 All right, ladies and gentlemen, the clock on the walls is one. So that means it is time for our next lecture. And this lecture is going to be called growth theory, two views. And it turns out that there are a lot more than two views of growth in the economics literature. A casual survey of Snowden and Vain's modern macroeconomics identifies at least 14 theories of growth. I will not cover 14. I will cover a little more than two narrowly defined. But you'll find that what I'm going to be contrasting is sort of the Misesian praxeological understanding of economic progress and contrasting that with modern growth theory. As we talk about it, as I have proceeded in my research, I've come across a number of more recent pieces of the literature that are there for you to peruse. Of course, you could preface any suggested readings with, of course, the classics. I read Manger, Bumbaver, Mises, Rothbard, et cetera. But also, the most recent piece of literature I've looked at is an article by Victor Espinoza in the Market Processes Journal of European Political Economy. It's a Spanish-English bilingual journal on epistemological problems on development economics. I highly recommend that piece. I think it's very insightful. Then there are some works there by Randall Holcomb, Haces, Huerta de Soto, and then the late Suda Shanoi. That's the bulk of the literature I've been drawing upon, building on top of, of course, the standard bearers for Austrian economics. My understanding is these slides are available online, too. So if you don't have to copy this down now, you can take a photo of it. But it's going away fairly quickly. And by that, I mean now. So as we talk about economic progress, economic expansion development, I think it's important to realize that this is a topic that's similar to business cycle theory in that a general theory explaining economic progress, like a general theory explaining business cycles, must be holistic. It must draw together a lot of strands of economic theory. I can't remember if it was Rothbard or Mises mentioned that often the chapter on business cycle is the last chapter in the book of an economics text because it requires knowing all of the everything before that to pull it together. Well, economic expansion development is also similar. It must be holistic. And so that means that it is theorizing and having a good understanding of economic progress requires both analysis and synthesis. Analysis in identifying and explaining the various particular processes that contribute to economic prosperity. That's the analysis part. We want to explain why all of these processes work together to enjoy prosperity as well. That's the synthesis, right? It's not enough to just sort of identify these arbitrary things in the abstract a good theory. And this is where praxeology has a leg up, I should say, on the competition. We can explain how these things work together. We can show the synthesis, how they work together to actually provide for a process of economic progress. And as I was putting the lecture together, it struck me also that the specific sources, or what I call engines of prosperity for lack of a better term, we've already been acquainted with in the theoretical lectures. The vast majority of these sources. For instance, one economic theory tells us that one of the sources of prosperity is specialization in the division of labor. That was the subject of a lecture by this guy named Rittenauer. He talked about the law of association and how specializing according to efficiency and cooperative action is more efficient and hence more productive than isolated action of self-sufficient individuals. And so the more extensive the division of labor is, the more productive we are, the more economic progress, the economic prosperity we can enjoy. In another couple of lectures, we talked about, you heard about the importance of capital accumulation from Patrick Newman. And then the Austrian capital theory, the theory of capital theory was applied by Jonathan Newman explaining sustainable development in his lecture on business cycles. You saw how saving and investment allows for both widening and deepening the capital structure which then increases our productivity and allows people then to benefit by obtaining more goods that they can use to satisfy their ends at lower prices. A third source of prosperity or ancient prosperity which hasn't been touched on in as much detail is technology. Technology, of course, is important. I would argue emphasize too much in modern growth theory but it is important because technology is simply the knowledge regarding how to do something. It's a recipe for how to produce something. And of course, if you don't have a good recipe, you can't make a good flourless chocolate cake. You just can't do it. And so a recipe is important. I know there are some who's wondering if I was going to be able to bring up that great dessert and the answer is yes. So you need technology. A technology, a technical advance, advances the technology contributes to economic progress in at least three ways. One, it provides for more productive capital goods. Think of the technology of a hand whisk versus the technology of a stand-up mixer. The stand-up mixer is more productive than a hand whisk. So some technology is more advanced than others, some technology allows for capital goods to be more productive than others. Another type of technology is the arrangement of the production process itself. And so a technological advance could be in the form of a more productive production process. A good example of this would be Walmart's warehouse arrangement. They're a cross-docking system that they developed. They developed a system where merchandise containers come into their warehouse on trucks, into their distribution centers, and then are immediately unloaded and reloaded on trucks that go right out to the stores. And so they don't have containers full of goods sitting in a warehouse for any length of time, or hardly any length of time. And that greatly reduces then the time from which the good comes from the manufacturer to, it goes out to the retail store, reducing transportation costs, reducing the time element, and hence making their operation more productive, less costly so they can then theoretically pass on their lower prices to the populace, right? That the consumer benefits from this more efficient warehousing process, and that is a type of technology. Thirdly, a technology allows for economic progress in providing a larger variety of higher quality consumer goods that can serve more of our ends. Think of, in my dining room at home, back in Pennsylvania, I have, I think, perhaps the only family heirloom that we have passed down to us, and it was my grandparents' telephone, and it was one of those crank telephones, right? It's on the wall, and you have to pick up the hand thing or the ear thing and put it up here, and the speaker's up on the wall, and you have to crank, and depending on how many times you cranked, then the operator would know, oh, that's the pyramid household, or that's the written hour household, and then they would do the pluggy thing, and then they could connect it to whoever. And of course, if you were, you know, starred for entertainment because there was no TV, you just pick up the line, if you hear a ring, you pick up the line and you can hear, you know, the conversations from other people on the party line to sort of say, well, what's happened, what are the Smiths up to this week? Oh, death in the family, sorry. So, it can happen. So that was the telephone technology circa 1945, shall we say, or 1940 in Western Nebraska. Now, of course, we have smarty phones, right? You don't have to, there's no cranking, you just, you pick it up like this. I mean, there's, you know, you have the flip phone, which I thought was pretty cool when it came out, and it took me about 15 years to get one of those, but now, of course, you have the smarty phone that you can talk, you do the computer, you do GPS, you can listen to music, you can be distracted in innumerable ways, right? So that's also a way that technological advance provides for economic progress. It allows people to have goods that can serve more of their ends than was even thought possible 50 years ago. And so technology is important. The fourth source of prosperity, however, is one that you have heard a lot about from Dr. Klein, for instance. Peter Klein, that's entrepreneurship, right? Entrepreneurship's important because all of the production in the economic order, all of the production in the economic order requires entrepreneurial judgment. It requires decisions to do something and therefore a decision not to do something else, right? And this is important because just as Mises puts it himself, capital does not be get profit. Just having capital doesn't mean you're gonna be profitable, doesn't mean you're gonna be productive per se. It is possible to waste capital that's already been accumulated, right? You could accumulate capital through saving investment and then squander it, producing something that nobody wants, sort of the anti-Zig-a-Zig-aw, so to speak, that you really don't want, that you really, really don't want or something. I don't know how you, it doesn't really, it's not as catchy, but you get the picture. Now, why is this a case? Well, as Dr. Klein put it out, production decisions or production decisions are made in the present based on a forecast of uncertain future market conditions. And if the producer, the entrepreneur forecasts incorrectly, he will use his capital making something that people do not want enough to pay a higher enough price to cover the cost of production. And if he does that, he will be a loser, right? He'll be a loser. And that's no way to make America great again. And so nobody wants to be a loser. So entrepreneurs are important. They're very important, right? You don't wanna squander the scarce resources that we have. Additionally, entrepreneurs drive economic progress through innovation. They are the ones that are always looking to produce new and different products in new and different ways so as to best satisfy the consumers so that they can reap larger profits. And so they earn profits precisely for serving other people, right? And so these entrepreneurial judgments, entrepreneurship is huge and this is an area that is woefully neglected in modern growth theory. Modern entrepreneurs have to make judgments on many margins, right? It's not just about knowing how many units of output of widgets to produce and how many units of capital and labor to utilize, right? The judgments that entrepreneurs have to make with regard to the product deals with they have to decide what type of product to produce. What quality of product do they wanna produce? Where do they want to produce it? Where should they locate the production process? What should be the scale of operations? How big of plant do we want to use? The time of availability. How long do we want the production process to take? What's the economically wise duration of production? As well as they have to anticipate the price that buyers are potentially willing to pay for the product. They have to do all of that. At the same time, they have to make a whole lot of decisions related to investment, right? They have to make decisions about the relative level of capital intensity, capital intensity of the production process. They have to make decisions about how durable of capital goods they want to invest in purchasing. They need to make decisions about how specific of capital goods, what the capital specificity, how specific the capital goods need to be or are warranted for our production process. They need also, of course, to make decisions about the quantity of the capital goods and the labor. They have to make decisions about what quality of labor do we have to hire. They have to make decisions about do we want to hire workers that are already fully trained in this area or can we hire them and then train them up? There's a whole host of those kind of decisions related to the factors of production that they have to make. They have to make entrepreneurial decisions related to technology, right? They have to make the decisions related to the technology embedded in the consumer good characteristics, right? What features do we want to put in the smarty phone and what features can we leave out? We need to, they have to make decisions about the technology and the production process. What type of warehousing system do we want to have? What type of mixer do we want to utilize in making a flourless chocolate cake? They have to make those decisions about what type of technology is gonna be embedded in capital goods and then they also need to make decisions related to how much research and development we want to engage in or can afford to engage in ourselves versus how much maybe we want to utilize from people maybe we can contract with, right? And so the decisions, the number of margins that entrepreneurs have to make judgments with respect to is very large, extremely large. And so entrepreneurship is extremely crucial for explaining the process of economic progress. And as Salerno noted in his lecture on calculation, entrepreneurs need to use economic calculation if they are to coordinate the economic order. If they're to coordinate all the production that takes place at all of these stages within the production structure in all of the industries in the market division of labor, all of that activity has to be coordinated and it has to be coordinated in such a way that the higher order goods are available when the producers that use those higher order goods need them to be produced so that they can produce a product that will be where and when their customers need them to be. And so they need to use economic calculation using market prices to direct factors of production toward their most highly valued uses and to coordinate the entire market division of labor, the entire social economy. Now one of, and so in some sense that's the analysis, right? Identifying those separate sources of prosperity that contribute to economic progress. The synthesis is important however too because there's a tendency and it must be as a part of human nature to identify like the one thing, like the one this finally explains economic development. If for a while everything is capital, then oh no, it's technology, then oh no, it's human capital, well no then it's institutions, no it's not institutions, it's culture. It's like there's only one thing that explains economic expansion development. Well, a press theological view I think is more robust is one that recognizes that economic progress is not monocausal, right? I mean it's only monocausal in the sense that yeah, it's the result of human action but then isn't everything. No, it's not monocausal, all of these sources have to work together, right? And so you can't really, in explaining the actual historical process of economic development, you can't neatly separate the sources in isolation from one another and sort of then assume that they all sort of participate in the abstract, right? They all work together. For example, a highly developed division of labor would simply be impossible without the accumulation and use of capital goods. And likewise, and so the existence of capital goods and saving an investment in capital goods and the accumulation of capital is like the other side of the division of labor coin, right? They go together, like Romeo and Juliet or Peanut Butter and Jelly. They go together. Sampson and Delisle for a little while. At the same time, like the entrepreneur, the entrepreneur must reveal, or am I sorry, must invest in real capital. The entrepreneur, it doesn't operate in the abstract either. He must invest real capital in the production process for anything to actually be produced. At the same time, as I've already mentioned, capital per se never guarantees economic progress either because it must be widely utilized, or wisely utilized. It must be invested productively. And if the producer urrs in his market forecast, he can indeed reap large losses. At the same time for technology to be productive, it must be bound up in actual capital goods. And so technology for it to be effective in the production process requires saving and investment. For someone to benefit from technology, it is not enough just to know that the technology exists, to know that a machine suitable for the task exists. It must be possessed, right? In order to make a flourless chocolate cake, it's not enough just to know the recipe, right? You have to have the semi-sweet chocolate, the butter and the eggs and the stand-up mixer and the springform pan and the electricity and the conventional oven and the microwave oven. You have to have that capital that you've previously invested in to put the technology to work. So without capital investment, technology is of no use. But with capital investment, technology will tend to advance as entrepreneurs continually seek to obtain and use better, more productive capital goods. And so these sources of prosperity work together, right? They work together and they're brought together by the entrepreneur, right? They're coordinated by the entrepreneur. So we could say economic progress. Economic progress is the happy consequence of a highly developed division of labor taking advantage of an increasing capital stock embodying better technology wisely invested by entrepreneurs. That's why economic progress occurs. It's a happy consequence. This is not the dismal science. We're the happy science. We're the joyful science, right? Now this general theory of economic progress has implications for institutions. It tells us that private property is crucial for the flourishing of all of these sources of progress. We can only specialize in producing certain things if we can trade our excess supply for other goods to get other goods that we want. So we need to be able to participate in voluntary exchange. It's voluntary exchange that opens up the door to the benefits of the market division of labor. And so we have to be able to engage in voluntary exchange which occurs in a society rooted in private property. At the same time, people have to have an incentive to save and invest in capital for them to do so. And people have an incentive to save and invest in capital only if they have an insurance or have some expectation that they can do with their capital what seems best. And if they can keep the positive returns from their capital investment. If an investor is always in fear of government confiscation, you know, like the sort of Damocles of confiscations hanging over their head and they don't ever know when the court's gonna cut and down comes the sword, right? They're gonna be skittish. They're not gonna be as eager to make long-term capital investments. And therefore, the capital structure will be narrower, it will be shorter and the society will be less prosperous. Likewise, in order to benefit from technological advance, people have to have the incentive to research, to develop and innovate and utilize better technology. And they will have that incentive if again, they're able to benefit from the gains that are associated with developing and utilizing better technology. And if they have the freedom to research, to do research in the areas that they want to do research in. And likewise, entrepreneurs can calculate profit and loss only if their calculations are guided by market prices. And those prices are only meaningful and helpful in economic calculation in actually helping entrepreneurs to direct factors of production towards their uses that are actually more valuable to people. Those prices, for those prices to be meaningful have to be market prices, free market prices. Prices determined by voluntary exchange because only prices that are determined by voluntary exchange are manifestations of subjective preferences. And so the link between the subjective preferences of people in society and the physical objective goods that are produced is economic calculation and the market prices that are used in the economic calculation. Another social institution that also undergirds effective coordination by entrepreneurs is sound money. Sound money, money that is not continually being manipulated significantly by the state or by the monetary authority because to the extent that the state manipulates the money supply that will alter the purchasing power of money, alter the pricing structure and driving the pricing structure away in some sense towards to a certain extent sort of fictitious values. It can make things look like they're more profitable when really they're not. And that sort of is sort of part of the seed of the business cycle. So sound money is also an important institution that fosters and allows for the development of economic progress. So that's one theory of growth. It's pulling together everything that we've seen and just recognizing that for economic progress we need the market division of labor, capital accumulation, technological advance and wise entrepreneurship that coordinates the whole ball of wax, so to speak. What about the other story? What about the other view? Well, we can say the other view is modern development economics and modern development economics emerged as the economic development of poorer countries, we call less developed countries, became an issue relevant for the plans for post-World War II reconstruction on the part of the major powers. And the sort of the history of modern development economics is a culmination of a historical process of incorporating many factors. One of which is just the so-called the golden age of Keynesianism, at the golden age of Keynesianism that stretched, the textbooks will say stretched from 1948 to 73. It was a period that looked like, according to certain people, certain statistics, looked like, hey, we got this macro management thing under control, it's the area of Keynes and we can increase deficit spending and then to get us out of recessions and then we can run budget surpluses, what if we wanna cool down the economy, theoretically. And so we can manage things, right? That's the so-called golden age of Keynesianism. It petered out in the 1970s when we had both high unemployment and high price inflation and that did not compute. So Keynesianism is like the golden age of television, right? The so-called golden age of television. Everything was in black and white and no one really knew what they were doing. That's sort of how you can see about it. Another aspect to this that made development economics appealing was the Marshall Plan. The conventional wisdom on the Marshall Plan, regardless of what actually happened, the Marshall Plan seemed to rebuild Europe and it was this great rebuilding program that made it look like, hey, if we just put our minds together, if we put our economic policies together, we can take economies that were in rubble and make them very productive, right? And so it gave some good vibes towards the idea of economic planning. Thirdly, the development of national income statistics such as GNP and GDP, et cetera, documented vast economic inequalities between the more developed countries and the less developed countries. And so in sort of, again, in black and white, you could see, ah, the GDP of the US is here and the GDP of, say, I don't know, the Congo is here. And so we've got a lot of poor people here and we just need to lift them up to get them up into the upper echelon to make the less developed countries a more developed country. So it's sort of, it was used as effective motive for we've got to do something. Also, part and parcel of this is the creation of a number of international aid agencies such as United Nations, the IMF, the World Bank. They directed many resources towards the issue of economic development in the less developed countries. So that's where the money was. The money, research dollars went flowing in to economists and research institutions that spent time investigating and churning out studies about how to help less developed countries. And those studies, of course, are gonna appeal to the people that are spending the money. They're studies that wanna appeal to the wishes of the planners. And also, say, along this line is sort of the fifth thing that happened that contribute to this process of the development of development economics. It's the development of modern growth models. The development of modern growth models. And those modern growth models, and they're gonna be once we're gonna be talking about for the rest of the time, probably, implied that there's an investment gap or there's some gap. They came up with a gap theory of poverty. The gap theory of poverty. There was some type of gap. Some type of gap in the lives of the less developed, people in the less developed countries that is causing them to remain poor. And with the right government intervention, we can fill the gap and everything will be hunky-dory, right? Everything will be hunky-dory. And so what I wanna talk about next is sort of modern macro growth models and the poverty trap. There are at least sort of three approaches, three different models, if you will, of growth theory we wanna touch on. The first is the Herodomor model. The Herodomor model is sort of the purest of the Keynesian type models. It's developed in a simple Keynesian cross framework where Y is output and that's equal to consumption spending plus investment spending, C plus I. C is for consumption, not for cookie. Consumption, I is for investment. And investment is spending on investment in physical production, right? So it's not investment in stocks, not investment in bonds, but it's investment in capital goods used for producing economic goods. C is just spending on household consumption. And Herodomor, the two of them, they're two different people, sort of independently developed very similar model using the Keynesian system. And so the model's known as the Herodomor model. And the conclusion is that the rate of growth in GDP, the rate of growth in output is equal to the savings rate divided by the capital-to-output ratio minus appreciation. And the great implication is that the higher the rate of saving in investment, the higher the growth rate. The higher the rate of saving in investment, the higher the growth rate. In some sense, so far so good. I mean, it would make sense as if we save and invest more, right, the options say, okay, if you save and invest more, you widen and lengthen the production structure, it will be more prosperous, right? But what they viewed as investments a little bit different. We're gonna talk about that in a little bit. The second sort of modern growth model, we wanna talk about it, is a neoclassical growth model developed by an economist named Arsalo and then also an economist named Swan against sort of independently, but sort of then gets mashed together. And this model is very interesting. It models the entire economy as one giant short run neoclassical production function, right? So that's a neoclassical production function there showing a K capital on the horizontal axis and Y output on the vertical axis. This, by the way, that's the micro foundation for macroeconomics, right? The micro foundation is modeling the entire economy as if it's one giant firm, right? And so somebody has to make a production decision for the entire firm. The production constraint there, if you look up there, that's Y at time T is equal to A at time T times the function of K times T. There's also labor in there, but because it's a short run production function, the assumption in this case is that labor is constant because they're wanting to, Sol is wanting to investigate what's the relationship between capital investment and output. And if labor is constant, and by extension, if land is constant and we increase capital, what are you gonna get? You're going to get a dimension returns, right? Dimension returns. And so that's why we have this sort of, the shape of the production function that we get. Notice though, in front of the function, on the right hand side of the equation, but in front of the function, there's this A at time T. Now A is what's called the productivity shift factor, the productivity shift factor. It represents the shocks to the production process, right? Shocks to the production process. The shock to a production process is anything that changes total factor productivity. Anything that changes total factor productivity, otherwise known as TFP. That's not to be confused with MFP, which you should get with Colgate, that's maximum fluoride protection, but TFP is total factor productivity. A total factor productivity is essentially the level of output forthcoming for given levels of labor and capital outputs. In other words, it's not just a productivity of land or the productivity of labor or the productivity of capital. It's not the marginal product of any one of those. It's a measurement of the total productivity of all the factors, right? And often this A is seen to be sort of a measurement for technology, right? The idea is as technology increases, all the factors become more productive, so total factor productivity goes up. And so what do we get from this model? What do we get from this? What are the conclusions here? Well, because of diminishing returns to capital, an increased capital investment eventually will yield a maximum output, right? You get diminishing returns, and so if you keep adding more and more and more capital with a fixed amount of labor, at some point we'll reach maximum output and we can't do better than that, right? So it puts a limit on how much output we can get through increased capital investment, right? And that's why people recognize that the solo model tended to predict that there would be a convergence eventually between more developed countries and less developed countries. As both more developed countries and less developed countries start increasing their capital production, the more developed countries as they increase their capital investment will reach the sweet spot, the maximum, and then they'll just stop with capital investment. And the less developed countries will continue until they also get to that stop, that point and they'll stop and so there will tend to be a convergence between the less developed countries and the more developed countries. That's one sort of implication of the model. Another implication of the model is that if we want to have continued economic expansion once we hit the maximum amount of output we get from capital, the only way to increase output then is through technology. We need a positive technology shock and that's what's illustrated on that graph, right? The shift from the bottom function to the top is a result of a positive technological advance. We have a new way of doing things. We have the development of the internet or the development of air conditioning or the development of who knows what that affects everything and so everything is more productive and you can see them if you look here at the same amount of capital investment, you now get a higher level of output. So that's the beauty of technological advance in this model, right? There was a certain economist, Paul Romer was looking at the data and didn't see as much convergence as he thought we should given the solo model and he saw that the United States continued to increase their productivity and continue to grow for decades. What explains this? Well, he said it was the way technology grows. He developed the endogenous growth model. He argued that, okay yes, in the short run there can be diminishing marginal returns to capital but they're offset by increases in technology and it turns out that there are certain things about technology, he argues, that when we have a capital investment that's related to technology that can sort of take on a life of its own. There could be increasing returns to technology. The idea here is the more we know, the easier it is to discover more knowledge. So if we engage in some research and development and we learn certain things, that makes it easier for us to learn even more things. And so, like the old shampoo commercial, this lady said something like, I tried this one shampoo and I just loved it and then I told two friends and then I told two friends and they started to multiply and the next thing you know you have like 64 pictures of the same woman on the screen telling you about how great the shampoo is. Well, that's sort of like, it's like a geometric progression, right? It's a geometric progression and the thing sort of just takes off. And so we can overcome, we overcome diminishing returns to capital because of endogenous increases in technology. And Paul Romer argues that one of the reasons that the United States has continued to grow is because that the US had or has more people devoted to the knowledge discovery process. We pour more human resources into research, development and innovation. Also the United States developed research universities and research grants. And that is the key in his mind to explaining why we have this technological progress that has taken off and has helped us overcome the diminishing returns to capital. So those are the three models we can sort of contrast praxeology with in six minutes. These models fomented what I call, I don't call it, they're called the gap theory. It was the investment gap, but there's, just like there's many growth theories, there's many gaps. So I'm just called the gap theory. The gap theory is a theory that says less developed countries are mired in poverty because they're stuck in the poverty trap, right? They're stuck in a poverty trap and they can't walk out. Elvis Presley. They're stuck in the poverty trap. Why? Well, one is the investment gap. Jeffrey Sachs sort of, the investment gap is something that goes way back to the 1950s at least. It was rehabilitated by Jeffrey Sachs in his work, The End of Poverty. And it goes something like this. Take the case of the impoverished household in a less developed country. All of his income goes to consumption just to stay alive. And if all of his income goes to consumption just to stay alive, he has no personal savings. So there's low saving and therefore low investment. There's low investment in capital formation. The productivity remains low. With low productivity, there's low employment and also low income. And because there's low income, there's low amounts of savings. Because there's low savings, there's low investment, low investment, small stock of capital, low productivity, low income, low savings, and it's just a circle, right? It's a vicious circle that leads to perpetual impoverishment. Once the idea of diminished returns to capital became popular in modern growth theory, attention turned away from the investment gap and capital investment towards what we call the technology gap. The real gap, it turns out, once the idea was, oh, well, the reason why we have continual growth is actually through technological advance, the reason people are still poor must be the technology gap. Societies are impoverished, not just because they don't have enough capital because it's argued that capital's not where it's at. It's technology. They don't have enough technology. The technology is possessed by and used by the more developed countries. The less developed countries don't have enough technology. They're less productive because they don't have technology. And because they don't have technology, they're less productive, they have lower incomes. They have less saving and capital accumulation which keeps them lagging behind the more developed countries. Now the implication of all these gaps, by the way, the technology gap is also given way to now the human capital gap. The real problem now is not so much technology because even, as Mises pointed out, a technology because just knowing how to do things, you can learn technology from reading scientific books. So it's not really a matter of know-how. Maybe the problem is human capital. People don't have the skills to utilize the technology. So it's a human capital gap that's holding everybody back. But with all these gaps, the solution always is intervention. Investment in foreign aid. If we pour enough foreign aid into these societies, we can fill the gaps. If it's an investment gap, we give foreign aid to fill that investment gap and then productivity will take off. If we pour money into technology, the technology gap will be bridged so then those societies will take off and become more prosperous, et cetera, et cetera. Well, what do we say about this? Well, on the first place we could say that the poverty trap itself has been refuted by the empirical evidence. Over the past 100 years, just look at the data, over the past 100 years, there's been a continuous widespread decrease in worldwide poverty. The number of people that are living in extreme poverty is significantly less now than it was even 30 years ago. And so if there's a poverty trap of some sort, it doesn't seem to be universal. P.T. Bauer noted this in the 1960s even, writing an article on the vicious cycle of poverty where he noted that the existence of more developed countries right now, per se, refutes the poverty trap. I mean, we did develop somehow, before foreign aid, how is that possible, right? If the poverty trap theory is true. More specifically, William Easterly has written a couple of really good articles about the efficacy or lack thereof of foreign aid. And in one study he looked at some of my 88 different countries from, I wanna say, 65 to 85 or something like that. And found very little, very little evidence that foreign aid actually enhances investment of any kind. And virtually zero evidence that investment driven by foreign aid results in increased economic growth. And so the data, the empirical evidence, that the both, shall we say the, if you wanna call it the econometric and the economic historical data, refute the theory, the gap theory. And I would argue that the history refutes the poverty trap theory, the gap theory, because of a host of theoretical problems. A host of problems with the economic framework, one of which, in some sense, it's simply that these models are guilty of four out of the five forms of scientism mentioned in Rothbard's Mantle of Science. If you've never read Rothbard's article, Mantle of Science, I encourage you to do so. He lists five and four out of five are right here. So as Meatloaf would say, I think four out of five ain't bad. But unfortunately, you're gonna have to read about this by looking at my notes, because I'm out of time.