 Market failure, what I'm going to talk about today is sort of a little bit of history of economic thought, I guess. I'll just give you a little bit of background about the economics of market failure. Those of you who have taken economics, you know, you read through the chapters of the textbook on externalities, public goods, monopoly, all the standard examples of market failure. And there was a huge literature that came up and relatively new in the scheme of things, really beginning in the 1930s and 40s, because that's when the so-called perfect competition model was developed. Prior to that, just about anybody who wrote anything about economics and competition and industry pretty much followed what the Austrians were saying about competition being a dynamic rivalrous process of entrepreneurship, sort of, you know, a common sense ideas about what competition is and involves price cutting and product differentiation and mergers, and that markets are constantly dynamic and businesses are constantly changing, changing tactics, changing strategies, changing products, changing prices to see what works best. So the market evolves to tell us what works best, and that's how businesses find out what works best, you know, what price to charge, and so forth. But then in this sort of the crusade to create an economic science and the mathematicianization of economics, it was decided that the old ways of thinking about markets were inadequate, we needed a new theory, so they developed the theory of perfect competition. And like I said, in the scheme of things, it's relatively recent, you know, 80 or 90 years old as far as that goes in terms of the history of economic thought. And so Peter Klein probably talked about some of this, but you know, the new definition of competition involved a number of assumptions about what a perfect market would look like, homogeneous products, homogeneous prices, many firms and costless entry and exit, perfect information was also in there. I'll just call that omniscience. So all of a sudden, the markets did not change in the 1930s. Markets were markets, you know, the normal ups and downs of markets or the 1940s. But all of a sudden, homogeneous products, you know, if the New England Patriots adopt a slightly different defense than the Atlanta Falcons, well that's product differentiation, that's an imperfect market in professional football, you know, pick your industry. You have a sale, well that's not homogeneous, you're not charging the same price as everyone else anymore, that's market failure. Costless entry and exit, well that guarantees that the prices will stay at this same level, you know, the price equal to the minimum of average cost, because if you raise your price one penny, 10,000 firms will costlessly enter immediately and drop the price back down that one penny. And then of course you're omniscient, you know exactly how to produce the cost minimizing combination of inputs and everything else, consumers know exactly what they want. And as Friedrich Hayek said in his famous essay, The Meaning of Competition, which is online, he said, under a perfect competition, there is no competition. So the economics profession took this seriously, took this seriously and made recommendation after recommendation for government regulation of all sorts to deal with this problem all of a sudden that existed, that economists didn't think it did exist for many generations before that. And what that, the rubric that goes under is the Nirvana fallacy, Nirvana fallacy. And the Nirvana fallacy is a phrase that was coined, probably was coined by an economist named Harold Demsitz, that's spelled D-E-M-S-E-T-Z. He wrote an article in the Journal of Law and Economics in, I think it was 1969. It was called Information and Efficiency, another viewpoint. I found it online at some point, so it's online somewhere, Harold Demsitz. And he was in a debate at the time in the journals with Kenneth Arrow, who was a Nobel Prize winning economist and a famous market failure theorist. And the reason he used this phrase, Nirvana fallacy, is he's saying that one of the method of analysis of these mainstream economics profession was to set up this unrealistic, unobtainable utopian ideal called perfect competition and then compare that to the real world and then announce that the real world is a failure and that perfect government must step in and perfectly solve the problem of market failure in some way. And so there's sort of double dishonesty there. One is it's a totally straw man argument, set up a straw man, perfect competition and look around the world and say, oh, I don't see perfection out there. And then part two is, but I'm looking at Washington D.C. in the distance and I see perfection. I see Nirvana. I see politicians and bureaucrats and they will perfectly solve the problem. And that's basically the method of analysis of the market failure theory. And when I was just getting out of graduate school, when I got out of graduate school, when I started my career, I remember having a colleague at George Mason who was very prolific. He's publishing like mad in all these highly mathematical journals because his dissertation was one big mathematical model of market failure and he would just add another tiny little different assumption, the slightest different assumption and then churn through all the math again and he would get a yet another article in the international review of international trade or something like this. And he was like a dozen a year like this. And so if you look at the literature, you think, oh my God, the markets are rotten. There's failure everywhere. And this was why. And that's why, by the way, the whole field of public choice came along to say, hold on a minute, the governments are not perfect. And they pretty much accept it. They said, even if you accept all this market failure literature, then you can't assume the government will make the problem better. It might make it worse. But that's sort of, I'm getting off my topic a little bit. And so what I wrote down here, so that's what the Nirvana fallacy is. And what I wrote down here is how to make markets fail, quote fail, or how to declare markets being failing. Nirvana fallacy, step one, ignore the fact that markets are dynamic. So if there's a there's some sort of problem or issue and you don't like how markets are operating, well, give them time. The markets aren't static. They change over time. And I'm going to talk about that in a little more detail. Also, you ignore entrepreneurship, because if there's a perceived problem in the market, you know, more often than not, there's money to be made by somebody by solving the problem. Human beings are problem solvers. It's what entrepreneurs do. And so you have to ignore entrepreneurship, too, to guarantee that markets fail everywhere. And you also have to ignore reality. So a lot of these market failure theories that have made it into the textbooks are theories. And they're assumed as truth because they're theories. And this is especially true of the hyper mathematical segment of the economics profession that comes from places like MIT and Harvard and Princeton and schools like that, where they they have the extraordinarily elaborate mathematical models and then not a single statistic or a bit of history or anything. They assume that since the mathematical model, they solve the mathematical model and got an equilibrium condition that that's God's truth. And that's not always true. That's not always true about about these models. I can remember early in my career, I wrote a whole book with sections of a book about the phenomenon of that, the fact that in the Congress, about 90 to 95% of all incumbents have been reelected for the past 60 years. That's a true fact. Okay, I was at a meeting of the public choice society and a mathematical political scientist was there and he had this very impressive looking mathematical model. And the conclusion of it was that incumbents will never be reelected. The government was perfectly competitive. And he was kind of laughing at me when I threw up the real statistics and kind of giggling about this and what planet am I living on? You have a choice, reality and BS. Oh, I'll pick the BS. It's better for my career to pick the BS. So what do I mean by all this? Well, an example, I'll give you one quick example of the Nevada fallacy in microeconomics. That used to exist not so much anymore. Yeah, it's on there. This is the old monopoly diagram from the textbooks, the marginal cost. You know, the monopoly model says a monopolist will chart equate marginal revenue and marginal cost, produce QM and charge PM as a price. Whereas this would be the competitive price and this would be the competitive output QC on there because the marginal cost curve would be the supply curve and here's demand right here. And so that would be the price. And so for years, there were economists criticizing product innovation and research and development and urging more government regulation and control of R&D and innovation because they thought it was leading to monopoly. I was sort of that sort of thinking that led to the any trust lawsuit against Microsoft. When was it 15 or so years ago? But the argument they were making was that if you invent a new product, by definition, you're creating a monopoly at least temporarily before anybody gets there. And so you're restricting output. And so the standard analysis was that although we should be leery of this, they're creating monopolies because the output restriction is said to be this amount here, you know, a perfectly competitive market. If everybody had the same idea at the same time, then the market equilibrium would be QC right here. But they didn't. You did. You had the idea and now you're a monopolist and you're producing QM. And so therefore perhaps we should force Microsoft to share the code for Windows. That was a proposal that the government made back when they were suing Microsoft, you know, publish that. Or maybe we should force Coca Cola to publish the recipe for Coca Cola or the Kentucky Fried Chicken recipe. You know, it's unfair that Colonel Sanders hogs it all. But what Harold Dempsey said and what's still say still around is that the appropriate comparison is the existing world today, which is right here is zero to the existing world after your invention, which is QM. So by inventing the product, you have actually expanded outputs, expanded production. You haven't restricted production because of course, if you if you compare Nirvana, perfectly competitive equilibrium QC to something less. Well, yeah, you denounce it as failure. But the real comparison is what we have today versus what we have tomorrow after your invention gets on the market. That's the real comparison. And so to put aside the fact that the whole idea of output restriction is a bad thing. As Murray Rothbard pointed out in man economy and state that even assuming that one industry does restrict output like this. Well, all those resources don't just disappear. They're put to work somewhere else. And so there's going to be an expansion of output somewhere else. So you cannot say that there's been an output restriction in a global sense because the economy is fluid and dynamic. So that's one example of the Nirvana fallacy. And so what I thought I'd do is give you some talk about some of the economics literature on market failure that I think illustrates what I just said it illustrates how to declare markets failing. And I'll put that back up on the screen now by a combination of all these things. The Nirvana fallacy ignoring the fact that markets are dynamic and ignoring entrepreneurship and ignoring reality. One example, there's an article by Ronald Coase who won the Nobel Prize in Economics some years ago. He was never considered to be an Austrian economist, although a lot of his research and he was around a long time. I've read articles by Ronald Coase that he published in the 1930s and he was still 10 years ago. He was still publishing articles. And so shortly before he died, I think he lived to 105 or something like that. It was a good long life. And it would have been consistent with a lot of research in Austrian economics. And I'm pretty sure it would have been welcomed in the quarterly journal of Austrian economics, some of the things that he wrote. He was the editor of the Journal of Law and Economics for many years. Anyway, he took on this idea that in all the textbooks for many, many years, when they get to the section on the free rider problem and the public goods problem, it's time to name an example they would name the lighthouse as an example. The lighthouse would be an example. Here's what Paul Samuelson said in his famous textbook. Take our earlier case of a lighthouse to warn against the rocks in the ships, warning the ships against the rocks in the bay. Its beam helps everyone in sight, but a businessman could not build it for a profit since he cannot claim a price from each user. This certainly is a kind of activity that governments would naturally undertake. He goes on and he gives a much more detailed explanation of why this is a classic example of the free rider problem that you can't charge the next ship coming into harbor for the light. Once the light is provided, the next ship to come along will just free ride on whoever paid for the light. And therefore, in advance, you can never get the merchants, the shippers, to pay for a lighthouse because of the free riding problem. They would all be motivated to say, let George do it. Let the other guy pay for it. I'm not going to pay. And if everybody thinks that way, then you end up not getting the so-called public good provided. Classic free rider problem. Well, Coase did something. You know, he quotes Paul, you know, the great Paul Samuelson. Well, I think Samuelson won the first Nobel Prize in economics. He quotes Arthur Pagoo. You know, his name is also associated with the theory of externalities on this and other famous economists in the history of economic thought is saying the same thing. And none of these great scholars did what Coase did. Coase got off his butt and out of his swivel chair in his faculty office and went to the library. Imagine that. Imagine an economic theorist going to the library and he read some books about lighthouses. You know, what a pedestrian thing for a PhD to be doing, reading books. And lo and behold, he studied the British lighthouse system and found that for many generations there had been privately funded lighthouses. So that the shipping industry was not so stupid after all as Paul Samuelson thought. You know, it's kind of like, and so I'm not going to tell you the whole story. So he did this big long study with, you know, big lengthy quotations and all that. But he found out that it did exist. Okay. The story told by the market failure theories did not match reality. And then he concludes by saying this, the question remains, how is it that these great men have in their economic writings been led to make statements about lighthouses, which are misleading us to the facts, whose meaning of thought about in a concrete fashion is quite unclear and which to the extent that they imply a policy conclusion are very likely wrong. And he was on to say the explanation is that these references by economists to lighthouses are not the result of their having made a study of lighthouses, or having read a detailed study by some other economists, despite the extent extensive use of the lighthouse example in the economics literature. No economist to my knowledge has ever made a comprehensive study of lighthouse finance and administration. The lighthouse is simply plucked out of the air to serve as an illustration. And you see that all the time in the economics literature. And like I said, it's especially the the math obsessed model builders. They exhaust themselves with building these mathematical models. And then apparently they're too tired to pick up a book and see if reality matches the conclusion of their model, or at least go online in nowadays. And one of my one of the first book reviews I ever published when I got out of graduate schools in the Southern Economic Journal. And it was a book on innovation, technological innovation. And one chapter had 57 equations, a model with 57 equations to come to the conclusion that the higher the expected return on an investment, the more money a corporation will want to put behind that investment. And I published that in the Southern Economic Journal because that's a direct quote. It took 57 equations to come to that conclusion. That's the lighthouse. Another good example, famous example in the literature is called the fable of the bees. And again, this is another example of market failure that was in almost all the microeconomics textbooks. And it's a situation of where you have a phenomenon of an apple orchard and bees and bees could pollinate the apple trees so that the apple orchard owner will get more apples. And also when the bees pollinate the apple trees, the bees get nourishment and so the beekeeper will get more honey. So there's sort of a reciprocal positive externality there. And for years and years and years, this was given as an example in the textbooks of market failure under the assumption that there's no way that there would be any sort of payment of the beekeepers to have their bees near the apple orchard at the time when the blossoms come out. And or the apple orchard owner wouldn't, you know, they wouldn't get together in any way and figure out how to benefit from this. And so therefore they these people said there's a need for government intervention to subsidize beekeeping. Okay, and I'll read you one thing here. And once again, another economist named Steven Chung is from Hong Kong. And he was teaching at the University of Washington in Seattle at the time. And if you went to the nearest grocery store here in Auburn and bought apples this afternoon, you'd probably find some from Washington State, the big apple growing state. And so he was right there in the middle of it. And he also did the unthinkable. He got up off his butt and went to the library. Not only that, he went and interviewed beekeepers and apple orchard owners. Imagine that. I mean, you know, what the school all those years to do to do that. It's supposed to sit in your office and play with math is if you're an economist. And so here's so Steven Chung quotes some other famous economists, Francis Bator. He wrote the book on market failure in the 1950s. If you if you went to graduate school in 1950s and 60s and took a course in public finance, you read Francis Bator's book on market failure. He said this, it's easy to show that if apple blossoms have a positive effect on honey production, any Pareto efficient solution will associate with apple blossoms, a positive Lagrangian shadow price. That's some math econ lingo. Don't worry about it. If then apple producers are unable to protect their equity in apple nectar and markets do not impute to apple blossoms their correct shadow value. Profit maximizing decisions will fall will fail correctly to allocate resources, market failure at the margin. There will be failure by enforcement. This is what I would call an ownership externality. I wanted a new type of externality and ownership externality. There's no way that they could find out some financial arrangement to have the bees close to the apple orchard and so that both could benefit. And Steven Chung and coast sort of thought like an Austrian would think who has been studying entrepreneurship seems to me there's money to be made here. The beekeepers can make more money with more more honey and the apple orchard owner can make more money if he has bees pollinating his apple trees. It's as though there's a $10,000 sitting here on this chair today and it's also here by Sunday and nobody picks it up. I'm not saying that you guys are a bunch of thieves. It would pick the money out but but there's a clear profit opportunity here and the assumption is entrepreneurs are kind of dumb. They leave it there and they need us economists who are sitting on our butts in our offices at MIT to tell them how to organize their industry. Well, Steven Chung, like I said, did the unheard of and he actually became an expert in beekeeping and apple orchard running. And he found that for many generations, the beekeepers and the apple orchard owners had written contracts specifying how much the beekeepers to be paid when the bees are to be there. When the apple orchard owner puts pesticides on his trees, he gives two weeks notice to the beekeeper to get the bees out of there so they're not harmed by the pesticides and so forth. I'll read you one little thing. He says, this contracts between beekeepers and farmers may be oral or written. I have at hand two types of written contracts. One is formally printed by an association of beekeepers. So the trade association of beekeepers actually had form letters for this. You want to make a contract with an apple orchard owner here? Here's what our lawyers prefer advise you to use this contract with a few printed headings in space for stipulations to be filled in by hand. Aside from situations where third party demands documented proof of the contract written contracts are used primarily for the initial arrangement between the parties. Otherwise, oral arrangements are made. And so that basically is a summary of what he found. And then in the concluding paragraph of Stephen Chung's article, which was also published in the Journal of Law and Economics, he says the problem here is that some economists have been distilling their policy implications from fables. In a desire to promote government intervention, they have been prone to advance without the support of careful investigation, the notion of, quote, market failure. And how do they do that? He says they do it by, quote, comparing the ideal with a fable. Nirvana fallacy, comparing the ideal with a fable. And he says my main criticism concerns their approach to economic inquiry and failing to investigate the real world situation. So that's ignoring reality. That's my point number four there. And also ignoring entrepreneurship. You know, the beekeepers and the apple orchard owners are very entrepreneurial in figuring out a long time ago how to ring every last penny out of their investments in beekeeping and apple orchard owning. Okay. There's another another interesting article in this literature. And by Steve Margolis, forget his co-author now. Steve Margolis and Stan Liebowitz entitled Fable of the Keys. Not Fable of the Bees, Fable of the Keys. Who knows what that is? That's the configuration of the keyboard. Well, there was an article published in economic literature by an economist named Paul David that argued that this is yet another case of market failure. Because in the story that he told in his article was that there is a different type of keyboard. This, that's not the configuration of letters. It's a man's name, Dvorak, that is superior. And so he invented a new type of market failure, path dependence. He said that there are certain types of technologies that are adopted for whatever reason that are inferior technologies. And so we get on this path and we lock in inferior technologies. And as his example, he used the QWERTY keyboard because he argued that the Dvorak keyboard that was developed in the 1940s, he said, was clearly superior to QWERTY. But for whatever reason, the QWERTY got there five minutes earlier, you know, whatever the reason it became adopted. And so we're locked into inferior technology. So another fault of the free market is that it locks in inferior technology and I'm working on it. I'm planning on writing a paper on this subject now and I'm collecting information on government locked in inferior technology. And my best example so far is that the U.S. nuclear arsenal still uses 1970s era eight inch floppy disks. You can Google it, you'll find articles on it. The General Services Administration did a big study and you read this and they're like, holy cow, the nuclear arsenal is running on outdated eight. They even did away with these eight inch disks and went to four inch disks at some point in a floppy disk. But anyway, I'm getting a little away from myself, the fable of the keys. Well, anyway, Stan Liebowitz and Steve Margolis did yet again the unheard of and did not rely just on theory. And they didn't really buy the argument that consumers for decades and decades would be satisfied with inferior technology or that some entrepreneur wouldn't take this Dvorak keyboard and market it and convince people and improve it and persuade people that this is a competitive product. And so in not every typewriter, this is back before computers, personal computers should have the QWERTY keyboard. Well, anyway, what they found out was, I'll read you some of this. When they looked into it, they wanted to find out, well, where did this Dvorak keyboard come from? Anyway, who made it? And so they found a bunch of U.S. Navy studies that were done during World War II claiming that the Dvorak keyboard was superior to the QWERTY keyboard. And that was the evidence that Paul David in his article. And here's what Liebowitz and Margolis write about this. He said, Earl Strong, a professor at Pennsylvania State University and a one-time champion, chairman of the Office Machine Section of the American Standards Association, reports that the 1944 U.S. Navy experiment and some Treasury Department experiments performed in 1946 were conducted by a Dr. Dvorak who owned the patent for the keyboard of the Dvorak system and received at least $130,000 from the Carnegie Commission for Education for the studies performed while he was at the University of Washington. And so it's as though Chrysler did studies of cars comparing Chryslers with Toyotas and said, we have a series of 10 studies that proves Chryslers are better than Toyotas. And that's what Dvorak did. So that doesn't prove that the QWERTY keyboard is not inferior to the Dvorak keyboard, but it raises some big red flags, doesn't it? There's a conflict of interest here. And so they kept digging. And I love this kind of research. It's guided by economic theory and its reality. And it's hard work, it's history, and it's a study of reality. And it's much more convincing than the MIT version of economics where you sit in a room doing math all day. Not that there's anything wrong inherently with math, but sometimes you have to look outside the window too. Anyway, they found a whole bunch of 1956 General Service Administration studies that did not support the Dvorak keyboard. And so they took a step further and they got a grant and hired their own experts to do ergonomic experiments. And they ended up concluding, the experts did, that the QWERTY keyboard is marginally better in terms of words per minute typed with no mistakes and not much, not much. But for whatever reason the consumers liked it. And so once again they went a little too fast in condemning markets by some combination of the Nirvana fallacy, ignoring entrepreneurship, ignoring reality out there. Private roads. Walter Block is not here this year, so you're spared the words of our famous road scholar, Walter, who's been making the case for private roads for about 50 years now. But the original case for private roads, as far as I know, are not for government subsidies for roads. Probably the original case was made by Alexander Hamilton himself. He called it internal improvement subsidy. In my book on Hamilton, Hamilton's Curse, I quote him himself saying this, saying a pretty good rendition of the free rider problem at the time, that he thought that private funding would not be sufficient for road building. And then that Thomas Jefferson's Treasury Secretary, after Hamilton left and George Washington was out of office, he was an advocate of government subsidies for road building for the same reason they thought a free rider problem. So they both expressed a free rider problem long before there were any textbooks written in explaining the free rider problem. But at the same time private corporations were busy building private roads all over the country. Let's give you another example here. And here's, I'm going to read you one short passage. There's an article that was in a journal called Economic Inquiry, which is a pretty high level journal, pretty good economics journal by Daniel Klein. And Danny Klein was an undergraduate student of mine at George Mason 100 years ago. I lost track of him now. I don't know where he's at now. He taught in California for a while and I lost track of him. So he's familiar with Austrian economics. He was part of the early, the very beginnings of the, I used to call it the Center for Study of Market Processes at George Mason and now it's the Mercatus Center, I guess. I don't know if they even have that same name anymore. But anyway, he did a study of the building of roads in early America when we're talking the late 18th century, early 19th century. And here's some of the things he found. And again, he found a whole bunch of books of historians who had studied this. Imagine that. Imagine that they had an economist who once again reads books. Unbelievable. Some years ago, by the way, let me diverge it. Let me sidetrack myself again. My university would give every freshman a book to read for freshman orientation. And it was the business school's turn to choose the book. And the economics department chairman asked me to be on the committee to choose the book because she told me, you're the only member of the department who reads books. It's a true story. It's a true story. That's what the economics department is like. So naturally I was on the committee to pick a book because no one else would have any idea what book to pick. They don't read books. But Danny Klein apparently read some books. And here's what he said, between 1794 and 1840, 238 private New England turnpike companies built and operated 3,750 miles of roads. New York led all over the states in turnpike mileage with over 4,000 as of 1821. Pennsylvania was second reaching a peak of 2,400 miles in 1832. New Jersey companies operated 550 miles by 1821. Maryland's operated 300 miles of private road in 1830. Turnpikes also represented a great improvement in road quality. And so they did build private roads in early America. And this was about the same time that Hamilton is saying, oh, we need government funding for the roads where we have no roads. And meanwhile, private businesses are doing it. And Dan Klein offered some good explanations of how this happens. He said that these turnpike companies were only paying about a 3% return. And you might have been able to get a 10% return on your money somewhere else, not necessarily even in the United States, in England or someplace. But people invested anyway because they knew that the road would strengthen their community. It would be good for their business. If you had a business and you were connected to the next town over, it would widen your markets. You'd have a bigger market for things. And there was a lot of social ostracism. People who did not invest were sort of socially ostracized or ostracized or they wouldn't do business with you. And so in small communities like that, these sort of tools were used to get people to invest. And a lot of people thought it was just in their self-interest to invest in these turnpike companies, especially if it led to greater prosperity for their community, which it did, which it did. And so that's another example I think that I would point out of being a little too anxious to condemn markets for failing because of the free rider problem without looking at history. Other examples, I published an article years ago called The Myth of Natural Monopoly and it's been translated into a bunch of different languages. I've had people all over the world contact me over the years to reprint this article on The Myth of Natural Monopoly. And the story that we're usually told is that, and it's usually told in a historical context to American college students that in the late 19th, early 20th century, there was the advent of these industries that had heavy fixed costs like the steel industry, natural gas, water supply, and so forth, telephone. And so as a result of that, they had economies of scale. And economies of scale were leading to a situation supposedly where one big company would achieve very low average cost of production and that would price everybody out of the market. So there would be a natural monopoly of whichever company got there first and then a big large scale production of whatever it was, water supply, telephone services and so forth. And therefore, government came in and regulated them in the public interest by doing two things. One, making it legally a monopoly because they wanted the low cost, which the monopoly would give them, but then regulating the price so that it wouldn't be a monopoly price. They'd let them make a profit, but not a monopoly profit. And so that's the public interest theory of regulation. Well, turns out that's another hoax that never actually happened. And I'll quote Harold Demsatz again. He looked into it and sounded fishy to him apparently at some point. And in his book, Efficiency, Competition, and Public Policy, Collection of His Journal Articles, he says this, six electric light companies were organized in the one year of 1887 in New York City. Forty-five electric light enterprises had the legal right to operate in Chicago in 1907. Prior to 1895, Duluth, Minnesota had five electric lighting companies. Scranton, Pennsylvania had four in 1906. During the latter part of the 19th century, competition was the usual situation in the gas industry in this country, meaning natural gas, I guess. Before 1884, six competing companies were operating in New York City. Competition was common and especially persistent in the telephone industry. Baltimore, Chicago, Cleveland, Columbus, Detroit, Kansas City, Minneapolis, Philadelphia, Pittsburgh, St. Louis had at least two telephone services in 1905. So it never happened that way. It never happened. This natural monopoly never evolved into natural monopoly. And in my article, I looked into it in a lot more detail than just that and found that when monopoly did occur, the classic example would be what happened in Maryland. Baltimore Gas and Light Company tried to merge with a couple of other companies and create a monopoly. It didn't work. Mergers didn't work. Too much cheating. Over and over again, they tried it. It didn't work. And so they did what corporations always do when they're trying to achieve a monopoly. They go to the state to get the government to give them a monopoly. And so they did. And so they went to the state of Maryland and they had them pass a law that said that the state of Maryland would share in the loot that they would get. Now, let me give you the exact numbers here in a second. Let's see how much loot they shared. From the consolidated gas company was called an annual payment to the city of $10,000 a year. This is an $1890, $10,000 a year. A couple hundred grand anyway. And 3% of all dividends declared in return for the privilege of enjoying a 25-year monopoly. So that's how natural monopoly came to Maryland. And then once they did that, other cities all over the country thought, well, that's a good way to sort of sneak in a tax increase, raise the electric bill for everybody or the gas bill. And the consumers will probably blame the gas company. They won't blame the politicians for that. So it was basically a share the loot monopoly scheme. And that's how the natural monopolies came into being. There's an article, an economist named Walter Primo, spelled P-R-I-M-E-A-U-X. And he spent a big part of his career doing statistical studies of the electric power industry. And he wrote a whole book called Direct Utility Competition. And he found out, and this is another guy that got up off his swivel chair, he found out that there were dozens of American cities that never did this and never went this route that always allowed direct competition. I mean, not like you have a monopoly in the east side of town and you have a monopoly in the west side of town, direct competition for all parts of town by multiple companies. And sure enough, what did he find in the electric power business that there are lower prices, better service, et cetera, everything you would expect from just a little bit of competition. And they also figured out how to minimize the power lines and all that sort of thing to create minimal, including burying them in some places. And so that's sort of a counter example to the standard story. But for some reason, the textbooks still ignore all this. They ignore Walter Primo to their shame of the textbooks because this was a... And I remember in graduate school reading these articles of his in the review of economics and statistics and econometrica. And I mean, this was a big time, well-known empirical economist who did these studies in the mainstream, but it's ignored because I guess it's too politically incorrect to do that. And that's my story for now. I guess we have one minute in case anybody wants to make a brilliant declaration or throw a tomato or anything like that, or howl like a wolf one more time. If not... Oh, the book I recommended to the committee. Well, this is a book. It was a business school's choice. And so I couldn't recommend an economic theory book because it's the whole everybody. It's all the freshman class, music majors, everybody. So I picked a book on the history of entrepreneurship by John Steele Gordon and I thought at least get them read stories of famous entrepreneurs and how they, you know, what they did and their lives and things. And it was a pretty good, very readable. Anybody could read it. You didn't have to know any economic theory or anything like that. And I knew that they wouldn't accept something like that. But the two left-wingers on the committee threw a fit because it was mostly white males, they told me. There weren't enough... And there were both women, the two lefties. But I tried to tell them, well, that's real American history. I mean, that's the truth about American history. It's not the truth as much today as it was 150 years ago. And it wasn't exclusively males. It went up to pretty modern times and there were female entrepreneurs in there, but a minority because that's the reality. But really they wanted some big lefty book like Nicollin Dimes or something like that. So the university actually had to intervene. The administration had to intervene and pick some administrator to pick the book. And they picked some New York Times commie, some book by some tuner, Times commie about international trade, about why we need NAFTA or something, as I recall. And that's the one they picked. I guess we're out of time. It's quarter of and that's... Feel free to howl instead of clap if you want. Thank you.