 What I want to do is explain to you some of the differences between the Austrian view of competition and monopoly and antitrust regulation and the so-called mainstream view that most of you would have been exposed to if you studied microeconomics in school at some point. And now the Austrian definition of competition is pretty straightforward and simple. It's competition is a dynamic rivalrous process of entrepreneurial discovery. So it's dynamic, meaning it's ongoing, never-ending. Competition is never-ending. Okay, it's rivalrous. It's what the person on the street thinks of as rivalry. What do businesses do? They advertise, they cut their prices, they differentiate their products, they merge with other businesses to try to create some kind of synergy to produce better products and or cheaper products. That's rivalry and entrepreneurship. And they're trying to be alert to profit opportunities and how are profit opportunities created? Well, if you find a way to please the consumer better than others are doing so at the moment, then there's money in it. As far as that goes, when I lived in Chattanooga many years ago, I was befriended by an 85-year-old retired businessman. He was a very wealthy guy and he would wanna have lunch with me about once a month and bounce his economic ideas off me. And I'll never forget, he used to tell me all his economic philosophies. He was a follower of the Austrian school too. And he used to say that, as sure as grass will grow out of a crack in your driveway, if there's a dollar to be made somewhere by pleasing the customer somebody's gonna make that dollar somewhere. And that's pretty much true. Someone will eventually figure it out. So that's the Austrian definition. But the mainstream definition, I'm gonna go down the definitions of mainstream economics that have been in there for many, many years of the so-called competitive model. And the first one is many firms. If you pick up a micro book, it says, well, in competition there are many firms. I don't know, but what the heck does many mean? Well, the government in the United States and elsewhere has tried to make this look scientific by coming up with what they call concentration ratios. Prior to that, prior to this, this came about around the 1930s, this idea that many firms was a measuring stick of competitiveness. But prior to that, that was not the view of anybody, hardly anybody in economics profession, let alone the Austrians. And as proof of that, one of my research articles that was published way back in 1988 in the journal Economic Inquiry with the co-author, Jack High, we surveyed the whole economics profession at the time the first federal antitrust law was passed. This was 1890, the year 1890, the Sherman Antitrust Act. And the economics profession was very small in America at the time. There was really just several dozen people who had full-time jobs as an economist. So we were able to read everything that was written on the subject by anyone who called themselves a professional economist in the late 1880s on this. And we found there was almost unanimous opposition to the whole idea of antitrust regulation as a matter of principle, because they thought it was inherently incompatible with competition, especially this many firms assumption that would come up later. Because what was happening was there was a corporate merger wave. But all of these economists looked at this and what did they see? They saw mergers occurring and then after the merger occurred, prices were going down and down and down and down. And the corporations were expanding production and inventing all kinds of new products. This was the industrial revolution in America. And so they saw this as nothing but good. So at the time, the economics profession all looked at competition like the Austrians do and like the Austrians always have is a dynamic rivalrous process. And it had nothing to do with many firms, fewer firms. Fewer firms is a good thing if the firms that leave the market are not performing well if they're not serving the consumers very well. Write this down, this will be on the exam at the end of the week, right here. And this too, this is the higher mathematics in the Austrian school. I don't know, right there. Okay. But the real problem with the many firms assumption is that with large scale production, what usually happens is that the long run average cost curve, here's a quantity of output of something being produced and here's cost over here. The economic students have all seen a graph like this. And by the way, if you ever watched this, television shows Shark Tank. How many people have watched this Shark Tank? I mean, my students, most of them watch this. If this is a show where these millionaires and billionaires sit up there and some entrepreneurs come and bounce an idea off them and ask them for half a million dollars or something to fund their venture capitalists. But the one question they always ask is how can I scale this business? So someone will have a new product, some kind of like the most successful so far is that funny looking sponge they sell at Best Buy or in place, what was it called? The Scrub Daddy, yeah. So how do I scale this? You'll have Mark Cuban was one of them, the billionaire owner of the Dallas Mavericks. What they're talking about is, okay, you have these Scrub Daddies and right now you're selling 10,000 of them. I'll give you a million dollars but we have to figure out how to sell 10 million of these things. Why do we want to do that? Well, when you do that, the cost of manufacturing per Scrub Daddy might become two cents, whereas now it's two dollars. And so how do I scale the economies of scale is the declining cost per unit as you increase the scale of production. And so that's what they're all about. And so when they turn these people down, that's what they're saying. They're saying, I can't see how I can do this. And so this many firms assumption has done a tremendous amount of damage over the years to the American economy and other economies around the world that have taken this seriously as an important measuring rod of competition. And like I said, the government in the US has used and enforcing this through the Federal Trade Commission or the Antitrust Division of the Justice Department, they use what are called concentration ratios. Like an example would be a four firm concentration ratio would be the four largest firms in the percentage sales of the four largest firms in an industry, okay? So if it's the concentration ratio of 60% would mean the four largest firms have 60% on the market. And that's an arbitrary number. It says nothing about how those four firms got that 60% market share. It just says they have a 60% market share. But for many decades in the US, the government would prosecute companies just for having a big market share along with maybe two or three other companies. And one of the, and for example, General Motors for decades, General Motors Management instructed all their lower managers that to make sure that we never ever get more than about a 40% market share because if we do that then there might be an antitrust lawsuit against us. You know, there will be accused of monopolizing the car industry for that. And so they actually instructed their people don't make these cars too nice or too cheap or else the government will be after us. And so right there you can see how this sort of thing is bad for the economy in general. But not only that, you know, when the government does and the government has done hundreds of lawsuits against companies for being too big and too successful and the main cost of the economy is they push you back up in this direction on the cost curve. That is when if the government comes in and breaks up an industry and causes it to have more, more many firms, you know, maybe there are four big firms that are dominating at a point in time, then the government breaks them up into 14 different firms then each individual firm is no longer this big is no longer capable of producing 10 million scrub daddies. They're all going to be much smaller. You're going to go back to this area where in my example, I said, maybe this is two cents is the cost per unit. Whereas here's $2. So the end result would be higher cost and higher prices to the consumer of so-called breaking up the monopoly based on this idea that many firms is something to be concerned about. And so that's assumption number one. So this all came about in around the 1930s and 1940s when the economics profession started to accept this new definition of competition. They abandoned the Austrian definition of competition and adopted the so-called perfect competition model. And this was the first assumption of it, as you all know. And so that was one bag thing that sort of this impulse against bigness per se. But there are a lot of big companies of course that go out of business, you know, bigness per se is doesn't mean you're making a lot of profit. The second assumption is homogeneous products. You know, this model, this theory of perfect competition, well, we have many firms producing pretty much the same thing. That's a competitive market. That's a homogeneous product. Now, the purpose of that supposedly, the purpose of that assumption was to focus on price competition because of course companies compete with quality and they differentiate their products. But the theory goes, the story goes that the model focuses on just price competition. Okay. And so, but this assumption almost immediately led to a revolution in economics known as the monopolistic competition revolution. And Joan Robinson was one of the names associated with this, pretty shakonomous and Edward Chamberlain, two British economists. They wrote the books in the 1930s on monopolistic competition, which is sort of a, it's an oxymoron, kind of like jumbo shrimp, military intelligence, you know, if you hate country music, country music, if you hate rap music, rap music, you know, contradiction in terms of monopolistic competition. And, but the, of course the idea there was that, well, yes, even if we don't, if we do have many firms competing, you know, hundreds of companies competing in a market, that looks competitive, they said. But if each of these firms differentiates their product, either physically or through advertising, through advertising, you can differentiate a product in the eyes of the consumer. They can think it's different because of their image of the product through advertising, then actually each product can be so, look that is so unique that everything's a monopoly. You know, no one produces exactly that product. So you could have 100 fast food restaurants in Auburn, Alabama, for example. And on the outside, that would look kind of competitive. But, you know, there's only one Wendy's burger. And so, you know, thank God, right? There's only one Wendy's burger. There's only one Chick-fil-A fried something sale. I don't know what kind of meat is in there. They say it's chicken, but I'm kind of dubious about that. You know, and so that was basically their argument that monopolies everywhere, and the status in the economics profession were just euphoric about this. I remember reading about this at the time and there. At last, we have a rationale for the pervasive regulation of everything that they said back in the 1940s and 50s because everything's a monopoly. The Austrian view, of course, is that product differentiation is an essential feature of competition. It's what businesses do to cater to the customer because the customer's preferences are very diverse. They're changing. And so, of course, a real competitive market would be characterized by lots of product differentiation. And here's an example of this. This is a page from one of the Dallas Federal Reserve Bank's annual reports, 1998, on something called mass customization and what all these numbers are that you can't read. I don't think the people in the front row can even read these numbers. I'll read off some of them. It was an article written by some pretty good economists. Stephen Cox is one of them. He's a pretty good free market economist. He worked at the Dallas Fed. And it was about the integration of manufacturing and computers. Whereas in the old days, in the car industry, for example, it was only economical to mass produce a couple of different types of cars. And if you mass produced, you had economies of scale. And therefore, you could have a low cost. Henry Ford famously said, he became famous for being able to produce cars so cheaply that anybody who had a job could afford a car. But his famous slogan was, you can have any color of Model T you want as long as it's black. That's one of his. So it was very homogeneous, in other words. But mass customization with the integration of computer technology and manufacturing, you want to buy a car today. You go online, you pick out the model, you pick out the type of model, even the models per se, like Honda Accord. You can get different styles of Honda Accord. And then you pick out all the stuff you want in it and then you can finance it online. So you can spend about a half hour online and get a tailor-made car that'll be delivered to you in a week to the local dealer. Mass customization. And so there's been an explosion of product differentiation as a result of competition. And this was back in 1998. Vehicle models, they compare early 1970s to the late 1990s. Vehicle models, the 140 in the early 70s, 260 by the late 90s. Websites, zero in 1970s. And even by late 90s there were 4.7 million. Movie releases, 267 versus 458. Even brands of beer, there was like 50 versus 5,000. And is it really bad that we have lots of beer? In other words, lots of different types of beer to choose from. At my university a couple years ago, the law faculty, they always bring some left-winger in to whine in badmouth about capitalism in their lecture series. And they brought someone in to complain that there are too many menu items at restaurants. That she even counted up how many hours Americans waste reading all the menus. And thought there should be a federal law limiting how big the menus are at restaurants. But this, you don't have silly dingbats like these college professors, that's one thing. But the government has long taken this seriously. And not so much today because a lot of the research has been done by the Chicago school, the Austrians and others in this area. But those of us who study these things are familiar with what is known in the literature as the Cereals Case. And this is a federal antitrust case that was brought against General Mills, General Foods, and Kellogg in the late 1970s. And at the time, General Mills, General Foods, and Kellogg's had about a 70% market share in the dry cereal business, okay? And so the government, the Federal Trade Commission sued them and the lawsuit went on for 10 years. Sued them. They invented a novel new theory of monopoly. They hired an economist from Harvard named Frederick Scherer, who at the time was like the big shot in this area of economics. I even remember using his textbook when I was a student in an industrial organization. And Frederick Scherer invented the idea of a shared monopoly. He said, these three companies have 70% market share and they're acting not as a monopoly, which is a one firm, but as a shared monopoly. And their tactic to get this is brand proliferation, not brand, but it was also, as a matter of fact, brand proliferation, you know, brand cereal proliferation, but brand proliferation. So he invented this new theory of brand proliferation. And anyway, they were wound up, they spent 10 years in court and then it was finally thrown out. And I dug up just this morning a 1982 New York Times article which you probably also will not be able to read. Oh, we'll see. Oh yeah, you can barely make out the headline. This is the best version of it that I could print out. The headline says, US drops 10 year antitrust suit against three largest cereal makers. And it says here in the New York Times, this is New York Times in 1982. The government had accused the three companies whose products are consumed by tens of millions of Americans every day of having operated a shared monopoly that limited competition. So it was thrown out, but not until they had been tied up in court for 10 years and they diverted all their managerial talent to complying with governmental edicts and with truckloads of documents that provided to the government and they had to hire, you know, spend many, many millions of dollars on lawyers and so forth. But here's what the new head of the Federal Trade Commission in the Reagan administration said. He said, from an economic perspective, I was troubled by a case which sought as a remedy, breaking up a dominant firms in an industry simply because they had become dominant. Such an approach would be deleterious to effective competition. So that's where this had led to, to a large extent, that if companies become dominant through brand proliferation, product differentiation, then they're sued, they're sued. But of course, the way, the reason they became dominant is customers liked their cereal. And at the time, I remember reading what the judge said, the federal, the administrative law judge on this. And he made the comment that, well, I eat bacon and eggs in the morning. And that was a very wise comment. But basically what he was saying is, well, even if they do have 70% market share and even if this did allow them to raise the price of cereal, what's stopping anybody from having bacon and eggs or bagels or muffins or oatmeal or something else, because the price of cereal has gone up? You know, a lot of substitutes. So there was a market definition problem here. And the judge realized that, okay? And so this decades-long attack on product differentiation based on the competitive model is an example of the Nirvana fallacy. And I'm gonna explain this with a type of graph that all the economic students in the room should be familiar with, the monopoly diagram from the textbooks. Now this is a demand curve and marginal revenue. And this is marginal cost. And the profit-maximizing business firms equate marginal and revenue and marginal cost to decide how much to produce to make the most money, which is right here, QM. And this is the monopoly price, okay? Now what the, this idea of product differentiation being monopolistic, what it basically is saying is that if it's monopolistic, if you invent a new product or through advertising you create in the minds of customers that your product is so unique that it's a monopoly, then you're creating a monopoly. You're creating monopoly profits. And here's the monopoly profits in the diagram. That's the, marginal cost is the same as average cost when it's constant like that. So here's average cost. This is the cost of producing each unit. PM is the price you get for selling it. And the difference is the profit margin. And so you have this permanent profit margin there created by the fact that you are now a monopoly and there's no entry coming, there's no competition coming in to push this price back down closer to your cost, okay? And so they're saying this is what product differentiation does. And what they're saying is the ideal situation is if everyone had this idea at the same time, say a hundred people had the same idea at the same time, well then this would be the quantity produced. QC would be the quantity produced. That would be the competitive level of output because the marginal cost here would be the supply curve if this was competition and that would be the amount. And so that has led over the years to governmental proposals, to force companies to share their technology or to share their secrets with their competitors. When Microsoft was sued by the government, what the government proposed doing, they lost, the government did not win the lawsuit, but what they wanted and what their competitors wanted, what Microsoft's competitors wanted was for Microsoft to share the code for Windows on the world, with the world is to put it out there for everybody. And they didn't do that, but that's what they wanted to do because that sort of thing had been done in the past under the guise of monopoly being created by a too successful company through product differentiation, forcing them to give away the information that would allow everybody to produce this amount, QC over here. Now the reason why this is called, I call this an example of the nirvana fallacy is that this level of output, this ideal level of output here is sort of a utopian fantasy. Everyone did not have the same idea at the same time. That's what entrepreneurial discovery is all about, is that they did not have the same idea at the same time. And so what the economists are doing who make this argument and the lawyers who make this argument is saying there's a market failure here because the actual market produces this much, QM, but the ideal utopian level of outcome is QC, where my finger is, is right there. So they're comparing the real world to some utopian fantasy, but the real comparison is comparing what exists now, the new product being created and producing this quantity, QM, right here to zero, to what we had nothing before. We didn't have anything, but now we have something. And so there's an output expansion here. So that's the nirvana fallacy, creating some sort of utopian ideal and saying the real world does not match up to that. Therefore we should condemn the real world. And Frederick Scherer himself, the economist I mentioned, he even recommended one of his articles, the creation of new standing congressional committees to determine which types of corporate research and development expenditures were appropriate and which were not. The appropriate ones would be conducive to competition in his view or the view of whatever experts would advise this committee and the inappropriate ones would be banned by the government. And of course that would be a heyday for the rent seekers in Washington DC because every corporation would get their lobbyists to go there to lobby to have their competitors R&D banned and theirs allowed. That's exactly what would happen. And but that was what they were up to for a while. So that's the homogeneous products example. The third assumption of the mainstream model, homogeneous prices, and this is an equilibrium model. So in the equilibrium you've all been taught everyone charges the same price. But in real markets of course there are a lot of reasons why you wouldn't have the same prices charged all the time. In some markets demand is more intense than others. So you have higher prices, costs can be different. When companies want to enter a new market they sometimes have lost leaders. They lose money on purpose for a while just to get people in the door. When I lived in downtown Baltimore many years ago and I first moved to Baltimore, I lived, I live right in the city. And every night when I get home there'd be a big stack of junk mail through my mail slot in my door. And I eventually saw how where this came from. I'm leaving one day I noticed there was a van pulled up and some guy with a large sack jumps out filled with flyers and just went door to door. And so I would get home and there would be like a thing where I could have a large pizza, a 32 ounce Coke and a sub sandwich for 6.95 or something like that. They couldn't possibly make money on that but it was like the latest pizza joint in Baltimore to open up, had a big sale going on. They wanted people to come in and try out the product. And then in a month or so, a couple of weeks then they'll charge what everybody else charges. So that's very common to have that, to have different prices all the time. And so, but because the economics profession not all of it, but much of it and the regulators the Federal Trade Commission and the antitrust division of the Justice Department has used this theory to enforce the antitrust laws that we have long had a situation in the United States where with the antitrust laws, if you cut your prices, you may be accused of predatory pricing which is against the law. I'm gonna explain that in a minute. If you raise your price, you may be accused of monopolizing your market. That's what monopolies do. If you keep your price the same, you may be accused of colluding with your competitors to set the price. So no matter what happens to price, the antitrust laws are written in such a way as the government has latitude to sue everybody to go after everybody. And of course, a lot of this a book that I've cited many times in my writings is a book by Fred McChesney called Money for Nothing. There's a real nerdy sounding subtitle to it also. But the theme of this book, McChesney's book is that there's a type of regulation out there that doesn't seem to come from special interest groups. He's studied, he's been studying and writing about regulation. Last time I saw Fred, he was a law professor at Northwestern. I've been out of touch with him for many years though. So he may be retired by now, for all I know. But there's a category of government regulation that seems to come right from Congress. I mean, there's no identifiable special interest group that wanted the regulation. And so he wrote a whole book about this published by Harvard University Press. And a lot of antitrust regulation falls into this category. The Congress will pass a law or they'll get the Federal Trade Commission or the Justice Department to do something that would threaten to do great harm to a company or an industry. Okay, some sort of predatory pricing lawsuit or something like that. Then the company or the industry will send millions of dollars in campaign contributions to Washington DC. And then as a result, the politicians will say, what was that all about? What were we thinking? Let's get rid of this stupid law or this stupid. So it's basically a shakedown. But this is a distinguished Northwestern University law professor publishing a book by Harvard University Press. And so that adds some weight to this argument that a lot of the times that's what's going on with antitrust regulation. Now on predatory pricing, I wrote an article about this a long time ago. If you Google my name and predatory pricing, you'll find it is published like in 92 or something like that. It was called the myth of predatory pricing. I call it the unicorn of economic theory. And the unicorn is something, some creature that people sometimes talk about, but no one is actually spotted one. And there's a good reason why no one is actually spotted one. And in terms of a scholarly article, one of the most widely cited scholarly article on this was by an economist named John McGee. It was in the Journal of Law and Economics way back in the 50s on the standard oil of New Jersey case. So if you wanna find the origins of sort of the free market examination of this idea of predatory pricing, that's where you should look. And of course the sort of part of the popular folklore in the United States is that one of the ways in which John D. Rockefeller made a lot of money and through the standard oil company was supposedly predatory pricing. That is setting a price below your cost on purpose to drive everybody out of the market. Then once they're gone from the market, you can charge the skies the limit, okay? And for many years, this was associated with Rockefeller. And so John McGee actually read through the entire standard oil of New Jersey, the standard oil case and came up to the conclusion that his conclusion was basically that it would have been extremely foolish for Rockefeller to have tried this. And no matter what people said about Rockefeller, he was no fool. And let me put it this way. I used to, I talked to one of my MBA classes about this and in these classes, I have a very big mix of people. I've had a professor of neurosurgery and Johns Hopkins in my class once. My university is a half mile away from Johns Hopkins. And I always have a lot of engineers from Black and Decker and Baltimore and people like that, some pretty smart people. And they're all upper management. They all have big jobs already. And so I told the Black and Decker, I had like one year, I had like 10 of these guys in my class. What if you went back to work on Monday and your boss at Black and Decker asked you, what am I getting for my money? What did you learn in the MBA class on Saturday? These were Saturday classes. And you tell them, well, you know, we have this drill that it costs us $150 to manufacture but we learned about predatory pricing. We're gonna sell the drill for 50 bucks and we're gonna just take over the market as a result. And it might take us three years, four years, five years and we might lose billions of dollars. But then after that, we'll charge $500 for this drill, you know, where the sky's the limit for the drill. And these guys just, they just laughed and said, I'd probably be fired on the spot. If I say something that stupid, you know, they pay me this big salary to be an engineer at Black and Decker. And I say something that dumb. So if you look at it that way, it is an extraordinarily dumb idea, isn't it? Of all the ways to make the money in business. You know, what's the opportunity cost of that? What are the alternatives of losing money on purpose for year after year after year? And then of course, once you've cleared the market, even if this did work, who's to stop somebody from re-entering the market? Once you charge the sky high price, what's the start, what's to stop the competition from coming back in? The answer is nothing. And so if you consider that, and of course a lot of the competition that you do have, if they were smart, they might just get out of that business temporarily, let the fool lose his money. And then when he's done losing his money, we'll get back into the market and start selling this product again. And so there never has been an example, a clear example of a monopoly created by predatory pricing. But this is really a big part of your folklore that is out there, okay? And that comes from, really it comes from this assumption that homogeneous prices is a hallmark of a competitive market, but it really is not, okay? And the next assumption is perfect information, perfect information in the market. And that has also done a lot of damage to the economy because it's taken too seriously by the regulators. For example, it has fueled all the criticisms of advertising for many, many years and assisted in the case for regulating advertising. But ask yourself this, if you were to, if you would have a strict ban on advertising or something, say you need new tires for your car, it's not the kind of thing you buy very often, new tires for your car. And so the first thing you'd wanna do is shop around, find out what the quality of the tires are out there, what they cost, what if we had a strict ban that you couldn't go on the internet and do this, you couldn't open up a newspaper and yet it was illegal for anybody to advertise the price of car tires. So say we had a ban on car tires. What would you do to buy car tires? How would you go about it? Do you think? I mean, anybody wanna volunteer? Is everybody awake in the class? Yeah, what would you do? Over the yellow pages? No, that would be illegal too. That would be illegal too under my assumptions and total ban by the government of that. Asking mechanic? Yeah, you'd have to go, you'd have to go around, you'd have to go to the Sears Auto Center or whoever sells tires when you find out for yourself. So in other words, the transactions cost would be much higher. You'd have to get out there and most people would maybe look at one or two places and then, okay, I'm gonna buy. And of course the merchants know this and as a result, they would jack up their prices because they know it's much more difficult for you to shop around as far as that goes. And so whenever the government regulators have taken this assumption too seriously of perfect information, meaning well, advertising, why would you need advertising if the ideal is perfect information? It's suspect, in other words. But what really causes monopoly power to be created is bans or regulation of advertising. Advertising is a competitive device. But if you ban or prohibit advertising, that impedes competition. Many years ago, for example, there was a good example of what's called the bootleggers and baptists phenomenon. Has anyone here ever heard of this theory, the one or two of you? It's associated with the economist Bruce Yandel, the spelled Y-A-N-D-L-E. And there's kind of a nice little YouTube of Bruce Yandel himself who's a retired economics professor from Clemson explaining the Baptist and bootleggers theory. And his theory of Baptist and bootleggers was that during prohibition, alcohol prohibition, the Baptists were for it for religious reasons. And the bootleggers were for it because if we had legal alcohol, they'd be out of business. So you had one group of people that they're in it for the money, nothing but the money. And then you had the Baptists, the religious people who were there for it. Okay, a lot of government regulation is like this. And some years ago, Holiday Inn, the hotel chain, teamed up with some environmental groups like the Sierra Club. At the time, the Sierra Club and some of the environmentalist organizations wanted to ban billboard advertising in parts of the interstate highways. They said it sort of ugly-fied the, if that's a word, I just made up that word, ugly-fied the highways, you know? And so it's the opposite of beautify, ugly-fie. And so, yeah, so they're the Baptists. We went to beautify the scenery, get rid of these ugly billboards, and Holiday Inn gave them money. Yeah, good idea. Let's ban these big billboards. And of course, a lot of these big billboards, at the time, said things like Motel 6, $19. So if you're trucking down the interstate and you've been driving for 10 hours, well, you know, Holiday Inn has a brand name. You know you're gonna get a pretty decent room, not too many roaches, you know? The, quote, free donuts are not too stale, usually. You know what you're gonna get, and it's $59, let me not do it. But if you had no billboard advertising at all, you would have no idea that you could get a room with a clean bed and a clean shower for 20 bucks at Motel 6. You know, how would you know? So you're gonna pull into the Holiday Inn. And so those were the bootleggers. They were the bootleggers. And that's often what you see when you have calls for bans or restrictions on advertising. That's where they often come from. And that's a good example, I think, of why it's restrictions on advertising that cause higher prices, monopoly power. Now, one other thing about, you know, one of the hallmarks of the economics of competition and monopoly from a mainstream perspective is that what causes the main problem they say, you know, in this monopoly diagram is output restrictions. Monopolies are said to restrict output from QC to QM in the diagram in the traditional microeconomics monopoly diagram. Now, Murray Rothbard was very good in man economy and states on this whole idea of output restriction being something fearful. Because for one thing, you know, if a business or an industry did reduce output or production below what they could be producing, well, those resources that are not being used by them are not gonna disappear from planet Earth. They'll be used somewhere else in the economy. And so there will be an expansion of production somewhere else. So on the face of it, you cannot say that an output restriction in one industry is necessarily a bad thing from the perspective of consumers because it leads to an output expansion elsewhere. Those resources will be bit away by other entrepreneurs and go somewhere else. And then there's another aspect of this, this sort of obsession with output restriction. And it is an obsession. For example, I attended an economics conference once where there was one of the speakers was an economist from the Federal Trade Commission and he was bragging about all the great stuff they were doing. And one of his examples was the car dealers in Detroit were shutting down at five PM in the winter. And the Federal Trade Commission, he said suspected they were colluding, they were colluding to restrict output because after all, they should be staying open until nine o'clock and not five o'clock. And so they were considering suing the car dealers in Detroit for colluding and restraining output. And this was, I forget what year this was, but I asked him if that meant that economic efficiency requires forced labor. And he didn't know how to answer it because it wouldn't be forced labor to tell these people you must stay at work until nine o'clock at night in the winter when there were zero customers in downtown Detroit buying a car. Yeah, it would be forced, some kind of a forced labor as far as that goes. But who here is a fan of ultimate fighting? And he's gonna have some of the guys who watch these people beating each other's heads in. You look the type, yeah, you look the type there. I would have guessed you were gonna raise your hand in ultimate fighting. How often do these guys fight per year, would you say? Maybe two to three times. Two to three times, yeah. How much could the human body take? Anytime I watch it, just two guys in bikinis beating each other on the inside of a cage, which is why I don't watch it. But your bikini bottoms anyway, and maybe on the other channel, they're in full bikinis, I don't know. But they're obviously restricting output, aren't they? Why don't they fight every night like that? Like Brad Pitt did in that movie Fight Club. Every night, bare knuckles. They had a big fight somewhere, in some basement somewhere. So when you think of it, take this to the extreme, everybody restricts output. I only teach two classes a semester at Loyola University. I could probably teach 10 if they paid me enough to do that, but I'm restricting output. You're all restricting output. You sleep part of the day, don't you? How many of you work all day and all night? Everybody restricts output. So it gets to be ridiculous to think that this is the hallmark of competitiveness, is output restrictions, this is as far as that's concerned. And so government is really the true source of monopoly has always been government. In fact, if you look at the history of the word monopoly, traditionally in Europe, it always meant a government grant of monopoly of some kind, franchise monopolies. The source of monopoly, I don't wanna give away too much of my, steal my own thunder for one of my later speeches on market failure, but the so-called natural monopoly, the public utilities that were set up as monopolies and electric power, a telephone, and so forth. There was nothing natural about that. They were all created monopolies by the government. And I'm gonna talk in a couple of days of how there was vigorous competition in all of these industries that was ended by government regulation, franchise monopolies. The airline industry, there were fewer airlines operating in the United States in the 1970s than there were in the 1920s. And that was because of the Civil Aeronautics Board, which was operated essentially by the airline industry to restrict output. So they created the government ran a cartel because cartels are notoriously unstable. You know, businesses that would conspire to try to monopolize an industry always face the cheating problem. You know, once one member cheats on the agreement, everyone else has to cheat also while the cheating is good. Or else there's no gonna begin to no profit left in cheating on the agreement. But the cartel agreement can be very long lasting if you get the government to threaten the throw people in jail if they cheat on your private agreement. And that's what happens. That's how we got natural monopoly regulation. That's how we got regulation of the airlines. The government regulated the routes of the airlines, how many companies could be. They even regulated the size of sandwiches that the airlines could offer to people because they were prohibited from competing with price. The government set the price through the Civil Aeronautics Board of all airfares. And then, so the airlines competed by offering free food and booze. And the government responded by limiting how much booze and how much food you could give a customer, the size of sandwiches. And if ever there was a, there was a one of the really dumb shows on TV a couple of years ago. I don't think I ever watched it, but it was called Pan Am. Has anyone ever stooped to watching this show? I only saw ads for it. But it was about the ads that I saw were about Pan American flight attendants who were called stewardesses at the time. And those of us who've been studying airline regulation for years know all about this. That back in the 50s and 60s, most people who could afford to travel around were people who were sort of corporate executives because it was so expensive to fly back in those days before deregulation. And they were mostly men. This was before women really made a big inroad into the corporate world in the 1950s. And so one of the ways in which they competed was to have flight attendants dress up sort of like playboy bunnies and serve drinks to all these corporate customers because it was illegal to compete by price. But all that disappeared with deregulation. And it was such an obvious monopoly scam that in Congress, the leaders of the deregulation movement, the leader was Ted Kennedy and Ralph Nader was one of the champions of deregulating the airlines. And it would happen under Jimmy Carter, the Democrat Jimmy Carter. And because it was such an obvious blatant example. So that's the airline industry, the civil and aeronautics board. The trucking industry was monopolized through something called the Interstate Commerce Commission, which regulated routes and prices. It was illegal to compete, the trucking companies to compete by prices. The cab companies, if you were to two years ago, Google the price of a medallion in New York City, it was just over a million dollars to get a license to be a cab driver. And so you have a lot of investors, wealthy people who buy these medallions. I think there's one guy in New York who's like the king of the medallions who owns several hundred of these or some large amount of these. And there was a big article in the New York Times a couple of months ago and it had everything but big teardrops coming out of his eyes because the value of his medallions is going way down and the banks are calling in the loans and he doesn't have the cash for the loans, but he's still going on vacation with 30 friends in the tropics someplace. So that's what the article is about. But the Uber cars have destroyed that. There are now more Uber cars in New York City than there are cabs, even though it always seemed to me like there are more cabs than people. And anytime I'm in Manhattan, it looks like that to me. But the New York Times says there are now more Uber drivers than there are cabs. And that has, and of course, in some sort of the cab industry is doing everything they can to protect its monopoly. Where I live in, I live just north of Broward County, Florida, the Uber cabs have quit. They announced they're not gonna, because the government has imposed too many restrictions on them to make it unprofitable to be in business down there. So they're succeeding in some places. But that's how we got the taxi cab monopolies is government regulation. The trucking industry, trucks were prohibited. If you're a truck driver and you drove a truck from Auburn, Alabama to Seattle, Washington, filled with furniture, you were prohibited from filling up with another load of something coming back to Auburn. You had to drive your empty truck all the way back across the country. And of course, what is that? That's called an output restriction, isn't it? So they did understand economics. They did understand that if you reduce supply, the price goes up. But they did it on purpose. They didn't say we're gonna protect you, consumer, from output restrictions that cause prices to go up. We're gonna cause them, why? Because the trucking industry gives a lot of money to the politicians. That's why we had a law like that, protectionism. Government has always been the key source of monopoly and not the free market. So maybe I'll quit there in my illustrations of how I think the Austrian school differs from the mainstream. And we have, I think one or two questions if anybody has a question, you know. John DeRocco said that something along the lines of the competition is sent. And if he didn't, undercut prices, didn't he manipulate the market in other ways? Did Rockefeller manipulate the market in other ways? Well, I'm not the world's biggest expert on everything John DeRocco ever did. But one thing I know that he did do is that his main product for many years was refined kerosene. And the price went down and down and down for decades for like 50 years. And he invented myriad new products. He invented Vaseline and all sorts of new products. So if you just look at the bottom line, you know, his critics tend to focus on stories like this of manipulating this and manipulating that. But from an economic perspective, the proof is what was the effect of all this on the customer? And the effect was a vast expansion in production and a reduction in the price of these products for 15, 60 years. That was the end result. So, and of course the people who lost out and were not as good at competing as John DeRocco ever won, that's the source of all these stories about manipulating. I even heard rent one story where he supposedly enjoyed kicking children, you know, in a boot, you know, you're a, yeah. So there's a lot of mythology about that. Maybe I'll take one more and then we'll get out of here and you can resume your afternoon nap. So we talked about limiting advertising, which increase prices. So a lot of progressive liberal income without rent. So isn't lived, for example, cigarettes advertising is very limited or almost inexistent? Isn't that- It's banned. Isn't that like a good argument for them like saying, yeah, seeing here some products when we limit, we're going to reduce, we're going to reduce the usage of the product because of a higher prices, it's less accessible. How are you- Yeah, that's their argument. You know, that's the, you shouldn't have the freedom to kill yourself. Whereas libertarians think if you want to do something stupid like be a cigarette smoker, you should have the freedom to do that. It's the bottom, the real question. This is a question for Walter Block, I guess, more than me. But, you know, does the government have a right to regulate what you put in your body? That's what it really comes down to and not just advertising things that you put in your body. Because there's a famous passage in human action about this, about where Misi's talks about opium. In his day, that was apparently the drug of choice opium. And he made the point that, you know, once you go down this road and you concede that the government has a right to control what you put into your body, well then, how could you argue against the idea that the government also has a right to control what you put in your mind? Because after all, you know, that's part of your body. So once you let the government control one part of it, you know, shouldn't they tell you what books you're allowed to read? What internet websites, you know? You know, isn't it a good thing to ban luerockwell.com, you know? As a lot of people do. I think Apple Computer does. Every time I go on, I read luerockwell.com every single morning. But you know how, if you have an Apple Computer, you know how you get your regular things, Drudge Report, misis.org is up there, but they won't put luerockwell.com on the icon, on the browser, on the icon. You know, I read it like five times a day, but it won't be on my browser under frequently visited things. Everything else is, but I'm not saying it is. When I was in Turkey a couple years ago, it was prohibited. It was, the Turkish government apparently decided, this is off limits, we can't read this. So I couldn't read it while I was over there. That's about it for now. We gotta get going, another class.