 Okay, good morning folks. It's Friday morning, so we're close to the end of Mises Yu which makes me very sad. I hope you're, you know, still seething with excitement over everything that you've learned this week and looking forward to the last couple of days because we still got a lot of great stuff going on, including this morning's talk on government and big business, right? So I've been having some interesting conversations with friends, colleagues on social media about the terminology that we use to describe a market system, right? Is the word capitalism the best term to use to describe a free market economy based on private property and maximum economic liberty and so forth? Or should we use a different term? You know, is free market economics a term that makes sense and is clear? You know, one of the one of the difficulties in the word with the word capitalism is that, you know, it kind of privileges one factor of production, capital, right, over other factors of production, right? You could say, well, a free society could be laborism if people choose not to use, you know, if market participants choose not to accumulate a lot of capital and have large production processes, maybe they prefer smaller ones, right? I mean, as far as an empirical prediction about what the world would look like in the absence of government intervention in markets, would we have large accumulations of capital, would most production take place in large enterprises, such that we would call it capitalism, meaning capital is kind of the dominant controlling factor, or would we have small scale, you know, cottage production with very little accumulation of capital? Well, I mean, from a praxeological point of view, we can't really say that's an empirical question. I'd love to just try it and see, but it turns out historically, right, that large enterprises characterized by large accumulations of capital have been historically very important for society, for economic development, economic growth, improvements in the standard of living. So most of us, most students of Austrian economics and people who advocate free and open markets, tend to have a fairly sympathetic picture of large enterprise, right, big business. And it rubs us the wrong way. We get very annoyed with sort of the typical portrayal of big business in Hollywood, in popular culture, you know, look at classic film. It's a wonderful life, of course, which is in many ways a great Christmas story, great Christmas movie. Frank Capra made a lot of really good films in the mid 20th century. But of course, the evil villain in It's a Wonderful Life is Mr. Potter, who is the grubby, money grubbing fat cat, you know, capitalist pig. And there's a whole subplot about central banking, of course, which is interesting too. If you remember the movie Wall Street with Michael Douglas back in the 80s, then they made a sequel to it, which is not very good, with Shy Labouf, which means it's not going to be very good. Where he says, you know, he has the famous greed is good speech, which is actually a pretty good speech. If you watch the greed is good speech, I actually sort of agree with him. One of the Bond films or a lot of the Bond films, you know, have in the early days, they had, you know, Russian terrorists as the villains. And then it became, you know, CEOs were the typical villains. This is nothing new, of course, in the 19th century, the big industrialists like John D Rockefeller Jr. were routinely, you know, eviscerated in the media, you know, that standard oil was this horrible, you know, was this horrible serpent with John D Rockefeller as its head, you know, sucking up and eating all, I don't know, small companies and people and all good things, right? So, you know, we typically in popular culture have had a popular culture has a pretty negative view of large enterprise, right? Even just a couple, this is a couple of days ago, what's today, the 19th, 20th? So earlier this week, I saw this story about Jeff Bezos, right? So as you may know, President Trump has been complaining. Trump, of course, is on kind of a little bit of a vendetta against, you know, Twitter and Facebook and Google and CNN and Amazon and any number of other companies. One of his complaints about Amazon is that Amazon has benefited from, you know, the post office, right? The fact that they can send packages cheap, cheaply using the taxpayer subsidized delivery system has been a huge boon. Of course, I think Trump views Bezos as a kind of pro-democrat, you know, left-wing political opponent. And then Bezos kind of said something himself just earlier this week. Well, yeah, we probably wouldn't have gotten so big or been so successful if it hadn't been for the post office. I'm going to talk a little bit later about in my talk at one o'clock today on technology policy and this controversy over section 230 of the Communications Decency Act, which is sometimes interpreted as providing a de facto subsidy, a taxpayer-funded subsidy for the big tech platforms, right? So, you know, we would say people who defend free and open markets and economic liberty and personal liberty would say, well, gosh, if there are companies that have gotten big because of taxpayer subsidy or special government privilege, I talked about this a little bit the other day in the monopoly lecture, then that would be a concern, right? So here's another way to put it, you know, if the question is, is big business harmful to society, to the economy, and so forth? You know, a lot of the discussion focuses on, well, just how big are these big businesses? Amazon has a very large share of the online retail market in the U.S. You know, Alibaba has a very large share in China. Of course, Walmart is still much larger than Amazon. Walmart has a very large share of the market for brick-and-mortar retail and so forth. Google has a big market share in search, et cetera. You know, we would say, look, that's really not the right question. How big is a firm in terms of sales or assets? How profitable is a firm? How many current competitors does a firm have? That's not the right question. You remember from the monopoly lecture that just counting the number of firms in an industry today, or computing some kind of concentration index, right, is not a good measure of how competitive a market is. The right question, from our point of view, if we want to ask is big business doing, is it doing good or doing harm, is how did big business X get to be big? Did it get to be big because it pleased its customers more than its rivals, right? Or did it get to be big because it had some kind of a special privilege? Right? So there's two kinds of big, there's the good big business and the evil big business, right? And sometimes it's not obvious just from inspection, which category a particular company belongs in. So to gain some insight into that, let's let's take a step back and talk more generally about the role of government in business, in commerce, in industry. You know, there's kind of the sort of textbook view that you get. You probably learned this in your classes in high school. If you took a civics class or something like that. Or if you took mainstream econ courses, you learned that. Well, the reason that we have regulation in the economy, business regulation, industry regulation is to correct for market failure. So-called market failure in quotes, right? In other words, regulation like everything else that the government does is to protect the public interest, to improve the well-being of the public. Now, that could mean a more sophisticated public interest view would say something like, well, we agree that property rights are important, but property rights have to be provided by the state or defined by the state or assigned and protected by the state. So you need a benevolent government to define and enforce property rights. A lot of problems with that view as you may know, property rights emerge endogenously through custom and convention and so forth. When the government tries to create and enforce property rights, it does so in a way that privileges special interests and so forth. You know, and the common economics textbook answer, mainstream textbook answer is you've got all these kind of market failures. You have externalities and under supply of so-called public goods, monopoly, etc. And therefore, the reason we have business regulation and loosely speaking, you could include antitrust and environmental rules and so forth is to protect the public interest from harm. Because in an unregulated market, the textbooks would say businesses, especially big ones, can do all kinds of things that harm the public, harm society and so forth. I mean, the reason I call that the high school civics view is because like most of what you learn in high school, it's completely naive and foolish, you know, incomplete at best. And I think most economists recognize that that's not the right way to look at business regulation, that in fact, lots of kinds of regulation and many circumstances in which regulation is applied are really protecting private interests, right? The private interest view of business regulation says that really what government is doing or what government policies are typically doing is benefiting some interest groups at the expense of others. Right? So even without expressing an opinion on desirability, almost almost all economists, if you press them will concede that government regulations typically benefit some groups at the expense of others. And you know, it's obvious in the case of like a tariff, right? Trump wants high steel tariffs to prevent imports of Chinese steel. You know, it's just a little bit. It doesn't take a lot of very sophisticated analysis to recognize that there are winners and losers, so to speak. Right? I mean, that means that steel prices will go up in the US. Domestic steel producers will increase their market share, will increase their profitability. Domestic consumers are worse off because they'll pay higher prices. Foreign producers will be worse off because it's more their cost of sending steel to the US have gone up and so forth. I mean, most of us, everybody in this room and most people who can think through a little very simple analysis, can recognize that tariffs aren't just, you know, for America, right? I mean, they benefit some US tariffs, benefit some Americans at the expense of some other Americans and foreigners and so forth. You know, less obvious to most people, but obvious to most of us. Easy to see is that a lot of other kinds of regulation also have this kind of effect, right? So, you know, health and safety rules, environmental rules, benefit large firms and typically incumbent firms over smaller firms, right? Think about, you know, regulations that say you have to have. You can't have stairs going into a building. You've got to have a ramp, you know, for disabled access. You need to have a special bathroom, parking spaces and so forth. You know, those are nice things, right? And they provide benefits to people with different kinds of physical disabilities, but if you think about it just in terms of types of businesses, you know, if you're a Walmart store or you're some, you know, I don't know, some giant office building downtown, you're spending millions of dollars to build this thing. You're a huge store or a branch of a huge chain. It's no problem whatsoever to install that kind of equipment. But if you're a little mom and pop store, you know, the cost of installing a ramp or designating repainting your parking lot, installing handrails and so forth in the bathroom, those costs can be significant given your small scale of operation and what might be, you know, razor thin profit margins. So large firms, if you look at, you know, lobbying records, large firms typically lobby very strongly for health and safety regulations, you know, higher minimum wages, stricter safety regulations on the job, stricter environmental rules, you know, more strict FDA testing and so forth. And you think, why would firms lobby for regulations that increase their own costs? Well, it's because they think it will increase, increase their rivals costs even more, right? So I'm willing to impose some regulation on myself if I think it's going to impose a higher cost on somebody else than on me, right? On my rival than me. So a lot of these rules typically have the effect of benefiting large firms over small ones. You know, in general, firms that are politically connected, right? Because in many parts of the world, you know, the CEO is the brother of the prime minister, or because the firms have spent more on lobbying, whatever, politically connected firms can use the regulatory system to their advantage. And there are a lot of theories in political economy, public choice economics, and so forth that try to drill down and identify the specific circumstances under which various types of firms can use the regulatory system to their advantage. We know that in in settings where the benefits from some regulation are concentrated among a small group and the cost can be spread out over large numbers of people, then those sort of special interest regulations are more likely to prevail and to persist, right? Because the beneficiaries can get they can organize themselves politically to lobby and so forth. That's in their interest to do so, whereas those who bear the cost are not really motivated to act in the United States. We have a very small sugar producing industry. We have beet sugar in the Midwest, but we actually grow some cane sugar in Louisiana and in Florida, and it's horribly unprofitable, right? In a free in a free market, the US would import pretty much all of its sugar from Brazil. But because we have tariff protection for these Louisiana and Florida sugar makers, right? They can they can produce sugarcane profitably because of this tariff on imported sugar cane sugar from Brazil. You know, there's like there's like 20 families that produce sugar cane sugar in the US. So those 20 families spend a lot of time making sure those tariffs stay in place. You and I all pay, you know, a couple of pennies more for sweet goods than we otherwise would. But who cares, right? We're not going to take our time to go march on Washington to get the sugar tariff repealed because it's not worth it, right? So if you can spread the pain, nobody's going to oppose you in getting your special your special favors. The regulatory economist Bruce Yandel famously introduced the concept of bootlegger and Baptist coalitions, right? So by bootlegger, he means a party that benefits gets some sort of, you know, financial or other benefit from regulation. A so-called what he means by a Baptist is like a party which supports a regulation because it's in the public interest, right? So this is the classic example. Think about prohibition in the US in the 1920s, right? Which sorts of groups advocated for prohibition? Well, there were groups, religious groups and feminist groups and others who claimed that alcohol was harmful to society. Alcohol abuse was a big problem. The Women's Christian Temperance Union argued that because, you know, I guess most men, all men, I don't know, men were drunk all the time. They didn't show up for work. They would come home and beat their wives and kids or whatever. And so banning alcohol will improve, you know, the public welfare in various ways or, you know, alcohol is sinful, et cetera. But of course, you also have the bootleggers, the mafia, right? Al Capone became the most powerful mafia don, I guess, in the US during that period because of his control over the illegal alcohol bootlegging industry. So bootleggers want alcohol to be illegal because then they can sell their bootleg alcohol at super high prices, right? But but if you're a bootlegger, you can't go in front of the public. You know, they have TV back then, but you couldn't go on radio if you're Al Capone and say, hey, Americans, you know, please join me in supporting prohibition because it's making me a blank load of money and it's giving me power and I'm now, you know, killing people and it's awesome. It's great. I mean, he can't do that, right? But Yandle's point was the bootleggers don't have to do that. They can just remain in the shadows and let the so-called Baptist groups, in other words, those who are advocating for the regulation in a, you know, because it benefits the public, let those people do the talking for them, right? So modern example, you know, I talked about some of these environmental rules, large companies favor stricter environmental regulation because it increases their profits by imposing differential harm on their smaller rivals. But, you know, CEO of some big company can't go on TV and say, yeah, we need, you know, people, we all need to lower our carbon footprints and we need the government to force, you know, green energy and blah, blah, blah, because we are making a lot of money on that. They don't have to do that because Greenpeace and the Sierra Club and, I don't know, all the major media, everybody else is out there saying, yes, climate change, et cetera, et cetera. OK, so if you're, if you're, if you're benefiting from some regulation, it's good for you if you can have a front group who not necessarily with explicit coordination, but is sort of doing the lobbying for you, that, that tends to help. So what about kind of social and cultural perspectives on business? Well, you know, what you might call, I don't know, if it's exactly the right terminology, I'll call it a sort of mainstream libertarian view, which was most famously expressed in an essay by Ayn Rand in the 1960s called Big Business America's Persecuted Minority, right? And Ayn Rand's argument was, you know, sort of building on those pictures I was showing you at the beginning of the talk. She was saying, Big Business really is a tremendous force for good in society, right? The Industrial Revolution, capitalism, you know, the Industrial Revolution lifted more people out of poverty than any sort of force in human history. And even just in the last, I don't know, decade or so, several decades, you see these websites like humanprogress.org with these charts. Have you seen those? If you look at one of those charts of, you know, estimated GDP per capita from like, you know, prehistoric times, you know, it's pretty flat. There's basically no change in GDP per capita. And then you get to like, you know, start of the 18th century and it goes, whoop. Right now we all expect progress. We expect, you know, to live longer. We expect our computers to get faster, our phones to be better, our cars to be better, health care to be better and so forth. But throughout most of human history, people didn't have any expectation that circumstances would improve because we didn't have capitalism and industry, right? So the Industrial Revolution was a huge boon to mankind. And like I said, just in the last few decades, the number of people lifted out of extreme poverty is greater than it ever has been before, et cetera. So, you know, on Rand's view was capitalism is awesome. Or as she titled her book of essays, it's an unknown ideal, right? But yet Hollywood and politicians in the media and so forth are always dumping on capitalism or neoliberalism, as they call it now. You know, you've got you've all seen the pictures of the of these antifa types, you know, with their Starbucks and their iPhone 10, you know, organizing the next window, smashing or beating up journalists or whatever in protest of capitalism, right? So that Tyler Callan has a book that just came out a few months ago called Big Business, a Love Letter to an American Antihero, which I've read about, but I haven't read yet. And apparently he makes not exactly the same argument as I ran, but makes what I would call sort of the standard libertarian arguments that, of course, politically connected big businesses, you know, crony capitalists can do harm, but in general, big business does a tremendous amount of good and doesn't get recognized it, recognized for it, et cetera. I think in the early parts of the libertarian movement, that was kind of the sort of standard view. And that that's probably the majority view among libertarians even now, but you know, there's some kind of alternative views on this too. In the 1960s, there was a group of historians that have been termed the New Left historians, people like William Appleman Williams and James Weinstein and Gabriel Colco, many of whom were business historians who argued that, well, in fact, a lot of the sort of 20th century welfare state regulations that were anti-trust rules in the late 19th century and all the progressive era health and safety rules and so forth really were not curbing the excesses of big business as they were advertised, but were really promoted by big business and supported by big business. And the rules were even written by big businesses, right? Probably the most famous best known example are these books by Gabriel Colco, a famous book on the railroad regulation. And then his, I think I might have the date, so those wrong, I think Triumph of Conservatism was later than 63, 68 maybe. Anyway, his most famous book, The Triumph of Conservatism, is the kind of revisionist history of the progressive era because, you know, you guys learned in school that the progressive era was when the people, you know, reacted to the bad things done by big business by imposing regulation and so forth. And Colco and his colleagues argued that, no, all those regulations were designed by big business to protect them from newer, more nimble and more efficient competitors. Okay, this is very similar to the view that Murray Rothbard also took, right? So if you heard Patrick Newman give some talks this week, you know, last year we published a new book of, a new book of previously unpublished Rothbard chapters as a book called The Progressive Era, where Rothbard argues that, you know, the antitrust movement was really a reaction against competition by sort of crony capitalists. The Progressive Era, as already mentioned, was not anti-business, but was really in was something engineered by big businesses to protect themselves against rivals, even, you know, World Wars, the New Deal and so forth. All of these sets of policies can be understood or at least were influenced by large, successful politically connected businesses using the state to their advantage. So if you haven't read the book, I strongly recommend that you check it out. What exactly is the argument? I mean, what is it that some businesses can get out of their partnership with the government? Right? What is it that government can do to help businesses or to put the question another way, you know, what is kind of the overall effect of government intervention on business in the typical country? So think of a couple of different ways we can think about it. One is to talk about what you might call effects on the objectives of business. There's this cute quote that's attributed to the humorous PJ O'Rourke. When buying and selling are controlled by legislation, the first things to be bought and sold are legislators. In other words, right, in a world like ours, where we have a government that is involved very extensively in the economy, right? So legislators are controlling, buying and selling. How do you make money? Well, you got to get control of those legislators, right? So you've got to spend money on acquiring politicians through lobbying and bribery and all kinds of even darker means, right, because you need the government on your side in order to make money, right? So, you know, by the way, I want to know this is not necessarily sort of a condemnation of business officials, business executives, managers and so forth. I mean, you know, if you're the manager, if you're the manager of a company or the CEO of a big corporation or even the manager of a mom and pop store, I mean, you have a fiduciary contractual obligation to make money for the owners, right? The CEO is supposed to be doing what's in the best interest of shareholders. You know, so there's kind of an ethical dilemma. If you are a libertarian CEO, should you lobby the state for favors? You know, ethically, you say, yeah, that's, you know, I don't feel comfortable doing that. I don't think I should do that. You know, in terms of positive analysis, you might recognize, well, gosh, if we're all lobbying the state for favors, that means more intervention. That means a less productive and efficient economy. That means we're all worse off somehow. But it's kind of like a prisoner's dilemma, right? If all the other firms are lobbying the state for goodies, you're sort of not doing right by your shareholders. If you don't also lobby the state for goodies, even though you feel uncomfortable about it, right? So that's kind of a separate issue of how you should act in this interventionist economy. You know, there's the Walter Block philosophy. Walter Block says, if you, anybody in this room, if you can get a government grant, if you can get the government to give you money, you should take it because in Walter's view, you know, it's better for those funds to be in the hands of a libertarian than in the hands of some statist, right? So we use it for bad things. Walter says, you're liberating that money. It's like you're stealing it from the bad guys and now it's in the hands of the good guys and that's a good thing. But I'm not talking about that point specifically. What I mean is, think about all of the discussion in many countries, the US is the one I know, the case I know best, of, you know, concerns about how much money is spent in elections, right? Some of you are from countries where elections are financed by the public treasury, right? In the US, we don't have that, though we do have some matching funds. So there's all this, there's so much money in politics and since the famous Citizens United decision was at 2010, now it is legal for corporations to give money directly to political causes and political candidates. And there are all these measures, all these studies trying to show how much is being spent on campaigns and how terrible this is. There are lots of proposals, campaign finance reform proposals, either eliminate all private money in politics altogether, make campaigns be state funded, but that doesn't sound like a good idea to me. Place limits on how much corporations and unions and individuals can give and enforce more transparency where any money that you have to give, you have to disclose. So in the US, individuals have to disclose publicly their contributions for candidates. Corporations do, but not all so-called political action committees, super PACs, do not have to disclose their donors leading to the rise of what some people call dark money. So the dark money in politics is big campaign contributions and contributions to various associations that can't be tracked. My reaction to that is, first of all, the empirical evidence suggests none of those proposals really work. Campaign finance reform doesn't seem to affect how much money people spend or who wins elections. But if you're really concerned that people are spending too much money trying to get their favorite politician elected, then wouldn't it be better if we had a world in which you had no reason to care which politician got elected because that politician was in no position to impose any costs on you, right? In a free society, who would care? Yeah, maybe we got a president or something, some sort of ceremonial figure who attends signs treaties and like the British Royals or whatever, dresses in fancy clothes and is in a procession every once in a while, but cannot affect my well-being or the profitability of my business. I'm not gonna lobby for that person. I'm not gonna spend money on that person. It's the fact that it matters so much to a business which party is in control, which legislators in your region or in office that you wanna spend so much money to get the guys you want, guys and gals you want, okay? There's a number of other effects too. There are, Mises argued in his very, very, very clear and highly, I would highly recommend to you his book, Bureaucracy. It's a small book where he describes, summarizes his position on socialist calculation, but also talks about how government intervention makes firms different than they otherwise would be. Not necessarily larger, but kind of more bureaucratic, more layers of middle management, less of a connection between what employees do and how much they get paid because according to Mises, there's various kinds of regulation, right? So taxes and regulations distort profit signals so it's harder for shareholders and others really to know how well managers and employees are performing. I think it was, was it Jeff Dice talking about? Who was talking about it? No, no, I think it was Lou Rockwell last night that Henry Haslett said back in the day it was easy to get a job as a newspaper reporter because it was easy to fire people. They would hire anybody because they didn't like you, they'd fire you. Right now it's very hard to fire people to close shops and so forth especially in Western Europe. So you have a lot of inefficiency in sort of the employment relation. You've got all these people who work for companies whose job is just to make sure the company is meeting all the regulations. In the last decade or so in universities where I see it the most but also in large companies there's this huge emphasis on compulsory diversity training, right? So you have lots of people who are employed by big companies and other organizations whose job is to run sensitivity training seminars that are compulsory for all employees. People whose job is to fill out forms to make sure that all of the different EEOC kinds of requirements are met. Well, Mises would argue those are people who are not producing stuff. Those are people who are not producing goods and services that the company can sell to the market. Those are people whose job is to make sure that the company doesn't get in trouble with the state. That's a drag on productivity. It's increasingly recognized by the way that these diversity training programs not only do they not improve profitability, they don't even improve employees' attitudes towards diversity. So there's several studies suggesting that employees' attitudes towards people who do not look like them in race, gender, or sexual orientation or whatever, people have more negative opinions of colleagues who don't look like them after they've been through mandatory diversity training, which they resent, then before they went through mandatory diversity training. There's another whole set of rules in financial markets, in markets for mergers and acquisitions and takeovers and so forth, where the government makes it more difficult for the capital markets, lenders, other firms that might wanna engage in a so-called hostile takeover to replace poorly performing managers through buyouts and so forth. So there are a lot of policies of the state that not only make firms focus their attention on influencing the state, but also make firms less efficient and more bloated, more bureaucratic than they otherwise would be. So that's something important to keep in mind when we're looking at big business. Does this mean, am I saying that? The net effect of government intervention is to make firms too large. That's a position taken by some libertarians today. And we see this quite well, right? There are lots of policies that promote firms being large. Already mentioned these kind of lobbying things and how regulations benefit large firms at the expense of small. But you could think of it this way, if there are fixed costs to lobbying, you've gotta set up an office in Washington, DC or Brussels or wherever, you've gotta hire a staff of lobbyists, you've gotta learn lobbying procedures and so forth. Once you've paid those fixed costs, you can amortize, if you can spread those costs out among a greater volume of activity, you lower your average cost, right? So the point is it's cheaper for large firms to lobby than for small firms because of these fixed costs. That suggests that their economies of scale and maybe economies of scope in lobbying, so we would expect lobbying to happen on a large scale and be done primarily by larger firms. In other words, when Mark Zuckerberg appeared before Congress last year, do you remember that when he was testifying about the Cambridge Analytica data breach and so forth? There was this great moment where Zuckerberg, I guess he went off script and he said what Michael Kinsley famously described as a gaffe or the Michael Kinsley definition of a gaffe is when a politician accidentally says something true. Okay, so Zuckerberg says, one moment he says, Congressmen, Congresswomen and so forth, you realize that the kinds of things you want to do to Facebook and Twitter, et cetera, we can accommodate those at Facebook. This thing's gonna be that hard for us to meet whatever privacy rules you wanna impose on us, but you gotta realize that startups can't do that. Back when we were small, we wouldn't have been able to do that and you're really gonna hurt the vibrancy of the innovation sector by imposing these strong privacy rules. It's gonna make it harder for new firms to come into the market. Then a few minutes later, he was back on script. Senator, I wanna assure you that we at Facebook look forward to working with you designing rules that are fair and protect the public, et cetera, et cetera. And there's lots of subsidies. Right, government gives cash handouts, right? I mean, look at Elon Musk, bless his heart, right? He's very entertaining. Yeah, he's very clever. I heard Peter Thiel once describe Elon Musk, you know, a good friend as like an iron-ran villain, like the villain in an iron-ran novel, right? Sort of evil, devious genius. You know, Tesla gets a lot of direct subsidies and setting up its factories and SpaceX and so forth. You know, what about firms like Goldman Sachs, you know, and the other so-called primary dealers? I don't know if this came up in any of your lectures on monetary policy this week, but you know, in the textbooks when it says, well, you know, to increase the money supply or decrease the money supply, the Fed performs open market operations. It, you know, buys or sells treasury bonds. If the Fed is gonna sell a treasury bond, you and I can't go buy one. Okay, there's a group, there's a handful of firms, the so-called primary dealers, who are the only ones who get to buy and sell the bonds from the Fed, and then eventually it circles out in these Cantillon effects, right, to the rest of the world. So if you believe in this redistribution through the, you know, monetary injections, who gets the new money first, benefits at the expense of those who get the new money later, I think Sandra Klein mentioned that in her talk too. Well, it's Goldman Sachs, and firms like Goldman Sachs that get the new money first. No, not to mention the fact that almost every treasury secretary is a former Goldman Sachs executive, et cetera. You know, Boeing gets huge subsidies. The U.S. domestic airlines, the big three airlines get big subsidies. Then they complain about their competitors like Emirates and Etihad getting big subsidies from the Gulf countries. So obviously, you know, those kinds of firms, right, are larger than they would be in the absence of the big interventionist state. We probably wouldn't have financial firms as big as Goldman Sachs. We wouldn't have Lockheed Martin and Boeing and other defense contractors and so forth. You know, a little bit harder to judge is these so-called indirect subsidies, like what I mentioned before with, you know, Jeff Bezos, some people have argued, well, Walmart gets to ship its goods on government-provided roads. So Walmart doesn't bear the full cost of transportation and of course the whole Walmart business model is based on aggregation, right? You have these large regional distribution centers, massive distribution centers that are shipping merchandise out to the Walmart stores, right, and in the absence of this kind of hub-and-spoke distribution model, it would not be possible for Walmart to operate on the scale on which it operates. And so people say, well, you know, if we really had private roads and everybody had to pay the marginal cost of using the roads, then Walmart could never have gotten so big. You know, Amazon would not be able to, would not be so successful if it hadn't been able to free ride on not only the post office, but you know, all the aviation subsidies and air traffic control system provided by the taxpayers and so forth. I mean, that's harder to judge, but you can make an argument that those indirect subsidies certainly are relevant. So does it follow that in the absence of government intervention, we would have mostly, you know, we would have smaller firms on average? Would we not have big business, as we know it today, in the absence of the state? Well, I think that is not at all obvious. And the reason is, yes, of course, there are a lot of government policies that favor size, but they're also government policies that promote smaller firms. Right, so I mean, antitrust. Antitrust does not go after mom and pops. Antitrust goes over large firms. Antitrust policy or competition policy more generally increases the cost of becoming a big firm, because when you get to a certain size then the antitrust authorities are gonna come after you or more likely to come after you. There's what the late Fred McChesney, a great economist at Northwestern University, called rent extraction. What he meant by rent extraction was this practice of the state kind of vaguely threatening private companies. You know, well, we might, if these firms don't do, you know, if the tech platforms don't, you know, plug these privacy leaks, we're gonna have to regulate hard. You know, guess what happens in the next election cycle those politicians get much more contributions from tech companies. Right, it's kind of like an, it's kind of an extortion racket. You know, one of the interesting pieces of evidence for this is if you look at patterns of campaign spending, this is an recent article, a lot of big corporations give equally to both Democratic and Republican parties, associations, candidates, et cetera. Well, why would you give equal money to both sides? Because don't you wanna give money to the side that has the policies that you think are better? Well, no, the fact that they give equally to both sides suggests that these donations are what? Protection money, right? You wanna make sure that whoever gets elected is your friend, right? So it's not about supporting this policy or that policy, it's buying insurance against the politicians hurting you later, okay? So little firms don't have to worry about this, but big firms do. You know, there's all the disclosure requirements for publicly traded firms that make it more costly to be a joint stock company, you know, a publicly traded company as opposed to a small one. There are a lot of subsidies for little firms. There are cash handouts of all kinds for little firms. You know, you could argue that government subsidized energy and telecommunications make it easier to have like a little mom and pop store in your basement because you got electricity from the grid that's subsidized by the state, right? In the absence of the state, maybe it would be more costly to send electricity around the world and to communicate around the world. So people would agglomerate and you'd have bigger concentrations of production. That's certainly possible. And of course, all the other sort of generic kinds of policies that we worry about, barriers to trade and war and state control of education, all these things retard the international division of labor, right, making the economy less efficient than it otherwise would be. And you know, maybe reducing the kinds of economies of scale and economies of scope that support large scale production. Okay, so it may very well be that in the absence of state intervention, we would see larger firms on average than the ones we have today. Or maybe it would vary widely by sector, by region. We might see a greater diversity of different types of organizational forms. And of course, my view is let's do it, right? Let's run that experiment and see. I don't have a dog in the fight, a specific defensible prediction about exactly what would happen, but I sure would like to try it. Roderick Long and I had an online debate, I guess it's 10 years ago now, that you can look up on whether the state makes firms more hierarchical than the otherwise would be. Roderick says, yes. I say, we don't know, but probably know. We also argued a little bit about limited liability. You may have heard people say that limited liability is a special protection for corporations. It turns out it's a lot more complicated than that because there's different kinds of limited liability, right? There's limited liability for debt, meaning that if you're a limited liability company and you can't pay your debts, your creditors can get the assets of the firm, but they can't come after your personal assets. They can't get your house, your kids' savings, you know, college savings fund or whatever. That of course has nothing to do with government intervention. That's just a market arrangement worked out between creditors and borrowers, right? In a free market, if you're a company, you wanna raise funds, you wanna get a loan, you would negotiate with the bank, okay, does that loan mean that if you can't pay it back, we can go after your personal assets? If so, we'll probably give you a lower interest rate. If you wanna shield your personal assets from liability, you wanna have limited liability. Okay, you can do that, but we'll probably charge you an interest rate premium. You can choose, you can work it out. The more complicated issue is limited liability for torts. So should corporations be liable if an employee harms somebody? And some libertarians say yes, but state limited liability rules immunize companies from that liability and that's a special subsidy or protection for big firms. I don't think that's right because in fact, it assumes that in the absence of the state, the sort of common law remedy for harms done by employees would be to sue the employer. But in fact, that's not really true. It depends on the contract between the employer and the employee. If the employee causes harm, not at the request of the employer, then the employer probably wouldn't be liable anyway under the common law. So my view is that limited liability is not a subsidy for big firms, okay, but there's some libertarians who disagree. Okay, so to summarize, does government help big business? Yes, but it also helps small business. Government policy has lots of different effects on the economy, on firms, on organization. Corporations benefit from the state, but corporations are harmed as well. Limited liability is not an obvious artificial state privilege. So again, as I said before, what would the firm look like on the purely free market? Well, I don't think we can really say praxeologically ex-ante, but let's give it a try, okay?