 I want to say thank you to the Federal Society and particularly to Jean Meyer, the Executive Director who's been a friend for many years. It occurred to me as someone who was probably well to the left for the majority in this room. My question is, how would the Federal Society come down in the Galileo case? I'm not sure, but I will leave that for questions. The other thing is that any of you who come to Washington and you get a chance to visit the Federal Society headquarters, why you have one warning for you, don't play poker with Jean Meyer. He is perhaps one of the best players in Washington, D.C. He's even better at chess, by the way. I know. He was ranked as a Yale student, I believe, but you better watch out on poker. He's pretty tough. In fact, the chairman of the Republican National Committee at one point, Richard Bond, ordered the group of poker players that he and I were both in that Jean had to be barred because he was taking too much money from the rest of the group. You're all free marketeers, so it's up to you to join the game or not. Let me say my basic premise is that really on a lot of these issues, there is no substantive difference between the left and the right on questions like equality of opportunity and equality of liberty. Let me read from this. It might be more coherent than my rambling. The differences between the left and right in America over capitalism and free markets are matters of degree, not fundamental ideological conflict. Both Democrats and Republicans endorse partially regulated free markets. Their differences are matters of details over the type of regulations to be applied and most especially over the winners and losers resulting from the different forms of government intervention. Bernie Sanders aside, there is no socialist movement in the United States. In fact, it's interesting, I know that it's all recently that the World Society of Socialists or a similar group basically renounced Sanders saying that he did not meet their standards. Maybe he could join the Federalist Society. Nor is there a patriarchal class ordered conservatism, except perhaps at the University of Virginia. In fundamentals, there is a basic ideological consensus. Take equality of opportunity versus equality of outcome. Basically both the left and the right agree on equality of outcome. The issue becomes, how do you define opportunity and equality? Does the kid born to a single family in a high poverty neighborhood have equality of opportunity to the kid born in Bill and Hillary's hometown, Chappaqua in Westchester County? Does elimination of the estate tax, and all those here I assume, many of you were in favor of that, does that actually increase equality of opportunity or does it give kids born with a silver spoon in their mouth an unearned advantage totally unrelated to their participation in the market? Is the aggressive use of any trust law a means to achieve opportunity or is it an excessive use of government in the marketplace? If education is a crucial element of equality of opportunity, should there be a policy that the quality of all schools or at least public schools be equal to achieve equality of opportunity? If equality of liberty is a goal, should everyone live in neighborhoods where crime rates do not restrict movement especially at night and in neighborhoods where the threat of disease which clearly restricts liberty is equal? The reality is that there is in this country broad agreement on the legitimacy of capitalism and free markets. Equality of opportunity and equality of liberty, the differences between left and right are over a relatively narrow range of policies basically between 11 o'clock and 11 p.m. and 1 a.m. They do not, that's not a difference between 3 a.m. and 9 a.m. The major left-right differences on capital and free markets are essentially qui bono disputes who benefits not over philosophy or principle. Philosophical principles are carefully chosen to make sure that the favored interest or constituency wins. Republicans at least until the emergence of Donald Trump, who I don't think is a favorite here, have generally sought to use government to protect the interests of business and the affluent in the application of regulations governing tort law, bankruptcy, labor negotiations, class action lawsuits, tax policy, the regulation of banking, patent law. The notion of crony capitalism is just as applicable if not more so to Republicans than Democrats. I would add the use of earmarks, if you consider that a distortion of an interference with the free market, the earmark usage exploded under Republican governance of the House under Tom DeLay and Newt Gingrich. Democrats in turn have sought to tilt the market in favor of core liberal constituencies, including women, minorities, cities, unions. Both parties have shown market distorting favoritism to agricultural interests, investment banks, the insurance industry, and other major sources of campaign contributions. In other words, neither the left nor the right have clean hands from a purest point of view. Politics and markets in the United States, and I suspect virtually everywhere, are inseparable, making the system inherently subject to the influence of power over the market, and power is most often used to defy or distort market forces. That's it. I, too, want to thank the organizers. It's a tremendous honor to be here. This is an incredibly important topic, and I can't say how thrilled I am to be part of this panel. I think there are two views of markets. In one view of markets, held by my former colleague, Senator Warren, markets are a place where people are trapped, manipulated, and made worse off. If they borrow money, they'll probably borrow too much that they won't be able to repay, then they'll be out on the street. If they were allowed to choose their own school in a market system, they'd make the wrong choice. So we have to make that choice for them. The other view of what markets offer is a chance. People can take risk, and sometimes they will win. And they win in a way which is absolutely relevant to what we're talking about tonight. They build businesses. Their kids get better educations. They escape poverty and move up in terms of social and economic mobility. Now, I'm an economist and a lawyer and a law professor, so I'll talk about the law in these brief remarks, and also economics. And one thing that economics has taught us, and we know, is that the ability to access credit markets, which will be the main focus of my brief remarks tonight, the ability to access credit markets is an absolute prerequisite to the formation of new businesses. And we also know something about new businesses. Most of the new jobs come from new small businesses. Indeed, I'll quote a few numbers. I'm not going to get all economists on you here with the numbers. But over a 30-year period, roughly 1980 to 2012, a little over 30 years, bigger businesses had zero net employment growth, on average. Basically, it hovered around zero. The net employment growth was entirely in smaller and newer businesses. The bad news is that employment in firms that are newer, defined as less than five years old, fell from 18 percent of private sector employment in 1981 and even 16 percent in 1988, down to 8 percent in 2012. Now, why is that? There are a lot of factors. But certainly one factor has to be that we have not created conditions in credit markets, and especially over the last, since the passage of Dodd-Frank in 2010, credit markets have tightened up and it has become much more difficult for new businesses to get outside capital. And most new businesses, economists kind of were surprised by this finding. Most new businesses aren't created by having equity from friends and family. They are outside capital is absolutely crucial to the creation of new businesses. And it's a simple story. New businesses mean more jobs. And new businesses also mean what? Entrepreneurs. And entrepreneurship is a major way that people move up the economic ladder. So, where do people get to capital? How do you get outside capital to start a new business? You need collateral. You have to, you've got to get collateral and you've got to be able to borrow. What are two ways that now economists know small businesses get going? Collateral and homes. People will take out home equity lines of credit. That's a really, really important way that new businesses are started. And the other way is credit card debt. A huge fraction, 54 percent of new businesses are using personal credit cards to finance the business. Not business credit cards, but personal credit cards. Senator Warren looks at credit cards and she sees what? She sees people in bankruptcy who've made a lot of bad decisions, not just in how they use their credit cards. And so they pass laws with card act that do what? Basically mandate certain terms in credit card contracts and make it more difficult for people to get credit cards rather than easier to get credit cards so they can use the credit cards for doing things like starting new businesses. What about home equity? How do you get home equity? Well, you get a loan. You've got to have a mortgage. What have we done with the Dodd-Frank law? We have wiped out the market for mortgages for people who are younger, for minorities, for anybody who doesn't have an established credit history. We've eliminated the subprime mortgage market. Is that a bad thing? For income and wealth mobility? For the creation of new businesses? Yes, it is. A couple of very recent studies have shown what? It was in places where home prices were increasing most rapidly during the 2000s that the rate of new business formation was the greatest. And that's not just a kind of a happen chance. There's a reason for that. Another study found that every 10% increase in home equity increased the probability that a household would become entrepreneurs by 7%. When you restrict mortgages, you restrict the ability of people to acquire capital in their homes. They can't acquire capital in the homes. A very, very important source of collateral for getting a loan to start a new business has disappeared. Why did Dodd-Frank do what it did? Because people looked around after the fact and they saw that some people defaulted. And it is true. Was there fraud in the subprime market? Yeah, there was fraud in the subprime market. But we have common law, which says fraud is a defense to contract enforcement and fraud is a tort. We didn't need Dodd-Frank to deal with fraud. No, no. Dodd-Frank was premised on a much different model of human behavior, not that active fraud is going to hurt people. We've always known that. Dodd-Frank was premised on a view that people are not smart enough to make the right choices. And therefore, they should not be allowed to choose at all. Certain kinds of mortgages should not be offered. Same thing with credit cards. So in these two areas, what have we done in this country? We've done exactly the wrong thing. Instead of harnessing market forces and making credit more available to people who are going to use credit to start new businesses and benefit not just themselves, but all the people they employ. And this is where all the job growth is. We have done the opposite. We are moving in the wrong direction at a rapid pace. Well, slowed in recent years as political sort of constellation changed. But those kind of laws are the kind of laws that basically prevent people from accessing the market in a way that can help overcome both poverty and, of course, inequality. Now, I know tomorrow we'll be talking more about education and the ability of people to basically make market choices and have a market choice of which schools their kids go to. We know that hasn't happened. It should happen. 80% of the Black families in Philadelphia, when they're polled on this, they say, yeah, I want my kid to have a choice. But they're not given that opportunity. Why? Because the teachers unions make that not happen because of legal obstacles. Those obstacles have to be removed. Otherwise, we're not going to make any progress in another very important kind of investment, which is what? Investment in human capital. That's the only way in the future. People are going to better themselves and move up the socioeconomic ladder. So I could go on. But instead of opening up markets, making markets accessible to people so that they can be an engine for overcoming poverty and inequality, we have done exactly the opposite. And why? There's a tendency of both lawyers and politicians to look at selected stories and their sad stories sometimes of people who've failed. You have to look in a different way and take a different perspective. You've got to look at the people who took chances and succeeded. How often do you hear those stories? That is the engine of growth. That's the engine for overcoming inequality and poverty. And that is where we have to focus more. I actually just got to note that if any of you are interested in a special assistant position in the Trump administration, the table outside the room, that was a funnier joke a couple of months ago. That's the joke. OK. So I'm writing a book with Brink Lindsey of the Cato Institute, which is represented on this dais. And so there's a number of times when, during this talk, I'll say we'll be arguing whatever. So I just want to make sure that the spectral vision of Brink Lindsey is sitting next to me. So I'm not taking responsibility for everything I'm about to say. And if anything I say really is half baked that it was probably put in here by Brink. So America today faces two great challenges. First, the explosion in inequality threatens the public's belief in the justice of our economic system. And second, sluggish growth in weak labor market and performance undermine both current well-being and future opportunity. The solutions to these problems are typically thought to be in tension with one another. Greater equality necessarily comes at the price of lower economic growth. This tension dissolves when we focus on inequality generated by policies that distort market allocation of resources, what we refer to as regressive redistribution. The use of state power to enrich the already advantage is large, it's growing, it's enabled by inherent flaws in democratic governance. Any feasible attack on inequality, and I think in many areas I agree with Tom, must therefore include a focus on the state's own role in producing inequality. So the rise of income and wealth inequality driven especially by rapid gains at the top, and that's mainly my focus today is on the, and again, on the very, very top of the top, is one of the most widely discussed phenomenon of recent economic life. Thomas Piketty and Emmanuel Saez have famously estimated that share of total income accounted for by the top 1% of earners has doubled from 8% in 1979 to 17% in 2010, while the share of the top 1.1% has quadrupled from 2% to 8% over the same period. Likewise, the dismal performance of the US economy since the financial crisis of 2008 has been painfully obvious to all, but what remains poorly understood is the connection between these trends, the connection between sluggish growth and exploding inequality. Yes, there have been efforts largely unconvincing to depict the former trend as the cause of the latter. The argument here is that excess income concentration has been bad for growth, and the implication is that we're suffering from an excess of capitalism. Market forces naturally give rise to big income differences which have unchecked, ultimately undermine the capitalist growth machine. I think there's something to this, but our analysis points in a different and in some ways, I think, complimentary direction. We identify a common cause underlying both inequality and stagnation, a large increase over recent decades in regressive redistribution, and are telling them the problem is not too much free market competition, but in some areas too little. The artificial suppression of entrepreneurship and competition by government intervention on behalf of the rich and powerful is not only stymying wealth creation, but also skewing the distribution of growth's diminishing rewards so that they're less widely shared. Now, conservatives should find the growth of regressive redistribution alarming. Historically, free market conservatives have defended the distribution of rewards that flow from capitalism is just so long as it's produced by free exchange. At the same time, conservatives typically argued that the growth of state intervention in the economy increasingly distorts the market, producing a political economy of crony capitalism. These two arguments are on a collision course. For the more we move toward crony capitalism, the more likely that the actual distribution of income is a product of state action rather than free exchange. Now, conservatives are increasingly willing to broach the issue of inequality when it comes to the bottom of the income distribution, but the existence of regressive redistribution gives conservatives strong reasons to recognize that exploding high in inequality is their problem too. The rigidities and distortions created by regressive redistribution are steadily sapping the dynamism of the economy undermining the entrepreneurship and innovation upon which continued prosperity ultimately depends. Furthermore, if inequality at the top is not diminished through removing the mechanisms by which the wealthy use the state to extract resources from the rest of society, the inequalities that conservatives believe are just those that flow from innovation and hard work will be in danger from populist policies that further degrade economic performance. You may have heard about this in the news recently. Some people may be proposing something along those lines. Progressives, meanwhile, need no urging to care about inequality, but their efforts to do something constructive about it are hobbled by their inherent suspicion of the market's low motives and their valorization of public-spirited government activism. It's difficult for my friends, often on the left, to recognize those instances where government interventions work to exacerbate and further entrench economic privilege and win as a result deregulation, is many cases, the egalitarian's best friend. What we call regressive redistribution is the fruit of rent-seeking, a genre, a game that is tilted in favor of societies richest and most powerful actors. Yes, sometimes government policies create rents that accrue to humbler beneficiaries, think of Wagner Act, unionism, or limits on mass immigration, and much of the regulatory state, and at least in my view, can be viewed as an attempt, in some cases, to correct for externalities, in the case of environmental regulation, but in our own era, the game is dominated by well-heeled interests who have the resources necessary to co-opt government for their own private enrichment. Meanwhile, rent-seeking is bad for inefficiency as it is for equity. In our book, we're going to examine four examples of this, right? And when you look through these examples, and then you also look at the Forbes Top Thousand Wealthy People in America, what's remarkable is how much overlap there is between the two. When you look at the really exploding incomes, right? You see finance, intellectual property. When you go further down in the income distribution, but where there's still lots of the 1%, you see huge amounts of occupational licensing, right? And when you look at the explosion in the wealth of the top 1%, one of the areas you see most is the explosion in real estate values. All four of those areas, finance, IP, occupational licensing, housing market restrictions, right? Are deeply implicated in the explosion of inequality in the last 30 or 40 years, right? I could go into details about all these later, but the thing that strikes you, right, is all of these are examples where the classic collective action problems that produce rent-seeking are all present, right? In the housing market, wealthy people who live in very expensive neighborhoods have every incentive there is to mobilize to keep people from building new housing in their neighborhood, right? All the people whose housing prices are increased and therefore can't actually buy into the market don't have nearly the same incentive to organize, right? All the people in finance who want to invest in maintaining their ability to get outsized leverage, to create a huge pool of securitized mortgage securities upon which they can trade with that very same leverage, right? They all have enormous incentive to organize to keep those rules in the books. All the people who are damaged don't. Occupational licensing is rife with these same collective action problems, right? One of the things that suggests is in order to deal with these huge areas of rent-seeking that I argue are really driving an enormous amount of the top end inequality, some kind of activity to counter that basic dynamic of democratic governance is necessary. One of the arguments that I've made is one of the things we need to do is maybe counterintuitively to insulate government more thoroughly from private influence. And this is where I think that creating agencies that have greater autonomy, right? Increasing the capacity of Congress. One of the facts is most legislatures all the way from Congress, all the way down to state legislatures, down to city councils that make zoning decisions, right? Are almost all dependent upon the most concentrated interest for their information, right? Creating more information internal to government, which means in some sense increasing government in those areas where it actually makes decisions might actually help rectify some of this imbalance. I too would like to thank the organizers. It's a real honor to be here. In particular, given that if the Democrats at 11 and Republicans at one o'clock, I'm trying to figure out where I am, but probably at six p.m. So about as far from each as one could be. So given that radical nature of my positions, I'm particularly glad to be here. Capitalism and inequality. Capitalism causes inequality. I mean, that is just a fact. Before capitalism, indeed in every country that one can look at in the world today that is pre-capitalist, hopefully for them pre-capitalist, there is less inequality than there is in the United States. They're all duit pour, all of them. Pre-capitalism in the West, 350 years ago, we were all duit pour, there was equality. Equality of poverty. Capitalism, one of capitalism's great virtues is the fact that it is created inequality. Now, what does that mean? It means that capitalism has allowed the creators of wealth to keep it. And as rewarded individuals, based on their level of productivity. The more productive you are, the more you make. The less productive you are, the less you make. Supply and demand, market forces. It's created a mechanism of meritocracy. And capitalism in its pure form in a free market setting, we'll get to cronyism in a minute, is a meritocracy. It is a system of earned inequality. And as it turns out under capitalism, historically and indeed geographically, when we look cross-sectionally across the world today, as countries that adopt capitalism, more capitalism, more freedom, more free markets. Yes, the rich get fabulously rich. And the poor get just rich. Rich relative to where they were before. Just go ask any middle-class Chinese person or Indian person or Taiwanese person. They're rich relative to where their parents were or whether to where they were given the speed at which this is happening on a global setting. Say, yes, capitalism creates inequality. Yay. Inequality is good. We're different. Look around the room. That's fabulous. And the fact that there are people who are much smarter than I am and who have the ability, I always use my iPhone in presentations, have the ability to create beautiful stuff like this and sell it to billions of people is wonderful. All of us benefit from that fact. All of us benefit from that fact. And if they make billions of dollars, good. Because that's part of the incentive to make this. It's good for them. Part of their ability to market it. Good for them. And every time you buy a product like this, are you better or worse off? The example we use in the book is, J.K. Rawlins is one of those responsible for inequality in the last 20 years, right? How many of you read Harry Potter? This is why, right? Every time you bought one of those books, you added to inequality. Piketty wrote down minus $20 for you plus whatever the leftover is for J.K. Rawlins. She became a billionaire. You became $20 poorer. It's true. But we don't, what's the problem? You're better off because you get the spiritual value of reading Harry Potter, at least I did. And she got money. Good for her. She became a billionaire. That's a good thing, not a bad thing. You're better off, she's better off. That's the beauty of markets. That's the beauty of capitalism. Yes, it creates inequality, but so what? If the transactions are win-win transactions, as voluntary trade is, we are all better off. Now there are real problems in the world today. Which inequality, in my view, the whole inequality debate is hiding, is trying to disguise. There are real problems. We've heard about some of them, poverty, cronyism, low growth. None of these problems have anything to do with the gap between rich and poor. They have to do with mobility, economic mobility for poor people. They have to do with cronyism. We resent the fact that some rich people are rich because they're cronies. That's a problem. But the gap, the number, the genie coefficient, however you wanna call it, the gap is irrelevant. The inequality is not an issue. It's a bogus issue. There is no issue of inequality. There's no problem of inequality. There's a problem of poor people not being able to rise up from poverty. That's a problem we should think about and talk about. And it's usually caused by the policies most politicians wants to institute in order to reduce inequality. Like restrictions on credit, like minimum wages, like licensing laws. If you really look at it, those are the much more important with regard to the poverty. Of course, low growth doesn't help when it comes to the inability of poor people to rise up from poverty. And what causes low growth? This is not science fiction. I'm not a lawyer, so I'm not as sophisticated as you guys. I'm just a finance guy. Low growth is easy, right? There's low growth because we're dramatically over-regulating this economy, over-taxing and over-regulating this economy. When you over-regulate economy, you get low growth. There's no surprises here. And are there people at the top who make money that don't deserve it? Absolutely. There's massive cronyism in America today. But how do you solve that? And I take a little bit of different spin. I don't believe that it's so much that business captures politics as much as that politicians who are power hungry impose themselves onto business and then business in an attempt to defend themselves ultimately capture the politicians. But the beginning point is the power we grant politicians. What we really need to do, in my view, is insulate business from government rather than government from business. And my favorite example here is the Microsoft case. The famous hearing where Microsoft was bought in front of Congress in the early 90s and told, you gotta start lobbying. You gotta build a nice building in Washington, D.C. We're not seeing any of your money here in D.C. And Microsoft basically said, you leave us alone, we'll leave you alone. And they went home and they never lobbied. Microsoft just spent $0 in lobbying. And then what happened a year or two later? The justice department came knocking and Microsoft suddenly realized that the government wasn't gonna leave them alone. And today they spent tens of millions of dollars a year in lobbying. They've got a beautiful building in Washington, D.C. You should go see it sometime. It's right behind the Cato building, it's very close. So in my view, the only, we have set up and this is why I think we all think in terms of inequality as a problem. We have set up this platonic ideal that equality is a good thing. And it's not. There's nothing good about equality. Equality of outcome is not a good thing. Now it's true. Nobody actually advocates today equality of outcome because they all know how unacceptable that view is. We've tried it, it's horrible. We've seen it all over the world. You don't want, so whenever I debate somebody who wants more equality, I ask them, well how much is just right? What genie coefficient? What redistribution is just right? And they never tell you, right? Because they can't. There is no right level of inequality because the ideal that we've all accepted implicitly is equality is an ideal, it's just not practical. I reject that. Equality is an evil ideal. There's nothing good about equality of outcome. And equality of opportunity, by the way, as Paul Krugman, my nemesis has pointed out, is just another form of equality of outcome. It's a different outcome, but it's another form of equality of outcome. The only legitimate concept of equality, and I'll end with this, the only legitimate concept of equality is the equality you guys deal with. It's equality of rights, it's equality of liberties, it's equality before the law. And indeed, every attempt to create equality of outcome or equality of opportunity violates the idea of equality of rights, of equality of liberty. Somebody's liberties are restricted in order to supposedly increase the opportunities and the outcome of somebody else. And that is a moral that is wrong. We have to get rid of this ideal, this moral ideal of equality of outcome. It is a wrong ideal and it distorts our politics and our policy thoroughly. Thank you. For those of you standing up in the back, there are a lot of seats here in the front, and I promise you, you won't be called on, but you're welcome to come sit wherever you like. So let me ask the panelists, do any of you have a follow-up to or a question of any of your fellow panelists about what's been said here so far? And we're still gonna have plenty of time for questions. Well, let me just throw out one thing. Let's talk a little sociology for a minute. We've heard a lot of comments in the past few years about the so-called disappearing American middle class. Could you comment, any of you on, is it true that there's a disappearing American middle class? If there is, should we care, does it really matter? That is to say, to what extent is a stable middle class central to a stable capitalist system under our constitutional form of government? I'll just note, looking at the numbers, the middle class is shrinking. But if you look carefully at the numbers, it's shrinking for two reasons. One, a lot of people in the middle class are now becoming wealthy, going into the upper class, and a number of people, and the ranks of the poor are increasing. But it turns out that the ranks of the rich are going faster than the ranks of the poor. So more middle class people are moving up than they are down, which is a good thing. But yes, there's a real problem in America today, which is low economic growth. When you have low economic growth, you have real problems of people's earnings increase, increasing, and there's less wealth in the economy, which is not good. So to the extent that we can solve the growth problem, which I think is relatively easy to solve, you solve the problem of this, not just the shrinking of the middle class, but the fact that they're pulling out wising as fast as they used to from poverty. Actually, I think the data shows that you're correct up until around 2010, but that since then, the top portion has been growing slower, and the bottom and middle have been declining. You are correct that people were, the net gain was at the top, but it's now lately has shifted so that now the top is losing some. But I would ask you a question. How do you achieve equality of opportunity for the kid in East Baltimore who's growing up there? How does he have, yeah. Him or me? I think, so first of all, as I said, I don't believe in equality of opportunity. Again, no, I don't think there is such a thing, right? Opportunity. My point is that you can't achieve equality of opportunity for the kid in Baltimore. My kid is gonna have more opportunities than the kid in Baltimore. Let's not pretend, let's not delusion out. Now, how do you increase the opportunities of the kid in Baltimore? So I'm for maximizing opportunities. We wanna maximize opportunities, not equalize. The way you maximize opportunities for the kid in Baltimore is to increase opportunities, which means more markets, more capitalism. And the most important thing you can do is get rid of government schools. Because the most valuable thing you could do is bring innovation, competition, progress, to schooling, imagine if instead of writing the next stupid little app for the iPhone, entrepreneurs were trying to figure out how to better educate our kids because there were real opportunities in doing that, driving down the cost of education through innovation and entrepreneurship. Education is where the opportunities really exist. And education is something owned by the government and it's failed miserably. So let's not give them more power, let's give them less power. If I could just, second. If I could just, can I second that and also elaborate a bit on that and also respond to a couple of things that were said earlier? Judge? So, no, the applause is gone already. My timing was off. Look, if you remove barriers to entry in schooling, you don't have the teachers needing to monopolizing and preventing the construction of new schools. As was just said, you'll have an increase in the supply of schools, the price will go down. And even if you're not committed to vouchers or some kind of system recognizing education has some public good aspects, even if you didn't do that, you would still have an unbelievable fall in the cost of education and increase in the quality. I have no doubt about that. Now I wanted to respond to two other things that were said earlier by the commentators on the other side of me. First, the idea that liberals and conservatives are both committed to individual rights is wrong. Progressives are not committed to individual rights. Progressives are committed to group rights. They do not believe in meritocracy. They do not believe that any individual deserves what that individual gets. They view groups and they're trying to create equality across groups, whether it's gender, race, ethnicity, whatever. That is the progressive vision. It is not an individual vision at all. I think that's our stereotypical characterization. Well, you haven't- That's not true. I mean, you're just not in the same world I'm in then. And the second thing is, and this is Steve's point, I don't know why in the world we would wanna give Congress more resources and the legislature's more resources to do more things. I don't believe, there are some economists who've written books and trying to demonstrate that generally legislation can be efficient because if they propose an inefficient piece of legislation, the people who are gonna lose from the legislation will always be willing to sort of spend more to stop it. But of course, as Steve was saying, the problem with that is the people who lose from legislation are diffused, they can't organize easily, and they can't gather the resources to oppose legislation which confers very concrete and big benefits on certain people. As I tell my students, look at the tax code. There are tax provisions that are set up for particular families, let alone particular firms. They know exactly what they're getting. Who's, how are we supposed to oppose that? Are we all gonna get together and say, well, yeah, they're getting a $10 million benefit this year, but let's get ourselves together and make sure they don't get that. That doesn't happen. I mean, that's just basic political economics. And given the way majoritarian legislatures work, I don't see in the basic political economics of that kind of decision-making process, I don't want them to have more money. I don't want them to meet very often at all. I don't want them to do anything. I mean, look, what we've got to do is get rid of the legislation. We've got so much legislation that we've got to get rid of. Let's try to do that first. And I don't know if they need resources to do that. I'd actually like to do something innovative which is actually try to answer the question. I wasn't directly aiming you, just kind of indirectly. So first of all, just to go back to- No, that is pretty direct. Okay, it's right over here. I think part of the argument, again, goes back to one of the areas I was talking about which is the housing market. One of the problems is it's actually hard for people to move where economic growth is. If you look at where really exploding incomes, New York, San Francisco, DC for good or ill, Boston, all those places that exploding incomes, they also have incredibly constricted housing markets, which means that it's actually hard for you to actually move to close to those places where the exploding incomes are, where you can actually create jobs to serve people like that, right? And so one of the reasons that incomes have been so sluggish actually in the middle is it's actually hard for people to actually get the economic mobility that's associated with geographic mobility. So I would say that's one area. I think the other thing, just again, I'll take the opportunity just to respond to one point. I think there's no question that whatever you think about whether government in general should have more resources, right? I think there's a very strong case that government in its role of being a decision maker needs more resources, right? And the reason for that is even if you think that everything government should be doing over the next 10 years is all deregulatory, right? Those are very complicated decisions, right? On which right now policy makers in Congress have to rely extraordinarily heavily on precisely the industries that are advantaged by our existing regulatory arrangements, right? So unless government agencies actually have the internal capacity to actually understand the matters that are before them, actually have the, you know, can hire people like sophisticated federal society lawyers, you notice the suck up there, that was intentional, right? If you actually want to be able to hire people who can actually compete with the regulated firms in order to deregulate them, right? You're gonna need to have governments that can actually have both the resources and the internal sort of mobility structures where you can actually think, I'm gonna go and spend 10, 15, 20 years in government, right? And not just so circulate back and forth into the regulated industry, into the regulated occupational, you know, licensed occupation, right? Or finance, right? Or the housing market, right? All those things are gonna have outsized earnings, right? That they can offer you. And if government can't compete with that, there's no question that those rents are gonna keep recirculating. So in some sense, the irony is, even if you wanna push government down overall, the overall amount government spends, I think there's an almost unarguable case that government in its role of decision maker in Congress and the executive branch actually needs to be stronger and better resourced. I would just argue that this criticism of liberalism is done from an ivory tower point of view. That what you were saying is that liberals have the liabilities of the Democratic Party, that they do suck up to unions, they do allow distortions, they prevent the school systems from having free markets, they probably do a lot of things that prevent wider access to credit. I personally agree with a lot of that point. But you then try to categorize them as you separate yourself, well, put it this way, you're saying liberals have these faults and you have saying your position is pure and free, but you're separating yourself from the conservatives and Republicans who do not, you're setting yourself apart from both parties, but you're placing the liabilities only on one in the way you focus on these things. You're? No, you. Oh, me? Yeah. No. The two right-wingers. That's just a default position. Well, first of all, I didn't say anybody in political parties. I don't think progressives identify necessarily with the political party, and maybe more Democrats and certainly Republican, but they define themselves as progressives. And that's a misnomer because the original progressive has nothing to do with today's progressives. But is it, I'm not, so I didn't say anything about any political party. I'm just looking out there and saying there are certain restrictions on people's, there is a tendency to wanna restrict people's access to markets in a way that makes it harder for people to move up the socioeconomic ladder. And there might be Republicans as responsible for that as Democrats. And I'm not sitting here defending. There are a lot of Republicans from corn states that really like the ethanol subsidy. And the ethanol volumetric requirements, and it amounts to a subsidy. I'm gonna sit here and defend the ethanol subsidy. It's bad for the environment. It's pork barrel. I don't care if they're Republicans or Democrats. It's an unjustified interference in the market. It's created tremendous harm. Hasn't helped the environment. It's created tremendous harm by boosting corn prices. And so, you know, I don't care, Republican Democrat just has to do it. Basically have we given people, the goal should be to maximize liberty and maximize freedom. And whatever party it is that happens to be supportive of that, I could support. I'm not saying anything politically. Yeah, let me second that. And if I came across as two harsh on Democrats and not harsh enough on Republicans, let me correct that. Let me fix that. It was Republicans under a Republican president, a Republican House and a Republican Senate that passed one of the most biggest abominations in regulatory policy in the last 100 years, which was Salbanes-Oxley, which I don't know how many of you know, how many conservatives voted against it in the Senate. Zero, zero, 98 to zero, Salbanes-Oxley. Public cost of your economy, north of 1.5 trillion dollars of just flushed down the toilet wealth. Caught, how many fraudsters is it caught? Zero, zero, did it prevent the financial crisis? No, but Congress and the president fell good because Enron had just happened and they need to do something. So why not, why not handcuff American businesses? And we worry about economic growth. These are the reasons why we have problems with economic growth. Because when you create a law that basically guarantees full employment for accountants and some useless lawyers, some, not present company excluded, of course. They're still young. Yeah, I know. Then yeah, then that's a drain on economic resources of the country and you're gonna get lower economic growth, instead of writing software, they're doing accounting. So the Republicans are almost as equally at fault in the state of the world that we have today, particularly on the crony side. Republicans are very much prone to what's cronyism. Ethanol subsidies, there's a presidential candidate right now running who is a big fan of sugar subsidies or tariffs on sugar because the only people who grow sugar, the few people who grow sugar in the United States happen to be in his state. But yeah, the whole political system today is filled with cronyism left and right. Occupy Wall Street, it was interesting. Occupy Wall Street was against bailouts, right? But there wasn't a single person in Occupy Wall Street that was against auto bailouts. No, they like their bailouts. They just don't like those bailouts. I'm against bailouts, period. No exceptions, no Wall Street's bad and Main Street's good, no bailout. So there's bad on left and right. There is no political party today in the United States that represents free markets and liberty, and that's a tragedy. I think one more bipartisan comment. Congress loves to pass laws that impose paperwork burdens. Dodd-Frank is one unbelievable example of it, but it's not the only example. And we also know that small and medium-sized banks, because they have relationships with people in the community, are really important in getting money out to new businesses and in the community and to entrepreneurs. Well, guess what Dodd-Frank did to small and medium-sized banks? It essentially destroyed them. Even as they have been firing people, they've been hiring people for Dodd-Frank compliance. Fortunately, lawyers and accountants and that sort. So they're shrinking. Their market presence, I mean, I have some data here. I mean, again, more numbers, but the market share of the smallest community banks has fallen precipitously and continuously, and the biggest fall has been in the market for commercial and industrial loans, and it's just striking. They've been hiring people for Dodd-Frank compliance, even as on net they've been firing people, and that can't happen. And I think Republicans and Democrats probably equate a blame for that, although not for Dodd-Frank. I'm wondering what any of you think about the impact for better or for worse on all of what you've described of the so-called safety net, a safety net that largely didn't exist 60 years ago, and I'm talking about things like the school lunch program, food stamps, Medicaid, certain tax credit programs and other such things, and now probably Obamacare. What effect does that safety net have on income inequality? Should the safety net be raised to solve some of the problems, or is it a problem in and of itself? I mean, I guess I would say one of the problems actually in the United States is actually we're trying to do things that could much easier and with much, in my view, much less infliction of constraints on liberty through the welfare state, but we're doing it through all kind of complicated, I wrote a piece of national affairs called Clegeocracy in America on the incredibly complicated ways in which we're trying to solve what are essentially often very direct questions, right? As if you really want to raise incomes of people in retirement, we have a fairly direct simple way to do that, which is social security, right? We could increase social security payments, right? But instead, what we've done is created this enormously complicated web of subsidies, IRAs, 401Ks, same thing with saving for student loans, right? That is, we have fairly direct Pell grants or actually a pretty simple direct way if you just want to hand people over money for higher education, right? But we have this incredibly elaborate Byzantine network of things that we've done in lieu of just creating a fairly transparent welfare state. So it gets in my position, in a way, I actually think I agree probably with more on Jason, on the things that we've been talking about so far, right? That is, in lots of these areas, as a liberal, I would actually prefer a much less subsidized, much less regulated market and much more extensive and fairly transparent redistribution, right? I think, in a way, on net, that would be a much freer, much less regulated world, right? If we could get one where we'd simply increase social security and get rid of all these other subsidies, if we got rid of the web of occupational licensing, which is often given the argument that it's supposed to be helping out poor people, but in fact is only increasing constraints on them entering the market. And I think in some ways, this is the agenda that we may be looking at over the next 20 years, right? Is to be simultaneously deregulating large areas in the market, especially where that regulation redistributes upward, while simultaneously increasing and simplifying our welfare state. So, yeah, if I haven't proved to be a six yet, let me do it now. I think it's incredibly harmful, the safety net, the so-called safety net, the welfare state, if you will. I don't think it's a safety net. I think it's a net that keeps people down. I don't think it's a net that propels them upwards. I think it is incredibly destructive to hand people a check without any strings attached. I think it is incredibly destructive to create an entitlement mentality across a whole class of people. What you're doing them is basically institutionalizing them into poverty. You're taking away their self-esteem, their pride. A good friend of mine tells a story, he's a CEO of BB&T, you're familiar with BB&T, John Allison, the former CEO of Cato. Tells the story of his grandfather, who was a bricklayer and made almost nothing. This was a long time ago before there was a safety net, and he was a bricklayer, and he barely made a living, but he made a living. And he went home every day, and he put food on the table, and he raised his kids, and he felt pride in the fact that he fed them, that he made a living, that he took care of his family. Now take that same guy in hand in my check and tell him, don't worry, be happy. Well, that can be happy, because without self-esteem that comes from the kind of pride, that comes from that kind of hard work, and knowing that you can deal with reality, you can deal with the world, that you can take care of yourself, you're destroying people. That's what the welfare state does, and that's why the war on poverty, in spite of all the massive gazillions of dollars we've redistributed has done nothing to reduce rates of poverty. And indeed, rates of poverty were declining far faster before the war on poverty was launched than they are today, because when you have a dynamic free market, which creates jobs, jobs is the way people rise up from poverty, not through checks that you're not through handouts. You wanna create jobs, you wanna create a dynamic economy, and redistribution of wealth crushes that dynamism, but it crushes more importantly the spirit of those who are ambitious and a poor and would like to rise up, and then you overlay that with the minimum wage, the prices out, a whole generation of teenagers out of the job market who can never find a job, licensing laws that make it impossible for poor people to start businesses that are going to professions where anybody could see you don't need a license, like to braid hair, or in California you need a license to shampoo hair. I mean, who does that hood? Who does that hood? It hoods poor people. So it is all of these government policies passed over the last, I would go further back to the FDR days, passed over all these generations in an effort to help poor people, actually hurting them and actually creating a whole entitlement mentality that are keeping people down instead of allowing them to have the opportunities that capitalism really provides. Yeah, I don't have much to say because this is not an area of expertise, the kind of conjuries of welfare and safety net programs we have, but I have been thinking, and my impression before really having started this project, and I haven't started and haven't been working on it, is that the best way to explain the bizarre, complex, crazy system we have now that's ostensibly designed to provide a safety net is through the incentives of the bureaucrats to run the system. That's what makes it so difficult to change it, that's what makes it so difficult to rationalize it and make it more efficient, assuming you wanna provide some minimum level of safety, but the number of agencies and bureaucrats at all levels of government who are concerned with in some way helping the plight of the poor, the amount we spend on the bureaucrats has to be, and I can't tell you that I've got the number because I haven't computed it, many times the amount of money that is actually transferred to the poor, and if that's true, we gotta be able to do better. So let's take the social security, which is the largest redistributed program in the United States, that assumption that the transaction costs of that have to be some multiple of how much is being distributed, I mean something like the social security administration uses something on the order of 0.5% or less, I think actually in their transaction costs, and that is by far the largest redistributed program that just swamps all these other ones that people are talking about, right? So there may be areas where that's true, and I do think that the complexity of the welfare state is a big problem. I think in large part it's actually a function in a way counter-intuitively of separation of powers, which is actually it's very hard to destroy things. Again, one of the things that's odd about separation of powers is I do think it has some effect on the way up of constraining the growth of government. The irony is it also has that effect on the way down, right? That is it's actually much harder to get rid of things, right? If you've already got a very complicated policy, you wanna find some way to rationalize it, right? You have to go through all those same multiple different veto points created by separation of powers, and so in that sense, I think a lot of this complexity, the fact that we keep layering things on towards to our efforts to fund student finance, right? There's all kind of ideas about how we could finance education easier, right? But the fact is it's much easier to simply layer new things on top of the old things, which again, create a lot of the complexity. I don't think it's often the logic of the people who run these. The people who run these programs, and I've talked to them, they hate them. They think they're ridiculous. They wish they could actually reform them. You go, we look at opportunities when in many cases bureaucrats have had a chance to, when they looked at the deregulation of airlines, right? It turned out that a huge number of the people in the old Civil Aeronautics Board were in favor of it, right? They were the ones running the program and knew it was crazy, and they felt sick about the fact they were running a program that basically was just keeping a bunch of airline executives who were providing bad service in business, right? That wasn't the reason, right? I mean, there was only these rare opportunities when there was enough agenda power and often a bipartisan one, right? Where those bureaucrats were able to actually do the thing they knew was right. So I don't think it's the bureaucrats. I don't think it's usually the case it's the self-interest, and as in lots of these things, you know, the enemy is usually in Congress, right? And even in there, there's lots of people in Congress who know that the complex systems we have are no good, right? But they know that they can only operate incrementally, in which case, they almost always, like you're stuck in quicksand, you keep moving around, you only get deeper. Yeah, and I did not mean to include Social Security as a poverty program. I've never thought of it as an anti-poverty program. I think the standard political economy explanation has always been it's a middle class program. It's not means tested. People can have many, many millions of dollars in financial assets, and they may be taxed differently, but they're still eligible for Social Security. We don't, I've never thought of it. That's why I didn't include it. Well, Dan, if you actually look at the actual incident, I mean, there has been very substantial redistributive effect at the bottom. That is true. If any of you have questions of these panelists, we have, there's two microphones here at the front. Please do. I just wanted people to be aligning up if anyone has any questions. Just, I think it's worth noting, maybe this is the most underreported story of the last 30 years. Over the last 30 years, one billion people have come out of poverty, according to the United Nations, not an organization, they're usually site for statistics. One billion people around the world have come out of poverty. One billion people. We should be dancing in the streets instead of complaining about inequality. The reason nobody celebrates this is because not one of those one billion people came out of poverty because of government program. They're out of poverty because of capitalism in places like India and to the extent that China's adopted in Taiwan and South Korea. And that's something global inequality is actually shrinking because other countries are adopting the free market. I think some of the things, not all, some of them that you got, the two right-wing guys, us being the two left-wingers here. The two right-wingers are saying are entirely valid and are good points. But I think that puts the burden on you to then demonstrate to a public that could understand it that these are good ideas and they are good approaches. And then if you assume people are rational, just assume it, because they're not all members of the Federal Society, but if you assume they're rational and you can sell it, then the political system is gonna pick it up at some point. But you have some points that are the critique and I would fully agree with a lot of the critique of the welfare state, a lot of the critique of the education welfare state, whatever you wanna call it. But you haven't made a very good public case for what you're saying, even to the party that would be more receptive in theory to what you're saying. So please go buy my book. Well, I just think whether you can sell it to the public depends on, I don't know if it's luck or what, but you've gotta be lucky. You've gotta find a great politician, somebody who communicate like President Reagan could and stands for also these kinds of ideas. We do have a tremendous communicator right now who's in the campaign, but I have no idea what he stands for. I don't know about you. I mean, I actually think that in some of these areas, in some of the areas that we're gonna disagree, areas have to do with redistribution, but again, if you think about the degree of inequality, at least the top part, that's produced by rent seeking, I think it's quite enormous. And if you look at the degree of inequality at the bottom, for example, that's a result of mass incarceration, right? A lot of those issues are not on the basic axis of party conflict, right? That is, and if you look at a lot of the areas of mass incarceration, I just got finished writing a book on this, right? There's all kind of weird coalitions at the state level in places like Georgia and Texas, right? And I think it's possible for a lot of these areas, again, which are very consequential for inequality to happen in part because everything else is so gridlocked, right? But those are only gridlocked on those basic areas where everybody knows that they're the basic things that the parties disagree on, right? A lot of these other areas of finance, IP, occupational licensing, right, are ones where the parties don't all know where they're supposed to be. Democrats and Republicans don't all know what the right place to be in. And I don't think it always just depends on having a great leader who comes in on a white horse. A lot of this is real sort of, you know, hard blocking and tackling at state legislatures, right? And this is actually the kind of thing that lawyers can do something about, right? And I mean, if you think about all this occupational licensing, right? Having just a few people doing pro bono law in your state, right, especially in small states where there's often nobody testifying on the other side when somebody tries to license a new occupation, right? That's an area where that kind of work at the margin can make an enormous difference. Sorry, let's move into our questions and here are the rules. A question is a short sentence that ends in a question mark. It's not a speech. And please just give us your name and what school you're from and then ask your question and we'll do our best to let everyone who's standing here ask one. We'll start with alternate microphones. Go ahead. Good evening, thank you so much. My name is Luciana Milano and I'm from SMU in Texas. You guys have had a really lively discussion about whether we should even have, whether we should even strive to reduce inequality in the first place. And my question is can the left and the right really have a conversation about the topic of inequality? What are the principles, positions that the left and the right agree on on the topic of inequality? Is there any common ground from a philosophical perspective on the topic of inequality? I'll start. No. And the reason, and it's not left and right, it's some people versus most people. I think unfortunately, and this is the great barrier, unfortunately most of our society, most of our culture still views equality of outcome as some kind of platonic ideal. And I say platonic because it's one of these ideals that everybody knows you can't reach. And it's, as long as people say things like, communism is the noble idea, but it's not good in practice. No, communism is evil as an idea. That's why that that is why it is impractical. So I'm not quite sure how to follow that. Also, I literally cannot think of anybody who actually even took that position. So everybody applauded for a straw man there, but that's fine. I mean, again, I consider myself a liberal, right? And again, a liberal, and in some sense a classical liberal. I don't consider myself a progressive, right? In some sense, I think that a lot of the beliefs that got injected into liberalism during the progressive era are a problem. We need a more liberal liberalism or more libertarian liberalism in some sense. But I guess what I would say is that on a lot of these areas about whether or not we ought to have competition, right? That there's a significant group of liberals, not all of them are a lot of Democrats, right? I don't consider liberals in my sense of the word, right? I think that's an area in which, but I think part of the problem again, from my point of view is that capitalism, as I understand the word, and I understand the word capitalism in some sense in the way Marx did, right? Which was the control of the state by the owners of capital, right? Is always in conflict with the free market, right? Part of the nature is that free market outcomes, which are gonna produce inequality, some degree of which I think is just, right? Almost always produces the resources upon which those same people can essentially close off future competition, right? And that's in some sense the basic dynamic, right? That's always intentioned between when you have both democracy and a free market, right? Is that people are gonna capture the state and use it in a way to protect the people who won in the last round, right? And I think one thing that I think a lot to people who are on my side, right, can agree on is that we should do everything we can to push back against the translation of economic wealth into political power, right? And especially political power that reinforces and protects people against competition in some cases that can compete away some degree of that inequality, right? And so I think that's an area where, again, we should also get away from this thing where we talk about liberals and conservatives as if we're all a kind of monolith, right? I think we all know that that's stupid cable news kind of level of discourse, right? That is, there's lots of liberal, you know. There's lots of more libertarian liberals like me and there's lots of conservatives who simply are doing work to maintain the power of existing people against competition. So I think if we can move away from that, we're gonna have a lot smarter discourse. Well, I just, a quick comment, I'm not some sort of expert on how people have different ideologies of why they disagree or why they might agree, but I would point out one thing. It seems to be the most notable thing about this election, this presidential election, is if you go back a year ago, everybody thought, well, let's see. Clinton's got all the money and Bush has all the money. So it's a done deal. Really? I guess it's not a done deal. Bush isn't a candidate anymore. He's gone, okay? The simple equation of, well, here are the really rich guys, the billionaires, and they're gonna determine who the next president is. That is not happening right now. That simply is not happening. If you're a believer in democracy, you should be really happy about that. And if you identify sort of concentration of capital with concentration of political power, I think you should also be happy because what we have with Trump is what we really have with Trump are the people in Murray's fabulous book, if you haven't read it, came out some years ago. And he just talks about basically a typical lower middle class or lower class white family in Fishtown, which is part of Philadelphia, and what their life was like in 1960 and what their life was like in 2010. And it's a radical and complete, not transformation, but basically social upheaval and destruction of any community, of any sense of being anywhere. And it's those people, I think, who you see turning up and supporting Trump and what, it's not because there's a lot of money. Nobody's paying them, okay? They don't have any money. They are expressing a view about where this country is at right now. And they are the group that has completely lost, is forgotten, and has no place. But what are they doing through the democratic process is they're saying, we have a place. We can get out here and we're gonna vote and we're gonna turn up and we're gonna organize and we're gonna raise signs and whatever you think about Trump, he's communicating with those people. And I don't think it has anything to do with concentration of capital. It has to do with a lot of changes in society and changes in the structure that have occurred in the sort of political economic structure that have occurred over the last four decades. All right, let me throw two cents in here. One, I think the Trump campaign does, in fact, have to do with the concentration of capital. He is campaigning against, basically, Citizens United and he's campaigning against big dollar excessive control over all his opponents. That is a theme he uses all the time. Secondly, just very quickly, I think what Trump and Sanders to a lesser extent reflect is that there is a potential for a very strong candidate to emerge, whether it's third party or within one of the two parties who campaigns on a theme of no more bullshit. Just cut it out on both sides. No more crony capitalism for the guys on the top. No more special favoritism to unions. No more, let's cut out all the crap and run a campaign on that theme. And I think that candidate would have, if it's a decent politician, could be pretty tough to beat in either party. And I think there is, in fact, great political potential for this kind of phenomena to occur. Trump is only the opening, sort of the opening hand in the poker game. He's not Jean Mayer of poker. But I think he does show, he has, his greatest service in a way has been to show that there is an opening for this cut the bullshit stuff. And I think there is a potential which does unite left and right, or elements of the left and right together. All right, we need short questions, short answers. I will try to make this short as possible. And I can use the microphone except I think my voice won't come on if I was asked. Your name and your... Oh, I was getting to that, sir. Well, hi, I'm Andrew Everett and I go to school here, actually down the road. I'm an engineer here. My question is with respect to a regulatory capture with poverty. What I mean by that is social security, disability, VA disability, most of these programs have very strict cliff. Like once you make above X number of dollars, the benefit cuts off entirely instead of being tapered in any way. And that seems to be a reason to cause people to not wanna say work because they are afraid that if they make enough they lose their benefit. So I mean, what do you see as the probability of tweaking things like that to make it so that there isn't just a cliff loss of benefits that would maybe cause more people to wanna work? One thing I'll actually say in almost all these things is that one of the biggest reasons why almost all those programs have very significant cliffs, right? Is it's not a tweak to actually reduce the phase out, right? It costs an enormous amount of money to increase the phase out because it dramatically increases the number of people who are eligible for the program, right? And that's just basically a mathematical identity, right? Now I think it would be a case that lots of these programs would be better. They'd be less likely to have distortions to work incentive. If we had less, if we reduced the phase out and earned income tax credit, right? That would have a big impact on that, right? You would mean you'd have to spend a lot more money on the earned income tax credit, right? That's simply a fact. I think that's worth it, right? But part of the problem is that these, some of those, again, the irrationalities and distortions in the program are a function of the fact that we've actually had such tight constraints on taxation, right? That people have been looking for some way to get 75 cents worth of, you know, a dollar worth of government, a 75 cents of spending, right? And you can't do it, right? I think in some ways, if you want to get rid of some of those distortions, you have to think about whether or not we should actually be spending more money on government in general. Yeah, and when economists look at social security disability, they basically view it as a kind of supplemental, permanent unemployment program. The majority of people who are getting social security disability now are doing so, either get it or are eligible because of either minor depression or basically back problems. And then, of course, you have the problem with the administrative law judges, some of whom were not even doing their job and trying to figure out who actually qualified. But it has become a form of de facto permanent unemployment. And, you know, Congress would have to, that's even worse than the disincentive. Quick question on your middle. Question? John Vivenzio, I actually, I run a software company and I recently got involved in economics and law when we kind of lost our series A funding in 2008 through the whole economic displacement that happened. One of the things that I'm wondering is, and if anybody has any kind of answer as to why are we as a society concerned with like these taxonomy of perversity to quote William Buckley kind of things where, you know, the right to a proper money supply and a right to an equality of information, you know, markets are composed of capital and information and that's what creates capital flow to information. Why is that not a right in society to have the right to being informed as a public into those issues where the proper money supply and proper information can flow to the people which would then fix the inequality. There's inequality and there's injustice, I think. And the fact that there is an equal distribution between information and capital among people is one of those. Does anybody have, why are we as a society concerned with that and what can we do about it to fix it? I think access to information is something that takes a lot of work. And some people are willing to put in much more work to find out what's going on in a given corporation or given market than others. And I think that's a case where it's, the market, you get rewarded for your work. You can't just give it, there's no way you could convey all the information about all corporations that are publicly owned. I don't think. Well, at any rate, go to the Securities Exchange Commission and get the 10Ks and the annual reports and get all that data but it does take time, effort, and a learning curve. But that's. I mean, I think it's an important point that the, this goes back to your point about elections, right? I mean, inequality and spending on elections is a single most overrated instance of the importance of inequality. And inequality that's in the production and generation of information about government is the most underrated impact on inequality, right? That is, if you look at the, I think most political scientists agree, most of the really dramatic effects on inequality come out of lobbying, right? Which is actually, we spend way more money on lobbying than we spend on elections, right? And if you wanna see where money actually influences government outcomes, especially again, in redistributing upward, right? It's in the fact that existing benefit holders of various different kinds of rents are able to spend far more on the generation of information in those areas than they're much more diffuse opponents. You know, in a libertarian view, rights are things that protect us against the government and against government interference. You don't have a right beyond the basic rights granted by the Constitution. These are all individual rights against government interference. One does not have a right to any particular entitlement beyond those. Well, let's move on, let's ask a question. Thank you. Hi, Stephen Bogakas from Notre Dame. First, I just wanted to say thank you, it's been a great talk, I've learned a lot. My question is directed particularly Professor Tillis, but you all feel free to weigh in. I wanted to ask for clarification on when you talked about how, what might help combating economic, a lack of opportunity for the poor would be more independent agencies than having more protection or more freedom. And I was hoping you could expand on that more, and also you had mentioned on that note that separation of powers is potentially a problem. And so I wanted to ask, is that sort of a frustrated lament or do you think that we should constitutionally sort of erase the regulatory state or? That's a lot to throw out there. Just on the second one, I think there's no question, right? Again, that one of the natures of government is to accrete more activity, whether you like it or not. And there has to be some countervailing destructive force to go against that force to add new government activity, but again, it's the nature of separation of powers that it along with the collective action problem, the fact that people organize around things that government's already doing, not around opposition to it, that separation of powers has that weird perverse effect of making it hard to claw back things once they're already done. The other thing is I think it's really, the one thing I agree with you about is inequality is a really problematic phrase to pulling together two things that arguably are not mirror images of one another, right? The things that are actually causing a lack of social mobility at the bottom are not a mirror of the things that are producing exploding incomes at the top, right? I have a theory about why exploding incomes at the top are happening. I think it has lots of negative effects. I don't think it's a thing that's explaining why you have a sort of multi-generational underclass, right? And I think one beginning of having anything intelligent to say about these is just to think about those two things as two entirely separate questions that requiring an entirely separate analysis, right? I've got an analysis of top end inequality that's partially explained by trade and increasing returns to skill in a global economy. It's partially a result of exploding rents, right? I think at the bottom, you know, you've got a multitude of things, some of which are cultural, some of which I think are a result of the very poor quality of government services at the bottom and my wife works on school choice. So I agree on that as one of the areas. But again, the first thing that's thinking smart about this is to think of it as two problems, not one with a plus and minus on it. And I'm from Stanford. So I think we've heard a broadly kind of deregulatory de-interventionist framework for reducing poverty and inequality in this country. But as I was listening to a lot of your remarks, I was thinking back to say like the company towns of nine to 100 plus years ago and people were paid, not in real money, but they were paid in script, which was only redeemed by the company store. And they were part of this capitalist unregulated framework that really conspired to keep people down and they weren't able, there was a much less degree of social mobility. And I think it's a good thing that regulation eventually came in and broke up that kind of system with the possible exception of Dr. Brooke. I think we can all agree that there's perhaps some level of regulation that does serve a good and socially beneficial purpose. So where is that limit? Like what, where is the difference between breaking up the company store and having licenses for florists? Well actually, it's funny that you mentioned company towns because from an economic point of view, company towns are fascinating. There's an economist, Sean Everett Cantor, who's written a whole book on them. There are a couple books on company towns. Some company towns are the economist's perfect illustration of internalizing all the goods. That is, a company would provide not only wages, but also other benefits, such as a healthy and great environment. We have a company town today in Germany, Wolfsburg. It's where Volkswagen is based. It's entirely, it's only Volkswagen. They have everything. They have fabulous schools. They have high environmental quality and I mean, great amenities. And high wages. Now, so the interesting thing from an economic point of view is some company towns seem to be pressured by competition to develop in that kind of way. And it is true historically, some company towns were not pressured by competition to develop that way. In particular in parts of Appalachia, coal company towns in the United States. But again, we can explain that from an economic point of view because they weren't exposed. They had kind of, basically, they weren't exposed to competition. They didn't have to compete for those workers. They didn't have to compete to offer those workers really good benefits in a really nice place to live. So, you know, I don't know if company towns, I guess what company towns illustrate is, to some extent, whether you think there's a need for regulation depends upon market forces because a lot of times market forces themselves do away with any need for regulatory intervention. Maybe this can be a new cause for the Federal Society to promote company towns throughout the country. Well, hey, if you talk to the people in Wolfsburg, Wolfsburg is a very, very nice place. Thank you. Hi, I'm Bijena Budurabi from the University of Chicago. I agree fully with the view expressed by several of you that so-called equality of outcome is a red herring in a sort of abstract philosophical sense ought to be a non-issue. That said, doesn't it seem like a certain taste for material equality or relative status consciousness is just one of the weaknesses of human nature that we sort of have to deal with, especially in a democracy? And is there a way I wonder that that impulse can be assuaged without unduly sacrificing individual liberty and economic efficiency? So, I don't think it is, surprisingly. And I think you can see this by the different attitudes of different cultures towards envy of success. Until very recently, when Americans were polled about whether they had any problems with people becoming rich, their attitude was generally, we don't care, because the assumption was, it was earned wealth. Whereas Europeans for a very long time have hated it. There's a whole idea in Scandinavia, I forget the name, there are these junta laws where you're never supposed to stick out, you're never supposed to buy an ice-cold, you're never supposed to show off in any way. Whereas those never existed in America, so I would suggest that these are for the most part, without it getting into the biology of it, maybe there's some genetic thing, but that essentially these are cultural phenomena. And to the extent that it's a human weakness, let's get over it. We have reason partially in order to be able to control and to overcome whatever human weaknesses we might have, so let's use the one faculty that we have that has brought us the prosperity that we have. I do believe there are quite a few places in the Bible where one is instructed to not be envious of one's neighbor. I mean, just kind of picking up on that. It has to do with moral education, it has to do with moral character, you know? So I was wondering if there might be a bit of a tension. Your name and where you're from? Name and school. Name and name and where you're from? Where am I from? I'm from the business school. My name's Trevor. Yes, so I was wondering towards the end of the conversation, there might have been a bit of a tension. Dr. Brook, I definitely understand your discomfort with giving people money with no strings attached. And Professor Johnson, I definitely understand the discomfort with giving, when you have so many bureaucrats that they're taking more money than you're actually dispersing, but it seems that like the bureaucrats do place some sort of purpose in terms of both preventing fraud from occurring and in terms of making sure the money's being spent the way you want it to be spent. And when you have programs where the goal is to move people out of them eventually, making sure that you're tracking that progress. So I guess sort of, I mean dismantling the programs, which yes, I'd be sympathetic to, but I'm not sure that that's always politically practical. I'm just wondering how you think you should actually resolve that tension between having no conditions and having the bureaucrat a infrastructure to make sure that conditions are met. Can I just defend bureaucrats again? Maybe just because I came from a family of bureaucrats. Sorry, we all have our admission to make here. That again, I'll use a small example of this. I'm in a property dispute with my neighbor and wanting to build an accessory building, of course, which is one of the things that's necessary if you want more density, we should deregulate the building of accessory buildings, anyways, but the people actually in my, in very, people referred to as the Socialist Republic at Tacoma Park, Maryland, right? All the people who are there who work for the government were more or less in favor of it, right? Now in general, it's the case that the people who push hardest against building anything are people who are defending the existing arrangement. They got some guy, he doesn't want anyone to build anything. He's a squeaky wheel, right? Usually the reason bureaucrats behave the way they do in cases like that is that there's an enormously influential set of people who are actually pushing them to do something like don't build in this particular neighborhood and there's hardly anything on the other side, right? So I would actually look often, often bureaucrats try as hard as they can to push back against that because lots of people who go into it have some sense of public service, have some sense of the larger purpose of which they're doing it, right? But they're working in an almost impossibly political problematic situation. So I would actually look often to the economy of influence on them rather than something distorted or malignant about bureaucrats themselves. And I think in many cases actually increasing the autonomy and some sense of training, you go back to the German example, right? A lot of those things have incredibly effective, sophisticated bureaucrats who are better able to push back against influence. Again, and that's independent of whatever level, whatever size of government you want. I think we're gonna have time for one more question. Hi, I'm Jared Mayer, I'm an undergraduate. I actually had Johns Hopkins University. I had a question for Professor Johnston. You mentioned that with Dodd-Frank access to credit markets was significantly limited, but, and the counter reply is often one that goes back to sort of, I guess, the epistemic limits of individuals, not the fact that they're dumb necessarily at all, but rather the fact that knowledge as a concept is fallible. It can go hardly wrong. So how would you, in your own judgment, kind of balance opening up access to credit markets while also keeping in mind the kind of, the epistemic, I'm sorry, the fallibility of our epistemic limits as humans? Well, people make mistakes and you don't need behavioral economics to know that. And although the behavioral economists run a lot of experiments to show what kind of mistakes they make, the way it's a complex answer, but I would protect people against fraud, which the common law does. I would not protect people against making mistakes, which Dodd-Frank tries to do. And it's a complex story, but I do not think that the kinds of mortgages that Dodd-Frank doesn't like and the kinds of incentives for people to write mortgages that Dodd-Frank doesn't like. I don't think those things had very much to do at all with the housing boom. The housing boom was created by an unprecedented period of time during which the Federal Reserve kept short-term interest rates unbelievably low, which led people rationally to choose variable rate mortgages over instead of fixed rate mortgages. It was led by the Chairman of the Federal Reserve publicly proclaiming that house prices would always rise and interest rates would always stay low, and you can find that if you do a little work on Google. Mr. Greenspan making those kind of proclamations. It was fueled by Fannie and Freddie deciding that to meet various goals in terms of what they call affordable housing, they needed to start to write more mortgages to people who were in the subprime or all A categories. And then it just took on the characteristics of a speculative bubble where people were gambling mostly on rising house prices. The recent work has shown that this wasn't a problem as some economists thought of people in subprime zip codes taking on lots and lots of new mortgage debt that they couldn't handle. Most of the people who took on the more complex mortgage products were people who lived in neighborhoods or in zip codes where house prices were increasing really rapidly. They tended to be above average in income and they wanted to get as big a house as they could possibly afford and credit market conditions were such that they could do that through one of these mortgage products. So Dodd-Frank has premised on a completely incorrect story about what was going on and you pass a law based on a completely incorrect story and right in front of me I've got the number that as of the summer of 2014 there were 12.5 million potential borrowers disproportionately black and Hispanic who could have qualified for a mortgage prior to 2009 but since that time have been deemed unqualified. So the people who you're trying to help or ostensibly the people who passed Dodd-Frank were trying to help people like that and they've hurt them. I mean one thing I'll say just in general is it's a good idea for government not to construct markets that force people to make decisions that they're not well qualified to make. That is again just to go back to the case of my memoir which is sort of retirement incomes. If you look at the whole structure of IRAs and 401ks we've constructed a market in which individuals have to make very complicated asset allocation decisions that they're not really qualified to do between choices that are generally chosen not by them but by their employer often in weird relationships with financial producers. So there is, in general producing in a whole industry basically no value whatsoever because if you look at the basic logic of markets almost everybody except for a very thin layer of sophisticated investors should just be an index funds for and this again is just a mathematical fact. The government has created a market that actually creates enormous incentives toward active management for people who have both no reason to do active management and no ability to do it to deal with it, right? So that's the case I think where there really are genuine psychological or epistemic limits on people's ability to make choices and we've sort of loaded up their ability they're requiring them to make choices in an area where they shouldn't have to make those choices at all. Just a quick comment, I think it's very dangerous if we accept that people are fallible and that they're capable of making epistemic mistakes. If I make a mistake by buying a house that I can't afford, I suffer, my family suffers maybe a few other people suffer. When the bureaucrat with the gun with the force and power of government behind him makes that kind of mistake because they're fallible too after all, right? Everybody suffers. So yeah, I completely agree about the 401ks we've created a system which completely distorts incentives but the problem is when the government is trying to manipulate our incentive structure it's almost always gonna get it wrong. If we worry about people buying the wrong kind of mutual funds, educate them. But stay out of the nudging business. Stay out of the business of trying to nudge people into what you believe is best for them because you, A, I think it's immoral to try to manipulate people in that way but practically you're not them. You can't expect, I mean, 12 and a half million people in nine mortgages maybe nine million of them deserve not to get the mortgage but maybe three and a half million have the capacity and who are you to decide for them whether they should get the mortgage or not? Are you to decide for them whether they should speculate on mutual fund managers or buy an index fund? It's none of your business. Let people make the choices suffer the consequences of those choices. All right, let's thank our panel for a terrific job. Thank you.