 This is Jeff Deist, and you're listening to the Human Action Podcast. All right, ladies and gentlemen, welcome back once again to the Human Action Podcast. This week we are actually live video with our great friend, Professor Walter Block. If you've been following along, reading along, we have worked our way through Manneconomy and State, Murray Rothbard's Magnum Opus, and we have worked through several chapters on production, and we have now finally arrived at Chapter 10 to wit Murray Rothbard devotes an entire lengthy chapter, pages 629 to 754, to monopoly and competition. And there's a lot going on in this chapter, Dr. Block. It's a seminal chapter. It changed the landscape for monopoly theory and price theory. He went up against his mentor Mises, in a sense, in this chapter, so I just want to take some time and discuss it at length. And through the magic of Zoom, you're going to draw some diagrams today, even maybe. So first of all, how the hell are you, Walter, during all this pandemic? I'm hanging in there. I'm getting more work done than ordinarily, because for the first six weeks I was sort of self-confined. Nothing to do but write. And now I've been getting out a little bit, but still I've been doing more writing and reading than otherwise. So I'm a happy camper. Well, not fully happy. Who could be happy with this situation? One with the COVID and the other with the crazy government. But personally, in terms of production, I'm okay. Well, let's start with a little background. First of all, the history and the setting. Murray's writing this in the 1950s. So what was, very briefly, what was sort of the state of the neoclassical view of monopoly and what was the Misesian view of monopoly when Murray's writing this? Both were not good. The state of the neoclassical Friedmanite Chicago view was that the monopoly is part of the market. And it's a market failure. And the government has got to get in there and fix it up and it can do so in three ways. One is by regulating because the monopolist is charging too much and producing too little. And therefore the government should get the monopolist to produce more and charge a lower price. The second possibility, the second possibility is to nationalize it. You know, the government just takes over because it's a market failure and government is here to help us. You know, I'm from the government. I'm here to help you. And that's the way they're going to help them. And so that was very bad. Then Mises was much better than the neoclassical. He only said that there could be a monopoly and natural resources. And I remember, you know, I used to hang around with Murray in his living room. And I remember he was telling a bunch of us. I forget who was in the room. Maybe Joe Solano and I don't know, Leonard Ligio and Joe. I forget all the people. But he said that the first time that he publicly criticized Mises, he was very, I wouldn't say scared, but maybe upset or unhappy. And I mean, he looked at Mises as a God, and that's roughly the way you and I, if I can speak for you, look at Murray. And, you know, to criticize God, I hope I'm not being irreligious here. I don't mean to be disrespectful, but to criticize somebody that you revere is rough. And Murray said that one of the first times that he ever criticized Mises was on this issue. So that's sort of a little bit of a background on this issue that Murray made, how shall I say it, veered off the Misesian path and certainly veered off the mainstream path. And I forgot the third way that the government says is we should have antitrust and break them up. So it's either nationalize, regulate or break them up into 72,000 little companies. And that would be the, I forgot the third way that the neoclassicist would say deal with monopoly. But Murray certainly rejected the mainstream view, the neoclassical view as did Mises. And he also rejected the Misesian view, which had a very limited scope for monopoly on natural resources and stuff like that. So this is a big, big breakthrough is very, very important. A lot of a lot of this stuff doesn't have immediate effects, but this has got big effects on antitrust. And then Murray did all sorts of good research, historical research, and he would say, well, you know, it was the Rockefellers and the Morgans. And when the Rockefeller president was in what they did is they used antitrust on the Morgan companies. And then when the Morgan president was in, they used antitrust on the Rockefeller companies. And you had all sorts of chicanery and politics. And, you know, the most recent one is, what was it, the Bill Gates out in the Booneys in Seattle. And he wasn't paying off anyone. I mean, he was just, you know, creating stuff and they started antitrust on him. You know, how else are they going to get him? You know, they can't tax him more than anyone else because that would be invidious and discriminatory. But they said, well, you're a monopolist, we're going to come get you. And then Bill Gates started paying off the boys in Washington. And all of a sudden, there was no, no antitrust. And then IBM, IBM, when it started, it was the only producer and mono poly monopoly means single seller in Latin or Greek or whatever it is. And they had 20 year case against IBM. Meanwhile, Bill Gates is starting and you know, everybody else is starting and they're still bugging IBM poor IBM. So this is, I'm not saying that other things in Austrian economics and other things that Murray's done don't have real world implications, certainly gold and business cycles and a lot of stuff do. But like some of the previous chapters that you talked about in many economy state aren't as political as this one. This one is way more political than many of the other chapters on, you know, what's wrong with the difference curves or how do you do cost and stuff like that. So, interestingly, Rothbard takes issue with the term consumer sovereignty, which means is used, and which have been popularized by Hut. Murray thought it was a, it was a political term, not an economics terms to talk about that. Yes, Murray was excellent on that. You know, what he said was individual sovereignty what's with this consumer who's so great about the consumer. It's almost Keynesian the focus on the consumer. Individual sovereignty, we should all be sovereign, we should be sovereign. Yes, yes, he's not against consumer sovereignty. But how about producer sovereignty, why shouldn't producers be sovereign also where we're all, you know, human beings and human beings have rights and we should all be sovereign and, you know, I sometimes like to link this up with his anarchy thing and for Murray what's the ideal number of countries. Seven and a half billion. We should we should each have one. So it's sort of a strange thing for an anarchist say that he's in favorite countries but yes, he's in favor of many, many countries we should each have one. And if you ask a girl for a date you just can't ask her for a date you have to go through your foreign minister to talk to her foreign minister. I'm just being silly here but the point that Murray was making I think absolutely correctly was that why only consumer sovereignty so he wasn't against consumer sovereignty but he wanted to have producer sovereignty also and and anyone else sovereignty and you know violinist sovereignty or basketball player sovereignty or everybody should be sovereign subject to archie unjustified rule. So yes, this is another big breakthrough where that Murray made and in contravention hot and and other people who were you know pretty good hot was very good Austrian economists but you know we all have none of us is perfect. We all put our pants on one leg of it's on and all and I'm not trying to diminish hot and it wasn't just hot and this was a concept in all of the economics and Murray was foremost in obliterating. So Walter Rothbard starts with sort of the three definitions or the three identifications of monopoly one of which is where there's a single seller. Of course that's what we think of as a monopoly. He also goes into when there's a state privilege which we'll get into later in terms of patent and copyright for example, regulation and then, but the third kind which is maybe most interesting for our discussion today is when somehow a business unit achieves a monopoly price on its own so talk about definitionally as Austrians how should we be thinking about this. Yeah, well I think Murray again is making a very important point. First of all the single seller I'm a single seller of Walter block services you're a single seller of Jeff dice services we're all single sellers of unique we're all unique we're all different. And that sense of monopoly is almost silly, because you know, we're all monopoly, they say, we're all monopolist now in the single seller sense. The very important sense is this government privilege. That's the way monopoly started in England, you know the Duke of London fights the good battle against the King of France or something and now he's awarded the candle monopoly. He's got the candle monopoly say just in London, doesn't mean you can't make candles in London but you have to go to him for permission, and he'll say okay sure you can make candles but you have to pay me you know half of this or whatever. And if you try to make candles without the Duke's monopolist permission, well you know, you go to jail or you get punished. One of my favorite parts of the movie Gandhi was when they were all marching up to the ocean to try to get water to the boat and then the police were bopping them over the head. What was that all about. What was that all about is that the English government, the British government gave monopoly privileges to somebody. And Gandhi didn't much like that and Gandhi was trying to demonstrate this is unfair. Well, that is a very very sensible understanding of monopoly. And even the neoclassicals would include that as monopoly. This is just a grant of government privilege and it's certainly incompatible with freedom and with free enterprise. And there's no question about that and you have modern cases of that for example, a taxi cab in Dalyan. If you try to drive a cab in New York City and you don't have a medallion they'll arrest you. Then you had some sort of the gypsy cabs and because the cabs weren't going to black areas so the black people started driving cabs and you had all sorts of problems. And now with Uber, they won't allow Uber to work in some places. Well, that gives the taxi cab people a monopoly or Airbnb the hotels don't much like Airbnb. So they're trying to get a monopoly there. And monopoly events sort is right throughout the economy. Young black girls want to do hair braiding. And they're told well you have to get a license which is a monopoly in effect and you just can't have braid the braid people's hair you have to go and study for 20 years or something I'm exaggerating doctors or monopoly. So monopoly is rife throughout the economy, and certainly all libertarians would oppose monopoly on that ground now there were some libertarians who are not Austrians, and they would, they would have a problem with the third point, namely achieving monopoly price. And now, in order to illustrate that I'd like to use the blackboard or the whiteboard here. And all you're saying there is how do you know what the monopoly price is. The whole thing is ridiculous. So I'm first going to do a very simple monopoly diagram and this is called a corno oasis water water oasis. And here's the quantity of water. And here is the price. And here is the demand curve for water. And here is the marginal revenue curve for water which has got twice the slope if I can draw this accurately. And this is the marginal revenue curve my handwriting is a little problematic but doing the best I can. This axis over here is really not only the quantity of water but it's also marginal cost and average cost. Because the situation here is you own the oasis, and I come along with a pot and I, it costs you nothing. And we assume away all the costs of collection, just to make it simple. And finally, I'm honest and I'll pay you whatever the price is a gallon of water is two bucks, I'll put the two bucks in your, in your collection bin, and I'll take the water and I won't take more water, I will cheat and I'll give you the money. So it costs you nothing. So what would be the perfect competitive place the perfect competitive place would be right here. And this would be the quantity of competition. So how much the competitive industry would charge for water zero, because in perfect competition there are no profits. And when there were no profits. And there is no cost while the price has to be zero. So that's the quantity of the competition. That's supposed to be a C right there. And here is the price of the competition, namely zero and all is all as well. And the mainstream point of view. Now, how, how do you figure out what the monopolist charges well the monopolist charges where marginal cost equals marginal revenue. That's how he figures out the the quantity and we're marginal cost and marginal revenue meet right there. And then we move up to the demand curve because we decided how much we want to produce and this is the end point. And this is the quantity of the monopolist. And this is the price that the monopolist charges. And this is mainstream straightforward stuff. I mean, some neoclassical economists were looking at this he would say yeah you know that's that's right maybe the handwriting isn't as good as it should be but that's right. And the indictment here is four fold. The first part of the indictment is that the price of the monopolist is higher than the price of the competitor. And here's when Murray comes in and he says well you know how do you know all you know is that there's a sky say IBM or Bill Gates or somebody they're charging a price how do you know it's a monopoly price. And then they go into the elasticity of demand curve and all sorts of complications but the key element the key element, the first indictment is the price is too high. The second indictment of monopoly is that the quantity of the monopolist is less than the quantity of the competitor. And somehow we should have more quantity. Don't ask me why why more quantity better than less quantity. I mean if you have more quantity of violins you have to have less quantity of shoes. And we don't want more quantity of any one thing what we want is the proper allocation of shoes and violins or whatever items or water and something else. And that's the second indictment the third indictment is that the profit of the competitor. Profit of the competitor equals zero. And the profit of the monopolist. The profit. We usually use pie as an indication is greater than zero. And we can and somehow profits are evil. You know, give me a break. Well, where are the profits? Well, the profits are this box. This box is the profits. Then I'm shading in and somehow profits are evil and the monopolist shouldn't have profits and this is interesting for the libertarian point of view you know what's wrong with profits. We make profits every time we engage in an economic activity. I bought this shirt for 10 bucks, and I value it at more otherwise I wouldn't have bought it. Let's say I value it at 11 I made a dollar profit off of it. And the guy who sold it to me value it at $2 because he had tons of them and he's trying to get rid of them and he sold it to me for 10. He made a profit of $8. We each exploited the other. We each made a profit off each other. Okay, and then the fourth and for the neoclassical the most powerful on indictment is a thing called dead weight loss, and I'm not going to spell that out because it would take me forever dead weight loss, dead weight loss. The idea and this triangle here is dead weight loss. Right. Dead weight loss. The idea is that we value this extra water the area under the demand curve. It costs us nothing. And yet it's not being produced. And this is anathema I mean, these guys go berserk when they hear dead weight loss that's market failure par excellence I mean, you know, the government's got to get in there. And, you know, Murray is saying that the whole thing is nonsense. And let me explain why the whole thing is nonsense. And maybe in a more deep way forget about water. Suppose this is Mike Tyson, and this is number of fights that he does per year. And Mike Tyson only wants to fight 10 fights per year. That's roughly what he fought. And somehow the antitrust people want Mike Tyson to charge to charge to play to fight 20 times a year, because they've drawn these diagrams and they know better than Mike and I mean this is obviously ludicrous, because you know, you get the problem of ICU. I would now have grandchildren very young grandchildren and I would go peekaboo I see you but I see you here is very different. I see you means here interpersonal comparison utility. What you're really comparing is Mike Tyson's. Look, every time Mike Tyson fought, it's truly one but he got bopped in the head and you know punched and he doesn't want to fight 20 times a year. He only wants to fight 10 and the antitrust people are saying no no Mike you got to go fight 20. Otherwise will what nationalize you or, or regulate you or break you up in a little pieces well that wouldn't work but they could regulate I mean if they adopted the policy of antitrust, and they applied it to Mike Tyson or, or a singer or, you know, any more or you Jeff I mean you give 10 lectures a month, and we want you to give 20 lectures a month, and you said but my throat will go and my voice will go and we say that how would you you don't know your throat and we know better. That's roughly what's going on here. And the key is that if, if this monopolist is sold the the new average cost curve will be up here, and people will still misallocate resources in other words even if the monopoly is sold now, there'll be no profit. Because let's say it sold at a price that reflects the present discounted value of the monopoly profits, there'll be no profit, but still prices will be too high quantity to low and there'll be a dead weight loss. So even if the monopolist is sold and you get rid of this one, but you have the other three indictments. This is sort of a geographic geographical graphical depiction of it. A more fancy way of doing this would be, wait, I want to erase everything. Clear all drawings and now this would be a more sophisticated version. Maybe before I do the more sophisticated version that you would see in the intermediate textbooks, maybe I'll take a break and let you have a turn. Well, I just want to go back very briefly to your Mike Tyson example and Mike Tyson is a very specific good. There's not a lot of Mike Tyson's out there. And in your example of let's say an oasis or a water cellar. I just wonder how conceptually, because I know what critics are going to say, conceptually, how should we think about this in terms of spatial orientation? In other words, if you go to a small town, let's say there's one Dairy Queen and let's say eating out is very, very different from buying groceries and cooking it yourself. Let's say those are two very different goods. And so the Dairy Queen is the only restaurant and spatially it takes a long time to drive to the next town. You're in a rural part of America. I just wanted to understand how you and Rothbard would think about this spatial orientation. Well, it's not only the spatial it's also how do you define it. For example, if you define the key is concentration ratio. A monopoly has 100% of the industry. Well, what the hell is the industry? Is the industry dried breakfast cereals? Well, if the industry is dry breakfast cereals, you're going to have a high concentration rate and the plaintiff is going to say, yes, it's dry breakfast cereals. And therefore we should have and I trust whether it's the plaintiff, a private plaintiff who's trying to complain about Kellogg's or the government, they're going to have the industry very narrow. The defense is going to say, no, no, no, the industry really isn't just dry breakfast cereals. It's also cooked breakfast cereals and not only cooked breakfast cereals, but all food. And if the industry is all food, well, then the concentration ratio is very low. Well, what's right? Is it should it be breakfast cereals dry, wet breakfast cereals, all breakfast stuff, all food, it's arbitrary and capricious and it's the same thing with the point you're making geographically. Namely, it's the same thing whether it's geographic or industry definition. Namely, well, how far do you have to go. If there's a Dairy Queen 30 miles away, is that a monopolist? How about 25 miles away? How about 10 miles away? How about five miles away? How about across the street? You know, where do you draw the line? And this is important stuff because people can go to jail for this. People can be fine for this. People can lose their livings. And from an intellectual point of view, it's sort of like without a basis. I mean, you know, if I shoot somebody, well, you know, I shot somebody. It's clear. But am I monopolist? Well, it depends upon how you define the industry. And there's no right way to define the industry, Murray would say. And also geographically, how far does the next competitor have to be for there to be a monopoly? Well, you don't get that out of the theory. They just sort of make it up as they go along. The whole thing is arbitrary and capricious. I mean, law, you know, you're supposed to know if you're obeying a law, just law, you know whether you're obeying the law. You know, if I shoot somebody or somebody punches me, we know that you violated the law. And if we're just sitting here talking, well, we're not violating the law. Well, I now open up a business and I get bigger and bigger. And I don't know if I'm a monopolist. Well, you know, I don't know with the best intentions. In other words, suppose I believe in this crap, I still wouldn't know whether I'm a monopolist or not. Well, what kind of a law is that? It's just very arbitrary and capricious. So I think you make a very good point about the geographical distance. And Murray also makes the point about, well, how do you define the industry? All right, so let's see your intermediate graph. Okay, the intermediate graph is we now have the same axes, namely quantity here, and we have price here. Only now we have a average cost curve that looks like that. It's a U shaped average cost curve. And we have a marginal cost curve that looks like this and it intersects the average cost curve at the bottom of it. And there is marginal cost. And here we have a demand curve. And the demand, oh boy, that's a messy demand curve. Let me see if I could just clear that up. Okay, I'll just make the demand curve this way. Hey, it's sloping down. You got that. It's sloping down. Oh, wait, this could be the marginal revenue curve. There we go. So we're not too bad. Okay, so this is a more sophisticated view of, and you'll find this in every intermediate microtext to illustrate the evils of monopoly. Well, where does the perfect competitor end up? The perfect competitor ends up at point C. Where supply, this is really a supply here, where supply hits the man. And this would be the quantity of the perfect competitor. And this would be the price that the perfect competitor charges. And we get that by zipping along here. And how do we get the monopoly price and quantity and profit and deadweight loss and all that? Well, first you choose quantity where marginal cost hits marginal revenue. Well, here's marginal cost. Here's marginal revenue. Where do they hit? They hit right there. So that is the quantity of the monopolist and notice that the quantity of monopolist is less than the quantity of the perfect competition. And how do we get the price? Well, we go up to the demand curve. We extend the line up to the demand curve. And this is M where the monopolist locates. And this is the price that the monopolist charges. And again, you have the same four indictments. First, the quantity of the monopolist is too little. He's monopolistically withholding. Like Mike Tyson, he was withholding. Jeff, you're withholding. You only do 10 lectures a week. You dirty rotten kid. You should do 20. If you had any decency, you would do 20. But you're withholding your monopolistic elements or efforts, as is Mike Tyson, as is this company here. They are withholding the distance between QM and QC, those rotten kids. Second indictment is that, and here Murray, again, talks about the price of the monopolist is higher than the price of the competition. I once got into a debate on this issue and the guy said, well, look, whatever the monopolist is charging, we don't know for sure, but just make them charge less. Well, if that's the rule, then the monopolist is going to charge way up here, right? And he'll say, okay, sure, lower me back to PM because I want to be at PM anyway. I mean, the whole thing is sort of, I don't know, what do they say, nonsense on stilts or something like that? So the price is arbitrary, but the price is too high. The third one is, well, where's profits? Well, the competitor makes no profits. Where's the profits of the monopolist? The profits of the monopolist is this box right here because you have to go from average cost. And that would be profit similar to what I drew before. And now where's the deadweight loss? This is, I'm not going to do DWL, but I'll put D. This triangle here is the deadweight loss because we value the stuff at this rate. It only costs us this much. Therefore, the difference is deadweight loss. Now I have to bring in my favorite economist, not really, I'm kidding, Milton Friedman. Milton Friedman is very sophisticated about this stuff. He says, just because, you see, the mainstream economist, the non-Friedman-esque one, and Friedman is a bright guy. The mainstream guy says, look, there's a deadweight loss, therefore you have to have antitrust. That would be the mainstream view. Friedman says, not so fast, I'm paraphrasing, of course, because antitrust costs money too. You have to have judges, you have to have lawyers, you have to have court reporters, you have to have real estate. You know, it's not a cheap thing. So Friedman's free enterprise, Friedman is saying, yes, we have to have antitrust, but only when the deadweight loss is greater than the cost of stopping it. And there's a certain low cunning here, a certain coherence. I mean, you know, given that you believe in this stuff, well, then Friedman's point is very well taken. The whole point is that Friedman is a neoclassical, he's not an Austrian follower, Murray, on this issue, and therefore he starts with a false premise. But if you grant him the false premise, then what he's saying is reasonable. It costs some money to have antitrust. Antitrust is a pain in the neck. It costs money. And think of the full employment opportunities for economists starting to measure this stuff. I mean, thank God for Milton Friedman, all of us economists are going to have jobs forever. Because right now I'm just drawing curves on a blackboard or on a whiteboard. But with the Friedman-esque twist on this, all of a sudden we have to measure these curves. We have to do a lot of econometrics. We have to do research and, you know, the BLS Bureau of Labor Statistics and all these Murray once wrote this magnificent, very short little gem of an article. I think it was called Statistics, Governments Achilles' Heal, something like that, where he was saying, you know, if a businessman wants statistics, he'll go and buy them. You know, he'll do the research. But this stuff, when the government does it, it's sort of like carte blanche for economists. Because now, you know, we can sound very profound. Well, according to the Commerce Department, they said, well, there are these many industries. And now we have three-digit industries and we have different concentration ratios. And we have all sorts of great stuff like that. So this would be a more sophisticated version of the Oasis water selling, but it's the same nonsense. Well, I want to touch on a couple of points that people make, one of which is huge firms like Walmart and the problems they might have internally. The other thing is cartels when multiple firms come together. And it's interesting, Rothbard touches here in this chapter. There's also a letter that's reprinted in Guido Hulsman's biography of Mises the last night of liberalism, where Rothbard points out, you know, a cartel isn't all that different conceptually from just a bunch of people getting together and pooling their money, issuing shares and calling that a corporation. But yet there's this pervasive sense in America, even today, when legal scholars would say antitrust is that sort of a low ebb. But nonetheless, there's this pervasive sense that these big cartels get together and sort of set the price. So talk about big corporations and cartels. Okay, first, Walmart in New Orleans, they just put in a Walmart all about five years ago. And before that, every lefty forever, you know, oh, Walmart is evil, you know, they're too big, they don't have good medical coverage, they pay low salaries, they'll knock out the mom and pop stores and people were, you know, the lefties were just adamant. I don't think Walmart is allowed in New York City. I'm not sure about that, but I think they're not allowed there because, you know, they made some sort of rule that if you're a certain size, you can't come in New York City. And I think in Canada, they're having no in Canada, what happened is that they had a strike and then Walmart just got out of Canada. So now I shop at Walmart. And every worker in Walmart is black or African American, whatever the expression is and half the customers are black. And they opened up finally after going through hoops for years where the city government wouldn't allow them open. They advertised for 400 workers they wanted 400 employees. And there was 4000 people that wanted those jobs those crappy jobs you know. So, you know, Walmart is a blessing. Walmart is magnificent, you know one stop shopping you can buy toothpaste you can buy. You can buy old shoes you can't buy a violin I don't think but you know, you can pretty much buy anything. It saves time it's a consumer sovereignty, you know, will be better, better that way and produces sovereignty. So, you know, just business is nothing wrong with the business, you know, and you know there's still small places because Walmart is an open 24 seven and you know there are small places like you go get gas. There's a little grocery there and you know you pick up whatever beer or something. So, just because the company is a big company. There's nothing wrong with that now cartels cartels have got a bad reputation, especially if you talk about Mexican drug cartels but that's a different kind of cartel. You know those cartels use machine guns and fight with the Mexican government on roughly equal terms. That's a different kind of a cartel Murray's point is look, you know, the mainstream view of cartels is very different than Murray's view Murray is absolutely correct. The mainstream view is that cartels are subject to dissolution from internal and external sources. In other words, if if here's we can use this monopoly diagram, according to the mainstream what the cartel is they're all located here, and they want to locate there. And right now they're, they're producing 20 units each and they want to produce 10 units each because if they can, if the elasticities are right and the, the thing is roughly in elastic between these two points well then you'll have more to view at the higher point than at the lower point. So, each cartel owner agrees to cut out half of his production. And now we'll go from point C over here to point M, and we'll make more and we'll make profit instead of losses. The mainstream says well this is a subject to cheating internally, because each person will say yes, let everyone else cut back from 10 to 20 from 20 to 10. I'll cut back from 20 to 15 or from 20 to 19, and I'll piggyback on everyone else but everyone is thinking that and everyone is trying to cheat, and then you have a question well with a cartel agreement be legal. Namely, Jeff you and I are part of this cartel and you you dirty rat are only cutting back from 20 to 19. Can I sue you is this a legitimate contract and that's a whole libertarian issue. I don't see anything wrong with that if you agree to do it. Well, you know collateral didn't pass hand so it's a very complicated issue as to whether you can. And on the economics, it's subject to break up internally and also externally, because if we go from PC up here to PM people from outside are going to start producing this product. So, the mainstream people are saying well, you know, cartels are subject to dissolution so let's not worry about that Murray is saying look, nothing wrong with a cartel cartel is great. You know I'm working on defending three now and I forgot to put the cartelist in there and I'm going to stick them in there thanks to you. Well, is it is a labor union of form of a cartel doesn't try to reduce profits but it tries to reduce participants in this on the supply side. But, well, Murray has a brilliant aspect part of this chapter also on labor unions. Look, there's nothing wrong with labor unions, a reducing the size, if they do it voluntarily. And this is Murray's point but what the labor union does is, you know, you're a scab you're trying to get in on this and we're going to beat you up or something or we're going to get the government pass a law saying that you can't come in and compete with us. Well, that's a very different kind of a thing. So yes, labor unions are a cartel, but and Murray would defend cartels. As long as they don't use violence to keep out scabs or, you know, competitors or go to the government like like the taxi people go and try to get uber prohibited and in many cities uber can't uber is illegal because they passed this law. So Murray is saying, look, a cartel is, yes, it is subject to break up from internal or external. But, you know, if it succeeds, well, it's a monopoly, nothing wrong with a monopoly, and therefore ergo nothing wrong with with the cartel. Walter, I just want to bring up something that Rothbard posits which is that even in theory, even in the purely theoretical plane demand curve slope downward. So can we go back to your diagram and just help us conceptualize that. Well, here's a downward sloping demand curve, you know, demand curves, typically slope downward now there are fancy schmancy people who talk about what is it the Giffen good where the demand curve goes upward and that's nonsense because the proper demand curve is one where the only thing that changes is price and quantity. Whereas the the given good is based on well you know as price falls from this point to this point income rises. And if it's an inferior good a very inferior good well the income effect will outweigh the substitution effect you could get a an upwards sloping demand curve but only an upwards sloping demand curve for a non kosher demand curve. This couldn't happen because everything else supposed to be constant along the demand curve, and on the neoclassical demand curve income is allowed to change and what kind of. Well, of course if you have that kind of a demand curve well then it theoretically could occur and the example they give is the Irish potato famine kind of a thing where potatoes were a big part of the diet and the demand curve could go upward but you know if you and you could have a diminishing supply curve to and then if you had a demand curve and a supply curve where this was the demand curve and this was the supply curve. prices would rise up to infinity or fall down to negative infinity. If you had a crazy demand curve like that. But you're asking not about upwards sloping demand curves you're asking about flat demand curves. Well, that that's a problem because eventually if you had a flat demand curve and here's quantity and there's price, and you're supposed to label all your axes otherwise you're rotten kid and here's the demand curve. Well, you know, then you'd, if the price went down by 1 millionth of a percent you would buy an infinite amount of stuff. So you could draw the thing it's easy to draw it I just drew it but I don't think it makes much sense. We know there's something interesting that's related to this Walter which is the socialist calculation debate which has been going around and some people have been saying that artificial intelligence will give governments the ability to calculate just like profit and loss signals give private firms the ability and they point to something huge like Walmart which has come up earlier in our conversation and say you know they're so big and they have so many departments and divisions and you know they're almost like the government of let's say a not even a small country maybe a medium sized country and they are calculating internally despite on the wholly internal side of their balance sheet you know the profit and loss signals within them. So, so I don't think AI solves the socialist calculation problem because I think it's about more than information it's about skin in the game and profit and loss but give us your thoughts there. Oh yes I certainly agree with you on that you know it is sort of part and parcel of that automation is going to take our jobs away. Right. So software is AI and we've had software a long time. Yeah, I mean there's incentives there's information there's continual changes there are seven and a half billion people. You know they start inventing super duper AI machines that can do things for all seven and a half billion of us. I mean, even if it could it would only scratch the surface. Yes, AI is good. Look, we all benefit from computers we couldn't be having this conversation. 2030 years ago. We could have the conversation on the telephone but we couldn't do it the way we're now doing it through zoom. So, you know, we have to be appreciative of AI but that doesn't mean that it undermines what do you call it. Central planning or socialist calculation debate. Before we get off I must draw you. We must talk about the Rockefellers. Yes, sure. Must we not because you know when people when people think of monopoly they think of Rockefeller is evil. So, is that okay if I get it so they also but also they think of that era they think of let's say mid 1800s to early 1900s so I think Rockefeller is an excellent example. Robert Barron's of which he is the most famous but they're Robert Barron's and not only refining oil but you know just that sugar and you know copper anything railroads whatever. So, let me now clear this and brought a picture of the United States. Here's the United States I have to draw up Long Island because that's where I'm from and here's Florida. And here is Texas. And there's the United States looks like Dilbert. Okay, so the the argument of the people who think that Rockefeller is evil is you have standard oil all over the place. And then you have independence well indicate with an X. And here's a standard oil and an X and standard oil here and there's an X and there's an X here and a standard oil. There, there are places all over the place where there are independence and standard oil. So what's going to happen. What's going to happen is standard oil is going to try to get rid of this Floridian competitor. How's it going to get rid of the Floridian competitor. He's going to charge prices way below costs. He's going to suffer a loss. How will we finance it, he'll get money from all these other standard oils that the X can't get because the X are independent. The X's are independent. So he's going to lower the price and drive this guy out of business and then guess what happens when this guy is driven out of the business. He raises his price inordinately to monopoly levels. And now he goes over to here to Portland where they're having riots and well they weren't having riots then but goes over to Portland or Seattle. And now he finances the same sort of thing with all the money from these other assets and a lot of money from the Floridian one is the Floridian one is coining money hand over fist. And then he knocks out all the X's and he's a monopolist. And this is the theory that a lot of people believe. It's absolute nonsense in so many, many ways and one of the best articles on this is a guy named John McGee in the Journal of Law and Economics he's not in Austrian but boy oh boy is he good on this one. And half of it is why it can't work and the other half is what the history of it and the history of it was the reason Rockefeller did well is he could refine oil more cheaply and better than his competitors. And he goes into some of the people would set up X's just to be bought out by Rockefeller because Rockefeller was easier for him to buy out another refinery and then incorporate his own refining methods and to start a new one. And now why is it dead from the neck up intellectually. Well, first of all it assumes all the X's are independent. Once this happens once all the other X's are going to say hey look at what they did in Florida they can do it to us. We got to you know shape up. The second is what about all the people that use lots of oil in Florida. And now when Rockefeller triples the price they're not going to be happy campers. They'll subsidize the X if need be to keep the X guy going but even that is only touching the surface because what the X can do is say look, I'm shutting down. I'm going to buy Rockefeller oil at half price and I'm going to store it in every silo and basement that I can. And meanwhile Rockefeller is losing money hand over fist and as soon as Rockefeller starts raising the price I'll come back in and I'll have all of his oil and I'll start selling it. So the whole thing is nonsense. And this is sort of a reputation and I wanted to get this on record because the Rockefeller case is, you know, prevalent among people who have the views on antitrust, other than our our views. Well I'll try I want to go out on one last question devil's advocate question it's akin to what you just drew but let's take Google which exists electronically more than physically in terms of you know gas stations or something like that. Supposedly I don't know if this is true but supposedly Google owns about 90% of all search traffic. And if Google were to come along and say if you type in Mises or Rothbard or something like that in the Google, they could disappear the Mises Institute by moving all of our search results to page 30 instead of page one or two where we want them. And so what however you define the industry maybe if you're defining breakfast cereal, you know we ought to look at the larger industry of breakfast which includes eggs and bacon and sausage and you get into lots of other sellers and producers. But if you said search is really the industry and globally Google owns 90% of it. And in a certain sense there are some barriers to entry there's network effects. There's Google size and its ability to snap up really top software people and top engineers in this net but these these barriers to entry exist in any in any or you know industry I suppose to accept but give us your case to not worry about Google. Well, um, I do worry about Google but not for monopoly reasons. Right. Because I think they because I don't like their politics. Right, look, Mises is hateful. I'm offended by the Mises Institute because you know you free enterprise and that's fascism. Not only will they put you on page 30 maybe they'll obliterate you that you know. And this has happened the Federalist Society has been downgraded. The President of the United States wants to get on Twitter and they don't want to get them on Twitter. The Twitter is a similar thing to Google. Because he's hateful or offensive or whatever. I mean, this is problematic. So when you said it's not a problem. I'm sure you agree with me it is a problem. But as you said it's not a problem from the monopoly point of view. I'm glad we got this diagram here because we are all the exes. It's not just the Mises Institute but it's the Federalist Society other conservative groups. There was this woman Amy Wax from Penn State or University of Pennsylvania, who said some things that were offensive. By the way, I was almost fired from my job for being offensive with voluntary slavery. The mainstream media and not just the electronic but print, you know, Wall Street and not Wall Street Journal. New York Times, Washington Post, all of them see economic freedom as fascism and as hurtful and harmful. And you remember what happened at the New York Times where somebody. Tom Cotton to be on give an op-ed and you know Tom Cotton is a senator from Arkansas wanted to have federal troops come in and this was deemed horrible. So yes, the Rockefellers of the day or the the left wing media people are running rampant. Well, is this censorship? No, it's censorship because we define censorship as only government concerns. They're not censoring. Look, you don't let everyone in the Mises Institute. I don't let everyone into my apartment. You know, you own the Mises Institute or you're the president of it and you only allow people who you want and same with my house or Loyola University only allows certain people in there. So we all have a right and Google should have the right to not allow hateful offensive people like you and me if they if they want and not only putting us on page 31 but just off off the chart. Well, the all of these people are now starting to set up alternatives to Google. I forget the names of them there the three or four of them and as you mentioned network effects you don't really want three or four or five of them you want them to have a cartel or a counter monopoly and I'm using a monopoly here. Improperly, but you want to have another group, Schmugel and Schmugel would be equal size to Google after a while, because all the people that Google is kicking off or deprecating would would subscribe to Schmugel. And then that would be I think the solution to it and I think it's already starting. Well, there you have it ladies and gentlemen chapter 10 of man economy in state it deserves its own show groundbreaking stuff. Wish more economists would read it very very important even in our current age plus you get a little bonus. You get some video this week you get some charts and diagrams you get to see Walter Block spare bedroom which of course has books in it. And I want to remind you you should be reading along with us we have a code HAP od which you can use at our website at our store to get a discount on this book and either paperback or beautiful hardcover form you can also just go to Mises dot org type in man economy in state and read it and search it on a very beautiful HTML page. Which is going to let you go from chapter to chapter so you don't need to spend any money but you're going to enjoy this book a lot more if you're reading along with us going through it. We have a chapter coming up on money and banking then we're going to get into the power and market section of the book which is really some of the sexy stuff about private defense and private police and that sort of thing. So, you know, get caught up, get the book this is one of those books you're going to want to own, then stay tuned as we get through the next few chapters of man economy and state. Walter Block I want to thank you so much I hope you have a great weekend. Thanks I just have to say one thing thanks for having me on this and I remember the first time I read many economies that I've read it maybe three times now but the first time I read it. I had first met Murray and I'd read it all day and then at night I'd see him and it really just blew my mind that I mean the guy is a genius. He's magnificent and I was honored to be able to be his friend for many years. While reading this book I first met him and it's an experience I'll never forget some thanks for having me on this show I really appreciate it. All right thank you Walter have a great weekend. Take care. The Human Action Podcast is available on iTunes, SoundCloud, Stitcher, Spotify, Google Play and on Mises.org. 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