 We're here to talk today about a debate that is very hot right now in the United States. I don't think there's much of a debate going on about this in Europe, because the left one this debate a long time ago is over here, so they don't have to talk about it anymore. But in America they haven't won it yet, and therefore it's a big issue. And this is the issue of inequality and the whole idea of the evil of inequality as you probably know there's this book by Piketty Outday that's now being endorsed by all the leading economists in the United States, so a lot of the leading economists in the United States is the most important book of our generation because it advocates against inequality and supposedly produces the data to prove that capitalism leads to inequality as if we didn't know that already. But it's this massive argument and the left is just falling right in line to advocate for this. Now, why do I say in Europe this battle has been lost? Well, you live here so you know I think that the idea of inequality, you know, certainly you know that Europe is considered as a bad thing, that the whole notion of inequality is perceived as immoral, and the masses have already accepted that. That's already baked into the political process in Europe. In the United States that's not true. Most Americans think inequality is fine. They don't think it's a big issue at all. They don't think it's a bad thing. And you know I really think that this is why the left is placing such a big emphasis, big push right now with Obama in office to really get this idea into the American people, to really capture this last bastion of a little bit of freedom, a little bit of capitalism in the world, and it's really across the entire leftist spectrum. I've never seen all the leftists get together on one idea and agree on it as adamantly as they are right now in the U.S. It's the, as Obama said, Obama said in one of his political statements that inequality is the issue of our generation, the issue of our time, the most important issue of our time. And I think that he's leading this movement to try to really undercut the American view that says that inequality is fine. So what I want to do today is talk a little bit, give you my views on what I think lies behind the whole debate about inequality, what they're trying to achieve, why I think it's obviously, why I think it's wrong, why I'm a big fan of inequality generally. But, you know, to kind of discuss what lies, what I believe lies at the core of this and what lies at the bottom of this. And then we'll open up for questions and that'll be more fun anyway. So I'll talk for about 30 minutes, 40 minutes, something like that and then we'll just take questions. But in the meantime, if you really have a buggy question and related to what I'm saying, if you wave at me then I don't mind doing this more like a classroom given that we've got a small group here than a formal lecture, which I don't particularly like. Teaching is much more fun than lecture. And for students and for the, you know, for the professors. So let's start by first trying to understand what the issue is here with regard to inequality. So what is the, what is the observable facts of the reality that relate to inequality? Of people equal, metaphysical sense, all different. We're all unequal. We're all different skills. We are all different interests. We are all different passions. We are all different abilities. Human beings are not equal. Human beings are not equal. And indeed, so the only sense in which we are equal is what? When in enlightenment they talked about all men are created equal. What do they mean by that? Given that they're just looking around the room, I can tell you're not equal. Some of you are tall. Some of you probably play basketball well. Some of you. In what sense did the enlightenment talk about all men are created equal? So equal before the law. The sense was that an ideal legal system would treat all men equally. But it's more fundamental than equality before the law. The fundamental idea here is that all human beings have the same rights. Have the same rights. That is, we are all born free. We all have the same freedoms. What are rights? When I say I have a right to my life, what does that mean? It means I have a right to live my life as I see fit. I have a right to act, to make my life a success. Without you guys forcing me to do something I don't want to do. So in that sense, when people talk about all men are created equal, what they're saying is all men have the right to be free. All men have the right to be free of being cursed. Have the right to be free from force. Right to be free from violence. That there are no masters and slaves. Shouldn't be masters and slaves. That masters and slaves are a way of imposing coercion, a way of imposing force, and therefore are wrong because they violate this notion of rights and they violate this notion of equality. So the only sense in which we can be equal, because metaphysically we are not, is equality of rights which manifests itself. Politically, one of the ways to manifest is equality before the law. The only way equality applies to human being is that we're free. So what are the socialists trying to do? What is the left trying to do? What is the attempt by the left involved? What they're trying to do is they're trying to take a metaphysical fact that we're all equal, that we're all unequal, that we're all different, and use force in order to change it. At least change its external manifestation. So they know they can't deal with, I don't know, talent. They'd love to be able to deal with talent. They'd love to be able to destroy people who are talented. To make us equal should have said destroyed. To make us equal because they're not talking about destruction. They're just talking about making us... They would love to all of us to have the same talent. I mean, it's sad if you're a leftist. Some people have less talent and some people have more talent. But that's the only way you can make people equally talented. So I like to use the example of basketball. I'm pretty bad at basketball. Michael Jordan, maybe I'll use a model who plays basketball today. I'm James, the Bon James, you know. Do you guys know basketball? Maybe you should use soccer. Football. How do you make me and Michael Jordan the same in basketball? How do you make us equal? Because I'm terrible and he's like the best player we've ever lived. How do you make us the same? Are you making another Bon James football? Yes. So you laugh. It's the only way. Because I could train every day all day shooting the basketball and he'd still be better than me. So you can't make me as good as him. So the only way is to make him as bad as me. How do you make him as bad as I am? Breaking his legs. And if you watched me play, you'd know that that's not enough. You have to break his arms too. You have to break his legs and arms to make it equal to me. Good and talented. And that's even, you know, even the hardcore egalitarian, even hardcore, you know, people who believe in equality, find that a little upsetting. A little, not too much, but a little upsetting that you're breaking people's bones. So what are they advocating in terms of what kind of equality do they advocate for? Because they think it's more palatable because they think it's more, you know, it's nicer. What kind of equality? It's all about equality of income, equality of wealth. How do you make us equal financially? Taxation. So you take money from some people and you give it to other people, right? So you take money from people who have a lot and you give it to money, they give the money to people who have a little. Now, what's the difference between taxation and breaking legs and arms? Taxation's huge. Okay, we can pass a law that allows us to break their arms and legs of great basketball players or whoever we feel like, right? I mean, the legality of it is just that, you know, what we've agreed is legal. We can change what's legal. I mean, slavery used to be legal. Smoking used to be legal. It's not physical. It's not. Try not paying your taxes. What happens? They come and they take from you and they take you in jail at the same time but they confiscate. What's confiscating? Is that physical? It's not in your body. Okay, so it's not in your body. There's no blood. There's no tissue. There's no bones breaking, right? But think about what taxes are. Think about what taxes are. Where does the money that you have come from that you're taxed on? Where does it come from? Assume you're not students and the answer is not my parents or the state. But where does the money you come when you pay taxes come from? This is going to sound wrong but you rent out your body for another one. You rent out your father. Okay, but the money doesn't come from other people using your body. Unless you're prostitutes. No, no, no. Maybe. Why are people willing to rent your body? I mean it's not really your body but why are people willing to pay you? For your labor. For your labor. For your thinking. For your skill. For your talent. For your ability, right? They're willing to pay you for what you produce. For your time and your effort. So where does the money come from? From time and effort, right? So, you know, you spend 8, 10 in America we spend 10 to 12 hours a day working and we get paid for it. And the money is compensation for our time, for the use of our body and mind during that period of time, right? So, what is taxes? If the money you're paying is a product of your time and your effort what are the taxes you're paying? The time and effort? If your tax rate is 50% half the time that you're sweating away that, you know, they're using your body and your mind you're using your body and mind to pay somebody else the efforts and work that you're doing and half the time is for somebody else. Now is that that much different than breaking arms and legs? Valuable to you, the time. You guys are young, so you know, with advances in medicine if they continue and, you know, if your healthcare system will provide them to you you know, you got a good chance of living to be 90 but that's it, there's 90, 90 years. Half of that time and effort is gonna go to you and half of that time and effort is gonna go to somebody else. Now, I would be happy to have my arms and legs broken if you'd give me half my time back. The argument of the left is that taxes are not just going on this morning that are used for other products like roses that are also used. Absolutely. Perfect. Perfectly. Perfectly. Absolutely. I'm not arguing about how they're gonna be used we can talk about how they're used. The point is, doesn't matter how they're used the point is to get them they have to break my legs and arms. There's no difference between that. Now, you could argue that breaking arms and legs doesn't serve any purpose and I could argue that taxes don't serve any purpose too and we'll get to that. But it's the same thing violence is being used against me my time, my life is being taken away from me in the name of what? In the name of equality put aside that part of the taxes that are going for roads and factories we can deal with that later but a big chunk of my taxes are going to what? Are going to give to other people are being taken from me and handed to other people so that we establish some utopia of equality. Now, when did this utopia when does this utopia actually exist? When are we equal? When are we relatively equal when it comes to income? Relatively. We're never completely equal. But when is humanity achieved real, you know sustained long term relative equality? It's pretty much the same. There's always been some people who had but let's say there's never been a period where 98% of the population was pretty much at the same level from most of human history from most of human history how many people were poor 250 years ago? I mean dirt poor because they lived in the dirt I mean, literally how many people on the planet 250 years ago were dirt poor? 95% 6% 7% few aristocrats at the top Most people were very, very poor and pretty equal the distribution of wealth I mean, a few had a bit of luck here but everybody else was pretty much the same. Well, in human history it's been basically flat for 10,000 years not only have they been equal at any given point of time but for generations they've been the same. I mean, you get some variation here and there so it's some years of history but if you look at a graph of wealth per capita on the planet for the last 10,000 years it's like this it's pretty much flat and then it goes like that I mean, like that and it happens about 250 years ago and when it does that what happens to the inequality? some people become rich some people become middle class some people stay poor or what? Are they the same poor as they were 250 years ago? No, they're much better off, right? They're rich 250 years ago well, never mind 250 years ago would you rather be like lower middle class today maybe even poor today or rich 70 years ago? No internet just to remind you no phones, right? no phones in, you know, some electricity washing machines I don't think they're washing machines air conditioning, well you don't need air conditioning over here but in California it's important I'd rather be lower middle class than rich 70 years ago I'd rather be poor in America today than rich 70 years ago the poor live a better life today in America than the rich did 70 years ago they almost all own automobiles which 70 years ago the rich would have had 100 years ago the rich didn't have automobiles 150 years ago the rich didn't have electricity because nobody had electricity electricity is pretty cool even if you're poor so what happens with the industrial revolution and with the growth of capitalism is that inequality goes up, boom, it explodes right, we were equal before capitalism we don't have to go 250 years ago what's the most equal place on the planet today from an income perspective what's that North Korea is a good example but what continent has the most equality? everybody's poor not everybody, there are few people who are rich but almost everybody else is poor that is the natural condition of human beings human beings naturally without freedom without industrialization without capitalism, human being a poor and we're equal that's history the industrial revolution and capitalism create inequality that should be celebrated because that inequality is a consequence of what what produces that inequality welfare welfare produces the inequality the richness but where did the richness come from how did the rich get so rich how did the middle class get created where did it come from yeah it's by creating value so the way that equality gets created is a long time ago we were born with different talent but we had no way to use them like Michael Jordan if he'd been born 250 years ago it wouldn't matter that he's incredibly talented in basketball even if he practiced there every day nobody would pay him for it he couldn't make a lot of money and he'd have no stage in which to play because there was no such thing as basketball it creates an opportunity for all of us to take our talents and to use them to create value and some people create values that have huge material value if you will tell the people and therefore they become rich other people create values that don't have a lot of material value to other people and they don't become rich teachers are not good for a lot of money they're not, you're not willing to pay teachers a lot not as much as a software engineer software engineer is a wearer and he creates more material wealth than teachers do teachers make less they choose to make less they become teachers, it's a choice they make but capitalism creates this incredible opportunity for all of us to express our unequalness which is not a word it doesn't matter the fact that we're different the fact that we have different talents the fact that we have different passions different interests, different skills that we do different things that we can create values in different ways and somebody who creates lots of values becomes wealthy how did Bill Gates how did Bill Gates spend a billion dollars for himself how did he make it he started a company lots of people started companies he created software he sold the software and the software was so successful that what, everybody had a half one and he sold them, let's say he sold them $100 I think that's what they used to go for DOS or windows or wood or whatever it was they paid $100 for it how much was the software worth to you when you bought it for $100 you wouldn't bother to get out you wouldn't bother to make the exchange if it's exactly equal, why do I care if you keep that $100, it can get the software it doesn't matter to me the reason you give money for the beer how much is the beer cost? two euros it's a better example of the software obviously I got your attention you don't care about software how much is the beer worth to you? if you're willing to give up two euros how much is it worth to you? this is the most fundamental principle in all of economics, right? if you're paying two euros for a beer how much is the beer worth to you more than two euros you've given up the two having two euros in your pocket is worth less to you than having beer in your bill now I don't like beer I know that's heresy to me it's not so I don't buy it I keep my two euros because it's more about the two euros in my pocket it's worth more to me than the beer in my belly so when somebody sells you a beer who lost? he gained whoever sold the beer whoever sold the beer gained because they're making a profit two euros and they're selling it to you for two so they're better off and you're better off because you have beer in the belly instead of two two in your pocket it's worth less to you than the beer in the belly right? so the only way to make money in a free market is by offering people a value that they value more than you do sell them because beer is not worth much to me I wouldn't be tempted to drink it so Bill Gates makes a lot of money by selling you software for a hundred dollars a piece and all of you are what? because of that because you got something for a hundred dollars it's actually worth to you more than a hundred dollars how much more than a hundred dollars do you want to guess? a lot think about what life would be without Microsoft it's hard to imagine because it's so embedded in your lives every piece of software is good to an individual tens of thousands if not hundreds of thousands of dollars and all Microsoft charge you is a hundred you got that unbelievable deal of a lifetime how many people in the world are affected by Microsoft? how many people's lives work better because of Microsoft? more? a billion? I think it's somewhere between six to seven billion because almost everybody on the planet life is better because of Microsoft it's better because we have computers that all talk to each other we have networks, we have software that's intuitive that wouldn't have happened if not for Microsoft somebody like Microsoft creating it it's made seventy billion dollars how by making the world a much better place to live by creating a value that everybody paid for he made money, you made money not money, you made success some of it turned into money lots of millionaires made money off of their Microsoft products most of it so the only way you create wealth is by offering other people a value i.e. making other people's lives better so yes, the rich are way up here very unequal but the way they got here is by taking these people down here and pulling them up in the very essence of what a marketplace is a marketplace is the creation of value that you sell to other people that you trade with other people and a trade is by definition win-win, you both won right with the beer everybody won, nobody lost Microsoft everybody won, nobody lost if you're selling because you're making a profit hopefully and the buyer wins because he's getting something you want to do, hopefully you can make mistakes you can buy lemons you can buy dad products but those are mistakes, you enter the transaction with the intention of winning so trade is win-win so what's the problem with any more? if I can name the publication the level the software it's an optimization and people lose their job so the people lose their own welfare and that's how we lose their taxation so it's fascinating the fact that since the 1980s when the software came into being the number of jobs in the world has increased dramatically nobody has lost this job because of software not an aggregate and this software creates many many many more jobs than it eliminates and this is true of technology through our history and at every point in technological history since the late 1700s people have said over three doctors to count you people will lose their jobs and in every step in the industrial revolution now in the information revolution more jobs are created than were lost and this continues I mean think of the millions and millions and millions of jobs that exist today that didn't exist 20 years ago 30 years ago and you can see this for example by the fact the simple fact that China has gone from a country where everybody was a subsistence farmer to a country where you've got hundreds of millions of people producing stuff in jobs that didn't exist 20 years ago and they haven't replaced the jobs in America unemployment in America is relatively small and it's caused almost 100% by government it is I could eliminate unemployment in the United States within a week reducing unemployment is easy it's easy nobody wants to do it but it's an easy thing to do all you have to do is provide the way it's centered for the creation of jobs which means no significantly less regulations and lower taxes and jobs would appear like that and it always works whenever you strike a history it always works and it's easy to do if you have a political stomach the political will and the political ideology to actually do it it's fascinating that you use China as an example because it's a very strong communist home for the United States so there's no sure if we're getting away from inequality but that's fine although China is a good example of inequality again China was very equal 40 years ago today there's massive inequality in China but they're much better off equality is a sign of a vibrant, thriving successful, prosperous wonderful state of affairs now China's a mixture that's right and that's why it's only partially successful it's still got hundreds of millions of people in poverty but notice which parts of China are successful you have to go to China to actually see this the parts of China that are thriving, that are booming that everybody's moving to where cities are being created from scratch although it's part of China from an economics perspective the government has said you can do whatever you want in southeast China the area surrounding Hong Kong one of the few province I think it's called there are no regulations on business but very little what was this Steve Wynne who's a business friend in America owns the Wynne casinos in Las Vegas that it's much easier to do business in China it's far less regulated in China than it is in the United States and I believe so when you take an area like that part of China and say okay, free markets will even pretend you have poverty rights because they just pretend in China you don't really have poverty rights the government pretends you have poverty rights human productivity explodes wealth creation implodes and inequality goes through the roof in those areas in China where the state still controls everything where state enterprises are the major source of jobs it's flat it's very little wealth creation there's very little growth and indeed those are the parts of China that are dragging its economy down right now because state-owned businesses don't function they don't run well what's that trains in Belgium are a good example or a bad example a bad example of functioning well yes trains everywhere because trains for whatever reason I'll get you trains for whatever reason have been nationalized to a lot of the world and they're all out China has said those areas that are like three kinds of biggest growth those areas you talk about are areas that certainly are the wealthiest and we have other areas in China that have the state autonomous region so they are about the same as Hong Kong and they are really poor just because they also have the historical background of being poor because they are like too much for example because they just have mountains they don't have a roof that's not true and let me give you some examples Hong Kong what's the history of Hong Kong before before when Britain first showed up 100 years ago war was in Hong Kong nothing there was a fishing village what did the British bring to Hong Kong originally what did they bring to Hong Kong college they brought some knowledge but Hong Kong just a contrast it was a fishing village 75 years ago today it has a population of 7.5 million people and the average the capital GDP the GDP per person is equivalent to that of the United States so incredibly wealthy what happened during those 75 years there's no history of wealth there there's no natural resources it's not even a good place to start a city because it's on this very steep hill so it's very difficult to build there's a tiny little bit of flat land so it's worse than Tibet what did the British bring to Hong Kong they brought one thing that made all the difference why Hong Kong there were 1000 places they could have but what made trade in Hong Kong favorable what they brought to Hong Kong was property rights what they brought to Hong Kong was freedom respect for individuals what they brought to Hong Kong was equality before the law you what do you say about the other parts now there is also the same so take Tibet take Beijing and take Tibet take Tibet why is Tibet not developed because it's poor lots of places let me finish this because you're right take the area around Hong Kong there's a city called Dongguan Wang Xiu that whole area that whole area used to be dirt poor there was nothing there indeed Dongguan which I visited about 8 years ago didn't exist in 1986 there was no city there was nothing there was just flat land right there's no history of wealth in the Guangzhou province so what created the wealth there what created the wealth there was that China went there and said this area here you have property rights we're leaving you alone you can create and build whatever you want individual initiative and people from all over China who are allowed to do it because Chinese there's an autocracy it's got a lot of control all the people went there and they built and you should see these cities the unbelievable cities the skyscrapers everywhere the biggest mall shopping mall in the world is in Dongguan China a place you've never heard of where up until a few years ago 50% of all the shoes in the world were made in this one city because of freedom now why is Tibet and not just Tibet a lot of western China why are they so poor why are they so poor why are they so poor why are they so poor so I'm trying to think of a good example of a landlocked area that doesn't exhibit that phenomena Switzerland Switzerland thank you I was going blank for me I was thinking cancer natural resources don't matter one I order in the big scheme of things the historical scheme wealth does not come from natural resources if they did then the Spanish Empire the Spanish Empire would have creamed the British and the French they had all that gold from South America but it doesn't matter because if you have a lousy economic system and a lousy political system the gold goes right through you it doesn't stick it doesn't create wealth it doesn't generate natural resources that matter what matters is freedom Tibet in particular is not allowed to be successful economically because the Chinese want to suppress it they want to press them to bend they don't want the Tibetans to have an idea of independence so they oppress them they don't have property rights they don't have contract rights they don't have the freedom that you have they don't want the same is true of western China which is by the way and they are afraid of them so they haven't expanded the freedoms to western China they have allowed certain regions you can take a map of China and you can say where have they allowed freedom check, check, check, check you see economic growth except for Beijing Beijing is successful what because they tax all the other successful places and they steal their money and they bring it into Beijing but all the success reduction the wealth creation is happening in those areas that are left free and the areas that are poor are the ones where there is no freedom the correlations throughout history there is a correlation throughout history between freedom and wealth non-natural resources involved freedom and wealth in Saudi Arabia a wealthy country that's a lot of natural resources is it a wealthy country for 90% of the people it's good, they're good to poor the king has all the wealth the country is not wealthy there is no middle class in Saudi Arabia the people are poor in spite of the natural resources yep isn't better than most in the ecosystem where one person is everything and the rest is nothing yes and you know that that's not because of capitalism that's always because somebody is themselves as king or pope always happy or some form of dictator that sucks up everybody else's wealth for their benefit that creates if you will but if you look at shitty coefficients which are the coefficients that measure wealth scientifically Saudi Arabia scores low because so many of the population are down here the inequality of this one king doesn't put the coefficient up enough and it's a place that scores more bad than India for example yes but in my view my view that's a good thing that's not a bad thing a high GDP coefficient means there's a lot of inequality as I've explained so far I think that's good because there's no accident that America is much wealthier than India we're free and therefore more wealth is created and therefore there's more variety of creation between the very successful the medium successful and an actual successful but I would rather be poor in America than middle class in India so I'd rather be a part of the coefficient of the you know graph in America because the whole thing has been bought yeah yeah I don't mean that America is that's wealthier because they have like 15,000 dollars or something yeah but the used economy is enormous so I'm not saying America is ideal America is terrible right so the government debt is amazing but America is very wealthy Americans are very wealthy the standard of living in America far exceeds the standard of living in Europe well if they have such amount of debt aren't they like above their standards well the government is living above its standards the government is spending a lot of money on wasting a lot of money but Americans don't have that much more debt than other people around the world and there's no reason to believe Americans would default on that debt because they make a lot of money I believe that China is like buying they're buying something from America yes the Chinese buy American bonds but why did the Chinese buy American bonds because they have dollars how did they get dollars because Americans are so rich they'll be buying all this stuff from China so we're buying Chinese goods because we have money the Chinese that have dollars and they put them back into the US economy otherwise where would they get dollars from yep but if we say that the creation of wealth and the existence of wealth goes together so in the 1950s and 60s Chinese government all around the world were dropping like for example Christmas so in the 1950s and 60s Chinese officials dropped and they saw an increase in quality for a while right it's because post-world war 2 a lot of the ways in which wealth is distributed got crushed so for example in Europe you know basically Europe was flat so a lot of the assets of Europe came down so a lot of the measurements coming out of world war 2 thank you I'm also going to do this it's getting harder so first of all a lot of the measures get distorted right after world war 2 because of wealth but second I don't know that that's a good thing what was the main economic activity during the 40s and 50s particularly in Europe what was the main so-called wealth creation that was going on in Europe during the 50s and in the early 60s reconstruction so reconstruction is not wealth creation reconstruction is wealth recreation when did wealth started to be created and new new wealth new assets, new products, new goods new real investment going into the new it starts in the 60s and really accelerates in the 80s with technology so and then the and then the Gini coefficients explode they start going up in the 80s all over the western Europe all over Europe and the United States so reconstruction is reconstruction do you guys know you know what the broken window fallacy is you guys get excited broken window fallacy you like I mean part of this is the broken window fallacy do you know the GDP in the United States when we in 1942 1943-1944 and yet what happened to standard living in America during those years what happened to standard living during World War II in America just guess think about it half the male population is overseas fighting a war thousands of them are dying which are building a tanks not machines tanks are not exactly productive things they're not consumables they're not things that make life better so standard living was dropping GDP was going up so the way we measure economic activity is completely distorted by the broken window fallacy does everybody know what the broken window fallacy is you know you break the windows that creates economic activity but all you get at the end there's a window and that's not real economic activity wars are not real economic activity reconstruction you need to do it but it's not all creation where entrepreneurs innovators create new ideas and wealth that is what creates any hope because again we go back to the metaphysical fact that we're not and all the income inequality is a reflection of that it's a reflection of the fact that we're not equal we're not equal to talent we don't equally work hard some of us make more beer than we should some of us are more responsible right and that is reflected in how much money we make some of us make different choices I chose to be a teacher I got a PhD in finance could have gone to Wall Street chose to be a teacher I don't care I mean one of the things that I find fascinating is that the capitalist side doesn't care that much about money so people what let me ask you this question in terms of really inequality in terms of lifestyle life quality what's the difference between me and Bill Gates Bill Gates is 10,000 times richer than I am I think that's right 10,000 or more times richer than I am but in terms of the way we live our lives how big of a difference is there between me and Bill Gates not much we both surf the internet at about the same speed we both fly private airplanes across the country I happen to share mine with 300 people and he does it by himself but I can go anywhere in the United States I can afford to go pretty much anywhere he can afford to go anywhere he has a bigger house than I do but you know what I have a pretty big house I've got a really I've got a nice German car I don't know what he drives it might be German it might be it was voice who knows but it's the same car that gets you from point A to point B even if it's Toyota it gets you from point A to point B what was the difference between my lifestyle my argument would be that he's probably going to be able to live I mean if you look at medical technology you know maybe he'll live a few months more than I do but not much I have the same access to medical technology he has it's not that expensive and I have insurance and they cover it so what's the difference between me and Bill Gates in terms of actual living there's not much inequality between me and Bill Gates but take take trying the difference in inequality between peasants and some government bureaucrat who threw brain meat in the system has made a fortune there's a huge difference in the lifestyle the peasants can't go anywhere he needs to get a permit to go anywhere or take like 300 years ago you can't leave your village in China you can't cross state lines of China without getting a permit even today they control those east because they don't want too many people flying east there's lots of illegal immigration with it migration within China but it's illegal there are millions of people living in Shanghai who don't have permits to live in Shanghai but it's they control it or they try but take 300 years ago if you were a peasant how far could you go as far as your legs would carry you not very far because you didn't know on a horse never mind an automobile or a plane how far could you go as an aristocrat as far as other people would carry you well as far as a horse would take you I mean the distances were fast there's no difference between how far I could go and what you could go so in terms of quality of life in a sense there's more quality today than there was back then even though in terms of equality of income we're much more unequal today than we were back then because even at a minimal level of income in the West you have access to amazing wealth because of capital there's another question yeah I'm sorry if we go back a little we're talking about the bets thanks to great quality and those capitalism actually there are a lot of rise in the bets and there's even no taxation at all it's the central state base all the government and all the education bets from the pockets of East Coast so how do you explain the difference in wealth so again I would bet you anything I'd have to go over and check Wikipedia as well the differences are differences in freedom they're not differences in anything else I mean it could be differences in culture but if you look at natural resources for example in Germany at the beginning of the 20th century where is the wealth there isn't really a cultural difference or difference in economic policy the wealth is created around coal mining and steel mines so for an actual resource also at least the capital states are welcome there was more natural resources in Russia than there were in Germany of course it was a capital system but it was a capital system natural resources at least oh no, look better lies the growth of the ecosystem they don't not in a free market because look you have a mine right the mine produces something that you never have to sell somebody else has to be able to create wealth so that they can buy what you're selling but they don't have a mine or something they have to create something that's not a mine it doesn't matter it's a question of what kind of wealth you create some people could create wealth in natural resources by mining the natural resources other people create wealth from ideas from building stuff from sewing dresses from making shoes and then you trade natural resources who's better off the guy with the natural resources is the guy making the shoes it depends on the relative supply and demand of each the guy with the natural resources is not automatically better off than the guy making the shoes I heard you mention that during our dinner and so I agree there's a win-win situation in trade which is kind of an artifact someone can possibly win more than the other oh yeah there's relative gain but it's not clear that the relative gain is the natural resources the relative gain is to that which is more valuable more rare, more scarce if you will and often which rare and scarce is the idea and the product created by an idea that it is the natural resources and it depends on how efficient you are producing natural resources my guess is the Germans were very efficient at it relative to others that was the example of course even with Germany people want to go to the rural region as it's called sure look I'm not arguing the natural resources don't create economic activity and if you have a free market then the economic activity the natural resources create is a positive people want to go there they create value and they create wealth what I am saying is the fact that you don't have natural resources in a free market does not exclude you from being able to create wealth that's all so what the relative is it depends on the time, it depends on the place it depends on the relative values of what you're producing but natural resources in and of themselves don't give you value they need to be combined with freedom not having natural resources the advantage when you're free is clearly the advantage if you're not free the only nice thing about natural resources is if you can steal the technology even an unfree society can get the natural resources like Saudi Arabia Saudi Arabia can produce ideas they don't really produce anything other than dig the ground and get the oil out which is a technology they didn't even invent that they stole they stole it so they can still benefit from the natural resources because they happen to be on the land even though they're not free so that's the advantage natural resources have they give power to autocrats, they give power to unfree societies but if you have free societies the advantage of natural resources is very small not to say there are periods in which it is an advantage but it's very small for instance, freedom not the natural resources again, Hong Kong is an example Switzerland is an example there are lots of examples there are plots in America that have no natural resources and yet thrive if you're completely free and you forget about the choices you make is there any chance you will not become wealthy yes as a society of individuals as a group or as individuals oh yeah, absolutely I know lots of people who are free and who are lazy no, but if they are not lazy they want to work, they make right choices in a free society if you're not lazy if you make the right choices if you're hard working then you won't make a good living and if you live in India there are accidents that can happen India is not free India is not free you live completely free and you live in America then everybody could do well you live in a village you speak a language no one knows yes, so you're going to create a real science fiction story for me you speak a language no one knows and no one knows, it's not true because the rest of the village and you want to make it then what do you do ok, say it's an experiment guys no, there is no there is no free education because the government doesn't provide it so what do you do what's that you figure out how to in a village again we expect this to do so what do you do you live in a village in India nobody speaks your language and the village is stuck it's like in a remote place and it has no natural resources and they can barely feed themselves you see there's nobody in the water what do you do you go through and help from the US imagination, what do you do it's simple you pack your bags and you leave what did you do what did you Europeans do when they lived in oppressive regimes and they were good poor in little villages in the middle of Poland, in the middle of Russia in the middle of Germany what did they do, they packed their bags got on the boat and went to America okay, they killed the Indians but they created massive amounts of wealth and they lived free and happily about it you know, talk about the Indians separate topic unrelated, the point is if you're in India and you're poor you pack your bags and you move to a place where there is work you figure out the language just like those poles figure out English and by the way the people who immigrated to America in the 19th century knew how much English zero they had how many years of education zero they knew what skills some farming in Ukraine not farming like they do in England in the UK, most of them didn't in the US and most of them didn't become farmers they figured it out you go, you work hard, you try hard the Jews who came to America in the late 19th century I'll talk about my own people the Jews who came to America in the late 19th century ignorant uneducated poor English skills and no abilities and within one and a half generations they were middle class how did they do it? because they were free and it was their safety net in America in those days to protect them there was no safety net they found jobs that paid very little they fed themselves they got better at those jobs they got a little bit more money, they sent their kids to school they paid for the school the kids did even better and the kids became middle class or the grand kids became middle class there's no secret to how to make money enough to live on it's to work up in a free society in a mixed economy we have today it can be hard but that's because the government is constraining the number of jobs they're constraining entrepreneurial ability they're constraining capital they're constraining wealth creation if you're in another example like the film ones that's a fair company doesn't have low social or environmental standards but if you look at thousands of people they have the highest patent rates in the world and they have the most equal schooling system as well how can you explain that? relative to what? I'm not sure what relative to Finland is relatively free it has property rights it allows people to have ideas it's actually easier to start a business in Scandinavia today than it is in the United States there's less regulation more redistribution of wealth but less regulation you know Finland is a relatively free country now there's massive redistribution of wealth which I think is terrible because it means people's legs and arms are being broken every day but people work in spite of that but if you see there much more patents and citizens than they have in America America is more deregulated less taxation America is not more deregulated America is more regulated than Scandinavia but even in North Canada it's more regulated so there's an index that comes out every year of economic freedom how free a country is from regulatory they take taxes and all these things anybody know what number one is at least the most free economy in the world what's that no, it's actually Hong Kong, Singapore always number one and two from a purely economic perspective Singapore is not particularly free if you want to chew gum or something like that but from an economic perspective they're very free you know where the United States is today 18 you know who's the head of the United States Sweden, Switzerland, New Zealand, Australia so the difference in economic freedom from a regulatory perspective between the United States and the rest of the world is not as shrunk dramatically over the last few years now second the United States is massive you're taking a country with 300 million people from incredibly diverse backgrounds incredibly diverse educational levels where the government is involved in education let's be straight this is not private sector education government education is awful when it's delivered to any case even in Finland it's not that good it's just better than American education which is not something to brag about no, no relative to all of the public education system it's the best I'm saying if you had real education free market education if you had innovation why does everybody want to innovate for this stupid little thing a little new app all the brain power in the world is going to devising apps for this I'd like to see all that brain power going to devising new educational products they would if education was private it wasn't funded by the government and then you'd see what education could be I mean imagine if the state built a phone no I'm serious think about it instead of Steve Jobs doing this imagine a committee of the Belgian state was responsible for building this what would it look like on the Finnish state let's take Finland because it's a big country it would look terrible so let's put aside education for a second America has a lousy public educational system it has 300 million people it has a very diverse population from all kinds of backgrounds it has a horrible history of racism for example it's still a great state it has an entitlement system that is very destructive in America much more destructive in America than I think in other places for variety of historical reasons yeah I mean the areas if I took Silicon Valley there are more patents for capital than Finland for that matter Finland might have more patents but you know where there are more entrepreneurs more businesses started per capita than any country in the world Israel particularly in high tech and that's it, not compare to Silicon Valley Silicon Valley has more so America has a lot of different things going on that make it very difficult to compare to a homogeneous population in a very small country with a very small population, how many people live in Finland 5 million 5 million, less than living in my metropolitan area that doesn't matter if you work hard and you do your best yeah they do so in Finland they get more deserving than the government cuts and chops their legs off and takes it and gives it to somebody else and I bet you that the people who work the hardest in Finland if you lower immigration barriers I always want this I'd love somebody to do this experiment of course the politicians would never let you but this is an experiment I want take any country in Scandinavia which everybody thinks is heaven but immigration between Finland and America where do you think people will go from America to Finland for Finland to America I mean the entrepreneurs the people who hold the patents the really hardworking smart ones where would they go they don't go to America I guarantee it and very few Americans will go to Finland so in terms of differences but the amount of actual innovation that happens most Finnish countries small companies ultimately want to become American companies because that's where the market is that's where the site is how did we get on there can you remember what's that patents what about patents they have more patents in Finland than the United States that's right inequality or should we take more what's that I've got more to say than equality if you're going to hear it so so in my view inequality is generated for freedom it's generated for capitalism it's something that should be celebrated it's something good any attempt and this is I think a crucial point any attempt to reduce inequality violates the one type of equality that is legitimate what's the one type of equality we said before is legitimate equality before the law equality of rights equality of freedom but how do we make things more equal by doing what by taking from some people and giving to others that's treating them unequally that's cursing some violating some people's rights reducing some people's freedom taking the time and effort of some people and giving it to other people so some people have more rights than others supposedly by the system because you're rich you don't have a way to owe your money if you're poor you have a way to owe your money but if you're rich you don't have a way to owe your money that's not equal before the law that's not equality of rights that's not equality of freedom it's a violation of political freedom equality which is the only legitimate form of equality in my view what if you're rich you have more freedom than the poor like you have a better law what does freedom mean what does the word freedom mean when we talk about freedom what do we talk about freedom from what freedom from what freedom means freedom from coercion freedom means freedom from coercion in political sense freedom means freedom from coercion if you live in a good country I'm not saying all countries are like this no country today is like this but in a proper political system where you have equality of rights the poor person and the rich person are both free from coercion the fact that the rich person has more options doesn't make the poor person less free that you're taught that freedom is related to wealth but that's just not true there's no relationship between freedom and wealth freedom is freedom from coercion and the number one coercive force in the political reality we live in as well who coerces more than anybody else the state, the state coerces and who do they coerce more poor people than rich people they coerce rich people much more there's a lot more to coerce rich people are less free than poor people nobody's free because we're all being coerced all the time by the state but it's not true that poverty reduces your freedom in a truly free country in a capitalist country I want to go more to the fundamental thing about the coercion thing so it's really important to build up the ideal you were explaining but what about coercion in raising a child what about people who need leaders who can take the situation themselves and really even with education or other okay so let's take those two examples because if you raise a child you need coercion you need to coerce children what about adults let me start with adults and they go to the children adults who are just too stupid just too stupid to think for themselves what percentage of people are too stupid to do it for themselves oh yeah you know how to use the word stupid in a sense you use another word but that's implication they can't think for themselves I mean we're not all leaders we're all most of people actually most people are some kind of a product of their circumstances of their the media the big companies so I mean this goes to the very core of your view of human nature my view of human nature is that everybody is capable of making decisions about taking care of themselves doesn't mean everybody exercises that some people are lazy and they don't want to think but what makes man unique is the fact that he is the rational animal the thing that makes individuals unique and whatever IQ level you have I'm above a certain minimal where you really are deficient and you really can't make decisions and you can talk about those people in a minute but that's a tiny fraction of the population most people from whatever IQ it is up have the capacity to think rationally about life and to make choices and to make value judgments but what's good for them many of them particularly in the world we live in today don't do it partially because we don't expect them to do it because we say don't think here's a check and by the way you're not doing them a favor do you think giving people money makes their lives better is life about money what's life about what's any individual's life about or should be about happiness how do you attain happiness how do you achieve happiness I know we're going to how do you achieve happiness beer that's called joy and it's short-lived maybe that's required for happiness beer doesn't equal happiness usually the other way around but what is happiness what do you get happiness from for doing what you want to do what kind of things lead people to be happy they give value great value one of the things in my view necessary for happiness is self-esteem a sense that you're worth something a sense that you're able a sense that you're worthy to be on the planet that you're living up to your own ability and your own potential a sense that you can take care of yourself to me we get most of our self-esteem from doing what you guys are too young maybe to know this maybe most of your self-esteem from working for producing, from creating value I mean people talk about the most important thing in life is family but it's not how many of you, how much time do we spend with our families I mean if we had just proportionally Americans at least Europeans are a little different we spend 80% of our time a non-sleeping time at work and 20% with family that gives you a certain set relative importance to replace some stuff because work is where you challenge yourself work is where you set goals work is where you push yourself work is where you get your self-esteem that gives you the confidence the assuredness to do more to be more successful and that's what leads to happiness that sense that you're worthy that sense that you can be successful when you hand somebody a check and say don't work here you're too stupid to work I'm just going to give it to you because you need leaders or whatever you are making sure that that person will never be happy in my view people who don't work are not happy don't achieve are not happy you could view work as a broad thing you could raise kids as work being an artist as work there are lots of things that will work but if you don't create value you're not going to be happy by giving people checks so that they don't work and we give them no inducement to work we're institutionalizing them into unhappiness we're guaranteeing them you're not doing them a favor they are the victims of the welfare state the recipients are the victims of the welfare state being poor but knowing that you are taking care of your family that you are taking care of yourself that the money you own that you're not dependent on other people creates pride and brings about happiness knowing that you can't take care of your family is incredibly destructive to the soul of a human being so in my view 99.9% something like that people are completely capable of taking care of themselves not children in a special category because they're developing from what pace and the right to freedom so I think the state sets a certain age let's say it's 16, let's say it's 17 whatever you want and then if you think that you've attained the maturity level for that in an ideal society you would go before the court and you would have to prove that you're mature enough to attain the complete freedom but at some age you attain it automatically I highlighted the importance of the work what are three market solutions to the well-being of people who can't produce enough added value to be able to to have a job to achieve their level of needs so that percentage of the population they can't produce enough to be able to live to eat so first how big of a number do you think that is half percent I think it's probably less than that but it's something far less than one percent of the population you know they're either born with a physical defect or there's something wrong with them that they can't so what is the solution to that what is the non-course of solution I mean do you guys care do you care about these people if you do then you can all get together and form a charity and give them money you might not care don't give them money the fact that somebody can't take care of himself the fact that somebody is suffering the fact that somebody is in need does not create a model obligation on you somebody else's pain is not automatically your problem if you care about the person that's a complete inhibition but it's a stranger it's not your problem right so it's not automatically something you should care about they might be a broad sense in which we value human life we don't want to see suffering we're willing to put a little bit of our extra money into our pot to help them out I think people are benevolent in that way we value human life even when it's not doing well certainly if it's a friend of yours you would help them something happened in an accident or something you would help them because they were a friend if they were a family member you would help them I think the first the first people who would help children like that adults like that are family members because you have a responsibility as a parent no matter what happens to the child you would have a responsibility you brought him into the world the outcome of what size I mean I think it's the most important to me in America today right now because it goes to the heart of what makes America different in the world Americans so far don't care about inequality that manages to cause them to care then I think from an economic political sense the United States will decline in a much more accelerated way that it's already declining and every indication is that they are winning the people who care about inequality the picketies of the world the park movements of the world are winning but to me this is a battle that has to be fought this is a struggle that has to be engaged in in my view what really motivates the inequality to be because I don't think the stuff we've talked about so far is that hard I mean if you look at unequal societies people are doing well in those societies I mean free unequal societies the battle should be about freedom but you see the left the modern left the new left the left of today doesn't care about the poor it doesn't care about progress it doesn't care about you know wealth creation they want equality for the sake of equality they want to destroy for the sake of destroy they want to knock stuff down for the sake of knocking stuff down they want to see America becoming egalitarian they know America will be poorer if it's to get more egalitarian they know America will produce less if it's more egalitarian it'll have even fewer patents relative to Finland if it becomes more egalitarian it will do you take the incentive to go away from Silicon Valley and they'll be fewer patents filed it's very simple but they don't care it's not about it's not about the poor it's not about the poor because they don't care about the poor because the poor are the ones who suffer the most when the economy puts I'll give you an example which is going to be controversial because it's a controversial in America where minimum wage minimum wage everybody loves the minimum wage right? you have a minimum wage in Belgium? what's the minimum wage in Belgium? how many euros? 6.5 euros what's that in there? it's in that range in the United States right now it's 7.25 Obama wants to raise it to 10 10.10 what's that? he raised it for federal contractors he can do that unilaterally but he wants Congress to pass a law that everybody raises to 10.10 right now it's 7. something what is the consequence of raising the minimum wage? actually not even raising it what is the consequence of having a minimum wage? who benefits? who suffers? who suffers from having a minimum wage? the people on the lower side have a minimum wage so who most suffers? the poorest of the poor and this is who suffers if you're young if you didn't go to school if you live in an inner city usually means you belong to an ethnic minority in the United States you're the one who suffers because the left uses this right they pretend that they can't but why are you going to suffer? it's a price control what happens how many of you take an economics? economics 101 what happens if I set a price? what happens if I artificially raise a price? price of bread the price of electricity what happens if I artificially raise it? I force the producer to raise it what happens to demand for that good? it drops so if I raise the price of unskilled labor which is what a minimum wage does what happens? what happens to demand for unskilled labor? it goes down now this is economics 101 it's like gravity this doesn't change who suffers the kids who are unskilled who've never had a job in their life who can't produce a ten dollars they just can't they're not skilled enough they will never ever have a job what happens then? how much time do people usually spend making the minimum wage? how many years do people work at the minimum wage? well, very few less than one year I think for the most part, why? because what happens after you work for a year or two? you get experience and you work more and you start getting paid more but if you deny people that first entry into the workplace what will happen? they will never enter the workplace so what the minimum wage does is it institutionalizes young, poor people into unemployment they will never have a job now you think the left that cares about poor people would be really really upset and they would want to do away with the minimum wage to give opportunities to young people but they don't because they don't care no, I think they know exactly these are smart economists who advocate for raising the minimum wage they know economics 101 they know exactly what this will do and they don't care how it benefits from the minimum wage increasing the minimum wage by the way, who else loses? when you raise the minimum wage the people who work at McDonald's get minimum wage if you raise it from 7 to 10 dollars what happens to McDonald's? prices go up prices are going to go up who buys McDonald's? I have not hit a touristy place like here who buys McDonald's in America? who are consumers of McDonald's? poor people so whatever you just said you raise the prices for poor people again, you lower the standard of living who benefits? by the way, shareholders lose they take a one time hit because when you raise the price the return on capital goes down so the stock price goes down nobody cares about shareholders shareholders lose poor people lose young and skilled neighbors lose the most all of them lose new entrepreneurs lose don't start new businesses to employ people who would make the minimum wage see, you have fewer jobs more than that happens the woman or the guy standing behind the counter taking your order with McDonald's I want a beef patty maybe, but maybe it turns out that there would be 7 to 10 I can put an iPad there and you can just click on what you want and I don't need this person so now I have increased unemployment even more because I mechanize but mechanize not officially I didn't need to put this iPad there she was fine at 7 bucks an hour but at 10 bucks I can't afford her anymore so now I put an iPad in it the winners are the guys who make the iPads the winners are unions that have their salaries linked to the minimum wage the winners are the older employees who are going to be kept on at 10 bucks when I fire all the kids who have less experience those are the winners and losers in these cases but the losers are huge and nobody cares everybody's for the minimum wage it has 70% approval rate now you wait, some people don't think but the intellectuals know the economists know but they don't care and it's hard to comprehend but they don't and the whole debate about inequality is not about economics it's about ethics, it's about morality it's about the fact that they view it as immoral, it's unethical it's apathy oppressive because economically it's kind of obvious is inequality caused by colonialism unethical? good question money printing raises the share of all this value that doesn't create value it's a good question there's one type of inequality that's wrong but of course it's associated with a free market it's associated with cronyism because what is cronyism? cronyism is coercion cronyism is force so in my view there are two ways of getting money you can create it by building wealth by working for it or you can steal it inequality generated from creating wealth is good inequality created anything created from stealing is bad, the stealing is bad cronyism when a company comes to government and says protect me have your relations so they're no competitors or when the fed prints money and what does money money do the central bank and the Federal Reserve are now engaged in one of the largest redistribution of wealth schemes ever from poor people to old people it's bizarre because when they print all this money what happens stock markets goes up who won't stock a lot of rich people now pension plans also won't stock which are for the workers so it's not all rich people the distribution of wealth gets all skewed and who suffers people are saving money in bank accounts or in bonds they suffer so it's a redistribution of wealth you can steal which direction but it's skewing and that's force so yes cronyism is the one thing that all coercion cronyism is just one form of coercion all coercion is distortion and it's wrong it should be stopped but notice that the people concerned about inequality never complain about cronyism they complain about capitalism that's the enemy what's he saying that the advocates of equality are fundamentally driven by jealousy yes I know I agree with that so when I say what they're really concerned about is knocking this down what that means is they're driven by I use envy because envy is a stronger word of envy of these people and they want to see them suffer they want to see them knock down it's not about raising these people it's about knocking these people down and I think having much of the inequality debate much of the advocates of inequality is about envy and I'll give you an example of a study that's being done I'll ask each one of you here's the question you got two options I'm going to hand out some money this is theoretical I'm not actually going to give you the money right I'm willing to give you I'm willing to give you a thousand dollars and give your neighbor a thousand dollars as well that's possibility one possibility two I'll give you two thousand dollars and I'll give your neighbor ten thousand dollars which one do you prefer say the one is a thousand a thousand and the other it's two thousand ten thousand and you can't negotiate to share so how many one option one how many one option two so we've got three insane people why do you care what your neighbor gets for you two thousand is more than a thousand your life is better all you should care about is that your life is better assuming your neighbor is not a bad guy not a crook or not a whatever right but the fact is that when you do these surveys out there most people choose option one they grab a screw their neighbor they get more money for themselves now that's heavy now it's a bit of an artificial experiment because the money is coming out of no way and you don't know quite what to do with it but it's illustrative right all you should care about is hey I'm better off good why do you care how you are willing to give to somebody else I mean I'm literally happy when another billionaire is announced let's assume it's gone away when a billionaire is announced because they go wow that's so cool that somebody's made so much money because what does it mean that he made so much money how did we say before that you make money yeah he created value he lived he created value for himself he employed people and hey my life's probably better because he created this value he invented some app on the iPhone oh no he did whatever I don't use whatsapp I don't know if you guys use that $19 billion for the chat thing I don't use that I'm still happy that they made billions of dollars they created value for me but they have 200 million customers that's good I think Facebook's nuts to pay them that money but that's a separate story so this experiment shows the impact on the enemy so the majority of people choose different stuff but under democracy everybody has one problem yeah I I think democracy is a bad system in this sense democracy when we vote on everything is a bad system the classical example of democracy in action is Athens ancient Athens and it's not pure democracy because not everybody's voting but a significant proportion of population is voting and Socrates is walking around town and he's challenging young people he's like I'm challenging your religion I'm asking you tough questions so all the people of Athens get together and they say this isn't good we need to stop Socrates how do you stop Socrates the only way to do it is to kill him because you know he's never going to stop speaking he does, he challenges people's beliefs so they vote who's for killing Socrates and I don't know what the margin was 51%, 75%, 99% does it matter do they really have a right to kill Socrates because when he says we in modern western Europe say no but they believe in democracy so they vote in and the vote was yes we kill Socrates, they gave him the poison and part of the story is Plato his student says to Socrates I've got a tunnel, we can escape and what does Socrates say no, I believe in democracy I ain't drinks the poison I don't believe in that kind of democracy I don't believe you can vote to have me killed I don't believe you can vote to have me silenced you don't like what I say I don't believe you should be able to vote to take my money it's mine I don't believe you should vote to take my house it's mine so I believe I don't believe in democracy I believe in a constitution of a republic where there's a constitution that says speech property life you can't vote up there are a few things you and they can vote on they're pretty insignificant at the end of the day but the government, I mean they're important like defense, like police fine private property it's pretty tricky sometimes that's what you can vote on but other than that you're left alone when you say that the US constitution comes pretty close to your idea of the constitution it's still without this one because people don't believe in the constitution so constitutions can't survive a culture that doesn't believe in them anymore I don't give it Hayek but Hayek tries to manufacture a constitution that's just perfect it gets everything right but one of the big problems there are many problems with this constitution but one of the problems is it doesn't matter if the people over here who live under this constitution don't believe in it anymore they'll trash it so what you need is education what you need is to get people to believe in it but to do that you have to have people who believe in rights who believe in freedom and it's something like all men have freedom in their hearts all men desire freedom this was when he was invading New York he was called all human beings desire freedom and I immediately said that's just not true all of you in history is an example of where people didn't desire freedom they weren't much more like what he said before they just want to follow don't think about it freedom is a value you have to fight for all the time countries or people that value freedom will find a way to create an appropriate constitution an appropriate system to do people who don't don't the constitution is a technical means to help sustain the freedom once it's established but it's not perfect and it won't protect you from a change in the culture but more than that let me get to these ethical points it relates to inequality but it's broader than this there's a fundamental there's a fundamental problem that we have in the west today not today but we've had in the west for 2000 years and that is that this notion of freedom this notion of individual rights is in conflict without ethics without deeply held moral beliefs what does ethics tell us what does morality tell us what is value what is virtue what is goodness what is noble who's a saint I mean a saint not from a Catholic perspective but a saint from a moral perspective what do you have to do to be a saint put aside yourself but it's not enough to put aside yourself what do you have to do you have to sacrifice you have to live for other people you have to help them at your own expense that makes you good that makes you virtuous that is 100% incompatible with capitalism, freedom and individual rights think about Bill Gates for a second how many people did he help, take me say before by making money how many people did he help billions billions did he get any moral credit for helping 6 billion people did anybody say whoa Bill Gates is a good guy he's an ethical guy he's helped so many people, why because he did make money at the same time I'll get to it, let me finish this point he did help himself at the same time when did Bill Gates become a good guy when he left Microsoft and he starts giving his money away so building Microsoft making Microsoft helping all these people billions of people, that doesn't count ethically but once you've created the world you're giving it away, oh now you're a good guy but he's still not a saint how would we make Bill Gates a saint what would he have to do to go down in history as a great moral leader giving away his money he'd have to give it all away he'd have to move into a tent and he'd have to, if he could bleed a little bit that would do it he wouldn't have to perform a single miracle if he did that now none of us would want to be here but we would say oh wow isn't that noble isn't that moral, isn't that good history would remember it forever 70 billion dollars in bleeding bleeding is important because you have to suffer he's giving his wealth away now but they still don't like him why don't they like him because he's having fun doing it he seems to be enjoying it that's no good that's not moral moral is about suffering see that morality the morality of altruism the morality that Augustine coined as altruism the morality of self-sacrifice the morality of other people more important than you here you're your brother's keeper and morality is killing us it's killing the West it's behind the city quality debate you know those rich guys over there they're moral duty they're more responsibility based on every religion based on every secular philosophy giving their money to the poor and they're not what we're doing is helping them be better people we're just helping them by taking their money and giving it to the poor it's just a manifestation of our ethics to these guys so the challenge is the challenge is to replace this morality of altruism with a more proper morality of self-interest a morality that says that you're more responsibility you're only more responsibility it's to your own happiness it's to making your life the best that it can be it's to making the most of your life it's to flourish it's to succeed it's to live a great life the answer to morality should be about then you can ask the question well how do you do that what are the steps is cheating lying and murdering people is that okay with living a flourishing life flourishing successful happy human being that should be the purpose now what kind of political system the self-interest that people want the political system that forces them to give away their money then tells them what businesses they can start what they can't then regulates every decision that they make tells them how much sugar should be in their peanut butter now how people people with self-esteem don't mother government telling them what they can't do every second of the day they want to be left free they want to be left alone they want a political system that leaves them alone so the real challenge here and the reason why the inequality debate is going against us the reason why we're moving more towards stateism and away from capitalism has nothing to do with economics we won the economic debate decades ago capitalism works better than any other system there's no question what we lost is the moral debate we lost because we never participated because we've always accepted the morality of altruism we've always accepted the fact that our moral duty is to other people but it's not your life is yours to live as you see fit for the purpose of your own happiness and the challenge of morality the challenge of the science of morality is to figure out how do you do that what steps do you need to take in order to achieve the best life that you can achieve if you win that debate then inequality who cares if I focused on my life if all I care about is being happy I don't care what the neighbor does I mean as long as it's not hurting me I don't care how wealthy he is I'm focused on me I'm a selfish bastard selfish people don't worry about their neighbors they don't worry about inequality they don't worry about themselves they want to make the best of themselves so to me that's the battle it's a moral battle he had a question that I delayed yeah well I don't believe that Bill Gates is that much of a hero because the only thing he did which wasn't part of the fact that he just brought the peace of both together but I believe it was more a collective thing like the technology was there and they worked together to get the same done it turns out that putting the puzzle together is worth 70 billion dollars that not everybody could do that otherwise somebody else would have done it nobody it's not an environment it's not just about creating the software it's about knowing how to market it it's about knowing how to leverage it it's about knowing how to get it into people's hands nobody else did that he changed the lives of 6 billion people maybe somebody else could have done it maybe if there was no way somebody else would have done it that's fine but then that person would have created that amount of value to me he's a huge hero because he created so much value and he did something nobody else did other people were trying nobody else succeeded including Apple which if you remember was nothing right and so only now that Apple is bigger than Microsoft because the government stopped Microsoft one thing that disturbs me about the economy is that that it isn't economically good for a company to create a product that lost like probably should last like 2 or 3 years and then they should buy a new one so that is a complete myth it's not true you can run experiments in your head let's say all of you are building or choose a product or whatever product you want a computer and your computer is only last 2 years because you said you wanted to replace you and I come into the market and I say my computer is last 5 years and I talked a little bit more than you do some people are going to buy my computer and not buy your computer and if they might really do last 5 years then a lot more people will buy mine if the marketplace values 5 years and it turns out in computers I don't want a computer that lasts 5 years does anybody here want a computer that lasts 5 years ok well then Apple's last 5 years I have one and it lasts 5 years but I don't want a computer that lasts 5 years you know why because in 2 years I'll be much faster, much better, much cooler and I buy an iPhone every time a new one comes out not because anybody forces me because it's better it's more productive, it's more efficient and it's cooler it's not good for the earth it's not good for the earth why do you care about the earth because the USB stick has done much more things good for the environment what is the environment I want to understand this environment because I've never quite figured this out what is the environment it's not a good place to live ok so a good environment would be a place that's good for us good so the environment is the human environment what's the when have we had a better human environment than right now when have we lived longer healthier had more fun being more great things happen to us than right now the environment has never been cleaner it's never been better it's never been healthier than the environment we have right now but what if things change what would happen if let's say the global warming thing is true and I don't want to debate it but let's say it's true because I don't really care if it's drawn up we will have less environment space for living will we? what would go away because the sea level will rise people have less sea levels will rise a little bit you guys here will be affected a little bit 7 meters even catastrophic predictions don't predict 7 meters but look what would they do in Amsterdam because it's already Amsterdam is below sea level what would they do in Amsterdam they will build higher dates but is that sustainable to do every time I mean the technology is there you can dig deeper into their ocean bed you can build thick stuff there's no engineering problem building bigger dates but you know let's say flood of floods we don't have the money to build banks what happens what will happen less pensioners less pensioners which is cheaper right it's like smoking you know smoking actually lowers because people die which is cheaper flood of floods and people will move nobody will actually die the pensioners won't die they'll just move someone else have human beings ever moved in the history because of weather yes of course they do all the time what is the biggest threat what is the biggest threat to human life global warming or the next ice age which is going to happen because you can't avoid an ice age what's the biggest threat can accelerate and make it more sure so there will be a little warmer I live in the deserts you guys have nothing to worry about I'm the one who has to worry I'll go up because I'll consume more air condition really Canada becomes habitable I might have to move to Canada but it actually becomes warm so you can live there I mean the hysteria around this stuff is mind-boggling to me we live and this is part of the guilt this is part of the altruism that is generating guilt in the west we feel like we're not exploiting we can't explain our success by saying all of that people now we have to feel guilty about trees and shrubs we live the best lives we've ever lived we live the highest standard of living we live longer, we live healthier we have wonderful lives stop worrying it's not going to end because of global warming indeed temperatures have been flat for 16 years even the data is not true but even if it gets warmer we'll figure it out we'll create technology, you know what the solution is let's put ash in the atmosphere to cool it down there are lots of technological ways to solve the problem that don't involve stopping to live because that's what dealing with global warming means it means stopping to use CO2 you can't live without CO2 and you know who I'd like to lower the weight of CO2 who is going to suffer if you lower the weight of CO2 if you stop producing if you stop using energy you stop the growth in production of energy who will suffer? I'm not going to suffer believe me, Southern California we're set who's going to suffer? the poor will suffer and which poor? who's going to suffer the most? Africa because Africa has no development so new development is going to happen in Africa Southern Africa so what? this is a challenge if you're an African you're in the middle of the Sahara you're in the middle of Africa you survive if you're African with air conditioning but you can only get air conditioning if you build a power plant that produces electricity that spews CO2 but this is the point, if you're in a hut in Africa today it's your good poor it's 90 degrees, 90 degrees Fahrenheit whatever the centigrade is outside and this is life and you're going to live like this forever option 1, option 2 is temperatures go up to 100 degrees 10, 10, that's huge even the global warming goes down that much, 10 degrees, 10% but now you live in a nice house with air conditioning in it I take option 2, I don't know about you guys technology wealth progress is much more important than climate climate always changes it might go faster because of human activity it might go slower because of human activity who knows, I don't maybe the scientists know maybe they're right but the point is that doesn't matter what matters is the quality of human life and the quality of human life depends on CO2 emission and the quality of human life for Africans depends more I can probably afford to put solar panels on my it's stupidly ridiculously expensive and I would never do it but I could afford to do it so I could survive without CO2 Africans can't what you're doing just like with the minimum wage is to make you middle class Europeans feel good about yourselves you're destroying the lives of the African poor that's exactly what the environmentalist movement is it's a movement of middle class European and Americans who have life set life is fine victimizing the third world because you're going to deny them economic problems and that's a fact that's not debatable the fact is they cannot produce energy to create an industrial revolution of their own without CO2 so I'm full human life I don't care about spotted owls I don't care about snails I don't care about these animals I mean if you like them buy some put them in your father's but I care about the human environment and I look about the world and I say capitalist economies have the best human environment the West which has some capitalism still in it luckily has the longest life expectancy the healthiest lives and the best quality of life I want because I care about people I want Africa to have the same quality of life we do so I want them to have property rights I want them to have freedom and I want them to have lots and lots and lots of coal powered energy plants because that's how you succeed in life by the way people say that global warming causes really bad storms and maybe that's true again I'm not going to help you I doubt it but let's put that aside how many people do you think dying of weather related effects today versus a hundred years ago let's say the weather is worse today I don't know that it is but let's say it is some people die more from hurricanes and tornadoes soon they'll blame earthquakes on global warming as well but they haven't yet but they'll find a way to do that one where do you think people die more a hundred years ago it's not even close because they didn't have the technology to protect themselves from weather we have the technology to protect ourselves from weather why because we burn CO2 there's almost nothing in this room that doesn't come from oil oil is the most magical amazing the black stuff the most amazing product we have ever invented I mean prom cross used nothing comes close I mean a lot of you close a polyester and that's oil anything plastic here is oil many of the construction products here have oil and oil was used in their production there's nothing in modern life that is not dependent on oil and CO2 engine we should celebrate it I love oil and natural gas coal is a little yuckier but I love coal too because most of my electricity is coal these are wonderful products and if they create problems let's deal with the problems but the problems are not by shutting these things down the problem is okay what do we do about rising sea levels let's deal with that but not you don't destroy it this is why again it goes back to what the left is the environmental movement generally is about is knocking this down not about raising anything up it's about engine sorry you look tired it's going to end soon so let's assume political warming is indeed true wouldn't consequence a little approach be that if it goes political warming the negative externalities that you would cause the rights of other individuals to participate no because this is not an externality that can be even measured like that everybody uses this then you you can't on a scale like that the only way to do that is through the legal system and you can't with CO2 because everything we consume can we ever see the little carbon footprint right you get these things and I tell you how much carbon what the carbon footprint of something is when is it zero what's the only time your carbon footprint is zero even when you're dead it's not zero because you're decomposing which means CO2 the only time your carbon footprint is zero is decomposed and a natural phenomenon should be treated like that now if my factory is pewing out cyanide and you're breathing it and getting sick from it then you have legal recourse against me to shut me down but that's you and me or 10 of you and 10 of me but it can be society-wide there is no such thing once it's society-wide it's nature, we are nature I mean that's another thing the environmentalists do is they have nature and man not according to evolution but I believe that we're part of nature boy if you're religious God created us part of nature we're part of it so our activity is not an externality it's only an unusual activity like spewing a particular poison that particularly poison a particular person that's an externality that needs to be compensated for but something that's culture-wide is not externality okay we'll take two more questions because it's getting late you promote selfishness but if everyone is selfish you can't rely on private funding and charity to feed the cripples don't we? so I don't believe that's true for two reasons one I think the cripple will primarily be funded by the families who have responsibility over them people who love them second I happen to think that selfish people that self-interested people that free people are the most benevolent people in the world we don't want to see children suffer we don't want to see people suffer for no cause of their own I mean if it's self-inflicted I don't mind but if you've had an accident and something bad happens to you I'm happy to hope because you're a human being and I value human beings it's a selfish act it's a selfish value to me so I think you'd have more charity than you could spend but if you didn't then you didn't then people would suffer but the point is this the fact that somebody's crippled doesn't make me a slave doesn't automatically give away to stick his hand in my pocket right? you had an accident you can't afford to help you gotta be crippled and there's surgery to fix it you've got two options and only two options let's say you don't have enough money to pay for the surgery you've only got two options you can come to me and ask for my help and make a case why I should help you and I might help if you're a nice neighbor if I have excess money I'll probably help you you could pull out a gun and steal my money those are the only two options you can do in democracy we get a neighborhood together and we vote to steal my money and somehow it's not stealing anymore because we voted but it's still stealing you're still taking my money by force but I don't want to give it to you it's mafia, right? you've hired somebody to do it for you that's the two options in life ask or steal I'm against stealing always in every case that's it, whether you vote on it or you don't vote it, I'm against stealing so while you're stuck with this charity and hopefully there'll be enough if there isn't business that's life last question do you want to raise taxes on property? yeah, no they love to raise taxes on property because property is a sign of wealth and that's an easy one to raise property on and of course CO2 is politically correct now we want to raise it as high as possible and in the United States we don't have any CO2 taxes and we still have a lot of room to raise all our taxes can go up a lot so we're in for a long ride because there's a lot of room, a lot of taxes we can raise you know we don't have a wealth tax do you guys have a wealth tax? not yet, but that's coming see the West will get out of its debt problems by trying to do a wealth tax and then it's over that's the end when the Institute universal kind of wealth taxes we've lost about thank you all