 This talk that I'm going to give is on the myths of market failure and I'd give you a little perspective You know in the course of my career I used to publish quite a bit in the area of antitrust and industrial organization and And one of the things I published in an article a long time ago in a journal called economic inquiry Was about the origins of antitrust and what economists were thinking about? Antitrust regulation at the time the first antitrust law was passed the Sherman antitrust law in the United States in 1890 the year 1890 and and one of the things I found was that the American economics profession was almost unanimously opposed in principle to the whole idea of antitrust regulation They thought they thought it was inherently incompatible with the whole idea of competition And the reason was they thought of competition like the Austrians do as a dynamic rivalrous Discovery process that involves entrepreneurship. It's ongoing never ending and they saw what was happening in their economic world at the time With there was a merger wave in the late 1880s in the United States And but they saw prices falling output expanding they they saw new products hundreds of new products being created There was deflation for 35 years after the American Civil War And they thought it was all all good is all this competition so that they didn't see the the merger wave of the time It's a bad thing that but and that that pretty much was the thinking until you get to around the 1920s and 30s and the the theory of competition changed in the theory of competition that was held by Those who call themselves professional economists became the the theory of perfect competition I don't know. Maybe Peter Klein covered some of this in the last lecture last class but all of a sudden the thinking of competition went from Dynamic rivalrous entrepreneurship the way Adam Smith sought the way the Austrians have always seen it to this this weird Theory that says competition means many firms producing homogeneous products homogeneous prices Costless entry and exit and perfect information and as Friedrich Hayek wrote in a in a famous article of his called the meaning of Competition in perfect competition. There is no competition. It's all assumed away And so and so if you look at if you define competition in that way that led to a whole a huge industry in the economics profession of market failure theory and the 1950s was probably the The high point of the market failure theorizing where there was market failure everywhere because after all Nothing on earth is perfect. And so if you posit that this is what perfection is And then you compare the real world to that. I sometimes call it this You you compare the real world to this bizarre model of utopia and you say aha the market is failed And so there were hundreds probably thousands of articles written by by economists You know labeling anything that happened in the market as a failure because it failed to reach this and it got to the point Absurdity even by the by the 1970s The late Robert Bork who taught antitrust law at Yale for I think 17 years or something like that he wrote a book called the antitrust paradox and And the there's a funny line in there My my favorite line in the whole book is that he said if we act if the government actually tried to enforce Perfect competition on the US economy it would have the same effect on wealth as several Strategically placed nuclear explosions and he wasn't an Austrian He never thought of it was an Austrian economist, but but he was a Chicago school A lawn economics guy, so he he knew a bit about economics and and he wrote some pretty good things About about that subject and so and so you had this whole list of market failures based on basically what I would the economist Harold Demsets called The Nirvana fallacy And this was in an article that Harold Demsets Write his name down here for those of you who have never heard of Demsets He was a UCLA professor Which I always thought he was very close to being an Austrian although he never called himself an Austrian But his the way he wrote about markets was very consistent with with things that you'd expect to see from Peter Klein For example of emphasis on entrepreneurship and the dynamic market And so he was I always thought of him as a fellow traveler of the Austrian But he coined this phrase in an article in the Journal of Law and Economics. I think it was 1969 1970 It was called information and efficiency I think it was called two viewpoints and so that's the Nirvana fallacy And so what I have here in this list is for reasons why I think there are there are a lot of myths about Market failure and then I'm going to talk about some specific myths that that I that I think have been debunked Either by me or others and the first one is a Nirvana fallacy, you know comparing the real world to utopia The real world always falls short The second is the ignoring of entrepreneurship a lot of the market failure stories are externality stories for example and And they just condemn the market for not being perfect in some way because they're at the presence of externality problems, but human beings are problem-solvers at least some of us are and Especially when there's money involved if there's money to be made Someone is going to figure out how to make that money and a lot of times the so-called extra not externality problems are just that There's a there are solved by just that means by there's a way of making money in it And somebody does and solves the problem in in doing it Some of our friends in Montana that run the political economy research Center Study what they call in viral preneurship For example, I just sent them an article from my local paper I live in South Florida and there's a brewery near my house saltwater brewery I notice they sell the beer next door saltwater brewery beer right next door, but these guys I think they're going to make a lot more money by solving an environmental problem Then they are selling beer. They're successful selling beer because they just hope they just rented out a barn in Delray Beach, Florida And now I see their beer on tap it Mama Goldberg. So they're they're going national and international, but They're environmentalists and they figured out There's a problem if you live on the coast you see these stories of fish choking to death on Six-pack rings plastic six-pack rings They got the residue from brewing the beer and they hired a chemist and they figured out how to make six-pack rings that are That are degradable so that they're good enough to hold six packs of beer or Pepsi or whatever but they throw them into a fish tank and the fish eat them fish eat they eat these things like rings and The local paper said they just had an order from like Ann Houser Bush for 50,000 of these things And so that's the first order. So I don't know how much money they're going to make but if you sell 50,000 of anything That's a good piece of change. And so and so and so and they didn't there's money You know, they didn't do it necessarily solely because they love Fish or they felt sorry for fish choking the death They're becoming very rich doing that. So that's the second reason third reason is lazy economists Who who spend their time never getting up out of their swivel chair in their faculty office and theorizing all day long Without ever looking out the window to see if the world matches their theories and then the fourth reason for this that I would give is It diverts attention to problems that are actually caused by government a lot of problems monopoly and so forth That are historically been caused by government all of a sudden that they divert attention to say no No, it's the market that causes all these problems So those are four reasons. So so what are some examples that I want to talk about? the first one is anti-trust which I mentioned briefly earlier and I once did a survey of all the all the when I was at George Mason University a hundred years ago I Got all the books from the library. I had a research assistant that about anti-trust law or anti-trust economics And I want to know what are they saying about the origin of anti-trust because by that time the Chicago school mostly and some of the Austrians had decades of criticism of anti-trust in practice But all the books seem to say but there was a golden age in 1880s where anti-trust was needed. We may have had a hundred years of counterproductive policy that actually makes markets less competitive But it was good at the beginning and I wasn't really buying that story And so and so and sure enough all the books said yeah, there was a golden age there was rampant cartilization rampant monopolization and government came to the rescue and Established the Sherman anti-trust law Okay, and so and that's the standard story that's still in a lot in a lot of the books And and so what I did was I tried to look for the data They would back this up and found there was none none of the books had any I'm not one statistic about any it So my research assistant and I Dug it up. Didn't you went to the Library of Congress? We got all what data statistical The statistics of the United States from the Census Bureau and one of the things we found I'll give you just very briefly what I found I published this article in the International Review of Law and Economics Way back. I think 1984. I think is what it was But 10 years prior to the Sherman Act being passed passed in 1890 GDP was growing at 24 percent for a 10-year period GDP according to the government's own statistics 24 percent the average growth the average growth rate of Industries that were accused of being monopolies by the US Congress That during that time grew at 175 percent on average That's what that's seven times faster So the so the industries that were accused of monopolizing industry were growing seven times faster than the economy as a whole and the economy's Whole was was doing well. It's a period of deflation the government's CPI fell by seven percent during that decade but but these these industries that were Expanding their production seven times faster than GDP or cutting prices even further this steel rails for example fell by 53 percent that was kind of pretty common during that time And so what I found was that these these industries that were targeted as monopolies and even involved matches and castor oil They were complaining about where the fastest growing Fiercest price-cutting most innovating industries of all so there was no monopoly There was no monopoly the old economists had it right in my article in economic inquiry when I when I Followed up from this article to the the economic inquiry articles published four years later Was that the economists of the of the day got it right? There's nothing to worry about here? even even socialists like Like Richard T. Ealy With the big statist even he was against the antitrust law at the time And so that that's the first big example. I would offer of a myth of market failure One of the biggest one the second Big myth is the natural monopoly and I wrote an article years ago in the review of Austrian economics about called the myth of natural monopoly It's online you can Google that and find it And I was always suspicious of this story also that you know the story It's still told today in the textbooks is that in the industries with the heavy fixed cost You know and you know what industries don't have heavy fixed costs these days, you know before you before you get started We'll have economies of scale, you know once it costs a lot of money to build a power plant But then once you start hooking up individual customers Your your costs are mostly fixed and then you you add You know customer after customer and and so the cost per unit falls sharply and the store basic story Is that in industries like that with economies of scale? That there's one big one big company will have will achieve economies of scale first Basically and be able to under price everybody and become a monopoly. We don't want that we don't want a monopoly but There could be a silver lining in the story the story goes is that on the other hand if the government creates a monopoly on purpose Then we can have the advantage of the lower cost for electricity and all these things But then the government will regulate the price in the public interest You know so that we won't have a monopoly price. We'll have a competitive price That's the theory of natural monopoly and and so you know one thing I so I'd dug into this too as had other people And and found out that well this this was the theory, but it never happened in the United States This it never happened that a natural monopoly evolved in the free market And that and then the government came to the rescue with some bureaucrat riding in on the white horse To rescue the consumers when I had friends working at the Federal Trade Commission by the way there's a statue in front of the French Federal Trade Commission of a Big cement horse in a big strong man It's like you know a professional wrestler wrestling the horse and I asked my friend Bruce Yandle years ago It was working there. Well, what's this about? What is the horse and the guy and he told me the horse was runaway government and the man was an economist Trying to wrestle it down But but but actually I think the real meaning of it is the horse the wild horses capitalism and The big strong he-man was the government was taming taming capitalism. That's just to this day It's still still there, but again, there's a Harold Dempest. This is why I kind of I was I was a Wasn't a student of his but I liked his writings back back in the day when I was researching this He wrote in his book efficiency competition and public policy He did a survey of what was going on in the these industries the the natural monopolies at the time late eight late 19th century early 20th century he said this Six electric light companies were organized in one year of 1887 In New York City 45 electric light Enterprises had a legal right to operate in Chicago in 1907 prior to 1895 the Luth Minnesota Had five electric light companies during the latter part of the 19th century Competition was the usual situation in the gas industry in this country before 1884 six competing companies were operating in New York City Competition was common and especially persistent in the telephone industry and on and on and on so there was fierce competition and all these so-called natural monopolies and so and I wrote about this in my article and I used to be a library rat before when I was early in my career before the internet I was a library rat. That's how I got to write articles and books. They're sort of investigative I enjoyed just going through libraries David Gordon is probably like this too, but but and I the Johns Hopkins library was about a 15 minute walk from my office at Loyola in Baltimore in one day I'm in the Johns Hopkins library and I'm looking at all this literature because I knew Richard T. E. Lee taught at Johns Hopkins So I went there to see What what kind of collection of his writings they had and I was digging around and I found Ely and he had written a lot on this subject at the time you know early 20th century and I found that old book on the history of the Baltimore gas light company that Richard T. E. Lee wrote about and It was it tells about the origins of natural monopoly in America of how it got started And it was one of the first states to start it was Maryland's was was Baltimore, Maryland And here's here's a here's what this book says how how it came into being in 1890 a bill was introduced into the Maryland Legislature that called for an annual payment to the city from the consolidated gas company of $10,000 a year and 3% of all dividends Declared in return for the privilege of enjoying a 25-year monopoly So before that there was competition and they sometimes tried to form cartels But cartels always break down didn't work. So they run to the government and said listen This is how we should do this give us a 25-year monopoly and we will share the loot with you Politicians, you know what it was at $10,000 You know in that period of time that that was a lot of money $10,000 a year and 3% of all dividends for a 25-year Monopoly and another old economist I ran across In a journal journal of land and public utility Economics points out that you know the whole National Recovery Act was basically like this when ron Roosevelt Set apart set about to to monopolize all manufacturing industry This was basically the model government created monopolies with price-fixing police roaming the the streets enforcing the price codes that was basically how how those monopolies were all Created in in this one other article that I ran across by an economist named Horace Gray He says this He says you know before too long You know once they started this with the the gas companies and the electric companies. He says Everybody want everybody declared I'm a natural monopoly too and this included the radio real estate milk airline coal oil and Agricultural industries to name a few everybody here. Don't forget me. I'm natural. I'm as natural as the other guy and so and so so that's that's that's the reality of So-called natural monopoly it was created by government, but this whole elaborate theory was was was a big diversion Away from the fact that government created it, you know in the common law the English common law Which is much of which was adopted by by Americans Monopoly was always defined as a grant by the state it wasn't until the early 20th century that monopoly was associated with the market and And I think the the creation of the perfect competition theory had a lot to do with that But it was always assumed before that that monopoly was a grant by the king or the or by the parliament or by somebody okay, I Have a whole list of These fallacies and I want to talk I'm gonna talk about as many of them as I can I guess during the time that I have the next one is the fable of the bees this is a and This is associated with an economist named Steven Chung if you Google Steven Chung fable of the bees you find his famous article and It was famous because in all in all the economics textbooks in the 1950s and 60s 70s They quoted an economist named J. E. Mead and when you get to the section on externality problems externality negative externality problems and positive externality problems and the example he gave and this ended up in all the textbooks for a Long time was a situation where you had beekeepers near an apple orchard and you know the bees pollinate the apple orchard And as a result the apple the apple grower has more apples because his apples are pollinated and This is a market failure according to J. E. Mead because there would be no mechanism For the farmer or the apple with the apple grower to pay The beekeeper and so there's an unpaid resource there a positive externality And at the same time it's reciprocal because the the apple trees the blossoms and apple trees provide food for the bees But then he said there's no mechanism though Where are the there could be any kind of collaboration between the beekeepers who have bees and the an apple orchard owner? And so there's the of these obvious benefits there So he called for government subsidies of beekeepers He said to correct this market failure the government should start start subsidizing beekeepers now I always assumed that J. E. Mead must have been a beekeeper on the side In addition to being a professor at MIT, you know He had a beehives in his backyard or something like that But anyway Stephen Chung he's he's a he's a professor at the University of Washington You know if you went to the grocery store this afternoon to buy apples Half of them in the in the apple bin and probably be from Washington State a big apple growing state And so he did something almost unheard of among academic economists He got up off his butt and left his office And he decided to investigate and actually educate himself about the beekeeping and apple Growing industries He was curious about this he was in all the books all the textbooks and sure enough what he found was that for generations They had implicit and explicit contracts between the beekeepers and the and the the apple orchard owners And they were very explicit very detailed for example, they even had things that would say If it were contractually obligated if we're going to spray bug-killing poison on our apple trees We have to give the beekeepers two weeks notice so that they get the hives out of there And we don't want to kill off the bees with the poison that we put on to kill the other bugs on the trees and things like that And they pay and they had payments that payments going in both directions depending on the situation What kind of apple orchard or what kind of fruit orchard you had and in the bees and so so basically what he found was that for many generations These business people were not as stupid as economists assumed all entrepreneurs are There was money to be made by collaborating between the beekeepers and the and the apple orchard owners and they're and sure enough If there's money to be made somebody will figure out how to make it and so so again by by ignoring the whole process of entrepreneurship Economists tend to not even think about private solutions to the problems like this. They just assume that it's a You know, it's never-ending. I mean, there'd be no end to it The next example is QWERTY, but who knows what QWERTY is It's the keyboard and the keyboard on a computer. This is the configuration the keys on a computer. Well, the next type of market failure has to do with what Buzzword is used for it is path dependence and the idea is that sometimes in a free market There will be an inferior technology that will be locked in people will will use this technology and there might be better more efficient technologies out there, but you know once people adopt it the market tends to lock it in and so so the whole society becomes less efficient with inferior technology and There was an economist named Paul David. I wrote several articles on this quite a few years ago and and he used the QWERTY as an example as a prime example in a couple of his articles and Because there was another keyboard configuration called the Dvorak. I gave this talk at the in the Prague once I was invited to give lectures for 10 days at the Prague University of Economics and The students all laughed when I mentioned Dvorak. He was a Czech, but he was he was an American But he was of Czech descent. I don't know why they laughed if it's funny that there's someone from Czech Republic would be in America They thought that was a funny thing, but anyway Dvorak It was a different configuration of the keys and and and Mr. Dvorak claimed that his configuration was superior And then this was way back in the 1940s He was claiming this and then Paul David the Economist in the 70s and 80s is writing these articles saying well Yeah, the Dvorak configuration. There's evidence that it was Superior to the QWERTY although by then the QWERTY was just sort of By circumstance happenstance locked in and the market fails us yet again. And so anyway two economists Liebowitz and Margolis Stan Liebowitz and Eric Margolis looked into this sort of like and they did apparently what Steven Chung did The the just unspeakable act of getting off off their butts and leaving their faculty offices and Investigating the whole computer keyboard industry and becoming sort of experts in the whole thing And among the things they found was that the evidence of the superiority of the Dvorak keyboard was produced by a naval officer during World War two named Dvorak and Who had a patent on that keyboard and it was his secretary who did the testing and Acclaimed that you know basically his keyboard is superior and so so they did you know Liebowitz and Margolis did they I think they hired Somebody to do you know they did additional tests of the other things and they found that cut pretty similar. There was no out There was no extreme difference in in in one over the other according to what they said, but what the thing is It wasn't worth it to the consumer to switch You know they had an opportunity to switch just like you can switch from Apple to to word Processing on your on your writing and your computers, but you know once you learn one system It's just not worth it to a lot of people now if there's a big significant improvement It might be worth it to retrain yourself But but in this case there apparently wasn't and so so like the fable of the bees the fatal of Courtney Turned out to be a dud As well and I argue in one of my articles that I published that that this also has everything Exactly asked backwards because if when you think about it where we really have Locked in inferior technology is government. That's where the inferior technology is like here's just one leap recent headline That there was in a news recently US nuclear arsenal is controlled by 1970s computers with eight inch floppy disks. I I'm old enough to have used floppy disks on about my first IBM PC in 1983, but they weren't eight inch floppy disks They were there were four inch there were not you know eight inch floppy disks and so talk about path dependence and locking in inferior technology and I'm working on a paper on this if you just You know, this is a note. I wrote to myself. It says Google quote outdated government technology I did that just before I left to come here and there's a big long list of articles like this On the web and so that's that's where the outdated technology comes from the next example I'll give is the asymmetric information problem and I guess the one of the pioneering articles of this was Written by mr. Janet Yellen Yeah Janet Yellen's husband, you know Janet Yellen is the chairman of the Fed or chairwoman of the Fed Her husband is George Akerlof Harvard professor and and he wrote an article on the what is known as the lemons problem and economics in 1970 the American Economic Review and The story that's told is for example a used car dealer has more information about the quality of the used car than the buyer than you the customer Therefore, he's able to rip you off and you know sell you a lemon And he predicted that the whole used car market would disappear because of this to be such a severe market failure But the whole car market would use car market would just be non-existent That's 1970 and there were already warranties on used cars in 1970 so like And of course now and now today if you buy a car from CarMax, so that's a big used car place in the US I think they still give you five days to take it back No questions answered if you decide you don't like the car and 30-day warranties You can buy inexpensive extended warranty so that pretty much solved the problem So the problem of asymmetric information that that he complained about was already solved at the time Bioproduct warranties at the time he wrote the article, but nevertheless There's a huge literature, you know Joe Stiglitz has written Hundreds of articles I think about this because it's an easy nirvana fallacy thing to do. It's easy to pause it that Well gee I the purchaser of an automobile don't know nearly as much as an automotive engineer who works for General Motors About the workings of an automobile don't I and I as a consumer of steak Don't know nearly as much as a rancher who raises cattle and puts brings a stake to market and all this stuff Yeah, that's true. That's true. So so this is seen as one big Market failure problem And but I published an article a short article about this in the core of the Journal of Austrian economics in 2011 and I'll just give you a couple of things that I wrote here. I quoted a hi-ac I basically argue that Asymmetric information is why markets exist It's another word for it would be the division of labor or the division of labor and knowledge You know we I have I I teach economics I make money teaching economics and writing books and things like that And I use that to buy the things that I buy my house food and so forth And so that's that's what makes civilization exist at the international division of labor and knowledge We all have specialized knowledge and something in our work lives And we make money doing that and we rely on other people to provide us with our other goods And so and but it's really the same thing as what they're saying is asymmetric information There wouldn't be markets without asymmetric information. Here's what Hayek said in 1964 We need to remember only how much we have to learn in any occupation after we have completed our theoretical training How big a part of our working life We spend learning particular jobs and how valuable an asset in all walks of life is Knowledge of people of local conditions and of special Circumstances the shipper who earns his living from using otherwise empty or half-filled journeys of Tramp steamers or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities Or the arbitre jour Who gains from local differences of commodity prices are all performing eminently useful functions based on special knowledge of Circumstances of the fleeting moment not known to others Asymmetric information he's saying that's what makes the market work That we all have different knowledge and so and I asked him our article you ask yourself these questions Who knows more about home building home builders or home buyers? Who knows more about supplying grocery stores with fresh meat ranchers and farmers or consumers? Who's knows more about manufacturing automobiles automobile engineers or car purchasers? It's in the whole marketplace is based on asymmetric information. I also quote Mises Who I didn't use the words asymmetric information, but he he wrote about the the topic And I'll quote very briefly this says in an economic system in which every actor is in a position to recognize Correctly the market situation with the same degree of insight The adjustment of prices to every change in the data would be achieved at one stroke Perfect information you know non-asymmetric information in other words it is impossible to imagine such Uniformity in the correct cognition and appraisal of changes in data Except by the intercession intercession of superhuman agencies So only only God could create a situation where there is a non Asymmetric or symmetric information Okay, we would have to assume that every man is approached by an angel Informing him of the change in data Mises wrote and he says if if market participants did possess the same data and information They are bound to appraise it differently even if you did have the same information. That's that's after all That's why that's why Marcus work you and I could have the exact same information about my bag here But if you are in need of a new bag and I decide I'm too old to be wearing a knapsack Anymore and I should sell it to a student. We look at the exact same physical object with the exact same information But we we trade I get rid of it you buy it if we can if we can agree on a price That's how that's why markets exist and so I make the case once again that That this is also asked backwards to use the scientific language for this And I also make the case that the real asymmetric information problem is in government Just look at foreign policy for example, you know who who has more information about The next war we're about to jump into The the dozen or two people who start the war or you and me You know who has who has more information about that or about anything government does, you know government secrets, okay So so that's asymmetric information now the free rider problem is also You know greatly exaggerated I think the way it's taught by most economists though and the most textbooks that students tend to get the impression that this is some sort of ironclad Insurmountable problem of markets the free rider problem whenever there's something on the form of a public good and One good example one example that I'll give you of something that I've written about is You know as a lot of you know if you've read it and some of you have read some of my books I'm interested in economic history And and one of the things I wrote about in a couple of my books is that the debates They began with Jefferson and Hamilton and went through the Civil War so-called About internal improvements or government subsidies for railroads roads canals things like that public works So-called and even beginning with Alexander Hamilton in the US He articulated the free rider problem is that private markets would never finance insufficient amounts road building canal building therefore we need we need government government spending to do this and American president after American president vetoed all of that until Lincoln came along it was it was all That's what it was all put in place, but but they all vetoed Madison, you know the father of the Constitution is very last day as president vetoed a Bill that was about it was about giving a bonus bill to veterans. I believe it was and in there someone had snuck Some money for road building and The father of the US Constitution said I'm to paraphrase and I can't put my finger on the part of the Constitution that allows us to spend money on on that something like that and other presidents said said something similar but I quote an article on This topic of government subsidies for road building because of the free rider problem Dan Klein in commas Dan Klein wrote an article in the economic inquiry some years ago about early American road building And here's what he says the private road building movement built new roads at rates previously unheard of in America Over 11 million dollars was invested in turnpikes in New York. He's talking about the period 1800 1801 1802 Hamilton was still alive Some 6.5 million in New England over four and a half million in Pennsylvania between 1794 and 1840 238 private New England turnpike companies built and operated about 3750 miles of road New York let all of the states in turnpike mileage was over 4,000 miles as of 1821 So so even when this debate was started by Hamilton Private road building companies were busy building all roads and canals with private funding private investors How did they do this? Well? Yeah, there was a free rider problem, but and at the time you could you could maybe make 10% On an investment somewhere, but only 3% if you invested in one of these turnpike companies are 4% But people also realized that if their little town was connected to the next town over It could it could double the size of the market for their goods that they wanted to sell and vice versa They would have more competition coming in to sell them things It may be at lower prices And so the people did that and they use social ostracism to to get their neighbors to invest and cooperate In this back in early America It was and so and so they didn't they didn't use The barrel of a gun which is the governmental method, you know pay up or die or or pay up Or we will make you live in a cage for for seven years something like that final final example. I'll give of Market failure mythology has to do with pollution and I wrote a couple of articles years ago It was very interesting when when when socialism collapsed around the world in the late 80s and early 90s There were all these closed societies that were all of a sudden people could from the West could go into East Germany and Poland and these places that have been part of the Soviet Union and and people did the journalists the United Nations sent people the academics of all sorts could walk around and look around for the first time in decades and One of the things I was thinking about at that time was that Well, how's how is this going to affect the theory of negative externalities because after all the theory of negative externalities that was first Articulated by Arthur C. Pigou the British economist Was that because of in unregulated markets the pursuit of profit? will lead Businesses to only consider the private costs and not the external costs like pollution of their factories Therefore the government needs to come in and regulate in the public interest or tax or tax in the public interest Corporations that polluting so the root cause of pollution is the the the pursuit of profit in unregulated markets Well, here we have a natural experiment We had where the pursuit of profits in unregulated markets was outlawed For 40 50 70 years in all these countries. So what would you expect the environment to look like in these places? Pristine you a heaven on earth, you know, you look like Al Gore's backyards And of course the exact opposite was true it was there was an environmental hell hole There were books written with titles like Ecoside and the USSR and I gathered all this up I wrote a bunch of articles at the time about this and there's stories of You know the Russians almost Depleted the caviar by the sturgeon population pretty much disappeared in Russia There and the Volga River in Russia had signs of a steamboat going down the Volga River had signs on a do not throw Cigarettes overboard the river may catch on fire because there's so many chemicals in the in the river there were 70 years of untreated sewage pumped into into the Aral Sea and other big bodies of water in in Russia and The one memorable thing is that they found an island of alkaline sewage three miles wide and eight miles long floating around in in The Aral Sea and you imagine being on a nice sunny day like this out on your sailboat And you fall asleep after a couple of beers and you wake up with a big thud You know you crash into something and it's an eight mile long chunk of sewage That's the sort of people that were in Poland The air pollution was so bad in Poland that they had water cannons going through downtown Krakow and Warsaw several times a day to knock the lead and cadmium dust out of the air in Poland If you had lung disease in Poland, they had underground Clinics in uranium mines and underground uranium mines That's what they sent you in Poland if you had they had lung disease from all this and so so you know We've had our problems here But but when you read about what happened in the in the countries that outlawed markets altogether The environmental problems were many worse a magnitude worse and so and so the conclusion is that Once again, you know, there has to be something more to it in terms of the sources of pollution than just Corporate greed You know the pursuit of profit because after all if you have a system of property rights that punishes people from harming others Whether through pollution or any other means That can be a deterrent can it if Private property and the liability that goes along with private property They had none of that in the socialist world and so it was one big commons and and they despoiled the commons In Czech Czechoslovakia and one that's it one anecdote. I remember Decades of chemical fertilizer had made the the soil toxic down to a foot deep where nothing would grow And and that but American capitalists came to the rescue They actually have soil cleansing machines that they went and use the soil cleansing machines to restore their their farmland to viability in the you know after the collapse of communism Okay, so those are my stories and I'm sticking to it about the myths of market failure There are many more myths of market failure and if for those of you who are looking for Dissidentation topics or just paper topics. It's it's You know the sky's the limit as far as that goes because there are so many so many of these theories out there And I guess our time is about up and I'm gonna stick around for office hours. Thank you for not falling asleep