 Good morning, ladies and gentlemen. Happy to see you here bright and early at 9 o'clock on Friday, the next to the last day, the last full day of Mises University. It's my pleasure to speak with you this morning about government and big business. We've certainly been talking about government already during the week, once or twice, government has come up. We've been talking about business, of course, and I want to try to bring the two together in a slightly different way. You know, in general, you might think that, you know, business and government have a fundamentally hostile or antagonistic relationship, right? You might imagine, you know, like a Bernie Sanders hectoring. I think that must be TJ Rodgers. You know, the sort of heroic business man being hectored and stymied by the politician. You know, you might remember Obama's famous, you didn't build that speech, which was not directed specifically at big business, but really at all business, large and small, and most of us had a, many of us had a not completely sympathetic reaction to the former president. On the other hand, you know, there's increasing talk, of course, there's been talk for many years about the idea that maybe government is actually helping certain businesses, ones that it favors for whatever reason. Everybody's interested now in, you know, denouncing crony capitalism, so-called crony capitalism. The idea that some firms become large and successful because they have access to powerful folks in Washington or Brussels or wherever it might be, and that maybe some big businesses are actually taking advantage of the consumer by working hand in hand with oppressive government. So we want to try to tease out these relationships in a little bit more detail, but let's start with a very sort of a big picture perspective. So what in general can we say about the role of government in the business sphere, the role of government in regulating and otherwise dealing with entrepreneurs, capitalists, and so forth? Well, you know, what most, most of us learn in school, how many of you were in the Tom Woods, Tom's afternoon talk yesterday, where he's continually referring to, you know, well, this is what you got in high school, this is what you were told in college, now here's the truth, right? So what most of us were told in high school and college and probably what most adults implicitly believe is what you might call the public interest view or public interest understanding of the role of government in the business sphere, right? So this sort of standard view holds that, well, I mean without without the government to be sort of the policeman and traffic cop and to make the rules and enforce the rules and so forth, things would be chaotic, consumers would be taken advantage of by unscrupulous companies and so forth. In other words, for the business sector to work well, to have a thriving market-based economy, you need a strong and efficient government to define and enforce property rights, but more importantly to redress so-called market failures, right? You know, externalities, public goods, monopoly and so forth. I'll be speaking in another time slot this afternoon at two, I think, on Austrian economics, some criticisms made by Austrian economists of the theories of externalities and public goods. And I spoke a couple of days ago about monopoly. You know, in contrast with this sort of benevolent, naive, public interest view of the state, we might contrast what we call a private interest view. In other words, that when government intervenes in the economy, it is doing so to benefit some private interest, some special interest. Now that private interest might be, you know, the ideology of Bernie Sanders, right? So there are Bernie Sanders and Antifa protesters and various folks who just hate capitalism and they hate business and so doing something that's harmful to capitalism and business gives them, you know, some subjective personal benefit. But leaving that aside, right, even in the absence of that case, there may be particular commercial interests which benefit from government intervention, right? Some of these are easy to see, like a tariff, right? If the U.S., you know, increases, places a large tariff or increases its tariff on, you know, imported steel from India, for example. It doesn't take a whole lot of sophisticated analysis and almost any econ student and really almost anybody can easily see that, well, a tariff is going to, you know, have a distributional effect, right? So domestic steel producers will benefit from a government, from some intervention that makes it difficult for foreign steel producers to compete, right? But while other people will be harmed, I mean, Indian steel exporters will be harmed, but so will domestic consumers who will pay higher prices for steel and higher prices for goods and services that are made out of steel. So it's not too hard to see that, you know, a steel tariff far from, you know, helping society as a whole is basically taking money from some people's pockets and putting it in the pockets of other people. Same thing with other kinds of trade restrictions, subsidies, equotas and so forth. But if you think about it, many government interventions in the economy have this same kind of character, even when it's a little bit less obvious, like health and safety and environmental rules, right? So you might think, oh, well, you know, the Environmental Protection Agency in the United States, do you use another U.S. example, obviously serves the function of giving us clean air and protecting us from, you know, big companies that would otherwise put smoke in the air and dump dangerous chemicals in the water and so forth. Therefore, it must be the case that a group like the Environmental Protection Agency is benefiting the public at large, is benefiting society at large. Yeah, maybe some big polluters are harmed because they're not allowed to pollute, but, you know, who cares about them? They're evil. Okay. But actually, you know, many mainstream economists have also become convinced, not only Austrian economists and others, that really what these kinds of rules typically do is they give competitive advantages to certain firms over others, right? So most environmental health and safety regulations are difficult to the cost of compliance can be quite high. They're very detailed. There's their questions of interpretation. Many times you have to buy expensive equipment, you have to hire many lawyers and so forth to figure out the rules and to deal with the regulators and so forth. Well, what kinds of companies can more easily accommodate that burden? Large companies, large incumbent firms that have a big legal staff and a public relations staff and have a lobbying office in Washington, D.C. and can more easily accommodate, can more easily, you know, adjust their behavior to these rules than smaller firms, newer firms, less politically connected firms. Okay. In the case of the EPA in particular, the way those laws, for example, the Clean Air Act, the first major piece of U.S. environmental legislation in 1970, was written specifically so that the restrictions applied only to new construction. So the owners of existing factories were exempt from meeting all of these requirements about putting less sulfur dioxide in the air and so forth. It was only new firms that were bound by these tough restrictions. So naturally, you might expect that owners of existing firms would be all in favor of the EPA. They would be all in favor of the Clean Air Act because it increases costs for their rivals. Okay. There's a whole literature in economics on what's called raising rivals costs. So many times business people will favor government interventions that actually increase their costs because they think it will increase their rivals costs even more. Right. This hurts you more than it hurts me. So I'm all in favor of it. So a lot of rules that look like on the surface, they're just protecting the planet or whatever, really are helping some firms gain an advantage over other firms. Right. In general, politically connected business people, just like any politically connected person, can use the regulatory system to his or her advantage. Now, there's some literature in in Austrian economics and public choice economics and modern political economy and the economics of regulation and so forth on these kinds of issues. Identifying some specific features that help us to sort of understand where we see these kinds of behaviors and where we don't. For example, we're more likely to see regulations or government policies that benefit some firms over other firms when the benefits of that intervention are highly concentrated while the costs are widely dispersed. Again, think of the steel tariff. Right. So imagine there's just a small number of steel producers in the US and if a steel tariff increases the prices of steel by some some significant percentage that has a huge impact on the incomes of domestic steel producers, their shareholders and so forth. And we say, yeah, but it makes steel more expensive for all of us. Yeah, but only by a little bit. Right. Each of us sees a small increase in the prices of different things that we buy. It's not enough for us to get really upset about it. Right. So we're not going to go, we as you know, members of the public, we're not going to organize ourselves into a group. We're not going to go organize a march on Washington, D.C. and hold signs and all that. Because it's not worth, you know, it's not worth my time to take a day off work and go march because the prices of some products that I consume went up by, you know, a percentage point or two. But if I'm a steel producer, am I going to go march on Washington? Am I going to make sure I get my steel tariff? Am I going to make sure the tariff doesn't go away? Absolutely. I'm going to lobby like crazy for that because that's my whole livelihood. Okay. Bruce Yandel, who's a sort of Chicago school economist, public choice economist, has done some really good work on regulation, has described what he calls bootlegger and Baptist coalitions as means of explaining the kinds of regulations that we see. What he has in mind with his clever analogy of bootleggers and Baptist is prohibition in the United States in the 1920s. I stole this picture from Yandel when he gave a talk here at the Austrian Economics Research Conference a couple years ago that his argument is in the 1920s when alcohol sales were illegal in the United States, you had two groups arguing very strongly in favor of alcohol prohibition. You had, you know, Baptist quote unquote, not meaning literally the Baptist denomination, but religious people or anyone who thought that alcohol should be banned for moral reasons, right? Alcohol is, you know, it's harmful, it degrades your character. In fact, a lot of the arguments for prohibition, if you look at the historical record, were made by groups that claimed that there was rampant alcoholism throughout society, that men in particular were going to the bar and getting drunk rather than being at home, taking care of their children and helping their wives and so forth. And that, you know, it's important to maintain the moral fabric of society that we eliminate alcohol. We try to ban alcohol from public consumption. But of course, these sort of moral groups, groups opposing alcohol on moral grounds were not the only ones in the story, right? Another group that benefited tremendously from laws prohibiting the legal purchase, manufacture and purchase of alcohol, of course, were bootleggers, right? The mafia, Al Capone. Al Capone became the most famous gangster in America from selling, you know, running bootleg rum in from Canada and from South America and so forth, right? So people who sell the illegal product at very high prices and so forth also want alcohol to be illegal, right? So Al Capone was in favor of prohibition. That's what made him Al Capone, okay? So Yandel points out that, look, if you're a bootlegger in the 1920s, you don't need to go on television, well, I didn't have television, go on radio, right? You don't have to make the 1920s equivalent of like a Tom Woods podcast, right? And say, you know, alcohol must be illegal. We must keep prohibition in place because I am making a boatload of money off of it, right? They couldn't do that. But Yandel's point is the bootlegger doesn't have to do that. He can just sort of remain quietly in the background and let the so-called Baptist group go out in front of the public and make the case for him. So, you know, the environmental, environmentalist version would be, you know, I'm an owner of a big factory in the 1970s. And if the government makes it illegal for new factories to pollute, then that makes more money for me. Of course, I can't go out and public and say that. But I let Greenpeace and the Sierra Club, and back in those days, there were groups like the Club of Rome arguing that we were going to use all our natural resources the next, you know, two weeks or whatever. I let the environmentalists make the case for me. I let them take the heat, let them articulate to the public why we need this rule that really benefits me, right? So Yandel points out where you have kind of a, you know, sort of a group making the public interest argument and another group that's working behind the scenes to get something for their private interest. You're more likely to see that kind of regulation be enacted. You're more likely to see it persist and so forth. Okay. So let's talk a little bit more broadly about how, you know, sort of free market thinkers have approached business. I mean, you know, some of you might have seen, there's a famous essay by Ayn Rand called Big Business America's Persecuted Minority, where she takes a very strong position in favor of big business. You know, if you've read Ayn Rand's novels, what she had in mind by big business was the heroic entrepreneurs and industrialists, you know, of her fiction works. But I think most, most Austrian economists, most sort of classical liberal political theorists have not been very favorable toward the Ayn Rand view, arguing that, well, historically, many, if not most big businesses have not been noble fighters for free enterprise, but have been happy to take advantage of government interference, where it's in their interest. Okay. So in the 1960s and 1970s, there emerged a group of historians who were called the New Left revisionists. They were leftists, but they were different from the sort of traditional left-wing historians. Most famous of these is Gabriel Kolko, whose books Railroads and Regulation and the Triumph of Conservatism are highly recommended and were extremely influential in sort of challenging what was then the consensus view that government acts in the interest of the consumer to protect the consumer from big business. So people like Kolko and these other authors, many of them wrote revisionist histories of the progressive era in the United States. And they pointed out that, no, the progressive era, far from being an example of government stepping in to protect the consumer from the excess of big business, in almost every case, the major pieces of progressive era legislation, like the Pure Food and Drug Act, for example, were really examples of a bootlegger and Baptist kind of a thing, that they were really in the interest of certain large companies. For example, the Pure Food and Drug Act was supposed to regulate stockyards and make sure that food was being prepared in a healthy and hygienic way. But the Pure Food and Drug Act was strongly, the main interest behind the Pure Food and Drug Act was large meat slaughter houses in Chicago who were losing business to smaller local slaughterhouses, local butchers. They wanted to put the village butcher out of business by passing a law saying the local butcher cannot cut up the cow into stakes. Only an authorized factory and an authorized warehouse in Chicago or Kansas City or St. Louis is allowed to do this. And so, of course, the owners of those authorized facilities lobbied like crazy for a law that would put their competition out of business. Okay, so again, these are sort of left-wing historians who said, gosh, if you look at the rules that we progressives are supposed to favor, it doesn't look like they were really in the interest of the public. They were more like versions of crony capitalism. And Murray Rothbard very much embraced this view of the new left historians in some of his writings on what he called corporatism. So corporatism is not the study of the corporation. Corporatism is an economic system in which certain large and influential corporations use the state to their advantage. And he wrote about this in the context of antitrust. The progressive era, like the new left historians, also later in the 20th century, World War I, the New Deal and World War II. So now, let me offer my own sort of analysis. What are some of the effects of government intervention, specific effects of government intervention on business? Well, one is, you know, if you're a business person in an industry in which the government plays a strong role, it's, of course, in your interest to understand that role and to try to change that role and to make things better for you. Right? There's a famous quote from PJ O'Rourke. I don't know if he's the originator, sort of the conservative humorist PJ O'Rourke, put it this way, when buying and selling are controlled by legislation, the first things to be bought and sold are legislators. Right? You hear people in the United States and other countries talk about, you know, we spent so much money, there's so much money in politics. So we need campaign finance reform and other laws that restrict how much private money, how much money people can donate to particular candidates. And you might remember the judge saying, I guess on Monday night, talking about that as a violation of the First Amendment, right, and a violation of your property rights. But there's all this call to reduce the amount of money that's in politics. I mean, from our point of view, from this point of view, if you think there's too much money in politics, the solution is not to make it illegal to donate money to politicians. The solution is to have an economic system in which no one would want to donate money to politicians because they can't do anything. Right? That's my approach to campaign finance reform. Maybe the problem is that we have a system in which people want to give millions of dollars to Hillary Clinton or Bernie Sanders or Donald Trump or whoever so they can get stuff. Right? If we had a society in which politicians can't do anything for you, then you would have no incentive to give money to them and then we wouldn't need laws that restrict how much money you can give to politicians. Okay? I said, let's keep in mind the concept of fiduciary responsibility. Meaning, from sort of an ethical point of view, if you're a business owner or you're the CEO of a large corporation and there's a lot of government intervention in your industry, I mean, as the CEO you have a fiduciary responsibility to your shareholders and even the libertarian CEO who feels uneasy about it may have an ethical duty to his or her shareholders to play the game. Right? To give money to the state, to bribe politicians and to lobby and so forth because otherwise my shareholders will earn lower returns than the otherwise would. I may think it's an evil rotten corrupt system, but I'm in the system. It may not be up to me to decide how to participate or not. I've got to do what's in the interest of my shareholders. Okay? So, we don't necessarily blame the corporate executive who engages in rent seeking behavior. The problem is that there are rents to be sought. Okay? The solution is to get rid of the rents and you get rid of the rent seeking. Okay? Mises has some interesting discussion in his little book, Bureaucracy from 1944, which I would recommend, on how the interventionist state or interventionist policy affects other aspects of business, like the organizational structure and management style of companies. He talks about how regulations that make firms less responsive to the market, that reduce the power of consumer sovereignty, make firms larger and more rigid, you know, more bureaucratic so-called than the otherwise would be. Okay? So, you know, when we complain about, oh, I don't like big companies and look at the airline industry, right? Oh, I don't want to be dragged off of a United Flight, you know, and have my head bloodied or whatever. I mean, in what industries do we tend to see that kind of behavior where firms are not very responsive to consumer wants, where we see what looks like a lot of inefficiency persisting? Well, those will tend to be the industries where we have the most government intervention, right? I mean, you know, software companies are not dragging people out, you know, on the street and beating them over the head, because software is a much more competitive industry where there's a lot less government intervention than airlines, right? I mean, it's basically a state-enforced cartel of airlines, of air service in most countries, like in the U.S. We can talk about that later if you want. There's a great book by a legal scholar, Mark Rowe, in his book, Strong Managers, sorry, yeah, Strong Managers, Weak Owners. He argues that the sort of Anglo-American-style corporation where you have a large number of shareholders, each of whom owns only a small percentage of the total stock, and sort of powerful, entrenched managers who are really, who are not the owners themselves, but are the agents of the shareholders, but yet hold tremendous day-to-day decision authority, because no single shareholder is large enough to influence corporate behavior, right? You get a ledge-free rider problem, the problem identified by Adolf Burley and Gardner means the so-called Burley and Means Problem or separation of ownership and control. And Mark Rowe points out, well, that's not something that just emerged on the market, right? That in the U.K., in the U.S., and some other corporate law systems, you have very strong restrictions on large institutional owners, right? So in contrast to, for example, Germany and Japan in which banks own large blocks of equity in corporations, it's illegal for banks to own corporations in the United States, part of the Glass-Steagall reforms in the 1930s. So part of the reason that managers have so much power and shareholders are so weak, according to Rowe, is because in the U.S. and U.K. and some other countries, we have laws making it that way, right? Laws prohibiting more, you know, stronger, more powerful groups from also playing an ownership role in the corporation. So things that we don't like about how big business seems to operate may not be the natural consequence of sort of market forces, but may themselves be the consequence of some other kinds of government intervention. What about firm size? This has been a big issue in some of the literature, some debates and arguments that free market people have, right? Is it the case that because of, you know, because of the welfare state, because of government intervention, in the U.S., we have much larger firms than we otherwise would have, right? Is it the case that government intervention, on average, helps large firms more than small firms and makes firms much larger than they otherwise would be? This is an argument that Roderick Long has made, people like Kevin Carson who make this argument. Well, I mean, it certainly is true that there are a number of important policies that do promote firm size, that do help big firms over small firms, and do tend to make firms bigger than the otherwise would. I mean, one way I like to put it, and this relates to the point that I made earlier about raising your rival's costs, you know, if you think that there are fixed costs of interacting with the state, i.e., hiring lawyers and PR staffs and lobbyists and so forth, learning the ins and outs of Washington, D.C., or Brussels, or whatever the capital is, knowing how to deal with politicians, you know, you can't do that just a tiny bit, you've got to invest a fair amount in learning how to master that skill, and once you've mastered it, you might as well use it, right? So if you think there are fixed costs of interacting with the state, then they're kind of economies of scale, economies of scope in lobbying and rent seeking and so forth, right? You know, again, just communicating regulatory compliance. I mean, in some industries, I actually, I'm on the board of directors of an insurance company, and it's, of course, the regulated industry, and probably, you know, half the time of the board has spent dealing with compliance issues, making sure that all of the eyes are dotted and the teas are crossed on various government forms. Okay, once you know how to do that, it's a lot easier for you to do it some more than for somebody who's never done it to just start doing it. Because it's very hard for startup companies to enter a regulated industry because you've got to master all this legal ease and you've got to know which person to bribe and so forth. So that helps, it gives an incentive for firms to become large so they can exploit these economies of scale and scope. Intellectual property might be an example of this kind of a rule as well. Now, in many cases, large companies get direct subsidies, making fun of Elon Musk earlier in the week, right? I mean, to be fair to Elon, I mean, some of the subsidies that he gets are tax rebates. That's kind of subsidy I can get behind, right? But he also gets direct cash payments, you know, from various municipalities and so forth. So, yeah, you might argue, oh, a firm like Tesla is, you know, getting a lot of support, direct support from the government. So that's why it's growing. You know, Goldman Sachs, what can you say? You know, I think of Goldman Sachs as like, you know, a fourth branch of the US federal government because it's so, so entrenched in Washington and so forth. You know, Boeing, the Boeing's major customer is the US military. The US gets huge amounts of subsidies, direct and indirect to airline manufacturers, aviation companies, not only the manufacturers but the commercial airlines too. But that's sort of easy to see. But there are also a number of less obvious things that might be considered a subsidy for large firms, you know, like the fact that the government owns most of the roads. So, Kevin Carson, for example, has argued that, yeah, Walmart is sort of a crony capitalist firm because, you know, what's Walmart's, what's the secret to Walmart's success? Well, I mean, vast economies of scale, right? And the most efficient distribution system of any retail company in the world are one of the most efficient. But of course, Walmart, to get the stuff to you cheap, it has to go on a Walmart truck and go out on the interstate highway, the taxpayer subsidized interstate highway. Therefore, it has been argued that firms like Walmart or Amazon, which use, you know, government subsidized airports and air traffic control and so forth, that large retailers that rely on subsidized transportation are really examples of sort of crony capitalism, right? That in a free market, you wouldn't have any Walmart's or Amazon's because if you had to pay the full cost of shipping your stuff around, it would be more efficient to produce things locally and not to produce in one big plant and then distribute all over the world. I don't think that argument's correct, but that's an argument that folks have made. I mean, what can you say about these kind of examples? Well, I mean, yeah, in most cases, I think these are government interventions that favor size, that make firms larger than they otherwise would be. Does that mean that if we could eliminate all government intervention overnight, all big companies would disappear and we would go back to sort of small household production, cottage production? No, I think the answer is clearly no, because there are many, many government policies that favor smaller firms, right? They're government policies that attack size and favor firms becoming smaller or favor existing small firms. And I trust, for example, right? If you're, you know, Mama Goldberg's deli next door to the Mises Institute, I mean, Mama Goldberg's has, I don't know, they have four or five of their restaurants here in the Auburn area. I think they have more in Birmingham, maybe Atlanta. I mean, they've almost got a monopoly on the fake Jewish delicatessen, you know, in small Southern town, right? But I think, you know, it's highly unlikely that the Federal Trade Commission or the US Justice Department is going to file an antitrust suit against Mama Goldberg's deli. This is a little teeny tiny thing in Auburn. Okay, but of course, if you're Subway or Jimmy John's or McDonald's or some large nationwide chain or any large manufacturing concern, you're much more likely to be the target of an antitrust suit. There's also what the economist Fred McChesney has called rent extraction. Rent extraction. He's got a great book called Money for Nothing, okay, on this phenomenon. And McChesney says what often happens, you know, we usually think of lobbying as a business person, a company, you know, going to the bureaucrats and saying, hey, I'm going to support you in these ways. I'm going to give you money. I'm going to give you free stuff, take you on trips, whatever, in exchange for you giving me some favors down the road. But McChesney points out, sometimes it works the other way around. And one example of this is the antitrust case against Microsoft in the 1990s, which I mentioned the other day, that one of, I remember reading at the time, many antitrust experts and, you know, former antitrust officials quoted anonymously and so forth in the New York Times saying, can you believe this tech industry? I mean, who do these people think they are? These tech companies, you know, Microsoft, they don't even have an office in Washington. How dare you go about the business of trying to sell products to consumers to make them better off. You're supposed to be, you know, bowing down to us in Washington. You're supposed to be lobbying. You're supposed to be giving us bribes and favors and we're not getting those. Therefore, we're going to tighten the screws, right? We're going to come down on you hard and let you know that's not the way it works in America. You want to, you know, you want to play ball. You got to play ball with us. And of course, after all these years of litigation, now all the big tech companies, of course, do have Washington D.C. offices and they lobby like crazy and all the tech CEOs were giving bazillions of dollars to Hillary Clinton or whatever, right? So the tech companies do play Washington's game now. You know, maybe the authorities let them know you got to, you know, you got to pay to play as they say. I sometimes wonder, you know, with these, there was this debate during the last campaign about, you know, all these politicians, their big speaking fees, you know, Bill Clinton, former president Bill Clinton, you know, gets paid, you know, five million dollars for a 20-minute speech or something ridiculous. They just think, you know, why do they, why do big companies, why do investment banks and big manufacturing firms, why do they pay these ridiculous sums of money to hear a speech by Bill Clinton? I mean, he's not that interesting. Okay, yeah, yeah, okay, former president, but you know, I mean, there's, you know, everybody's heard him say everything he could ever say. There's a good, how many hours of him on YouTube already. I mean, what could he say that's new? What are they really doing when they pay these people big money? I mean, one interpretation is it's kind of an insurance payment. If you're a large company, bank, investment, house, whatever, you know, you look at a guy like that and you say, okay, well, you know, a female member of his family might be president someday. Chelsea, of course, I'm talking about. When that happens, we want to make sure that we're in the Clinton family's good graces. And when the Clintons are making policy about XYZ, they will remember, oh yeah, remember that firm that paid Bill, how much money, you know, Goldman Sachs paid Hillary 500 grand when she was running for office, you know, that goes down in the ledger as a little plus sign or whatever. These other companies didn't pay, they get a minus sign, okay, or whatever. So it's kind of, it's a little bit of an extortion game. And so a lot of companies give money to politicians, not because they want to get a certain outcome, but as sort of protection money to make sure that they aren't hurt down the road. One good piece of evidence for this is if you look at corporate donations to political parties in the US, I don't know if it's true in other countries too, not the contributions of individuals who work for that company, but corporate level contributions to PACs and so forth, they're pretty evenly split between Democratic and Republican candidates, like in the same election. So a company will give the maximum to the Democratic candidate and the maximum to the Republican candidate in the same election. You think, okay, well if they're lobbying to get certain, if they're trying to get their favorite candidate elected, why would they give to both? If they're hoping that one candidate will win and enact some policy, then why are they giving to both? I mean, it's probably just they want to make sure neither one will be really mad at them after they win. Right, again, this is like the PJR work thing. If we lived in a world in which the person who wins the election for Congress or the Senate or even the presidency basically doesn't do anything, they have no power over you, then why would you waste your time bribing them? The fact that companies give money to everybody and anybody suggests that they're worried about what could happen to them if they don't. Other things, so some accounting rules like corporate disclosure requirements. Publicly traded companies have to disclose information in their financial statements that privately held companies do not, and so many companies may prefer to stay small, smaller than they would be if they went on the public equity markets, if they listed on public markets because they don't want to have to meet those disclosure requirements. There are direct subsidies for small companies, you know, especially in the tech sector, right? Governments build science parks and fund incubators and the SBIR program, which gives cash to tech startups. You have lots of indirect subsidies as well. So if we're going to say that subsidized interstate highways constitute, you can give sort of an unfair advantage to Walmart and Amazon, then we would have to say that subsidized electricity, subsidized telecommunication services give an advantage to small firms that are able to be in some small town, right? If it weren't for electricity subsidies, maybe you couldn't afford to live in Auburn, Alabama. You'd have to live in a big city that has a big nuclear plant, okay? And the only reason a little startup company can be in Auburn, Alabama or wherever is because they have access to the internet and they have access to, they can make phone calls, they can get electricity off the grid. All of those things are subsidized by the state just as much as the road system. So it's not clear that the kind of Kevin Carson argument makes any sense, specifically favoring one type of firm over another, okay? Now, more generally, I mean, think of what the government does to the economy, to society, right? I mean, restricting trade and starting wars and controlling the education system and so forth, you know, makes us all much poorer than we otherwise would be. And, you know, the massive scale of government intervention around the world, you know, it retards the international division of labor, right? Reduces stocks of human capital. If you want to use that language, it makes us all dumber than we otherwise would be if we didn't have state control of education. Reduces the marginal product of labor in many contexts, right? So, I mean, all of these things, you know, it might be that if we had, you know, sort of free society and we had better education systems, better transportation and communication systems, maybe the economies of scale and scope and production would be even larger than they are now. Maybe we'd see bigger firms than we see now if we were to get rid of the state and all of its harms. So, the point is, it's very difficult to say ex-ante what the world would look like if we could eliminate all government intervention in the economy. Would we get a society of lots of little tiny household firms, people living locally, you know, eating locally produced organic food or whatever? I mean, maybe it's possible and you might see that in some parts of the world, but there's no theory that tells us ex-ante, no historical evidence that would allow us to predict that that's necessarily what we would get. Actually, my conjecture is in many parts of the world and in many industries, we would see more consolidation and centralization of production if we got the government, you know, off our backs, so to speak. Okay. There's a good, there's a debate that Roderick Long and I had back in 2008 online on this very topic, Roderick was saying that corporate hierarchies are sort of the product of government intervention. I was arguing the contrary, of course I'm right, but you can, you can just Google that and you can find, you can find it. Okay, so just a brief note on sort of the legal form of business organization, the corporation specifically. The corporate form of organization, right, the limited liability company has been kind of a controversial issue among sort of market oriented economists. So there have been claims that even if large firms are legitimate in the free market, publicly traded corporations are not because they receive a special, they receive special privilege from the state in the form of limited liability. Okay, so I mean, it's also true, of course, that there may be tax advantages to incorporating rather than being a partnership or a proprietorship even for just a small operation. But what most people have focused on is, you know, this claim, so opponents of the corporation claim that the reason that most production takes place under this particular organizational form is because the state has granted corporations immunity from certain kinds of legal actions, right? So as you know, under the corporate form of organization, the shareholders, the owners cannot be personally liable for the debts of the corporation or for torts committed by employees of the corporation. Okay, and of course, that's one of the great innovations, historical innovations that allowed entrepreneurs to accumulate large amounts of capital, right? Because, you know, if if Tom Woods back there starting a new venture, a new Tom Woods dot com kind of a thing and he asked me to partner with him and to give him some money. And then he says, well, you know, if if somebody sues Tom Woods Inc. for fraud, they're going to come after your house and your car and your kids college fund. Then of course, I'm not going to invest. But if Tom tells me, hey, you can invest a hundred bucks in my venture. And the worst thing that can happen is you'll lose your hundred bucks, but you probably will make 200 bucks. I mean, of course, I would never invest in Tom, you know, Tom Woods thing like that. But hypothetically, you could. Therefore, Tom can raise a lot more money than he could if he were not able to issue that that kind of protection. So is limited liability an illegitimate grant of the state? Is it a form of privilege for large companies, for corporations in particular? So I think it's important in answering that question to distinguish two things, right? So there's two forms of limited liability. There's limited liability for debts. In other words, limited liability against claims, credit claims by creditors. And then there's limited liability against claims from victims of torts. In other words, the first the creditor category is simply this, right? If I invest in Tom's firm and it goes bankrupt, you know, can the bank, which right, so if I invest in Tom's firm, I get an equity stake. I'm not guaranteed any particular payout, right? I either make money or I lose money depending on the value of the equity after Tom has done his thing. But let's say Tom also has a bank loan where he agreed to a fixed repayment schedule of so many dollars per year. What if the business goes belly up and Tom can't pay the bank, right? So if Tom has set up a limited liability company, then the most the bank can get, they can take the assets of the company, but they can't come after me personally. Now is that legitimate or illegitimate on the free market? The answer is it's neither, right? Because that is a purely private contractual arrangement between the bank, Tom and myself, right? In other words, you know, in a pure laissez-faire society, Tom Woods comes to me and says, hey, will you give me a hundred bucks and I'll give you these shares in my firm? My first question is going to be, well, Tom, what kind of arrangement do you have with the bank, right? What did you tell the bank about what the bank would be entitled to if the business were to go belly up? And if Tom says, well, Peter, I told the bank that if the business fails, you know, the bank can get its hands on, you know, not only the capital invested in the firm, but the personal assets of the investors. Now notice if Tom were to try to strike that deal with the bank, the bank would love that, right? So the bank would probably give him a really favorable interest rate. That'd be good for Tom. But of course, most people like me would say no thanks. I'm not interested in making that investment. But on the other hand, if Tom can go to the bank and say, look, bank, I want you to lend me money, but it's in the contract that if I can't pay you back, it's on you. Well, I mean, the bank might still give him a loan, but he probably charged him a higher interest rate, right? But then Tom shows me that contract I'm more willing to give him my hundred bucks. The point is this is something that can be worked out on the market, right? Equity holders, debt holders, the entrepreneur, we can all negotiate for whatever kind of arrangements about who has to pay whom, what in different states of the world. That's not a, that's a purely private contractual issue. So whether or not he adopts the form of limited liability is just that's between us. That's not a policy issue whatsoever, right? So the issue that libertarians worry about is, okay, so Tom hires Lucas, you know, as his delivery man. And then Lucas is driving, you know, he's driving carelessly down the street and he runs into Jeff Herbner knocks him over and breaks Herbner's leg, right? Herbner has all these big medical bills. Tom Woods, Inc. doesn't have enough money to cover Jeff Herbner's medical bills. Can Jeff Herbner come after me? The guy who has, you know, invested a hundred bucks in Tom Woods, Inc. for an equity share. That's the more tricky issue. That's the legal issue. And so in, in most jurisdictions, if Tom has incorporated as a limited liability company, Jeff Herbner's out of luck. Okay, now is that an illegitimate grant of the, of state privilege? I think the issue is probably not for the following reasons and then we'll stop. Right, the more, in fact, this is a much more general issue than a corporate issue, right? Suppose Tom Woods does not set up as a corporation. He's just, it's just a mom and pop proprietorship and he hires Lucas and Lucas breaks Jeff Herbner's leg. I mean, is it Tom's fault? Most people assume that, oh, well, if the Domino's pizza driver, you know, is driving recklessly and causes an accident, it's Domino's fault and Domino's shareholders should be liable for that. Well, I mean, maybe it's the driver's fault, right? I mean, unless, unless Domino's specifically told the driver to speed, then why is it the company's fault, right? So this is a general kind of principal agent issue. You know, when is the owner legally liable for harms caused by an employee? And the way courts have typically ruled and common law courts, long before incorporation statutes ever came onto the books have argued that, you know, the employer is only legally liable if the employer, you know, very specifically directed the employee to act in a way that causes harm or has great risk of harm. Okay. I mean, if I, you know, if I punch though in the office, it's not Lou Rockwell's fault. I mean, it's my fault, right? So the legal term for this is respondeat superior, right? When is the superior legally liable for actions of the agent? And the answer is only in these certain limited circumstances. My point is libertarians who critique limited liability assume that the default should be the owners of an enterprise are legally liable for all torts committed by employees. And there's that's not the obvious default case. In fact, that's not the historic common law default. The historic default is no, you're not employers, whether they're corporations or not are not liable for torts committed by employees, except in these special circumstances. So it's not at all clear that the corporate form is some kind of a special legal privilege. Okay. So I've already run over my time, but all I wanted to leave you with is the idea is that government does help big business, but government helps small business too, right? Government policy has lots of effects, diverse and complex effects on business firms. Corporations benefit from the state, but they're harmed as well. And limited liability is not an is not obviously an artificial state privilege. Okay. So the bottom line is what would business firms? What would the corporate landscape look like on the purely free market? Well, I mean, we just can't say ex ante, but my my view is let's give it a try and see what happens. And then we can solve these debates by looking and seeing what actually does emerge on the free market. I think that's a policy that we can all support. Thank you.