, I'm gonna try to think of some others but the good titles I can recommend are my book The Count of Spinning, which is still in print and Bob Murphy's because Bob Murphy really does a dive into the data because Krugman covered the data and Murphy covers them very well also and I mean, the odd part of it is that if you, as I say in this particular case, I've been quoting from the Bureau of Economic Analysis Handbook and I should say the Bureau of Economic Analysis is the agency that's part of the Commerce Department and they cover the broad aggregate numbers and they have their own price measure. Then there's the Bureau of Labor Statistics that covers the unemployment rate and then does productivity and it also issues its CPI. The Bureau of Economic Analysis is a much more sophisticated agency than the Bureau of Labor Statistics and actually if you read their handbook which you'll find online where they explain the data, the quotes that I gave you I think were pretty good, pretty sensible and so I guess the third thing to recommend is reading the Bureau of Economic Analysis Handbook because it does explain the data pretty well. It's got about seven chapters and if you go, because most of these data come from Haver Analytics. They've given me a free subscription to their data and it's very user-friendly but of course you can get the BEA data on BEA Interactive. They have all their data that's on spreadsheets and of course then a lot of people use Fred. So I guess those are three titles. Anyway, anybody else? Yeah, yeah. Hi, I was born in 1995 and so I'm largely ignorant of history before them besides what I've read in books so I'm largely ignorant. Did you ever hear World War II? No, yes, but I'm largely ignorant of like economics history. So you know, if you read a standard history book he mostly is- The Great Depression, have you heard of that? Yes, yes, I've heard of the Great Depression. Nevertheless, I'm ignorant of any charts that correspond to- Well yeah, so that's the next thing. A lot of the- I was born in 1944, it's true and this data starts in 1947, I was only three years old then. But that, and I wasn't tracking it then, I was Stalinist at the time, you know. But of course you can actually of course look at history through this data, but go ahead, what was it called? Yes, my question is what is your interpretation for the drops in corporate profits from roughly 65 to 70 and then slightly after 95 to slightly after 2000? Yes, good question. Yeah, I guess I'm not the finesse of most of your excellent question. The only thing I have noticed again is that the profits were low during the high inflation years. You're asking me about 95 and 2000. Why they've risen a bit? I really don't know enough about it. The only thing I can say is that what's interesting to me, I post this a lot on Twitter because a lot of the left-wing Robert Reich, for example, he's got a million and a half followers on Twitter and he says profits are at a 75-year high and I'm just posting pre-tax profits as a percentage of the net income of these non-financial corporations. They're not at any kind of 75-year high. Profits are actually recently, not even that much higher than they were about 10, 15 years ago. But again, my lame answer to your question is only to say that what's interesting to me is that high price inflation is not good for corporate profits. The high inflation years were the 1970s and early 80s. And you can see the corporate profits fell, the low inflation seems to be better. And so I believe that what's going to happen, that even this slight bump up is probably not gonna last. And that really what seems to happen, certainly happened then and could, and seems to happen, will happen probably in the future, is that obviously price inflation also affects costs and the costs start to bite. And I think that that probably is gonna happen. The preliminary data indicates seemingly the third quarter profits, this just takes you through the, I'm sorry, second quarter, this takes you through the first quarter of 2022, just the first quarter and it bliped down a little bit. It's probably gonna blip down even further. They have to pay for oil, they have to pay for their labor, they've gotta pay for higher debt costs. So it puts them in a squeeze. It may have been higher debt, but so I'm only answering a small part of your question. And now that you know this history, I invite you to answer the next part of your question and write me an email with your answer. What happened in the 90s? Yeah, yeah. Well, you wanna say that in the microphone? Oh, the dot com, yeah. Oh, just I imagine the second drop that he knows would be the dot com bubble. Oh yeah, you're talking about, yeah, the, you know, one, yeah, yeah, that period. Yeah, absolutely. Yeah, yeah, I should, I probably should have put in some recession bars because you're right, yeah. During recessions, of course, profits really suffer. You know, the profits are much more volatile than wages. Capital investment is much more volatile. And indeed, so you have helped me out with that. Thank you very much. Yeah, any other questions or comments? Yeah. Yeah, when it comes to the economists like Robert Reich and Richard Wolff, do you see them as being malicious with the way they present data or as just being ignorant? Malicious. Well, no, I think, okay, now, come on. First of all, why are you generalizing about the two of them? Maybe one is malicious and the other is ignorant. And really, okay, Richard Wolff is both malicious and ignorant. Now, why do you mention, I debated Richard Wolff on socialism and it's gotten nearly 5.2 million views on YouTube and the commensurate number of podcasts downloads. And I owe it all to Richard Wolff, I think. I debated two other socials and that got about 100,000 views. But with Richard Wolff, it takes off. I think I'm co-tell riding on Richard Wolff. But interestingly enough, a week after our debate, give me a very long-winded answer, a week after our debate, he delivered a lecture in downtown Manhattan and for 10 minutes he talked about the debate he had had with a libertarian. And I have a video of that that I post because it was available in the video. I post those 10 minutes and I offer a free lifetime subscription to the soul form debates for anybody who can verify a single thing that he recalls. A week after the debate, he invented a completely fictitious narrative about what I had said and what he had said. And okay, that could be denial, maybe that's not viciousness. But I was told by a guy in the same term, I was told by a progressive socialist who used to be in the department with Richard Wolff at UMass that everybody hated him, nobody was talking to him, he's a vicious guy. And so that's the real evidence. But Robert Reich actually, so he's both ignorant and vicious. But Robert Reich really, I've seen him appear and I bridle every time somebody insults him for his height. I think it reflects well on him that he's four for 10 and then he got this far as he did in life. I think anybody who talks like that is vicious. And so I would defend this guy completely on that basis. And I've heard him speak, he's a little bit smug. Everything comes out of his butt. He doesn't look anything up. But he's clearly just sort of like a religious fanatic. He believes that if he thinks it's right, then it must be right. And every once in a while he's writing an article or something like that, but most of the time he quotes nothing, he cites numbers and quotes nothing. Really, the most baffling thing is that he does have 1.5 million followers and that people seem to believe what he writes. So I probably should get over the habit of running a chart that contradicts what he just said. I do that a lot on Twitter. Just to show that these are the actual numbers. But it's OK. So then to sum up my long-awaited response, Robert Rice is ignorant. He's a kind of a true believer. I'm reading the book The Righteous Mind by Jonathan Hite. And Jonathan Hite makes the argument. And I don't know, Michael Mallis highly recommended that book. And Jonathan Hite basically talks about how we have the mind. We're like a person on an elephant. We've got a mind, but really the elephant is telling us what to think. All of our intuitions and all of our presumptions. And then we use our mind to rationalize our prejudices, rationalize our assumptions and presumptions. And I want to say to Jonathan Hite, that's true, except it's not true of libertarians. And the reason why it's not true of libertarians is that we're stuck with a relatively tragic sense of life. We're stuck with it because we know there's nobody on a white horse. There is no government that can cure prejudice. We know that capitalism punishes bigotry. We know that, but we're not going to deny that there still will be bigotry. And then usually if there's a lot of bigotry, it comes primarily from the government. So there's really no solution. We have to reconcile ourselves to a lot of relatively unhappy conclusions. There are happy things that we believe in. We do see that a libertarian world could be a decent society, could be a good world, but it will be a highly imperfect world. There will still be awful things happening in society. Whereas the progressives, the progressives really think that if we just get government to behave better and act better, then most things can be solved. There won't be any bigotry because they'll pass a law against it. There won't be any shootings because they'll take away all the guns, all of those things. So how did I get into that? Yeah, that's because Robert Reich is really like that person in Jonathan Heidt's book, and I guess the followers are like that person as well. Our only hope is that maybe if you use your mind, you can cope with the world a little bit better and recognize that libertarianism and the free market is the only answer. And then as I emphasize today, that the happy fact is that capitalism not only brings freedom, it brings prosperity. And then every once in a while, when I get excited, I say, my God, maybe that's a good reason to believe in God. Maybe capitalism would bring liberty, freedom, and not prosperity. Then what would we do? We'd be kind of a dilemma. But it brings both. That I believe could be empirically and conceptually justified, and that's a relatively happy conclusion. And hopefully, if we preach this to the followers of Robert Reich, I don't expect him to learn anything at this point, but preach that to his followers. Maybe some of them will listen, and that's my long-winded answer to your question. And are there any other questions? We've got about five minutes to go, yeah, I guess. No. Okay, thank you very much. Thank you.