 Our next speaker, he is our cleanup man today, so that means we can save the best for last. He's an adjunct scholar with the Mises Institute, kind of grew up at the Mises Institute in many ways. He went to, he got his bachelor's of arts at Hillsdale College, which many of you may be familiar with, but went to the big city, NYU, for his PhD, worked for Laffer Associates as a portfolio analyst. He has a blog called Free Advice. He's written a number of books, The Politically Incorrect Guide to Capitalism, it is over there on sale, Study Guide to Man, Economy and State, Study Guide to Human Action, Politically Incorrect Guide to the Great Depression and New Deal, I think all those titles are over there, but he does a lot of great work. He's seen him possibly on Judge Napolitano's show. He's going to talk to you about government ag policy, harvesting absurdities. Robert Murphy. Well, thank you everybody for sticking around. I was remarking to Doug that I seem to have cleared out the table where we were sitting. Everyone there decided to leave. I told a few off-color jokes during lunch, but I didn't think I was going to have that effect. In all honesty, it is good to be here and it's particularly true to say that because yesterday Doug and I were sort of running the gauntlet, if you will, maybe you know we had to present to a group of about 51 high school students. That's actually the hardest crowd. I've done presentation to various crowds. The biggest one was at Fifth Third Arena last year, last tax day. There was a Tea Party event and I was the number two guy. The headliner was Jonah Goldberg, so that was sort of a surreal experience for me. It was a huge crowd and that was actually very easy because I tell people, no, it's not intimidating because you get out there and if you say something that you think should be an applause line, you just wait. If there's 3,000 people in there, someone's going to say, oh, we're supposed to start clapping and then everyone starts clapping. It's very, in contrast, yesterday Doug and I, we had a couple of jokes that just didn't quite work because Doug and I have a sort of deadpan delivery and that's not often suitable for a high school crowd because they don't, you know, they just don't know when you're kidding or not. They just assume everything that I made a reference to the fact that I was a consultant and I said, so I work for myself and I said, so my boss is a jerk. And I was waiting for, you know, the line and the kids are just looking at me like, oh, why, what does he do? Does he swear at you, you know, and then I, and then later. And so I thought, okay, I'm going to, you know, keep things real. I show, you know, I'm a man of many talents and somehow I worked in this anecdote, which is true, that there was a guy at another Mises event in Greenville. I was out after they've been walking around and this man of the street, if you will, comes up to me and he's like, hey, how you doing? And I know he's going to hit me up for money. And he just say, hey, you ever see that show, Seinfeld? And I'm like, yeah, I know. He goes, do you know, you look, I don't mean to offend you. And so I knew where he was going for the George Costand. So I just, you know, I said, I made it a guy's day. I just went, George is very angry like that. And so, you know, it got, it got a little bit of laughter. And I was like, okay, I've worked, so I'm thinking here that I'm, you know, putting on a show, hamming it up for the high school kids. And this father comes up to me afterward and says, Dr. Murphy, I really love your talk and everything. And that was a fantastic George Costand. I'm going to take my daughter and he had his daughter standing. I'm going to take her home and share on YouTube so she knows what you were talking about because here I'm, you know, thinking I didn't do Johnny Carson, this should be fine. And no, it's Seinfeld too is also before their time. One other thing I should mention, I will not be offended. I mean, this, this is true. These, these chairs, I've done a lot of these things. These are the most comfortable chairs I have ever sat in a, in a situation like this. So we just had lunch. If you want to just kick back and take a nap, I really, I wouldn't blame you. This is really, so the last thing I'm sort of mad that the weavers had to leave because I did have a lot of recommendations about popcorn. You know, I, I don't know if you guys have noticed that when you, the microwaving issue that if you go a little bit too long, you know, the, the, there's burning, if you don't go long enough, then there's extra unpopped kernels. And I really thought we were going to make some headway on that issue, but apparently I'm going to have to just write a letter. All right. So what am I talking to you guys about today? It is harvesting government or harvesting of certainties with agricultural policy. I'm going to be repeating some of what the other speakers have said here. I say, I guess the sort of theme of my talk is going to be the fact that when it comes to government intervention in general, but also in this particular area specifically, the theory is wrong. Right. So the, so the official justifications they're giving you for why we're going to do what we're going to do, they don't make any sense, right? It's bad economics or even on a theoretical level, it doesn't make any sense. But then what's worse is that's not really why they're doing it. Okay. They're doing it for corrupt reasons. Okay. And so they're doing a bad policy that doesn't make sense on the face of it and they're doing it for ignoble reasons. All right. So there's many of you may have heard of, there's this team that makes these documentaries and they're against the official environmentalist movement, right? So they sort of debunk global warming and things like that. And so their latest documentary is called Not Evil Just Wrong. All right. So what they're trying to say is we're not saying there's a big conspiracy. We're just saying these scientists warning about, you know, global warming and blah, blah. They're just, they happen to be wrong. We're not saying they're evil or anything. I, that slogan doesn't really ring true for me. My, I would say it's, you know, not stupid, just liars. Okay. In terms of when it comes to politicians in general, that these guys, they're not, I'm not here talking just about the environmental, so I'm talking about just in general, government intervention that especially the politicians, they're not dumb. And I know that that's, it's kind of fun and I do it too. You know, we make jokes about Ben Bernanke being an idiot and stuff, but they're only idiots. If you actually thought they were telling you the truth, that they believed the stuff they were saying, then yes, they would have to be stupid. That'd be the only explanation. But if you entertain just for one minute, well, gee, maybe these politicians are lying through their teeth all the time, well then, you know, you're simple. It doesn't need to be the case that they're dumb. And of course, how could some of the most powerful people in the world just be bumbling fools? Or that doesn't, that doesn't make any sense. How would they get to that position? There's lots of people who want to be where they are. So one example of that, just to show you the contrast, is I remember when I was younger that I thought, like a great example of how the government is just stupid, is to say, oh, on the one hand, the government subsidizes tobacco farmers. And on the other hand, you know, they spent all this money on public service announcements for people to quit smoking, right? And so people say, oh, it's just stupid. You know, the government doesn't know what the right hand left hand is doing, that kind of thing. But no, that only is crazy and idiotic and counterproductive if you actually thought there's this single thing called the US government that has objectives and that it really wants people to not smoke, right? If that's the only, you know, it really cares about public health. If you thought that, then yeah, what the government does is crazy. And yeah, Washington just a bunch of idiots. But that's of course not really what's going on. And so Bob Higgs alluded to this with his analysis and a lot of stuff that Tom DiLorenzo was saying too, that what's called the public choice approach to government says, well, no, if you look at the actual policies and the incentives facing the individual people involved and stop analyzing in terms of what does the government want to do here and you look at it more realistically and say what does this particular senator get out of it and so forth, then it all makes perfect sense. So that the senators and Congress people from states that have a lot of tobacco farmers, obviously they're gonna vote for those subsidies and their colleagues will go along with those votes if, you know, in turn they reciprocate and vote for the stuff that their colleagues want. You know, on some of the future vote. So that makes total sense why they would do that. And then in terms of the, you know, the smoking campaigns, there's various people who benefit from that. And so that's why they vote for those things. So again, it's not, so what I'm saying is even though it's kind of fun to make fun of those idiot politicians or whatever, that it's, I think that's actually naive and you won't really understand government policy and especially won't be able to predict future policies that haven't yet been determined if you actually think, you know, they're a bunch of bumbling idiots sort of like, you know, the Chevy Chase's portrayal of Gerald Ford, that's, you know, it's funny to do that and to think that but it really is not accurate that there's reasons for why the government does certain things that on the face of it seem crazy. Another example that's relevant for today is, I don't know how many of you know this but President Obama recently went to Brazil and there was a big, a lot of people in the energy, who are interested in energy issues were really upset because as you may know, especially since the spill in the Gulf that there had been a lot of stuff with Washington, you know, there was like a moratorium on offshore drilling and then they lifted it officially but it's hard for people to get permits. So there's a lot of companies in the United States who want to develop offshore oil and natural gas and they're having difficulty getting permits and so forth to do, they're getting official permission and yet President Obama went to Brazil and he's given a talk about how we're gonna work, the U.S. government is gonna help you to develop your offshore oil resources and maybe we know that that's the way to bring more supplies in the future and bring down oil prices. So it's, people were upset that Obama was, while they were fighting the U.S. government to develop American offshore oil resources that he's promising taxpayer aid for Brazil so that they can develop their offshore resources but another part of that speech that made no sense is he, so obviously he had to be careful with what he was doing there because he left himself open to objection from the environmentalist left because they hate oil and why would you want to develop offshore oil resources here or in Brazil and so he said, but at the same time, you know, that's just a temporary thing, at the same time we have to work with the Brazilian government and you have to develop your biofuel industry and he's lots of nice rhetoric about that but the biofuel farmers in Brazil would of course, if they knew the situation, it could be understandably upset and know that he's lying there because the U.S. government has a tariff on ethanol that's produced in Brazil. Okay, it's a, so there's a 45 cent tax credit that the U.S. government gives to domestic refiners who blend ethanol into their gasoline products which Bob was talking about and then at the same time, there's a 54 cent tariff on Brazilian ethanol because what happens is in Brazil, they use sugar cane, it's actually, they are more efficient at making ethanol than American corn farmers would be. Okay, so if you had an open market in ethanol, then yeah, the government could buy with a tax credit and with the mandates and so forth, could convince or cajole U.S. refiners to mix ethanol into gasoline that then consumers motorists get when they go to the pump but the point is that wouldn't be helping U.S. corn farmers, it would be helping Brazilian farmers who grow sugar cane and so to avoid that, what they do is they slap on the 54 cent tariff and what's funny is that's not just speculation, like back when those issues were being debated, some, I forget who it was, I didn't, I should have saved it but a U.S. politician literally just came out and said that, words to the effect, I don't remember the exact quote but said, well no, we have to keep the Brazilian tariff in place because otherwise the domestic tax credit would go to Brazilian sugar cane farmers and it wouldn't go to American corn farmers so why would we do that? In his mind, he thought, I'm showing I'm keeping the jobs here but of course what he was implicitly admitting was that our, we don't care about reducing emissions and we don't care about CO2 and global warming, this is all about funneling money to U.S. corn farmers, right? So that's just another example whereas if you naively believe the government was actually just dim-wittedly trying to achieve these objectives and just all the governments all thumbs and they always just botch things up, then you might say, well that's kind of weird that you hear, you think you're saying that you wanna promote more ethanol use and yet you're putting up a tariff against Brazilian ethanol when that would be a cheaper way. In other words, U.S. motorists could use more ethanol if you allowed in the cheaper Brazilian product but they don't do that, right? So that's just another example of that. Now I wanna come back a little bit to something that Tom Di Lorenzo brought up about tariffs because there is this relationship between the U.S. government supporting farmers on the one hand and saying that we're helping the farmers but then on the other hand by having tariffs in place on manufactured goods from other countries that implicitly hurts American farmers, right? So Tom mentioned this but it's a sort of a subtle point so I think it's okay to repeat it. So one way to think about it just in the grand scheme in the long run, a country pays for its imports with its exports, okay? So like in terms of an individual household, you could get by for a while if you consumed, if you spent more than your income, right? If your expenditures were higher than that, you could get by for a little while because you could run up debts and so forth. If you had assets, you could sell them off but the point is ultimately the way you pay for your purchases is you work and you earn an income, right? In terms of the individual household level and the same thing analogously holds for a country as a whole the way they do the trade statistics is that in one sense broadly speaking, the way a country pays for its imports is by exporting stuff that countries around the world aren't gonna just keep sending us cars and TVs and so forth if we never send them anything in return that we produce in the United States. Okay so again there's caveats to all that but for our purposes that's a good benchmark to think of a way to think about it. So what happens then if the US government puts in place tariff barriers on stuff produced abroad like let's say Japanese cars, makes it more expensive for Japanese cars to come in the United States, then obviously that hurts American consumers, people who were gonna buy automobiles now the price is higher but at the same time which a lot of people don't see the implications because it's sort of an indirect effect is it hurts US based exporters who traditionally have been farmers right cause we export stuff around the world in terms of agriculture. So and David Friedman actually was one who came up with a pretty clever way of illustrating that so David Friedman the son of Milton Friedman so it's kind of ironic that Tom read quotes from Milton Friedman and I had in mind this anecdote from his son David Friedman to make the same basic point. I guess the Friedman said around talking about exports and imports all day at the dinner table so he said look it one way to think about this again the point being when the US government puts up a tariff keeping out manufactured goods from abroad that actually hurts US based exporters including farmers is he said one way to think about it is just imagine that international trade is just like a type of technology and he said so we actually have two ways in the United States of producing cars one way is we ship steel and rubber and so forth to factories in Detroit and then people go into the factories and assemble it and the cars come out the other end of the factory that's one technological recipe we have but another way we've discovered of turning resources into finished cars is we take a bunch of wheat from American farms we put it on a ship we ship it across the ocean and then a couple months later the ship comes back and the wheat's turned into cars all right and so what he means of course is that we sell the wheat to Japan and then they ship us cars in exchange and he said so it's not an issue of creating jobs on net if you put up a tariff barrier and say no we don't want cars coming in from Japan anymore he said all that does is it puts the car producing farmers out of business or it hurts their business right that you're all you're doing is clamping down on that particular way of making cars and instead you're saying we want to favor the way of assembling them in Detroit rather than putting the wheat on a ship that magically turns into cars all right so that's one way maybe of getting it to click if you get lost in the currency exchanges and things is to see that you're not promoting jobs per se with tariff barriers all you're doing is favoring jobs in one sector over another and of course it's less efficient that you get fewer cars per hour of US labor doing it the way that the market wouldn't have normally chosen to do it all right so that's showing the connection so the tie in historically there is Herbert Hoover again this myth that Herbert Hoover was a do nothing reactionary who just sat back and twiddled his thumbs while the country fell in a great depression that's totally crazy Herbert Hoover was the most interventionist person in terms of peacetime interventions to help the economy up to that point so one of his big things was even before he got elected he was campaigning to be a friend to the US farmer and he did wouldn't place various subsidies and so forth but another big thing he did of course famously or infamously was signing in the smooth Holly tariff okay and so that's it didn't cause the great depression but it certainly kicked the economy when it was down it was an awful piece of legislation that drastically raised tariff rates across the board and a lot of people would argue foreign countries then reciprocated because of that and you know had an international trade war so that ironically you know certainly undid whatever alleged benefits he was giving to the farmers directly was by putting up this huge tariff barrier so that's just one example of when the government says we're here to help you and we're gonna help farmers that you know you should be afraid of that now what I think Tom also read a little bit about this so I'm gonna cover some of the same material but give you different examples of it so what was happening is originally in the Hoover administration they wanted to let me just check on the time here okay they wanted to the Hoover administration wanted to help farmers and so what do you do? Well raise farm prices, duh that's the way you help them and so originally they were gonna take government money and just start buying so they put a floor price under it and so the idea was if the price of a certain whatever it was weed or soybeans or whatever goes below if the market price would be below the target floor that the government set they would use tax dollars to buy the surplus and they'd put it in silos okay now and Murray Rothbard goes through and explains all these programs and how they they had sort of unanticipated results that yeah of course the immediate effect if the government comes in with a bunch of tax money to buy surplus product is that it raises the price higher than it otherwise would have been that day that's certainly true but it's not clear that the price is actually higher than it would have been had there never been such a policy because the farmers of course it wasn't like it was a surprise you know it wasn't like Hoover who would jumped out with a bunch of money and said ha ha who wants I'm gonna buy some soybeans now they knew that was coming because they were lobbying for it and that's how he got elected or one of his things so they saw that coming and so they planted more knowing that this was in the offing okay so again it's not clear that even on its own terms it was making the price higher than it otherwise would have been because now you had more land going into the production of those particular crops that were being subsidized and then Rothberg just goes through with a lot of statistical evidence to show that you had these crazy boom bus cycles and these various crops because you know the government what were they gonna do with it they bought it so they put it in silos because you know they were still of the mentality that food is a good thing you don't wanna destroy it right so they didn't you know so they won't put it in the silos but then as it started building up speculators would see those inventory levels and if they started getting really high eventually speculators would start shortening those products because they would know well the government's gonna dump that stuff in the market it's gonna kill the price and so it actually it made because in effect the government was you know doing the opposite of what a successful speculator would do they were sort of you know the government was not in the business of trying to make money they're almost in the sense trying to lose money and so it was doing the opposite of what successful speculators would do and so it was screwing up the market so you had you know these wild volatile swings in the prices because of the government getting involved so it wasn't so first of all it wasn't clear that it was keeping the price higher than it otherwise would have been and it wasn't even clear that it was making the price smoother which you know these were the alleged purposes of this program okay so again just on its own face not clear that it was helping and then of course if you went in and looked at the specific people benefiting it wasn't that it was helping necessarily the you know the little farmer with his plot that he's barely scraping by I just for a modern example with the numbers we have more recent I'm not sure I got this from a heritage foundation study I think this was true as of like about 1999 or so I don't know what the numbers would be today but as of then he was saying this analyst had looked into it and he said of all the agricultural subsidies going off the door from Washington the majority of them go to a certain you know like commercial farmers as opposed to just you know the mon pa and the thing you know Raisin Clark Kent or something and they so these commercial far huge agricultural businesses and he said the so restricts now these commercial farmers who get the majority of the subsidies in terms of the dollar amounts that their average income is over 200,000 a year and their average net worth is over 2 million okay so again and that just that just makes sense the government is gonna start handing out money to people they're not gonna give it to real poor people who you know don't have a lot of political clout why would they do that what's the point of you know you might pick up a few votes that's much more efficient if you're a politician to hand out money to real rich powerful influential people because they can do more for you I mean this so that's so that's you know one example illustration of this so back to Herbert Hoover's time that's what was happening it was causing more volatility and then of course coming into FDR's administration so what happened is there was a the planners they realized this okay so they could see what was happening you know even in the Hoover administration they could see okay this this isn't working we can't just go out in the market and buy up the product because then we you know that's we're just exacerbating the problem we're just making farmers put more land under under cultivation that which is what we don't want to have happen the problem is there's a glut and it's pushing down the price we don't want them to plant even more so that's how they then switch to the tactic of paying farmers not to grow the stuff right because that you know in the weird world of Washington and politics that actually made more sense than buying up the stuff and letting it rot in the silos or giving it away and then causing the price to crash and so on and so that's that's where that you know that was the objective there so in their mind that was a tweak that was an improvement you know that we learned from the past we don't do that silly thing anymore and put in silos we're now paying them to not grow it in the first place but there was a lag period where you know the farmers had already planted this stuff so let me just read you two things so this is coming from the grapes of wrath Steinbeck's famous novel and so the part of that novel where he where that phrase comes from is like the most horrifying thing in terms of an indictment of free market capitalism so he's talking about all these starving people who are outside looking at these farm operations he said and they stand still and watch the potatoes float by listen to the screaming pigs being killed in a ditch and covered with quick line watch the mountains of oranges slop down to a putrifying ooze and in the eyes of the people there is a failure and in the eyes of the hungry there is a growing wrath in the souls of the people the grapes of wrath are filling and growing heavy growing heavy for the vintage okay so that what Steinbeck thought he was seeing was free market capitalism that well yeah if you got land is held privately and that's the way you make your money as you sell food in exchange for money well duh the way you make more money is you destroy your product and even if people are starving on the streets you don't care because that's this crazy laissez-faire world that we're living in and so Steinbeck thought this was the operation of free market capitalism but of course no that's not the way free market capitalism works because if you have a bunch of farmers spread around the country yeah and if one particular orange farmer douses his crop with gasoline and destroys half of it that raises orange prices slightly but it also means he gets to sell 50% as much product if you destroy half of his yield so he's bearing the brunt of it whereas the high prices get enjoyed by all his colleagues okay so the only way it makes sense to deliberately destroy huge amounts of the product to raise the market price is if you get everybody to the door at least all the major players and for that you need the government so that was so that's why you need the government to come in and do this stuff so this was not a market based outcome Steinbeck was just wrong in thinking that this was because of a government enforced cartel so the producers in this narrow sense did benefit from the operations but the point was they couldn't have done it unilaterally they needed the government to come in and make sure everyone did it because otherwise people would cheat so historian Jim Powell talks about this and some of this is gonna be overlapping with what Tom said so he said by the time the Agricultural Adjustment Act became law and key people were recruited corn, cotton, tobacco and wheat were already planted and livestock operations were moving along the contemplated output restrictions wouldn't take effect until the following year so some of the new dealers began to think their only option if they wanted to force up farm prices soon was to destroy crops already planted agricultural department officials signed up about a million cotton farmers and they were paid a hundred million dollars to plow under some 10 million acres of farmland hog farmers were paid to slaughter some six million baby pigs and economic historian Broadus Mitchell noted that most of this pork under agreement of the government with the Packers became fertilizer less than a tenth was saved as food and distributed in relief okay they go on and say a few other things and so John T. Flynn who was a critic of the New Deal pointed out the hypocrisy of this and he said while the agricultural secretary Wallace was paying out hundreds of millions to kill millions of hogs burn oats plow under cotton the Department of Agriculture at the same time issued a bulletin telling the nation the great problem of our time was our failure to produce enough food okay so again just showing you the absurdity and the craziness of what the government was doing there so again in light of that it was an improvement now to get through that transition period where they had to pay people to destroy pigs and so forth and deliberately plow under and there's a funny it's probably apocryphal but there's the story of the people from the government going out to the farms and trying to get the you know the the pack animals they're pulling the plows to get them to plow under you know to destroy the crop and the animals didn't want to do it because they just you know they knew we're not supposed to do that and so the bureaucrats and so of course the idea was that you know the jackass knew more than the government bureaucrat when it comes to when it comes to agriculture okay now let me I'm just about out of time here let me just read you one last thing because I remembered this idea of the government paying people not to not to grow food I mean so again it's just it's hilarious and it's implications and I think the funniest take on that I heard was something you may familiar with the novel Catch 22 by Joseph Heller and one of the characters in there is his name he's so he's in the military and his official name is major major major major because his first and last name are major and then he's a major and then I forget what the fourth major's from okay so it's a it's a funny book and anyway he Heller spends some time talking about this guy major major's father so he says major major's father was a sober god-fearing man whose idea of a good joke was to lie about his age he was a long-limbed farmer a god-fearing freedom-loving law-abiding rugged individualist who held that federal aid to anyone but farmers was creeping socialism he advocated thrift and hard work and disapproved of loose women who turned him down his his specialty was alfalfa and he made a good thing out of not growing any the government the government paid him well for every bushel of alfalfa he did not grow the more alfalfa he did not grow the more money the government gave him and he spent every penny he didn't earn on Newland to increase the amount of alfalfa he did not produce major major's father worked without rest at not growing alfalfa on long winter evenings he remained indoors and did not mend harness and he sprang out of bed at the crack of noon every day just to make certain that the chores would not be done he invested in land wisely and soon was not growing more alfalfa than any other man in the county neighbors sought him out for advice on all subjects for he had made much money and was therefore wise as he so so shall ye reap he counseled one and all and everyone said amen major major's father was an outspoken champion of economy and government provided to not interfere with the sacred duty of government to pay farmers as much as they could get for all the alfalfa they produced that no one else was wanted or for not producing any alfalfa at all he was a proud and independent man who was opposed to unemployment insurance and never hesitated to wine, whimper, weedle and extort for as much as he could get from whomever he could he was a devout man whose pulpit was everywhere the Lord gave us good farmers two strong hands so that we could take as much as we could grab with both of them he said. All right so with that I will turn it over back to Doug.