The Jordan B. Peterson Podcast - 189. Is Property Theft? | Dr. Robert Murphy

Episode Date: August 30, 2021

Dr. Robert P. Murphy is an Austrian School economist, Research Fellow at the Independent Institute, and Senior Fellow at the Mises Institute.Please support this podcast by checking out our sponsors:Matter by Elysium - https://explorematter.com/Jordan promo code “JBPMatter” to save $45 (one month free).This episode of The Jordan Peterson Podcast covers topics such as value, free trade, private property, and minimum wage laws. They also dedicate time to discuss the specialization of individual tasks, interest rates, the Business Cycle, and more engrossing matters. Being the author of multiple books, from Lessons for the Young Economist, to The Politically Incorrect Guide to Capitalism, Dr. Murphy does not hold back with his economic and political discussions. He continues to highlight his views in his other book, Choice: Cooperation, Enterprise, and Human Interaction, which is a modern distillation on the school of Austrian economics. Dr. Murphy’s website: https://consultingbyrpm.com/Dr. Murphy's bio: https://bit.ly/38qiNykDr. Murphy's Book: "Choice: Cooperation, Enterprise, and Human Action" https://www.independent.org/store/book.asp?id=116Subscribe to “Monday’s of Meaning” newsletter here:https://linktr.ee/DrJordanBPetersonFollow Dr. Peterson:Youtube - https://www.youtube.com/c/JordanPetersonVideosTwitter - https://twitter.com/jordanbpetersonInstagram - https://instagram.com/jordan.b.petersonFacebook - https://www.facebook.com/drjordanpetersonWebsite: https://jordanbpeterson.com/Visit our merch store:https://teespring.com/stores/jordanbpetersonInterested in sponsoring this show? Reach out to our advertising team here.

This is season four episode 43 of the Jordan B Peterson podcast. I'm Michaela Peterson. This episode was recorded on May 19th, 2021. Jordan and Dr. Robert Murphy discuss Austrian economics. They discuss free trade, private property, the business cycle, and more. This is nothing that they teach in schools and probably necessary for everyone to hear regardless of age. schools and probably necessary for everyone to hear regardless of age. Dr. Murphy also discusses his book's choice and lessons to a young economist, which are super helpful for those looking to grow their knowledge in economics. Dad's feeling better, by the way. It was a severe autoimmune flare-up and now that he's back on our ridiculous all beef and lamb lion diet the reaction is dying down. No idea how to explain it it defies logic it seems to work for us though so he's

feeling better thank god and that's what's important. New podcasts out soon I hope you enjoy this episode and have an excellent week. Hello, everyone. I'm pleased to have with me today Dr. Robert P. Murphy. Dr. Murphy has a PhD in economics from New York University. He's a research fellow with the independent institute and a senior fellow with the Mises Institute. He's held academic positions at Hillsdale College and Texas Tech University.

He is the author of Choice, Cooperation, Enterprise, and Human Action, which is a modern distillation of Ludwig von Mises' important treatise on the Austrian School of Economics. He's the author of several other economics books for the layperson as well, including lessons for the young economist and the politically incorrect guide to capitalism, in addition to his scholarly work. He hosts the popular podcast, The Bob Murphy Show, concentrating on economic and political issues.

Thanks very much for agreeing to talk to me today, Dr. Murphy. How are you doing? Oh, I'm doing great, and thanks so much for having me on the show, Dr. Peterson. My pleasure. A lot of my listeners have mentioned their belief that my work is somehow reminiscent of work done in the Austrian School of Economics. And after reading, I didn't really know anything about the Austrian School of Economics.

After reading the bulk of choice cooperation, enterprise, and human action, I understand why there's an emphasis on value, I suppose. A lot of my work is predicated on the idea that it's not my idea, but on the idea that human beings are goal-directed actors and that much of our motivation, much of our behavior can be understood in that light, profitably understood in that light, so to speak, and Mises insisted upon the primacy of human action,

really as a starting point. Why did you write choice cooperation, enterprise and human action? And maybe we'll walk through it. I wanted to talk to you because I wanted a two hour lesson in Austrian economics, and I suppose I felt that this was the fastest way to do it, and I could share my intellectual endeavor

with all of my audience. And so I'm hoping we can manage that today. So let's go to the book. Okay. Sure thing. And I'm happy to do it. Let me just mention the before I forget that I have listened to a bunch of your lectures as well. And there was one besides what you mentioned, the affinity with value and that connection. You often talk about how people get feedback from social cues of others and that helps people regulate their behavior. And that's a very, let's say, Hayekki in perspective.

Like, when I heard that, I thought, oh, that's sort of like how the price system gives producers feedback as to whether they're using resources profitably and socially advantageous manner. So anyway, I saw that. Well, I did have an economic argument in mind, or an economic analogy in mind when I formulated that argument, I would say, you know, it's very difficult for us to compute our way through life, because life is so complex and so uncertain and so multifactorial, and all the factors continually change.

And so, yeah, in beyond order in my second book, in particular, and so multi-factorial, and all the factors continually change. And so, beyond order in my second book in particular, I stressed the role of responsiveness to feedback as a means of opening the individual to the corrective feedback from a distributed computational device, essentially. I mean, each of us are calculating madly in an attempt to minimize catastrophe and pursue some degree of satisfaction and hopefully pleasure. And we're all doing that independently. And cumulatively, that makes for an incredibly complex computational

system. It only makes sense to avail yourself of the outputs of that system if you want to orient yourself properly in life. And so I made the case that, well, one of the things you want to do with children, for example, is to make them socially receptive, because that way they can avail themselves of the computational resources of the society around them and keep themselves in sync with other people and hopefully to some degree with the natural world. I didn't think of that relationship. So, okay, so let's move into the economics field. Sure. So, yes, you had asked why did I write the book? So, what it is attempting to do

is to take, so Ludic Van Mises is a giant in the Austrian School of Economics and his magnum opus is called Human Action and it's a masterpiece and that's really in terms of modern Austrian economics, people can read that, but unfortunately it's something like 900 pages long, even though he wrote it in English, it's a very Germanic formal style, the vocabulary is difficult. And he assumes the reader is like a Renaissance man or woman and knows lots in various fields. And me, so just makes off-hand remarks

as if the reader already knows all these things. So what I try to do with my book Choice was to take the essentials of human action and make it about 300 pages or so. And the independence to the publisher, they told me, make it so that it could be assigned plausibly to an undergraduate class. And so that's what we tried to do. And the thing in particular, I wanted to make sure the reader got out of it was

knowing the Austrian theory of what causes the business cycle. Because to me, in our times, that's the essential scientific finding of the Austrians that even other free market schools are missing. Well, let's start with the basics. So how did Mises and in your book, how do you construe the basics of the economic system? How do you define it and define the individualctors within it. Okay, so the way Mises proceeds is he says that historically there was the classical economy, people like Adam Smith, you know, and he wrote the wealth of nations. And just the title of that shows that what the classical school was focusing on was the

production of wealth, you know, physical things that people value, and that's what they were focused on. And then there was the so-called marginal revolution when the Austrian school was born, and that happened in 1871. Karl Manger was one of the three people credited with ushering in what's called the subjective marginal revolution and economic thought. And that gave us what's called modern value theory.

Right, and so you could, there's different theories about why something is worth something. And one theory would be that something has a price because it took a certain amount of labor to produce it. It took a certain amount of goods to produce it. The price has to reflect the labor and the goods, I think it's not unreasonable to point out that that would be the fundamental presupposition of Marxist economists.

And then an alternative to that would be, well, actually, if you produce something that no one wants, it doesn't matter how much work and how many resources went into it. Its net price is essentially zero if there's no market demand. And so the economists that you talked about flipped that on its head and said, well, the price of something isn't dependent on the nature of the resources that went into it. It's dependent instead on the demand of the population served for that particular good. And then you talk about

the marginal revolution which transformed that theory that pricing occurs at the margins. And that would be something very much worth explaining. Okay, yeah, sure. So let me just, so everything you said is perfectly correct. But let me just, some people might have the misconception that, that the labor theory of value is a specifically Marxist invention, which makes sense because you don't Marx cares about the working class and thinks that the capitalist skim off the workers. But the classical economist also, like Adam Smith,

heroes of the free market tradition, also adhered to what we would call a labor theory or a cost theory of value. And it goes back, I think even it's like Aristotle. So the old conception was if a stage coach trades for so many chickens in the marketplace, there must be some quantity that's equal in both of them. You know, like the market prices are a measuring rod of something that's in the objects. And what is that?

And so marks that, oh, it must be congeal labor power or something like that. And so the marginal subjective is revolution of 1871 realized that, no, when a stage coach trades for a gold coin, no, but there's that it's not saying a stage coach equals a gold coin. It's saying the person who gave up the stage coach valued the gold coin more than the stage coach, that's why that person agreed to the trade. And for the buyer, it was the other way around. They valued the stage coach more than the gold coin and that's why they did it.

So there's no equality going on. It's a difference in subjective measurements on the margin. So there's inequality from both parties that just is lining up differently. And why on the margin? Okay, so the deal with calling and saying margin is, so there's the subjective element, which is like I said, it's just what's in people's heads. And then the reason it's called the marginal revolution is that they realize that any given

exchange is just particular units. So the word margin, meaning like on the edge, like the margin on a piece of paper. So the famous way to motivate this is to say, why is it that diamonds have a higher market value per unit than water does because water's essential for life? So you would think water should have a higher price. But the reason isn't any particular exchange,

you're not trading all the water in the world for all the diamonds. If you were, then the water would be more valuable. It's just like that gallon of water versus that diamond. And so on the margin, that one diamond can satisfy a lot more of your needs than that particular gallon of water, because most people already have enough water to, you know, satisfy. So it means that in that particular circumstance, or under those particular circumstance, or under those particular conditions, it rather than making some claim about universal value. Yeah, and to give it a very trivial,

but I think the illustrative example, too, of just applying this, when people go to the grocery store, you know, to say, oh, whatever, cans of Coke are on sale, let me buy some, that's a good deal. You don't empty out your bank account and back to truck up and get every last can of Coke in this. You only buy a certain amount and then at some point you stop. And so as simple as this, to explain that, you have to reason on the margin. You have to say, oh, the first can of Coke is worth more to me than my last quarter.

And the second can of Coke is worth more to me than my second last quarter, if the price is a quarter per can. But at some point, after you've got 16 cans in your cart, you say, no, the 17th can of coke is not worth more than my 18th last quarter in my, so at some point you stop. And so then you've showing you that you're making decisions on the margin. You're not saying, is coke worth more than a quarter a can?

That question doesn't mean anything. You mean, how many cans of Coke do I have right now? Is the next one worth more than my last quarter? So that's how the thinking is on the margin. Okay, what role, I mean, the labor theory of value seems to be all of these theories of value in some sense seem to be intuitively obvious, although they're different. And so that's strange that they can all be intuitively obvious.

I mean, it seems that when you decide to do something before you've been able to price it, you perhaps do something like an internal calculation to determine whether your labor is worth it. Before you can ascribe a monetary value to it, you might think, well, this seems to be worth doing, and maybe you sort out the pricing later, maybe that accounts for some of the attractiveness of the labor theory.

I mean, there does seem to be some association between the amount of work done and the value of the output. Right, so the classical economists, they weren't stupid. There was a reason that they thought that was a good explanation. And if you go and read their writings, it's not even that what they're saying is wrong. It's just there's only so much you can do with it. So it's true in a market where there's a good that's easily reproduced.

And you know, we have access to all the inputs or whatever. It's true that if it were selling above the cost of production, then more people would produce more of it, and that would push down the price, and it would raise the prices of the inputs until that huge margin was wiped away. So it is true that for easily reproducible goods, where all the inputs are available in the long run, the selling price has to be very close to the price of the inputs are available in the long run, the selling price has to be

very close to the price of the inputs. And it can go on the other way around. If people just stop buying it because they didn't like it anymore, then people would stop making it, and the only reason they would resume making it is if the price fell so that now it was affordable. So there is that element, but then there's all sorts of counter examples like you mentioned if just because I put a lot of effort into something, or if we're making a car and we all tire left hand behind our backs,

so it takes longer to make it, we can't charge more for the same product because it took more hours, like that, you know, the consumer doesn't care how much time went into it. And then things like, you know, a Rembrandt painting or something, like there's no way to apply that logic to explain the market price of a work of art, where the artist is not dead. So there's all sorts of things like that, or if we're just walking in the woods and we come across some object that's useful to us and then we wanna go sell it to others,

we have no idea how many labor hours went into it because we just found this thing. We're not gonna have a problem selling it. So part of the problem with the labor theory of value isn't that it's outright wrong. It's that there are all sort of there are all sorts of exceptions to its general applicability. And so it can't serve as a universal theory of price. And was that also true? Is that so that's what like Manger and William Stan Johnmings and Leon Walross, the founders of the marginal revolution, that's what they did.

They showed here's the exact thing that explains all market prices and then the stuff that the patterns of the classical economist discovered for certain scenarios, we can also handle in this new framework, but this new framework explains everything. Is it reasonable then to suggest that the marginal utility theory of value is the upper

most bucket in some sense, and then inside that there's the theory of utility, and inside that there's the theory of labor. Those apply only under certain preconditions, whereas the marginal utility theory applies generally. It's more comprehensive. Right, yes. To first and foremost, to explain a market price, you can use margin utility theory period. And then if you want to say more about particular circumstances, why is it that the marginal utility would tend to be such and such under these conditions, you can invoke the sorts of things that the classical commas would have used to explain, you know, the price of that or something.

Okay. Okay. So it's, it's, it's something like a classic Piagetian revolution in thought. I mean, when Piaget looked at stage theories, he believed that children developed cognitive, their cognitive apprehension of the world in stages, and that each stage would account for the, everything the previous stage accounted for, plus a little bit more. And the same reasoning has been assigned to scientific revolutions that, I mean, Einsteinian physics explains everything that Newtonian physics explained plus a little bit more. So that's what makes it a better theory. And so the same thing might be said about the marginal, the theory of marginal utility. It has more explanatory power. Right. Yeah. And I think the analogy with relativity compared to Newtonian

mechanics is, is correct that, That yes, the classical school, they could explain a small subset of market phenomena, whereas the margin utility approach explains everything and it doesn't, anything the classical economists could explain, we can explain it in the new framework, but we can also explain a whole bunch of things that the classical comms would just say, well, yeah, that's just scarcity.

And they'd throw up their hands and say, that's a different thing. We, you know, we're not talking about that. Okay, so I guess one of the thoughts that kept going through my mind, and this is not a critique, but it's, I think more the consequence of being ignorant about the field is that I kept thinking,

well, why should, why is it that people should care about this? Now, you make a case for that in the book, and so did Mises. He believed that it was absolutely necessary for people to be informed about economic matters and about economic theory. But the reason for that isn't self-evident, so perhaps you could do us the favor of explaining why we should care about this. And what does it buy us as individuals and as a society to have our to have an economic theory and more importantly to have this particular economic theory, let's say. Okay, great. So I think just stepping back, the reason it's so important, and certainly this is what Mises thought, for the general public to at least be aware of the basics of the findings

of economic science is that politically so much of harmful government policies are imposed in the name of helping disadvantaged groups or, you know, avoiding bad things and that this is why we have these policies in place. And so if the, and they're either they don't help or the bad things that are allegedly being solved by these policies are actually being caused or exacerbated by those same policies. Hey, Mikhail again, for an ad, you've heard me talking about Elysium,

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to continue functioning optimally for as long as possible. You really do have nothing without your health. So you guys can get one month free on a subscription to Matter. That's the equivalent of $45 off by visiting explore matter.com slash Jordan and using the code JBP Matter. That's ExploreMatter.com slash Jordan promo code JBP Matter for one month free. Enjoy the rest of the episode. Okay, so you cite Keynes, John Meinered Keynes in the book. And you say the quotation goes something like those who care nothing for economics are generally

the slaves of some defunct economic theory. And so the proposition is, we make decisions based on our economic theories, whether we know it or not, and it's better to have the theories laid out explicitly and appropriately so that we make our decisions consciously, rationally, and with as little error as possible. That's basically the rationale for developing some expertise in this area. Right, exactly, and also, so for example, like something like quantum physics,

the general public doesn't need to know that or even believe in that in order for your computer to work. You know what I mean? They can just go by the computer it works or it doesn't, but with that or even believe in that in order for your computer to work. You know what I mean, they can just go by the computer at work, sir, it doesn't. But with economics, it is important. I would argue and Mises would argue for the public to at least know the basics because like something like minimum wage laws, if Mises is right, then that actually makes it harder for teenagers with no job skills to get hired.

And so if the public is supporting a hike in the minimum wage to $15 an hour in the US Thinking this is going to help young people Well, no, that's actually hurting a lot of them. So things like that where let's walk through that Just as a practical example before we go back to the to the general Outline, so yeah the Democrats have been pushing at least on the on the edges, let's say Democrats have been pushing, at least on the edges, let's say, they've been pushing for a $15 an hour minimum wage. And people object to that for various reasons. Now, on the face of it, it seems like it would be a nice thing if people who were fated to toil away in minimum wage positions, had a living wage of, let's say, $15 an hour, which is hardly the income of a tycoon.

You can understand that people who have some sympathy for those who are relatively dispossessed would just as soon see them thriving economically. Then you can also see that it seems mean- mean spirited on the surface of it to object to such a thing because it's easy to say, well, what is it? You don't want poor people to have a living wage, which is the instant black and white objection that emerges when any such discussion takes place. Now is it, would it be a proposition of the Austrian school that instituting a minimum

wage of that sort would be an error? And even for the people it purports to serve, and if so, why and how confident can you be in that criticism? Okay, so great question. The so strictly speaking, I should be clear, the Austrian school is such is value free. You know, so it's a it's an objective positive statement of, you know, facts about reality. So it can't the Austrian economics per se can't say the minimum wage hike is good or bad. It can just say if what the consequences, this is what happens and so okay, okay. So what we can certainly say is workers, if their productivity is below $15 an hour, if you know, by the employer hiring them, if they're not increasing revenue to the firm,

if we put aside the issue of how much they get paid for the moment, if they're boosting the firm's revenue by less than $15 an hour, then if there's a loss and you have to pay this worker at least $15 an hour, well, then the firm's necessarily losing money if they hire that person. So to the extent that you think employers are profit seeking and aren't hiring workers out of charity, but are doing it because it's makes a smart business move, then by art of efficiency. Well, we can also say that because it makes them able to do it, I mean, if I'm making $40,000 a year, I can't afford to pay someone $50,000 a year,

whether I want to or not. It's just not within my power. And so is the proposition that there's a relationship between supply of jobs like that, and they're wage such that if you increase the minimum wage to $15 an hour, you necessarily delimit the number of jobs that are going to be produced

because of the problems that you're describing. Well, certainly you can say if you put on the caveat other things equal, right? And so, and that's how all these things go. So it could be in chronological time that it just so happened. There was a technological innovation that somebody invented some new tool. And now even when you hire a 17-year-old, with no job experience, you put this tool in their hands, and they're creating so much product, like you're making an extra $30 an hour by hiring them.

So if that just so happened to be invented, right, when the minimum wage hike happened, the data would not show a drop in employment, right? But the idea is that's because there was some exogenous shock. But the claim is, other things equal was some exogenous shock, but the claim is other things equal. Yes, if you make it artificially more expensive to hire some factor input firms will tend to hire less of it, right? Just saying something. So let me throw objections to that your way and tell me what you think, because this

is a pretty crucially important issue. So maybe I could say, well, wouldn't firms merely reduce the amount they're paying their other employees, the more highly paid employees, by a fractional amount, to increase the wages pushed down to the bottom and thereby compensate by what would essentially be something like an internal tax. I mean, these systems are so complex that there's a theory that we outlined the theory in the Austrian school about, at least to some degree, about why producing a minimum wage hike would delimit jobs. But there's a big difference between how a system works in reality and how it works in theory. And so what do you do you think that the propositions put forward by the Austrian school are of

sufficient integrity that predictions about the consequence of something like a minimum wage height can actually be made with some degree of accuracy rather than merely being theoretically consistent? Right. rather than merely being theoretically consistent. Right, okay, so great question. Let me first just use a quick analogy or an analogy, but another example, when progressives want businesses to emit less carbon dioxide,

one of the go-to policy measures is a carbon tax. So in that realm, most people on the left, you know, they want other measures too. But when you say, Hey, if we put a $100 a ton tax on carbon, they don't just start making up all these reasons why firms don't want to save money. And oh, no, they'll still use just as much carbon as before. They'll just pay less to other things to come up with the money. It's all straight forward. Oh yeah, or if you want to get people to not smoke as much, what do you do?

Let's put a really big tax on cigarettes. That will make people feel less. So in all these other areas, people respond to incentives, but for some reason with labor, the same firms that are money-grubbing and all they care about is jobs and they'll outsource factories to Indonesia

to save two cents on labor. If you make teenagers in the US twice as expensive by more than doubling them in on wage, no, that's a right wing lie that they'll hire fewer workers. So I'm just noting the end. So you're, okay, so your proposition is that the same people who formulate these theories allow, make an exception in the case of those exceptions they want to see, but they abide by the general principles that the Austrian school holds or that the marginal theory, the marginal, the theory of marginal utility proposes in other situations used carbon tax as an example. Right. So, so the basic proposition is if you make something more expensive, firms will be incentivized

to use less of it. Right. And even in the context of just labor, again, to say, oh, if it turned out that they ran the numbers and they could shut down the factor in the US, lay off all those people and open the factory in Indonesia and save a buck in our most people in the love of say, Oh, of course, the money, of course, would do that. But yet when you double the price of US teenage labor, all of a sudden, no, they don't care about money, the employers.

So, okay. So let me ask you a personal question. Yeah. And let's, let's jump outside the realm of theory for a minute. Do you, I mean, I, I understand the attraction of coherent and powerful explanatory theories. But I always balance that against the terrible complexity of the real world. Right. And so do you believe that then that instituting a minimum wage hike would in fact be detrimental to the poor? Or do you think the system would be flexible enough to adjust to that and that the net benefit

would be positive? I understand the theoretical prediction, but there's always margin of error, right? And I also understand the objections you laid to it. You're absolutely right that people assume corporations will maximize their profit seeking behavior, and why wouldn't they do that in the case of the minimum wage? But still, you know, the ethical argument for cranking up the amount of money that poor people are paid for doing minimum wage jobs, it's really quite compelling emotionally. And so you have to be pretty damn certain of your first principles to say, well, hold on there, you're actually going to do people more harm than good. And so are you confident enough in the way that these

theories lay themselves out? So you do believe that that would be bad policy, even for the very people that it purports to serve. Okay. So ethically, I'm against it because I believe in property rights, and I don't think the government has the authority to tell people, you know, oh, if you're going to hire someone, you have to pay them this amount. Like, as long as they're voluntary contracts, and it's not a six-year-old who doesn't know what they're agreeing to, so I don't think the government has the right to do it.

So, for that reason, I would never be in for it, but in terms of just the economic impacts, I think for a modest minimum wage check, so I think everybody agrees that they set the minimum wage at $300 an hour, that would be devastating. Right, that that would be when they get the right. So everybody agrees if you did it too much,

all the stuff, the Austrians and the Chicago school types are warning about would be true. So what we're quibbling about is, could you do it a little bit such that the net benefits. Right, exactly. Exactly. So I do agree, I mean, they have raised the minimum wage

in the past and it's not that all of a sudden, no teenager can get a job anywhere, but it is true empirically that unemployment rates among, you know, young people are much higher than the general population. Right. And so this, you know, is partly to explain why that would be. And so I think you're right, in practice, there are other considerations that come into play. And that's,

I mean, it could all ultimately work through the issue of productivity that for, you know, small minimum wage hike, the firm, like a McDonald's franchise is probably not just going to lay off everybody because that would be bad for morale. But I think what is true is knowing minimum wage hikes are on the horizon, they have revamped their operations to have more kiosks to have, you know, so now, instead of having 18-agers on each shift, they've got 135-year-old manager who's got, you know, the thing taking orders from drives through,

they got the machines that are optimum, they just put the drink there and hit the sides, and the machine fills it up. They're running. Okay. So I think that's all true. All right. So we could say with some certainty then that there's a price to be paid for increasing the minimum wage. And the price is that minimum wage workers are more expensive and will therefore, and therefore that will incentivize the search to replace them in some manner.

Right. And also how much they're replaced, well, that's not easy to calculate, but the incentives are then pushed in that direction. Yeah. And I would also have mentioned too that there's winners in losers, I would say. So it's, I can't make a blanket statement. Oh, this is necessarily bad. So yeah, they raise the minimum wage when the dust settles, there will be workers who are earning $15 an hour, who in the alternate timeline would have only been earning $850 an hour, let's say. But there's also a lot of workers

that never had a job in the first place that maybe would have gotten a chance to get hired. And never get in. So that's interesting, because that means that in some sense, there's a There's a hidden moral hazard there Which drives that sort of behavior because you can imagine this scenario is like

Every single person who has a job that's a minimum wage job who gets a boost to 15 dollars an hour Is going to be very happy about it And all those people who don't have jobs won't know that that's the reason why. Right. Right. They might, you know, attribute it to racist. Well, they could attribute it to 10 things, right? To 15. They're not necessarily going to point to that decision and say, well, it's that specific decision that means that I don't have a job at all. Right. And I should also mention too, I know know I actually know the Canadian data better because I've done some work for the Fraser Institute up there, but it's,

it's called a low income cutoff threshold is like the Canadian government's measure of poverty, you know, like households that are above or below poverty. And these aren't the exact numbers, but it's in the 80s percent where 80% of the people who make minimum wage in Canada are in households above that poverty threshold, in vice versa, 80% of the people who are in households that are below the poverty threshold make more than the minimum wage. So it's not correct to think of minimum wage earners as like single mothers who are struggling with kids. It's like suburban teenagers who are home from college

for the summer who are going and working at McDonald's for a summer job. Like that's the more prototypical minimum wage worker. It's not some blue collar person. Another thing too, just to mention, most people earn more than the minimum wage. So the very crude notion of power bargaining and the employer has all the bargaining power. And that's why we have to rate. If that worldview were true, just

about everyone would earn the minimum wage. And yet most people earn more. And so once you say, well, why is that? Well, it's because of competition and the people's skills are $20 an hour, they're going to get paid more than 725. You realize. So, okay. So it's really important actually to figure out who is it that's only qualified for a minimum wage job because that also drives the narrative of the utility of raising the minimum wage. Right. And your claim is that it's mostly people from households that are above the poverty line.

They're not people, they aren't the minimum wage earners aren't the people upon whom multiple children are dependent typically. Right. And so that's why, like just to give you an example, there could be a perverse thing. Significantly raise the minimum wage, thinking you're helping poor people could end up largely raising wage rates of middle-class workers, but making fast food more expensive for a lot of poor households. That's just, you know, the mom's coming home from work and she runs the McDonald's to get something for the kids. And now some of the probably, you know, some of the minimum wage height got passed through

to make that food more expensive, whereas she already was earning more than the minimum wage. Right. That reminds me of some of the controversy that surrounded Walmart because Walmart pays its employees a relatively low wage, but they also provide food at below what the market was charging for groceries, basic groceries at that point. And so you could make the case that they were a net benefit to people who were in poverty because they drastically, they materially lowered the cost of groceries. So it depends on whether you look at the wages they paid or they also provided jobs for that matter. And I'm not necessarily trying to provide a defense for Walmart. I'm just pointing out

that there are multiple factors that need to be taken into account when you're analyzing the consequences of such decisions. So I was thinking too about your book philosophically, again, trying to solve the problem of why this is important. You know, there is a philosophy that goes along with each economic school, and the philosophies, in many ways, have a pronounced effect on the nature of the public debate. Right now, we seem to be falling prey to a pretty intense ideological battle between those

who claim that our social institutions are functionally predicated on the expression of arbitrary power, which is, in my view, some in some manner related to the labor theory of value and the notion that the capitalist skim off the extra value, which is something we should return to, and there's an entire critique of the structure of society that goes along with that. Now, Mises predicated his ideas, and this is partly why these works are philosophically important and ethically important. Mises predicated his work on different a priori principles. So he believed that people were capable of free action. That was our determinant characteristic. And that we banded together cooperatively to maximize the, what would you say, to maximize the consequence of our free action.

And it's not a theory that's predicated on the expression of arbitrary power. Yeah, so in this even kind of ties back to what we just talking about the minimum wage debate, that I think the fundamental divide between people like me who are warning about the negative consequences and people who are saying, no, no, the firms would just, if you force them at gunpoint to pay more, they will because they got buckets of money and why I was saying, well, that's why it's,

if that's the person's worldview where they think it's all just a matter of the, you know, the employers have all the power, if you're a starving worker, you got to just accept whatever they give you, if that were really the full story or most of the story, everybody should be earning the minimum wage. And yet most people are earning more. And so that so that shows, no, it's really not just about bargaining power. It's if if your labor time produces $20 an hour of stuff for your employer, in a market economy, you might not get paid 20,

but you're not going get paid 725, because somebody else could come along and offer you 10 and you would take that offer and they're still, you know, they're making the gap. So, yes, like wise here, the Marxist conception, I mean, there was lots of things wrong with it, but yeah, Mises thought, no, if you study economics and just see how is it?

Like, when you study, why just see how is it, like, why, when you study, why would a, why would an employer hire workers in the first place? And it's not out of generosity. It's because the worker by adding to the operation, the firm makes more money, but then once you realize, okay, that's why. So if a worker can boost your revenue by a certain amount, well, other firms want that too. And that's as long as there's competition, that, you know, that worker's going to get paid accordingly.

Right. And so hypothetically, what happens as that sorts itself out is that the managers and the executives and the entrepreneurial types who are providing employment get paid for their managerial administrative and entrepreneurial ability in organizing the firms and the workers. I mean, not that there's a clear distinction, which is something else you point out. There's not a clear distinction between worker and manager worker and entrepreneur. But in any case, the workers pay the entrepreneurs and the managers for providing the structure within which they labor, essentially, rather than the managers and entrepreneurs skimming off the excess labor of the worker. And, you know, in that distinction between worker and manager,

the fact that that distinction is not so clear is also of paramount importance, I think, because it's very difficult to categorize the world into oppressors and oppressed if the categories of oppressor and oppressed aren't so clear to begin with. Right. Yes. You hit on a bunch of things there. So, yeah, Mises was, I think, one of the better economists in stressing that, yes, we have these, I think he called them catalactic functions, meaning like, you got your entrepreneur,

your worker, your landowner, your capitalist, and those are sort of ideal types that we can, but he was saying yes, in the real world, every action is entrepreneurial. So even a worker who takes a job with this firm, and you would say, oh, that's not entrepreneurial. Well, no, it was because the worker had to forecast the future and say, do I want to be with this firm

or maybe I can go with this startup over here, who maybe is offering me stock up. they're taking they're taking a risk. Right. Because in some sense they're purchasing a career. And so they have to analyze the general marketplace and decide, well, first of all, where they're going to get best value for their money, but they have to look into the future and say, well, is there a future with this firm? And so it's micro entrepreneurial in some sense because it only determines the course of their career and maybe their family's well-being moving forward.

So it's a difference of scale rather than type. Right, so just like some brush startup person go into outside funders to say, hey, can you put money into my new software firm? And the capitalists are wondering, gee, do you put money into my new software firm? And you know, the capitalists are wondering, do we want to risk and invest in this? Everyone knows that's an entrepreneurial decision. But by the same token, yeah, they go and get a bunch of programmers and say, come work with us. Don't go work for Google or whatever work for us, because we'll give you stock

options. And, you know, we can't pay you anything right now. Again, so that it's like you were saying, these everybody has to be entrepreneurial in a sense and Mises talked about that. To go back to what you're saying, you were right too about the notion that, oh, it's the capitalist skimming off the workers, because there is a certain plausibility to that, that there's a sense in which, well, gee, who makes the cars?

Well, the workers go into the factories and they're using their hands, and whereas the fat cats are just sitting, getting their dividend checks, looking at the stock price, they're not their hands and whereas the fat cats are just sitting, getting their dividend checks, looking at the stock price, they're not making the cars. So there is this sense that it's the workers who are making everything, and so why don't they get to keep the fruits of their labor.

But this goes back to Bumbava, who was like a second generation Austrian. He pointed out that it's the time element that in a sense really the workers, when they get paid their wages are getting it advance On what their labor is ultimately gonna bring down the road and so he was saying, you know workers if they wanted to they could just Formed together and they could build everything and sell it down the no one's stopping them while doing that But they want to get paid right well. They me well. They may also be stopped from doing that because they don't know how to do it.

I mean, again, there's an intuitively obvious phenomenon at stake there that you described, which is that, you know, where the rubber hits the road is the motion of hands. And when you build something, well, that's the sort of point at which the thing manifests itself is the operation of hands. But to say that what hands do, what manual labor does, is the only form of labor is to completely eliminate the notion that abstraction is useful and also laborious. And that would mean that thought itself is of no utility and that abstraction itself

is of no consequence. And that seems, I mean, that's an extraordinarily primitive theory of labor to think that thought itself isn't labor given that we know, I mean, we have to decide if we would accept this proposition, thought is a labor multiplier, otherwise why bother with it? Right. So if you're good at thinking, you think up a more efficient way of doing something. And maybe that's your managerial, what would you say, contribution. And that's not a matter of exploitation. That's a matter of providing a structure in which manual labor can be done in a manner that's more competitive. And so that enables people to hire other people.

And it's absolutely ridiculous not to give people at all levels of the abstraction hierarchy there do with regard to labor. I don't understand why Marx was able to get away with that. Like, is it just the fact that it's so obvious where the rubber hits the road? It's so obvious that when you're working with your hands that that's work, that that obviousness just overrides other more abstract considerations, more detailed considerations? I'm not sure if I might just emphasize that because you made a great point there and just have been driving home for people, right? So it's the fact that the that factory is sitting there,

someone had to make that decision and that's something that Mises focused on with the socialist calculation debate that I'm sure we'll get into later in this discussion. But people just take it from granted, the factory is just sitting there and the workers where you're right, show up and they have these tools that somebody, you know, Henry Ford or whoever, like came up with the idea of the assembly line approach to mass producing things. Like that someone had to invent that. And that, you know, and so you're right. Right. And so you might think Henry Ford thought that up in 15 seconds. And so the labor theory of value falls apart pretty damn hard there because that's such a stunning technological advancement that the segregation of labor into its constituent

elements. And it also enabled Ford to pay his workers much more than workers had been paid previously. And he was on board with that for all his other flaws. He wanted to pay his workers enough so they could buy what they were producing. So and you could call that an enhanced form of selfishness, I suppose, but it worked out quite well for the workers. And so you do get these situations where revolutions in thought produce something of almost incalculable value and no labor theory,

well, any labor theory, any theory of economic value that can't take that into account is severely flawed. But it still doesn't account for why it's so damn attractive. Yeah, and I do want to come to that, but just another thing, too, to consider. It also explained, or to just merely explain everything, but oh, it's the workers produce everything and everyone else is skims off the top. But why is it, though, that so many people around the world are desperately trying to get into advanced, like, you know, first world economies, let's call them?

It's because at average hour of labor in Bangladesh is not worth as much as it is in the United States. And so there is something about the fact that the infrastructure in the US or Canada or, you know, in Europe, labor is more productive there than it is other places on the globe. So it's, you know, there clearly is more to the story than just all the cast. Well, and then, you know, that also raises a question too, is just exactly what constitutes that productive infrastructure? And a lot of that is actually conceptual, right?

Because we don't know, for example, how much the idea that each individual is of sovereign value is worth economically, but it looks like it's worth a lot, because cultures that are predicated on that presupposition tend to be incredibly productive economically in cultures that aren't don't. And so we can see that abstractions of the sort that make up the philosophical basis for economic theorizing actually determine the economic course of the country and all the individuals within it. So let's go back to first principles again. What I'd like to do, if we can manage it, is to contrast, say, a radical leftist view

of economic function and individual psychology with the Austrian School of Economics. So this is gonna be difficult, but maybe we can manage it. So we kind of delved into the labor theory of value versus the marginal utility theory of value. And then we took a bit of a foray into the idea that, well, mere, you can't easily subdivide people into manual laborers. And those would be the oppressed class and those who skim off the top because, well, we should

also point out that even manual labor takes a certain amount of abstraction and intelligence. And I'm saying that in no means whatsoever to be denigrating, we don't have robots that can bust tables, for example, because busing tables actually turns out to be an incredibly complex cognitive task and requires a fair bit of organizational ability to do efficiently, especially under a high load. And so, okay, so we've talked about, we've talked about the theory of marginal utility and the idea that where labor resides is not so obvious and the notion that those higher in the hierarchy are just skimming is an unsustainable proposition.

But there's other fundamental differences between, let's say the Marxist viewpoint and the viewpoint of other economists, including the Austrian school. So let's delve into those, notion of the person, for example. So Marx presumed that our consciousness was determined by our society, right, that we were downstream from society in some sense.

And that's not a proposition that Mesus was particularly fond of. Right. So, um, I think I can, you know, at some point I'm going to reach the limits of my knowledge of the Marxist world, you, but I think I can safely say that Marx thought the material forces of production were the prime mover in history. And so, you know, you had slavery in ancient times, and then it gave rise to feudalism, and then it gave rise to capitalism, or mercantilism, let's say, and then capitalism, and then the next stage would be socialism and communism, and that he'd set each stage, you know, had to develop to its fullest potential, and then it would stage would be socialism and communism. And that he'd set each stage, you know, headed develop to its fullest potential, and then it would burst to thunder the next one.

And that at each stage, the intelligentsia would come in and give an ideological superstructure to justify the current system. But it was, you know, the productive forces were the driving thing, and then the idea people came in to just, you know, make up a story to explain to the mass. And then the story was to justify the exploitation

that was part parcel of skimming off the excess labor. Right, right. Right, but that isn't how Mises looked at it, is that people didn't bend together to exploit each other. Right, right. This is crucially important, right? Because the criticism that's directed at patriarchal structures, let's say, is predicated on the idea that they're fundamentally exploitative

and that the relationship between people is one of power. And the implication of that, especially if it's arbitrary power, the implication is that anybody who occupies anything but the lowest tiers in a given organization is in consequence an oppressor. But that Mises insisted that people banded together for purposes of cooperation and multiplication of effort. And that's a completely different view. So can you can you provide some justification for that? Sure. So the starkest contrast that with with Mises responding to that Marxist worldview is he thought that no ideas are the primary motivation that you know human action starts always with a thought. You know people have a goal and they use their reason to choose a means to try to attain it. They might fail but that's what. That's what he meant by. So we're rational sovereign actors.

Right. And we're trying to chart our own course. Right. And so for him to explain, for example, why is it that it went from feudalism to the industrial capitalist age, it's because ideas of individual sovereignty and people have rights for various historical reasons in Western Europe that emerged, whether it was because of Christianity or just the squabbling and the terrain, but the idea that the king can't come into your house. Your house is your castle, notions like that,

Mises argued came out of Western Europe earlier than other places. And that's why they took over the world, basically. Like that was the reason. So then scientifically or empirically, why was that idea so potent or powerful? It's because of what you're saying that Mises thought, it just so happens to be the case that human labor, when you work cooperatively, gets magnified manyfold.

That if we, especially, instead of everyone growing their own food, making their own clothes and everything, being their own house. Okay, so there's an attractive, there's an attractive quasi-religious notion as well. Okay, so here's what we do. I'll tell you a little story about this. I went and stayed at an Airbnb out on the coast of British Columbia one year, and it was this nice little cabin

perched on the shore of this idyllic island. It was kind of a log cabin, quite primitive, but very beautiful, in a beautiful locale. And the people who owned the place were from Europe, and they were back to the land types. So, you know, the 1990s equivalent of hippies, and they believed that everyone would be better off if they were self-sufficient

and that they would be more psychologically healthy if they returned to the land. And so, they bought this place. Well, they were trying to be self-sufficient and grow their own chickens and raise their own chickens. You don't really grow them. But to raise their own chickens and plant their own vegetables and so forth, and what

they soon discovered was that that was unbelievably difficult life, that they were struggling every second to stay afloat financially and that being self-disufficient, especially on an island, which is a place that poses its own complications, especially in a harsh climate, they were completely trapped and they couldn't sell their property for anything near the market value that they had purchased it for. And so their move back to the land was a complete bloody catastrophe. And so, well, I wanted to tell that story because do we have these romantic notions, you know,

that we should all be self-sufficient and that everyone would be better off individually in their family, in their town, in their states if we were self-sufficient. But there's a different idea, which is that we're better off trading with someone, generally speaking, even if we're better at everything we do than they are at anything they do. And so that's a really crucial point. And so maybe I could get you to elaborate on that. Like, we're rational people. We don't band together to tyrannize

each other. We band together to maximize our productivity. And we do that to stave off the catastrophes of nature, let's say, so that we have enough to eat and enough to drink. And we don't die from some bloody miserable disease. That's where the tyranny is in our subjection to our vulnerability. We band together to maximize our productivity. Why does that work?

And why is that justifiable in terms of assessing the nature of our social institutions? Okay, sure. And again, just to drive home for Mises, how critical this was, Mr. Hen, that was the basis of civilization. That's why we need to have property rights. We need to have rules of social order.

You can't go around killing people. You would always want to say because our standard of living rests on the fact that we all specialize in what we do best produce way more of our thing than we need personally and trade it with others. And so if every, you know, certain people specialize in our farmers and they grow way more food than they need and sell the rest to others. And some people just make a bunch of sweaters way more than their family needs to wear and they sell it. Some people just make a bunch of cars way more than they're going to drive and they sell it.

We all end up with more food. Sweaters. Yeah, and that's hard because once you build one car building the second one is a lot easier. Right. Yes. Right. So, so yeah, there's a few reasons that try to understand why is it that specialization magnifies the productivity of that. Yeah, well, let's walk through that. Okay, so there's a

proposition. Specialization maximizes productivity and then trade is of benefit to all. Okay, so let's justify that from first principle. I give you some obvious reasons. So one is people have different abilities and so, you know, some people are just like a big burly guy is gonna be better as a coal miner than some dainty woman. And so things like that are obvious. Okay, certain regions around the world just are more hospitable, right? You're gonna grow more oranges in Florida

than you are in Alaska. That's just so clearly the people in Florida should specialize in growing oranges and people in Alaska. So we can capitalize on the unequal distribution of productive resources by trading. Right. Right. Instead of trying to eradicate the inequality, we can capitalize on the fact that it exists, which is in a sense is something that eradicates it. And, you know, what would you say, practically speaking. And that's important to note too, because we have this idea, and I think it's deeper rooted in our moral intuitions

that everybody should be equal. It's like, well, wait a second, we trade on our inequality. So that's kind of interesting. You're better at something than I am at something, let's say, and that's an inequality. And you might even say, well, you became unjustly better at that than I did,

for historical reasons, but the fact of the matter is that than I did, you know, for historical reasons. But the fact of the matter is that inequality exists, so let's try to address it. Well, one way of addressing it would be for me to get as good as you are at that thing, but the other way would be for me to do what I'm good at and for you to do what you're good at and for us to trade. And then if we have money, well, we can transform the value of our labor into something that's universal, and that is an equalizing force in and of itself. Right. Yeah, that's all certainly true. Just another quick one, though, is even if people had similar aptitudes up front, like two people who are identical in all respects. If one of them went into studying

brain surgery and one of them went into studying chemistry, 30 years later, when you check in on them, the one person's going to be way better at doing brain surgery than the other person's going to be way better at, you know, identifying new chemical compounds. Right. So because we have finite resources, each of us, because we have finite time, that means that we can't be as good as everyone can be at everything, ever. And so we end up specializing in something so that we have a comparative advantage. But that's, it's not, see, the language here, and you said, Mises is very careful with his language. So let's be very careful with our language. If I study for 30 years, it isn't exactly that I have a comparative advantage over you.

It's that I comparatively have something to offer you. Right, because advantage implies that I've taken something from you in some sense, or now that I can hold something over you, you know, because you say take an advantage of someone. But it isn't that. It's now that I'm bringing something to the table that you actually desire. And so that's not an advantage I have. It's something that I have to offer.

And if I have any sense, I've picked something that I have to offer that I know other people want. And so there's a kind of altruism that's built into that specialization. Now, okay, so I'm going to take it one step sideways here too, from a Marxist perspective. Now, Marx also said that we were alienated, that specialization alienates us from our labor. And, you know, there's some truth in that, because, well, here's another example. When I was a kid, 16 or 17, I worked at this lumber mill, plywood mill, and it was probably built in the 40s. So it was kind of a dark satanic mill, you know, to use the poetic phrase. And it had a pretty hierarchical structure, the form and exerted power over the workers. And, you know, we had 15 minute breaks, but it took 10 minutes to get to the break room and back.

And so it was pretty regimented. It was classic labor versus manager situation for what it's worth. It was definitely noisy in this place. So you had to wear headphones all the time. And my job was to stand at the end of this platform facing a machine that was about two blocks long that was basically a natural gas furnace. And I flipped these pieces of plywood sheathing onto a conveyor belt and filled a conveyor belt, and then it would move into the furnace and go down the two-block journey through the furnace and be dry, and then my friend, who worked on the other end, would

take these off. And so it was really, it was alienating labor, right? I would do that eight to sixteen hours a day, depending on whether I was working overtime. And all I was really doing was grabbing a piece of wood and flipping it, pushing it forward. And so it was hot and dusty and all of those things. And now, and then the machine would jam and burst into flames and the whole plant would fill up with smoke and steam.

And then we could climb on top of the plywood stacks and have a nap. And so that was sort of like the holiday. But in any case, it did give me some sense of what it meant to be alienated from my labor. There had been guys there who had been there for like 20 years doing this job. And I thought, well, that would just drive me

stark, raving mad. And so that alienation theory, I mean, how do we deal with that? Because the problem with specialization is that, well, you have to sacrifice all the other things you might be to do this one narrow thing. Now, I know that opens doors. Like, if you become an expert at something, you go through a narrowing process while you're being an expert and then the world opens back up. But I mean, is it, how do you deal with, or does the Austrian school of thought deal with the fact

that specialization requires a particular sacrifice? Is the proposition just that it's worth it compared to the alternatives? Yeah, before I forget, let me just mention, you hit the nail when you used to compare the damage a few minutes ago and you said that even if one person or historically it was done in terms of nations trading, even if one person or historically, it was done in terms of nations trading,

even if one country was better at producing everything, its people would still have a higher standard of living if it's specialized and what it was really good at and then traded with some other nation. And so David Riccardo was credited with that. So you're right, that... And why is that? Because that's subtle.

And you know what I mean? It's easy to understand. A way to a more colloquial illustration would be like a doctor who can do a better job taking people's blood pressure and weighing them and writing down on a piece of paper what their blood pressure is and weighing them and asking them what brings you in today.

It would be a waste of the doctor. The doctor shouldn't do that. Doctors should hire other people, nurses or whatever to do that basic information. So the doctor can just focus the time of what the doctor can do. Or a lawyer. So he should concentrate on whatever it is that he's that other people are least likely to be able to do right. Right.

Or so that's kind of a general rule. So you should concentrate on what's of general value, but what other people are least likely to do. Right. Right. Or so that that's kind of a general rule. So you should concentrate on what's of general value, but what other people are least likely to do or you know other examples. We're able to do. Michael Jordan is very athletic. He could probably cut his lawn faster than the neighborhood kid, but Michael Jordan shouldn't be cutting. You know, he should hire someone else that he goes and practices basketball or a lawyer who's a really fast, type, or type best should still hire a secretary to deal with, you know, the paperwork so the lawyer can focus on talking to the client.

And so there's all kinds of examples where just because you can do a task better than someone else, it still might make sense for you to outsource that and hire that person to do it, to free your time up to focus on where you're really good compared to the other person. And so I guess the, I guess the alienation issue is dealt with to some degree I read young psychological types a long time ago and one of the propositions he put forward was that when slavery was eradicated in the West, we each became our own slaves. That was the price we paid for it. And so we slaved away for some portion of the day,

but the consequence of that was that we had some time where we could be free citizens pursuing our leisure at will. And I think that's kind of an interesting way of thinking about it, too, is that the advantages of specialization are such that it's worth harnessing yourself to the sled for a certain amount of time per week so that you can be relatively free and everything else you do. And the reason that that's acceptable and beneficial is because there isn't a better alternative. Right. And so yeah, I think the way Mises would handle the alienation issue is

this is a few things. He would say kind of like what you were saying earlier about this ideal notion of, and by the way, my wife and I want to get some chickens too. And so I'm not not getting that we want to do that too, partly because we're afraid of what's coming. But Mises points out that a graph of history in like per capita living standards is like this, like this, like this throughout the century, and then it goes like that starting in, yeah, 17, late 1700s or so. That most important charge in the world.

Right. And so, and also population explodes. It's not merely that it's the same population and just their living center. It's like all of a sudden, you know, the Earth's population starts growing very rapidly. And so Mises Point was the only way that could happen is the cities, all of a sudden started growing, you know, factories, so peasants left the farms and went to the cities where the

jobs were to speak colloquially. Well, yes, and they left the farms and went to the cities despite the existence of the dark satanic mills because of the things considered. It was better in the dark satanic mills because of things considered, it was better in the dark satanic mills than it was on the bloody farm. Now, to inferness, it wasn't just all laissez-faire and property like there's people on the left will argue that there was what's called the enclosure movement

and that like some of the land that the peasants used to just live on and it was considered there's these rich people in cooots with the authorities came in and fenced it off and kicked them on. And so they had no choice but to go to the cities because they were dispossessed. Right, but that doesn't stop. That doesn't mitigate the fact

that everywhere in the world, people are moving from rural areas to the city, right everywhere, and faster and faster and faster. And so, and so there's a general trend there despite I mean it's very important to separate out the general trends from the aberrations right and you can point to it and like this is why I want to emphasize this issue of power because we're talking about first principles here and and it's really important to get your first principles about

the nature of your society correct and so you, one theory is that values produced by labor and then the exploiters skim off the excess labor. And another theory is that, no, we band together as free individuals. We sacrifice ourselves to become specialists, but the net consequence of that is everyone's gain, including our own. And we do that as free agents. And that's not a fundamentally exploitative system. The fundamental exploitation is our subjugation

to the demands of our biological vulnerability, not the tyranny of the social institutions that actually ameliorate that. Now, and then we could say, well, yes, but there are aberrations and sometimes social institutions degenerate in the direction of arbitrary power and and and sometimes they're not merely a consequence of cooperative action, but that's not the main trend and that's not the central tendency. Right and also to just going along the lines of the alienate. So you're right and there is a tradeoff, I guess, that you can once that industrial revolution occurred and people and this is a point me says would stress too, that when you think about all the factory and that's just the fat cats, no, what are they doing at the factory, especially if they're mass producing,

that's mass production for the masses. It was in the middle ages, where there were boutique items made just for the rich. But the rise of modern capitalism, where people are going to factories and just cranking stuff out, and all this is so monotonous, that's because it's mass production.

So that's showing, that's what the consumers are getting. You're not a factory, it doesn't have a bunch of workers there sitting day in and day out doing mindless tasks Just for a baron that they'd be too much output. It's for the masses So there is that trade-off that you as the consumer if you want all of this cornucopia Of goods available that wouldn't have been available in the year 1500 That's because of this this new way of producing. Right. So you price you pay for that is that you have to serve to some degree as a cog

in the machine, but you get to decide which cog and which machine. Ideally, yes. And so, um, and also to like, we just take it for granted that, oh, we have a weekend now. We only, you know, typically work five days a week. And even there, when people go into the office now, they don't really work eight hours. They're on Twitter, they're getting coffee. You know what I'm saying? So even now, a work day is not nearly as hard as it was 50 years ago. And so, yes, you might feel like, oh, this job, my boss doesn't appreciate me. And I, but it is, you know, you have way't appreciate me and I, but it's, it is, you know, you have way more free time now because productivity is higher.

Your wage rate now is way higher than it would have been in the year 1850. And that's because of, you know, private property rights, Mises would argue in the incentives that entrepreneurs are faced in a market economy. So in ultimately, yeah, if you don't like your job, you can quit it and go do something else. If you have a genuine market economy. All right, right, right. So, so your, your, your, your, has a wage slave who can choose his slave owner, so to speak. And that's, and maybe that is what constitutes freedom when you also face biological necessity. That's the best you can do. All right, so here's a proposition. Property is theft.

Now, that stems from the same kind of ideas, the same Marxist matrix, let's say. And the idea there is that, well, people gain arbitrary control over a natural resource and fence it off from the use of others. And that should be a general resource. And the mere fact that they have power enables them to maintain the fences and to benefit preferentially from whatever can be raised there, perhaps as a consequence of use of exploitation of the labor of people who are then allowed onto the land. And again, there's something that sort of folk attractive about that, although I think it also dangerously incites and justifies envy. But maybe we need a better justification for private property. So what have Mises have to say about that? Okay, I don't know if Mises made this point,

but I've seen others like just Primaphasia, the statement property is theft is almost a contradiction or paradox because theft means somebody took your property. Right, so the notion of property per se is built. If there's no such thing as property as a nonsensical concept, then so is theft, right? And so that's, okay, I would make that point. Okay.

And so I think what Mises, one of the things he would say is even the socialists who say, oh, rather than the anarchy of production or how monstrous would it be to have all the factories in the farmland in the hands of this narrow group of people, the capitalist, let's call them, or the bourgeoisie or whatever term we want to use, and then the mass of the population is utterly dependent on their decisions and look at how they live, their riotous living and their drunkards. These aren't refugees or people anywhere or sober minded people.

This is a crazy system. Let's be more scientific and rational and have experts running it. Still, they're just replacing who the narrow group of people are who are in charge. It could not be that the people collectively decide which crops are going to get planted on this acre of farmland because what if people disagree? There has to be some mechanism by which we can agree, okay, we're going to plant wheat here and we're going to plant tobacco over here or we're going to build a factory here and this is what we're making. That people can have disagreements about that and it's silly and naive to assume, oh, if we just had reasonable people sit down

and think about what's right, then it would be obvious how to use all societies, you know, means of production. No, it's not obvious at all. And so under a socialist approach where we get rid of, you know, the evil or the theft of private property, at least in the means of production, you're actually not getting rid of the fact that a select few have to just decide and everybody else has to go along with it. And so, to private property per se, so why, I mean, it's easy to think of private property actually as property, but of course, the idea of private property is really the idea that you can own anything. And so then I guess if we go down to first principles, what is it that you need to own

in order to make social institutions work? Well, I don't think there's anyone who disputes the idea that you should own the right to dispose of your labor as you see fit. I mean, even people who are on the radical left, I don't think would allow for that degree of the dissolution of ownership to take place. I mean, their objection to begin with is that people are basically enslaved by exploitative capitalist institutions, and they should be free to choose. That seems to me to mean that they own the right to choose.

It's something like that. What is it that you need to own if we're banding together to maximize productivity and we're doing it in a cooperative way rather than exploiting one another fundamentally, aberrations be damned for the time being. What is it that we need to own? What rights do we need to own? Right, okay, great. So you're right that it's interesting that when you talk to, obviously among, you know, there's different groups like socialist and Marxist and Leninist and communist, those are not all interchangeable terms. And the people who believe in those things would get, you know, take on bridge at people eating, being sloppy with, you know, so.

Yeah, well, it gets really complicated in the case of places like Norway and Sweden. And well, Canada for that matter because we're more socialist than the US. And I mean, Canada and Norway and Sweden Finland, and so on are doing quite nicely all things considered. So these compared to Stalinist Soviet Union, for example. So yeah, these distinctions make tremendous amount of difference. So where I was going is to say, though, that when I've talked to people like anarcho-communists, let's say, or an anarcho-socialist that, and I ask them, they will say, oh yeah, people can own their houses,

like as long as they're modest, or workers should own their tools, right? So they have no problem with a carpenter owning hammer, a hammer, and nails, and a saw, and things like that, so even though those are means of production. Well, I'd also, but then of course the problem comes up, what exactly do you mean by own? Right. So if I own my house, but I can't own a factory, but I can own my house, well that means I can't trade

my house for a factory. So I don't own my house in that regard. So there's something really fundamental here that we need to sort out about ownership. So what does it mean to own something? Well, it means that you have the right to its use. Right. Yeah. Yeah. You your will determines how it will be used. Right. And so to say that yeah, I own a factory means that and I'm not a kind of, yes, not only do I get to determine what gets produced in it, or if it just sits there idle, but also, like you say, to really own it means

I should be able to sell it to somebody else for money. For anything, essentially. Well, that's where things get tricky, right? Because if ownership means something, it has to mean something like the right to trade the thing you own for other things you want, because why the hell else would you bother owning it? I mean, it'll produce profit, perhaps, but with that profit, you still want to be able to buy things that you can own, so it's the same problem.

So what we need here, at least to some, the reason I'm driving it all of this is because we're facing a situation in our culture where there are fundamental revolutionary critiques at the first principle level, right? We're not sovereign individuals, we're members of a group. We didn't band together for cooperation, we banded together to maximize our own selfish

needs, our own selfish ambitions. And we do that as a consequence of the expression of arbitrary power. That the fundamental relationship between people in a hierarchy is exploitative. That the enlightenment idea of the sovereign individual is nothing but a justification for claims of power for the privileged group. I mean, these are fundamental critiques. They go all the way to the bottom, which is why I'm trying to chase things down to the bottom. I'm also, and I want to go to this too at some point,

it's an attractive set of ideas. It's an optimistic set of ideas, but it isn't instilling the same revolutionary fervor among a minority of young people, let's say, in our culture that these more radical ideas are. And so we also have to address that problem, is that this is kind of a nice way of looking at the world. It's optimistic, it's positive, but it's not romantically attractive and it's being attacked madly. And so we can't defend it very well.

So, okay, so we'll sketch that out back to ownership. So, yeah. I think at some point in this discussion, what Mises would stress is to say, hey, let's not lose sight of the fact that, and just so you know Dr discussion, you know, what Mises would stress is to say, hey, let's not lose sight of the fact that and just so you know, um, Dr. Peters, he, Mises was not a natural law theorist, right? So even though plenty of people like libertarians, um, love the work of Mises and people who are very ideological and have views as to like where property comes from and ethically, where property comes from and ethically, Mises was more utilitarian or pragmatic. And I think he would just say,

yeah, I'm happy to have these discussions about the philosophy and the underpinnings of justice and so forth, but push comes to shove, the means of factories and farmland and crude oil deposits and mineral other minerals and things like those all need to be owned privately too because you need to have market prices for those things because a given business enterprise needs to be able at the end of the accounting period to say were we profitable or not and that's the

only way we can know if it's using scarce resources effectively. Okay, so one reason for ownership is that it's very difficult to monetize something without that ownership. And if you can't monetize it, you can't calculate its value. And if you can't calculate its value, you can't use it. Or you can't know whether you're using it efficiently or not. Well, but that would be the same thing essentially. Right. Because if you don't use it efficiently, you're

going to have to stop using it pretty damn quickly. And so to some degree, pricing is the antidote to the tragedy of the commons. That's another way of looking at it is that so for example, in the in the oceans, no one owns the oceans, at least not past when to get out 200 miles, it's free for all, essentially. And so the consequence of that is that everyone is incentivized to take every goddamn fish as fast as they possibly can, and that's exactly what's happened. And it's because the fish are free, but they're not because they're finite resource. And so the problem is we

haven't monitor or a problem, a potential problem is that we haven't assigned a monetized value to the fish. And so once they're pulled into an economy, there were something but out there are free floating, it's every man for himself. And so that means that without private property, you know, you could make a case that private property leads to the dispoiling of the natural environment, say, okay, well, what about those situations where there is no private property? Well, then you get instantaneous dispoiling of the natural environment, say, okay, well, what about those situations where there is no private property? Well, then you get instantaneous dispoiling of the natural environment because there's no incentive to maintain it. So we could say, you need

to own things so that your commitment to your specialization is paid for, right? So I want you to become a brain surgeon. That means I have to give you something. And to give you something means you get to own it, to dispose of it as you see fit. And so we're going to, we want to incentivize everyone to specialize so that we can exploit each other with maximal efficiency and that's to everyone's good. It's something to it. That's in everyone's best interests. It's something like that. And so we need private property to manage the incentive. And and then you also said to price things properly because that's also an important consideration. Right. So historically, even before Mises came along, yeah, the critics of socialism warned

even before Mises came along, yeah, the critics of socialism warned about the incentive issue. And like to say, hey, there are some really productive people. If they're just getting paid, from each accordion to its ability to each accordion to his needs, why would a super productive person exert himself so much

if he's just gonna get food based on how many people are in his household or something, that kind of thing. So that was a standard thing, but then the socialist countered that and said, well, no, in a socialist society, there'd be a new socialist man who would just you know, give out of altruism, you know, just to be the benefactor of his fellow man, and it's only when you grow up in a capitalist system that you're greedy and self-centered because you have to be to survive. So a system that you're greedy and self-centered because you have to be to survive. So Mises came along and his argument, you know, he acknowledged the truth of the incentive

issues, but his was more of a calculation or just knowing what to do and saying, you know, even if we stipulate for the sake of argument that all the comrades are willing to do whatever the central planners tell them, the central planners truly want the best for their subjects. It's just you don't know where should we locate the factories? How many cars should we make? Should we build more food distribution centers? Should we have more farms here or there? How many of our incoming, you know, of our crop of young scholars should go into these

different technical fields? Okay, and the reason, the reason that you don't know that is because in order to know that, in order to know the price of one thing, you have to know the price of everything else. Right, right, that's the fundamental problem. So, and then the problem is worse because well, how in the world can you calculate

the fundamental price of everything? Because that's an insuperable computational obstacle. And the answer is, well, you distribute the computational problem to the maximum number of actors and you try to bring everything under the monetization web. And there are places where that, where we have real trouble with that, where we can't monetize something accurately. Yeah, so there's areas where it doesn't work very well, but in general, yes, if you just

think about what does it mean in a decentralized market economy with private property, not just for Carpenter's owning hammers, but for the whole factory being owned by a small group of people or one person, you know, and everything is owned privately. And then, yeah, people have accountants and at the end, like I say, of an accounting period, they look back and say, how did we do? And if they're profitable, just think through what does that mean. It means their customers gave them more dollars than they had to spend on the resources to make that stuff, the goods or the services. Well, we could use an analogy. So imagine you're a carpenter and you want to build a house, but you don't have a ruler. You don't have any way to measure length. Right. Well, so maybe you eyeball it, maybe you get

pretty good at that, but for maybe you can't even do that. So you can't measure length, and now you have to build a house. Well, you can't, because you have to measure. And so then the fundamental principle here is that money is the measure of value and it's computed as a consequence of a distributed network. And that's the only reason it works. And each person is pursuing something of value in so far as they're capable of doing that. And they make some pricing decisions

on the basis of their specialized expertise, and then we sum the consequences of that specialized computation, and we have a price for everything, or virtually everything. And because we have a price for everything, we can roughly decide what to do. So it's best to think of this really as a computational enterprise. I believe yeah, Mises used the term calculation. Yeah, and that was so you're exactly right. He argued that one of the most important distinctions of modern civilization was the ability to apply arithmetic to human act. Right, right, right. So yeah, this is the measurement issue. And so we're, we're basically making the case that you, you can't, you can't get anywhere unless you can measure.

And money is the measure. And it's a measure. And so the proposition that central planning will work is the proposition that you can substitute one expert mind for a million distributed expert minds. And that's just not the case. It's obviously not the case because each person is going to have knowledge that pertains to their locality that isn't accessible, and that's another element of specialization, that isn't accessible to everyone. And so it's much better to let everyone make the decisions and sum them.

And so we have this free market society, isn't a mechanism to allow property holders to exploit others, let's say. It's a mechanism that the entire human race uses to calculate the comparative value of everything. Right. And it makes thought possible. And Mies does point that out when he talks about arithmetic. Is it it enables us to do arithmetic?

And we can decide is it worth it? Yeah. And so, Hayek, who was, you know, a follower of Mises and won the Nobel Prize in 74 for a lot of stuff stuff. He had a discussion where he was saying, for example, if a tin mine collapses in Africa or something, everybody around the world who uses tin needs to use less of it, at least in the near term, until they get that mine up and running again. And so in a market economy,

the way that happens is the price of tin goes up. And so you're saying like some factory owner in North Dakota doesn't even need to know why. It's irrelevant. He doesn't need to know the particulars of the my he just needs to know tin is more scarce now than it was yesterday. So if you can use something else on the margin. And that's exactly what happens when the price goes up, people who can substitute out of 10 for something else do so, but for firms that absolutely need 10, there's no other way to do this. Right, and they don't need to know anything about 10.

That's what's so cool about money is that you don't need to know anything about what it is that you're purchasing. And thank God for that, because we don't know anything about anything. You know, the stuff you go, I mean, I've tried to buy printers, which is very, very difficult because there's like 300 printers, you know?

It's like how the hell do you possibly know which printer is the right printer? And the answer basically is, well, roughly speaking, you can use price. You can assume the printer is worth whatever the price is. It's as good an indication of the quality as you're going to manage. And thank God for that because otherwise you wouldn't be able to make a decision. I mean, I ran into this sort of problem trying to price some things that I produced.

I produced these software programs, myself and my collaborators. One of them, the self-authoring suite is designed to help people write about their past and their present and to make a plan for the future. And we were trying to price that and it was unbelievably difficult decision. And it started me thinking about pricing. If you make it really expensive,

well, that's some indication that it's of high value, but it limits the number of people who can use it. If you make it, we thought, well, maybe we should make it free. Would more people use it? Because we were basic. We wanted people to use it, you know? I mean, we had other motives, I suppose. But fundamentally, the motive was, well, we have some psychological knowledge. Let's see if we can share this with people as broadly as possible.

But our conclusion eventually was that free was the wrong price. We couldn't generate enough profit to continually improve it. We couldn't justify the effort that we had put into it. And so we're likely to start looking at other things because we weren't incentivized properly. And people might respond that something worth zero isn't worth anything. anything. And that was just one pricing decision. And so, you know, we set it at a moderate to low price, and that seems to have worked. But it really did introduce me to the complexities of pricing. And people were willing to pay what we charge for it. And so maybe we should have charged more who the hell knows or perhaps less.

But okay, so let's go back to first principles a little bit. So maybe we should have charged more who the hell knows or perhaps last, but Okay, so so let's go back to first principles a little bit. So people need to own things because if they don't they don't we can't incentivize them to specialize in production and then we don't have anything And so ownership allows for incentivization essentially So that's one component, but I'm saying an independent issue is even if, right now, we, let's assume we have all the stuff that's, you know, the resources are available and people have studied to be brain surgeons and carpenters and whatever. Even so, we don't know what to do with all these resources without having a profit. I got to get that in my head because that's, okay, is there another, is there some, is

there another attribute we got to there? Ownership allows for proper incentivization and it also allows for pricing and that's necessary to provide comparative information about comparative value. Absolutely crucial. Is there anything else that ownership is key to, there probably is, but is there anything else we're missing? Well, I mean, not in terms of like the narrow economics of it, but I think the broader, so Mises would call himself a classical liberal, or he would just say liberal, but for our terms,

we mean classical liberal, like, you know, individual rights and so on. And I think he would just say in that paradigm, private property was the ultimate bull work against oppression by the political authorities. That okay, okay. So that's a good one too. So you might say, well, we need maybe it's better to have a thousand rich people than one tyrant because you've distributed

the tyranny at least. Right now there's tension between the tyrants. And maybe it's even better if there's 100,000 tyrants, because they're competing amongst themselves. And I mean, I think you could make that case because one of the factors that delimited the power of the absolute monarchs, say, as England developed, was the fact that there were nobles who also had independent basis of power. So ownership also gives individuals authority and power. Right. And another way of looking at that.

That's part of incentivization. But it's also stabilizes societies. Right. So if you think about it, it's true. The Marxists do have a grain of truth that the average worker, especially with no savings, is sort of at the mercy of all the big firm. You know, oh, gee, I need a job.

And right now there's really just 100 companies that are viable that might hire me. And if, you know, if I don't get along with them or if I don't cow-tow and do what they want, be a yes man, then, you know, I'm out. And I have to just do whatever. But how in the world are you in, is that situation improved? I think let's get rid of the 100 owners and just have the state be the sole employer and tell everyone here's where you're gonna work.

That there you've replaced, like you say, the 100 petty tyrants where ultimately you can just quit and go somewhere else. Now you have to leave the country if you don't get along with your boss, who's the state? Well, and you can see too. Yeah, well, and then imagine also the disproportionate power, okay? So let's go to that.

There's a centralized authority that's making all the decisions and then there's all these citizens and they're all equal. Well, yeah, but they're not equal in relationship to the centralized authority. They're radically unequal. They have no power whatsoever. And so now, if you look at a place like Communist China,

at least the central tyrannical tendency of the state is counterbalanced by the authority and power of the tycoons. And you've got to think about that as something that's better, at least there's a competition between tyranny and at that point. Even if you're very, very cynical about the whole situation, it's a good thing that there are loquals of power that are independent of the state, of the state's central authority. Right. And that's merely because of the state, even if it was benevolent, might be wrong. So just in terms of diversity of opinion, we'd want to have multiple power sources. Now, you know, I've also talked to my brother-in-law help me sort of puzzle this through too, you know. There's some utility in having some people who specialize in the ownership of money,

and so they have a tremendous amount of money, partly because some things are really expensive to do. So if you want to build a factory to build microchips, for example, that's a couple of billion dollars in investment, minimum. And so unless we have these huge pools of freely available capital, then that requires a certain amount of disproportion and distribution, right? So that there are some people who are extremely rich.

We couldn't do any of the things that riches require if we didn't have people who were rich. And so let tell me what you think about this. So is it the case that distribution of economic resources to the poorest is dependent on their availability to the rich first? So you think about cell phones when they first come out, they're like $25,000. And so, there's some people who can afford a $25,000 cell phone and they buy them and then now they're worth $20,000. And then more people can buy them because it's the $20,000 price range.

I mean, if we didn't have radical inequalities in income distribution, would we ever be able to introduce new expensive products into the market? Well, let me answer this way. And if you want to press me, I can try to elaborate more. But I think for sure what Mises would say, and I would agree with this, is for the introduction of new products, you do want to have private property and the ability of certain people to have accumulated

vast fortunes because if you think about how did some person get to be a billionaire, it was only because of that person's superior foresight in anticipating what the consumers wanted. And that's how you got to that position. And then that person then to decide, hmm, there's this new technology called a cell phone or cellular phone. Yeah, I think it's worth sinking millions of dollars and a scene at this will pan out. It's the, you know, who's making that decision? It's the person who's got the proven track record so far.

Whereas if you had a different system where, oh no, we don't allow individuals to accumulate vast fortunes. The state owns everything, then it's gonna be a committee that's always gonna guess and say, okay, we'll bring in the new proposals, let's vote on it. So there's not as much skin in the game to use that popular phrase now, that it's not that individuals own money.

And so you can just see how given human nature and the limits of what people's expertise is that distributing and decentralizing and allowing for the possibility of massive fortunes to accumulate is a better engine for innovation that now people can specialize. And a certain billionaire who doesn't know anything about phones, like he made his money with cars,

might say, I'm gonna pass on that. I don't know anything about that. Whereas somebody else who's more technically savvy might invest in it, but there needs to be some way you can't just invest in every promoter who says, Hey, I've got this new product. It's going to revolutionize the world because most of them are going to be able to do it. Right. So your argument basically is, well, there are people out there who specialized and developed expertise within a certain domain. And as a consequence, they've accumulated a fortune. And that marks accepting aberrations,

that marks the development of that expertise. It's a pragmatic marker for the development of that expertise. You want those people making decisions in their area. And if they make decisions in another area and it's a bad decision, they're just gonna lose their money. Right.

And so it's self-correct. And like you said, maybe this is what you're, if you said brother-in-law, it was getting it, but there are people in a market economy who specialize in investments. Like they're good at just picking companies, like Warren Buffett or whatever, to use a popular example.

So it's not that Warren Buffett necessarily is good at running a car factory, but he knows what team is gonna be good at doing that. Like, he can just interview people and get a sense of, I think this is, this firm's gonna do well over the next 10 years. And so, you know, there is that, so someone who's just good at investing

and picking winners in the stock market, if you really are good at that, over time you accumulate money, and then you have more decision as to which firms get funded. So again, it's like a meritocracy. And all the stuff presupposes, there's property rights and people aren't stealing it from something.

Yes, and free action and the ability to make professional decisions. Then, yeah, over time, who is it that's made a boatload of money in the stock market, the people who have successfully predicted better than everybody else, which stocks are likely to go up or they sold the ones that were before they went down. And that's exactly the kind of person you want deploying the scarce amount of capital funds, you know, sort of guiding the trajectory of our industrial base. Well, that's the person you would turn to if you were looking for advice. So it seems like that's the sort of person that you'd want.

Now that means that the thing about that, again, and this is a moral issue, that means those of us who don't have billions of dollars have to put up with the fact that there are people who do, right? And I suppose it's tempting to assume that they've gathered their fortune as a consequence of some misbegotten adventure that involves oppression and unfair extraction. And of course, there know, some misbegotten adventure that involves oppression and unfair extraction.

And of course, there's always some truth in that because all systems are susceptible to corruption to some degree. See, I've been thinking about this idea of systemic racism a lot lately. And it's very, very treacherous term. And purposefully so, I believe, or maybe it's evolved that way in some sense, because terms that are particularly treacherous are difficult to dispense with, it isn't the racism part of that that's the problem. Although it's sort of the heavy weight of the two.

You say racism and everyone responds, well, that's a terrible thing. And then to object to anything that has racism appended to it is a very treacherous enterprise because it looks like you're objecting to something that's obviously terrible. I mean, even if you're a filthy greedy capitalist, you want to exploit everybody from each race to the maximum degree possible. And so even for you, racism is going to be a terrible thing. But then there's this systemic issue. You see, and that's what, and that sort of snuck in there systemic. Well, systemic implies central tendency. Right. Because otherwise you wouldn't use the word systemic. And so the proposition is essentially that the central tendency of the social institutions is racism rather than an aberration in their behavior or a deviation from the central

tendency. And what we're trying to sort out right here is what the central tendency is. And so we're saying, well, people band together for productive purposes. They specialize because that is advantageous with regards to maximizing productivity and distribution because of the pricing issue. It's not a matter of exploitation. You have to specialize to do this and there's a price to be paid for that, but the price to be paid is offset by the price that you are paid for specializing.

And so that's a completely different view of, and so a system like that isn't going to be systemically prejudiced, because it works at counter purposes to its central tendency. If productivity is the aim and the goal, then you want to exploit everyone equally. Right, so just on the narrow point that you made,

I just want to amplify it, that yes, in a market economy, there is an inbuilt penalty for irrational prejudice. So, you know, you've got to... Okay. So now we can define irrational prejudice, too. And this gets to the issue of merit. Right. So imagine you're making widgets. Well, then the hiring criteria is going to be facility in making widgets. And anything that isn't relevant to facility in making widgets is prejudicial. And if you allow those prejudices to influence your hiring decisions, you're going to be less

competitive than someone who doesn't. And so the central tendency is against prejudice, not for it. It has to be if you define prejudice as deviation from the proclivity to select for the desired output. Right. And so for example, you know, the male female alleged wage gap, and I'm, you know, I know I've saw your wonderful interview on that issue. But on its own terms, just think of, it's odd then. If it really were true that in the United States, men and women are only gonna get paid whatever the number is, 88 cents for a man,

for the same work, it's a mystery then. So how come all the firms that are run by greedy capitalists aren't hiring just women? Because they get the same audience. Right, because they make a 20, they make a 12% profit instantly by doing so. And so if they're greedy and exploitive, why aren't they jumping all over that? The counter-argument has to be, well, they're so prejudiced against women

that they'll allow that prejudice to override their greed. Right. And what's interesting too is it's not merely that like, so I don't have to insist that every single employer thinks like that just all it would take is five to 10 percent. Like for example, why don't the female owned businesses, at least just hire all women to take advantage of the fact that women will do the same work? You know what I mean? So it's the other side that has to maintain that no, it's this blind irrational, you know, sexism that overrides the greed has to maintain that no, it's this blind, irrational, you know, sexism that overrides the greed, has to apply. Well, then they have to explain, well, why?

What the hell's the motivation exactly is that, so what is this? That there's a widely distributed cabal of owners who are so prejudiced against women in the main that merely to sustain their prejudice against women, they're willing to take a 12% profit hit year after year. And none of them are deviating from that to gain a competitive advantage. Right. And that's the theory. Right.

And why can't women who see this? It's so obvious then, why don't they start opening businesses to at least, you know, pay their female, you know, sister's 95 cents to them. You know, it's so, it's really nine cents for that matter. Right. So it's weird that that system, and then of course they would then respond and say, well, it's because of the, you know, and they push the sexism back. Like you say into the system.

And I think you're right. It's an insidious term because they use racism or sexism as the bad thing to taint it. But then it's unbelievably insidious. And that's partly why I wanted to have this discussion. It's like, is it systemic? That's the issue. Not is it racist? Yeah, yeah. There's racism. No kidding. There's all sorts of arbitrary stupidity. No one debates that. But systemic means central tendency. And so what we're trying to clear up here today, at least in part, is what are the, what is the central tendencies of our psychological motivation as individuals and the central tendency with regards to how we organize our societies? And we need to make a counter-argument to the proposition that it's blind, it's the blind

application of power, which I think is not only a weak argument, I think it's, it's, it flies in the face of the truth. It's, it's an anti-truth. Yeah. Because people don't organize their social institutions on the basis of exploitative power. It's not even very efficient to do that. Right. Because people aren't incentivized when they're tyrannized. And so, yes, so that's another area where I think what, you know, I've heard your lectures coincides very nicely with Mises work. When you say yes, there are hierarchies, but they're not based merely on pure power. There's some merit involved or sometimes there's merit. And that's what Mises says that he like he would talk about, you know, they referred to like the cotton king or the the barons of industry. And he said in a market economy, the people who were at the top, the

John, like, why is John D Rockefeller, you know, why was he on top? Because he delivered kerosene at much lower prices than his competitors did. That's the same thing can be said for Walmart and for Bill Gates for that matter who made who made I remember what happened when Microsoft started to develop. Gates bundled software together and sold it for like one tenth the price of his competitors. It was and he just wiped them out. And so and it happened very, very rapidly. And so okay, so here's another issue with ownership. I Robert Breedlove brought this up today on Twitter. It's not his idea, but other people have made the same case, but he did it quite nicely. He said that private property should, the right to private property should also be considered the responsibility of private property.

And responsibility properly had. It's like, okay, now you, here's a car and you own it. So what are you going to do with that car? Well, are you going to take care of it? Are you going to wreck it? Well, what if a thousand of you own it? So do you take better care of a rental car or your own car? And so then the question is, well, if you own something, do you take better care of it than if you don't own it. And I think everybody can kind of answer that question for themselves. It's it's it's in your best interest to take care of something that you own. And maybe you don't do a very good job of it, but all that implies is that you do even a worse job if you didn't own it. Right. And just to extend that against the mesession framework, that's what he would say is again, the critical function of having prices

and just simple accounting. Like Mises quoted Gerta, who said one of the modern miracles or the best inventions of the human mind was double entry bookkeeping. Something like, I forget the exact quote. Yeah. That seems like an odd thing for a Philips. Well, it's worth, yes, it is an odd thing.

It's, first of all, you should define double entry bookkeeping. So everyone knows what that is. Okay. So that, you know, on your, in terms of accounting, that there's like the liabilities and then on the opposite side of the balance, you know, you have the, or, sorry, you have the assets and then the liabilities and the capital and the company. So that every transaction, you sort of see the mirror image and you can just keep track of what's happening.

And Mises' point was that sort of trivial thing that the socialists just say, oh, that's just an appendage of the market economy to put some numbers on it. But he's like, no, that's critical because it allows the owner to know, have we squandered our funds? Like our capital at the end of the period is at higher or lower.

And it's sort of like a scorecard. And so that's what you just said, reminding you of that, to say, without prices, it's not merely that you wouldn't have the incentive. You wouldn't even know. Did I add to the stockpile of what I've been entrusted with, to be a steward for, you know, in society, of like these portions of resources,

it's my I own. And did that go up or down without market prices, you literally don't even know whether it went up or down. So it would be like, if you had a car and not just knowing, do you take care of it or not even be able to see it or not even to be able to open the hood and tell if there was an engine inside, like you wouldn't know, am I driving it too hard if you couldn't check up on it in some

way. So that's what market prices do. If you've earned a profit, that's a signal or feedback from the entire society. In a sense, the consumers say you've done a good job using scarce resources that you've transferred resources into something. Okay. So, okay. the you trans-right resources and the something that's something that's going to be. Okay, so ownership buys us incentive. It buys us stewardship.

It buys us measurement. And those aren't replaceable, especially measurement. That might be the most crucial of all of them, because the others fall without measurement. You can't even keep track of what you're doing. That's the point you're just making now. Yeah, so we can have, yeah, me, me, so this has a phrase where he said the central planners without market prices would be groping in the dark. Well, that's, that's the, that's a, that's a huge issue. I read in Solge-Nitz and I believe that the central planners under in the stillness of the union had to make something like 50,000 pricing decisions a day. And well, you can't even make 50,000 decisions a day.

That's impossible, but I don't know how they managed it, but without, right, there's always an assumption. There's always an implicit assumption on the basis of people who are pushing central planning that the data will somehow be there for the planners to take. Okay, so there's a couple more things I want to cover here. And so the business cycle, let's talk about that because that's, if we talked about general economics and the philosophy of economics, and one of the things we tried to understand was how we should regard the organization of social institutions and the motivation of individuals.

The motivation of individuals isn't to exploit other people. It's to stave off catastrophe using social cooperation as the means to do so. It's something like that. And the willingness to accept the sacrifice of specialization to participate in that process with the benefit of ownership and all the things that we discuss that emerge as a consequence of that. And that isn't something that anyone decided. That's the other thing we should point out is these systems have evolved across time. I mean, there's been rational inputs and all of that, and rational formalizations of the system, but this isn't evolved system, and it's a consequence of distributed computation running across hundreds and thousands of years.

Right, and I should mention that, well, like within the Austrian school, there's different empathy. So Mises was very rationalistic. So he would say, oh, the reason people engage in social cooperation is because they use their reason and they understand the higher productivity of the division of labor, whereas Hayek, who's also a big figure in the Austrian school, he was more evolutionary in the sense of different cultures for whatever reason. You know, like these people just didn't like cannibalism for some reason.

And then they would tend to multiply more than cultures that thought cannibalism was okay. You know what I mean? So for him, it wasn't so much that they had to understand why. It was just those that happened to think, oh no, you know, private property is a good thing. Or you should be able to, or if some society thought merchants were a noble profession, then they would explode and take off and then they would conquer everyone else who thought that no, working for the government was the only thing that mothers should hope

for kids to do. So there might be an evolutionary process that work here so to speak as far as that works in the social world. Random innovation followed by selection, there's certainly some of that, but it's also necessary for us to understand rationally what the consequence of that is at least so we don't disturb it unduly when we're tempted to.

Right. And that's something that Hayek brought up a lot. I think it is noble acceptance speech too. It's to say the problem with the socialist or more generally, like people coming along, looking at social institutions that we've inherited over thousands of years, saying, that doesn't make sense to me. I think we can do better and just throw that out. And that led to all the horrors of the 20th century, like the smartest guys in the room,

not understanding the social utility of the 20th century, like the smartest guys in the room, not understanding the social utility of some of these traditions. And so, you know, Hayek would argue that's actually not being scientific and rational. Like, let's think through. There must be some reason they doesn't. Yeah. Well, the big, the big issue there for me is, you know, as, look, for anyone who's intelligent, it's a very complicated because we do use planning in our day to day lives. You know, and I mean, that's an assumption of the Austrian school. And so then you might say, well, isn't there a role for planning at the highest levels of social organization? And the answer to that has to be something like the more complex,

the problem, the less likely that individual rationality is going to be able to solve it. You have to start moving towards distributed computational systems to solve incredibly complex problems. Yeah, exactly right. And that they talk about that a lot in the Austrian tradition too to say, we shouldn't even concede to the socialist this term planner

because in the market economy, like you said, Dr. P. So there's lots of planning, like the CEOs and the, you know, the VPs of finance and marketing, they sit down and they're planning all the time. Like, should we introduce this new product line? Should we build a factory here? And but it's decentralized. Whereas what the socialists mean by planning is no, a select group of people with political power

are gonna do the planning and in the post everybody else. It's like systemic racism, centralized planning. The planning sounds good. It's the centralized that's the problem. The more centralized the planning, the more room for catastrophic error. Right. Right. And also the political oppression too, like we said, that it's, that's not an narrowly

economic issue, but yes, since looking at history, we know it is possible that sometimes people do really awful things. That's another independent reason you would want to limit how much power a few people have. And to give them the power over the whole economy, that's a very risky thing to do. It's not merely that they might not make enough eggs, they might send people to work in death camps. It's not merely that they might not make enough eggs. They might send people to work in death camps. Okay. So are there more criticisms of socialism lurking inside the Austrian school at the level of first principles?

Or have we discussed most of them? I think hitting the calculation issue is the critical contribution that Mises made. I mean, he goes through all like inconsistencies in the Marxist worldview and they like that polylogism and so Mises says they say there's polylogism but they've never taken a you know a theorem from economics and shown oh this is true according to bourgeois logic but proletarian logic has a different axiom and therefore it's step four or the proof is right. He just as they just say that you know I mean so he's Mises does really get into rolls up his sleeves

and critiques Marxism, but in terms of freer audience, I think that the main thing was why calculation is such a flaw for socialism, but the market economy solves it with private property and money prices. Okay, okay, let's talk about the business cycle now. Okay, if you don't mind. So I'm going to give you free reign to do that all interrupt, of course. Okay, sure. So in this, again, like I said in the beginning, is I think one of the key

contributions of the Austrian school that even other free market oriented economists like the Chicago school don't have. So in the Austrian tradition, like we said, prices are sort of a very important social function. It's like you say there's like decentralized people all around the world with local information and the price system is the nexus by which that gets communicated around like hike even likened it to a nervous system. And so that's a sense in which the whole system stays rational if you want to use that phrase or how do we husband our resources economically, you need market prices to have that. It's okay.

But now specifically, what is it that interest rates do? And in the Austrian school, they say that has to do with inter temporal planning, like long term decisions, that's where interest rates really play a decisive role. And so give a silly example, you know, you're an entrepreneur trying to decide whether to build an apartment building, you know, so you can know how much the steel costs, the concrete, the lumber, the glass, you know how much it'll cost to build, you can even forecast, you know, all in this neighborhood, I'll be able to rent it for such and such and I'll bring in this revenue. So over the next 20 years, every year, I'll bring in this

much net income. Here's the upfront cost. Should I build it or not? A critical input to that decision, that calculation is what's the interest rate? Because the interest rate is really high then you won't build it if it's really low, then you might. Okay, so let me harass you about the interest rate. Sure.

So why do we have an interest rate? What is it exactly? Okay, so in the Austrian framework loosely speaking, it has to do with, let me say, like the amount of impatience, the amount by which people are willing to defer consumption as long as they get more down the road. So the higher the interest rate, it's like the bigger the penalty is on waiting. So if society is very future oriented and very long term thinking,

they're willing to save a lot, other things equal that tends to push down interest rates. So firms can borrow at cheap rates and invest in long term projects. So people are willing to do. So why do you think our interest rates are so low right now? Okay, so right now, I think it's because of the intervention of central banks. And so this ties into the Austrian concern with that is the low interest rates are giving the signal to entrepreneurs, go ahead and invest in really long term projects, but it's the wrong thing. Right. Because, okay, so your money, in conditions of low interest, you have money, say, in a bank

account, so it can be translated into spendable currency instantaneously. And it's performing a function that's reflected in the interest rate. And so if it's just sitting there collecting 0.1%, and the inflation rate is 3%, your money is losing value across time. So you're gonna be incentivized to go find something more useful to do with the money hypothetically. Right, so it's a two-pronged thing that low interest rates, other things

that will make people not save as much, right? Because of why would I save them? Only earning, like you say, 0.1%, whereas if you were earning 10% and you're saving his account, you might save 0.1% whereas if you were earning 10% and your savings account, you might save more. But then on the flip side too, businesses who want to borrow funds to go start a project can get it a much better chance.

And the idea of saving is complicated too, because you know, the typical folk notion of a billionaire is something like Scrooge McDuck. You remember Scrooge McDuck? He had this money bin full of money. And of course, as long as all the money is in Scrooge McDuck's money bin, no one else has access to it. It's like he's stuffed at 500 foot mattress full of cash.

And he's just sitting on it, occupying it, hoarding it. But when we save money in a modern economy, that isn't what happens at all. We put money, unless we put it in the proverbial mattress, we put it in the bank and that enables other people to use it. And they can use a substantial fraction of it to go and pursue pursuits that in principle have to be more productive than the interest rate

that we're being awarded. So we're not hoarding the money. Right. So everything you just said is true, but what's ironic is if you think about it, even if people did do that, it would actually be socially advantageous, right? So someone goes out and produces a bunch of goods and services and people give them cash. And then he goes and just stores it in his basement. If you think about that, that person's going around doing work for people and giving them benefits. And then he doesn't get it without consuming anything. Right.

Exactly. Like except future consideration. Right. And so if he never like in terms of like, what's the worst case? Oh, he never spends it. That's actually no, that would. So if he never spends it, it's deflation. So it drives down the cost of goods. So it's just ironic to that. But would you write? And the other thing too is, for most of today's billionaires, it's not even that they have money in a checking account that the bank had lent to it.

It's that they own stock in companies they created. So like Bill Gates or whatever. Right. So what they have is, it's very interesting, because in some sense they have power. And in some sense they have is, it's very interesting because in some sense, they have power. And in some sense, they have authority. And in some sense, they can exercise compulsion. But they also have a tremendous amount of responsibility because you really have to ask, and I've asked myself this many times, especially in recent years,

do you want that responsibility? Like having a billion dollars is no joke. I mean, yes, I think Ted Turner famously calculated that if you spent as much as you could every possible day just on one of those goods that disappear, consumable goods, you use them and then they're gone. You could spend $400 million in your lifetime and that would be flat out nothing but hedonistic spending.

So maybe you have $20 billion. And well, that's like you're basically running a pretty good sized country at that point. And it's not as I read a biography of Howard Hughes. You know, Howard Hughes had obsessive compulsive disorder. And he got very ill in his later years. And like his money just evaporated around him. As soon as he was unable to stay on

top of it, it just disappeared like mad. And that makes perfect sense because money is obviously valuable. And if you don't keep an eye on it, it has a tendency to distribute itself elsewhere extraordinarily rapidly. And so this envy of people who are extraordinarily well off, you know, it's based on a misapprehension about the nature of their existence, at least to some, I'm not making a case for the wonderfulness of abject poverty. Believe me, I mean, I'm not doing that at all. It's just that the picture isn't so simple. You do have a tremendous amount of responsibility along with all that money.

And if you don't exercise the responsibility properly, all that happens is the money disappears extremely rapidly. Right, which is again, another reason just in terms of pragmatic considerations that you were mentioning a while ago about redistributing. Is there some utility like allowing for the existence of billionaire speculators or stock investors and things. And I would say yes, that it's not correct to think that all the reason they achieved that is because they siphoned it off from everybody else. That no, large loss. Well, let's okay, let's go after that. Okay. They inherited it. Let's start with that. So justify that. Okay, well, there I would

say the person who, you know, if I go out and create a fortune, most people are okay with me being able to go and spend it at the casino or, you know, smoke it away or buy yachts or whatever, but I'm not allowed to give it to my kid. That seems weird. So it's yeah, well, I guess the rejoinder would be, well, why should your child have a special advantage? But my objection to that objection is, okay, aren't you trying to give your children all the special advantages that you can? And isn't that what you're supposed to do? Now, special doesn't necessarily mean

at the expense of someone else. See, this is the critical issue here, is that what we're facing in our culture war is the proposition that those who have have as a consequence of exploitation. And that there's no such thing as merit, there's just different, there's, there's exploitations justification for itself. Now, we already narrowly defined merit, right? So when we say our society is meritocratic, what we would say is no more than this and maybe merit

is the wrong word and that's a big problem. If I'm hiring a dishwasher, merit for me is that person's ability to wash dishes and nothing else. So the merit is very, and so we need a better word than merit. It's like functional utility or something like that because a company even by law, you have to do this. If you're going to hire someone in the United States, the labor laws are very clear about this point. You have to do a job analysis, which breaks down the job into its functional units, let's say.

Then you have to look through your candidate pool and you have to find the person who's most qualified to perform those tasks using the best measurement techniques that are currently available. If you don't do that, you're in violation of the law. And so that's another rejoinder to the notion of systemic racism. And those bloody laws have teeth. They're not trivial. And they're heavily enforced. But merit isn't defined in terms of ethical utility precisely.

It's defined very narrowly in terms of pragmatic function, so that you're meritorious to the degree, you're meritorious in this particular situation, to the degree that you can perform that particular function. And you can't say that a society is greedy and exploitative and say at the same time that it isn't predicated on merit using that narrow definition of merit because you're not going to be very effective at being greedy and exploitive if you're not selecting for productive capacity, let's say. And I think just more generally on these points that you're raising, like, I don't think

most people would say, yeah, it's a tragedy. Some kids are born without legs, like that happens. It would be crazy for us to chop everyone's legs off, to say, well, this is the only way to make it fair, right? That you would realize, no, that doesn't help anybody, including the people who naturally would have been born without legs, like they benefit from being in a society. So likewise, I understand, hey, it's not fair

if some guys rich and gives his fortune to his kid, when, you know, I understand, hey, it's not fair if some guy's rich and gives his fortune to his kid when, you know, I didn't get that. But I was, you know, I'm fortunate that my parents stayed married and that, you know, they valued really well. Yeah, that's, like, right. That's exactly the issue, right? Is that this, we, and I saw this watch this happen, so to speak, from a historical perspective, looking at what happened in places like the Soviet Union and in communist China, still happening

in places like North Korea, where every single person has enough of a comparative advantage so that there's some dimension along which they can be rightfully regarded as an oppressor. Because they have, we all differ in our advantages and disadvantages. All I have to do is point to your comparative advantages, despite your disadvantages and say, well, you're a member of the oppressor class because, well, you're physically healthy. You're, you're, you're not, you your near six feet tall instead of four foot eight. You're, you know, you have use of all your limbs. You have parents who stayed married, you're of above average intelligence, et cetera, et

cetera. I can make that. So what we would say instead is that for maximum fairness, you allow people, they're comparative advantages, but you encourage them to specialize in trade. Right, right. And that you're not, again, you're not, you're actually not helping the, the, this advantage on whatever that narrow criterion is that you're looking at in that moment of analysis by hamstring everybody else on that one dimension. So you're exactly right, that rather than looking around it, rather than looking with envy at other people

or saying that's unfair to say, oh no, this person has this ability that I lack. And so let that person develop that and run with it and produce an abundance and then trade with me. And I'll say, well, that's the issue with regard. Let's talk about the unfairness issue. It's like, well, there's, there doesn't look to me like there's any systematic, centralized way of eradicating the essential unfairness because the unfairness,

and the here's a perverse little issue as well, you know, amongst those who are tempted to engage in critiques of our social institutions, let's say, on the basis of their hypothetical grounding in power, there's this mantra of diversity. Okay, so let's think about that for a minute. Well, diversity has to mean something like difference in ability, because otherwise, why would it be a good? And so then we could say, well, yeah, you want to have a diverse workforce, well, all things considered, you need people who are capable of doing a variety of different things in case the environment shifts on you. Okay, so diversity is a good, but diversity is no good at all unless there's comparative

advantage. And so, and I don't see how to get over the equity hurdle with regards to comparative advantage, you know, we want equality of outcome. Well, do we want equality of outcome on all measures, all conceivable measures? Well, there's no comparative advantage then anymore. There's no diversity. So which is, which is we're going to have? We're going to have diversity or equity because we can't have both. Yeah, you're right.

It is a weird paradox. And it's similar to how men and women are exactly equal, but women are actually better at everything. Like there's those two undercurrents in the standard, you know, rhetoric coming out nowadays in these culture wars. So, yeah, I'm agreeing with you that it's the, yes, the ostensible reason for why you would want to promote diversity in the workplace is that because they, they will argue with if you say, oh, no, I should be able to hire The most qualified people and you know, to make the most profit and it's not they'll argue they say, oh, no, you're not going to sacrifice profit. You'll make more money if you do what we're telling you to because for the reasons you know you're saying that more money if you do what we're telling you to because for the reasons you're saying that you'll have new perspectives when you're making decisions and you'll know about, you know, these people will know how this customer base will react to your marketing.

And so they're telling you that this is actually the profitable decision if you were in light. Well, and, you know, the thing is, is there's probably some merit to that argument, which is that, you know, if you want to serve a population, you probably want representatives of the population within your decision-making purview. But I would say the market already rewards that, right? Intense. Right.

And just to use it, a different analogy, it's like in the climate change debate, I don't know how much you follow that. But it's a similar thing where they want to pass all these regulations like to give business, like to mandate businesses have energy efficient, you know, installation and do all these things. And so the right wing says, no, that's going to impose costs. And then they're the left will say, oh, no, actually, they'll save money. And so I would always point out, well, then you don't need to mandate it. Just facts your data to the CFO of the corporation, and they'll do it on their own. And so likewise, like you're saying here, if it really is true that this will promote, facts your data to the CFO of the corporation and they'll do it on their own. And so likewise, like you're saying here, if it really is true that this will promote,

you know, profit, if this is a good move for the company, it's weird that we need to browbeat and coerce everyone into doing it when by assumption these are greedy capitalists who do anything for a buck, except again, apparently the one thing they won't do is hire different people. Well, especially given that you could attain a comparative advantage by doing so. Right. And I would say that's actually what's happened. I mean, look, if you think about it historically,

look at how quick women moved into the workplace. It's been, let's say, a hundred years, not that they weren't working like mad before that, because they certainly were. But as soon as it became possible for women to enter the workplace on the same terms as men, the workplace opened itself up to them with incredible repidity.

And it's certainly a consequence of taking advantage of the available brain power. So that system does work. Yeah, and I should also mention too, with a bunch of this, you know, if it sounds like we're being real out of touch and like, well, yeah, it's easy for you guys to say that given our demographic character is there are a lot of things like injustices, but I would just I would attribute a lot of that to, you know, bad government schools and minimum wage laws and things, you know, things

along those lines, government measures that make it hard for someone to start a business and compete with the established firms. So there's a lot of things that explain why in practice, I think certain relatively politically powerless groups don't get a fair shake, but my point is, it's not the pure market account. We can also look, we can also be perfectly blunt in pointing out that aberrations in the system might

allow for the maintenance of prejudice. That's not the issue. The issue is whether or not the bloody prejudice is the central tendency, because that's the systemic racism claim. I mean, the fact that the systems are error prone is I have no problem with that. Obviously, that's the case locally and sometimes more widely. But that doesn't mean it's the central tendency of the systems.

The central tendency of the system works against slavery, for example, not for it, even though there are aberrations. And the issue is what's central and what's an aberration? The claim that it's power that's central is a totalizing claim. And I would just add to that, though, too, it's, I mean, I'm, as a complimentary point,

is I'm just saying, like Jim Crow laws, the, you know, the Southern states that had those, they, it was the government forcing companies to do that. Why? Because they would say, oh, some of these private businesses are just going to serve to blacks and whites equally. Because they would say, oh, some of these private businesses are just going to serve to blacks and whites equally. Because they don't understand the way our social system works.

So it's funny that a Jim Crow law is cited as an example of the failures of laissez-faire capitalism. And no, on its own terms, it was the government overriding the prerogatives of business owners to force them to do that. Yeah, because the money of any races of equal value, right. And all it would take is a few diners and bus companies in the way I would say believe that.

And then, you know, that this the segregated system would have a problem would tend to break. Well, and I that did happen to some degree because block businesses emerged to address exactly that lock. Now, that didn't remove the prejudicial laws, but it did allow for the provision of goods to the block community in those particular circumstances. So the market to found a way around the laws, at least with regards to the distribution of resources. So it's no justification for the laws.

It's quite the contrary. So okay, we need to talk about the business cycle. So okay, we need to talk about the business cycle. Okay. So, and let's start by what it is and why it's important. Right. So, what the business cycle, what people meet is the fact that market economies tend to grow over time, you know, the amount of goods per hour per person goes up, but it's not a smooth periodic increase. There's wild ups and downs.

And in particular, there's periods where there's high unemployment and then other times when the labor market seems very tight and people can get jobs easily. And so why, where's that come from? Why is that the case? And so the Austrian explanation is what happens is the banking system, and in modern times, under the ages of central banks, pushes down interest rates below where they should be. So interest rates get pushed to artificially low levels that gives the wrong signal to the entrepreneurs.

They start long-term projects, even though the public hasn't saved enough to actually justify those investments. So it gives this false boom period where everything seems prosperous prosperous businesses are hiring, but there's not enough actual saving to bring it to the finish line. And at some point, the banks chicken out the central bank raises rates because inflation's kicking up and then there's a crash.

And so in the Austrian view, the the the the the depression or the recession, the crisis is caused by the preceding boom and the only way to get rid of that boom bus cycle is to stop with this alleged medicine of cutting interest rates to stimulate spending that no that's just sewing the seeds for the next crash. So the price paid for central planning that's not guided by market signals is deviation from that's not guided by market signals is deviation from the average, essentially volatility. Yes, there's that, but then also in the long run, I think the Austrians would argue because of the mail. It's not just that all it's the same average over the hundred years. It's just more volatile, but that the average is lower than otherwise would be because... Oh, yes. Right.

So productivity suffers as well as in volatility increasing. Right. Well, okay. I can also see an analogy there with the theories that I've been laying out because, you know, my sense is that failure to react to a market signal, so to speak, in the psychological world

just stores up catastrophe for later. So yeah, so in the off story, the interest rate has a role to play. It serves a function in modern times when they say things, oh, because of slow consumer spending, the Fed cut interest rates to try to steam or are now, you know, because of the coronavirus interest rates are very low. In the most economic frameworks, that's like a good thing. And oh, the question is just, is that medicine going to be enough to help? And in the Austrian view, no, that's poison that you're not doing us any favors by making

interest rates lower than they should be because that's the wrong signal. Just like, you know, if you're put a thermometer on a feverish patient's head and it's real high and you put some ice on it to bring it down to 98.6, Fahrenheit, that's, you're not actually doing any favors by masking the signal. No, that signal tells you something. And so if interest rates are supposed to be 6%, even...

And how would interest rates be calculated properly in the absence of determination by a central source? Just decentralized, just like, you know, how is the price of oil? You know, so we don't have a group of... So you just allow private lenders to set the private interest rates? Private lenders and borrowers were, you know, they could work through commercial banks and what, but it's decentralized. I mean, if you think about it, it's weird. In the ostensibly free market capital is US, there is a group of people who tell us what interest rates are. And they periodically...

Okay, so why is that? Well, the official... I know that's a terrible complicated question, but I don't know the answer to it. It is odd. So it's the price of money is centrally planned. Right. And actually, because interest is the price of money, essentially, or the price of borrowing it. Yeah. The yes, it's funny. I think it was John Stewart, you know, the daily show guy. He had Alan

Greenspan on. If I hold him, not mixing up the, this is the spirit of this is correct. And he asked him that once. He said, you know, we have a free market economy, right? Why do we have a group of central plan with it? And, you know, Greenspan kind of gave some obfuscation answer. But so the official reason people would give is they say, oh, before central banks in the US, there were these panics, you know, and there was wild inflationary, you know,

there was ups and downs and then the Fed was supposed to be formed to be a lender of last resort and to provide stability. So even if that were true on its own terms, we'll know the great depression happened on the Fed's watch. The great recession happened on the Fed's watch. Other empirical measures, there was more volatility post Fed than pre Fed. So even on its own terms, that didn't the more cynical people would say, well, it's a group of bankers and they were instrumental in the Federal Reserve Act and getting that thing established. And it's an institution that provides liquidity and bales out bankers

when they get into trouble. And so what's the mystery there? That's why it happens. So that's the mystery there? That's why it happens. That's the cynical interpretation. And which interpretation do you favor? I mean, we don't want to be cynical about it, right? And so I'm always, I'm always lary of conversations that point to they, because these huge problems, they're all our problems, right? There are problems, man. So we have this central banking authority, and

we decided at some point that that was a good idea. And cynical theories tend to be incomplete at best, in my view. I mean, what's the cost in your view or the view of the Austrian School of having the central interest rate planned in this manner. It's the business cycle. That's the issue is that it's not informed properly the decisions. Right, that by periodically pushing interest rates below what they should be, what's the just, in pure cause and effect, what's the problem with that is,

and when it comes to interest rates in particular, it causes this artificial boom period that necessarily must end in a bust. And as we say over the course of the cycle, resources are used inefficiently so that when the whole thing is set and done with, people are poorer than they otherwise would have been, head interest rates been set in a true market all along. So that's the cost of doing it. Besides that, there's redistributive things as well that if you have this engine of inflation where in a sense, in modern times,

the central bank can literally just create money electronically, that's an avenue to corruption. Like right now, the Federal Reserve is buying private sector bonds. They started doing that in the wake of the coronavirus panic. So, are they doing that purely on the merits or is there some, you know, things going on behind the scenes as to which companies bonds get purchased and don't? So it's with all this stuff. Yes, there's different motivations, but I... Yeah, well, sometimes it's not merely is their corruption, but is there sufficient transparency so that conspiracy theories of corruption stay what, less popular? That's a problem when these decisions are being made, even if they're not actually corrupt,

they destroy trust in public institutions because they're not transparent and there is room for corruption. Right. So, yeah, what the Austrians can say is regardless of where the motivations are and what, but the fact is that yeah, centrally planning prices, you know, we know outright central planning of all prices doesn't work.

That's, you know, the collapse of socialism, we can just see empirically that doesn't work. And then the Austrians, I think, are being consistent in saying, so why are we centrally planning money and banking? You know, if central planning doesn where we're going to be. Let me close this. Then what do you, this is a bit of a left field question, but I've talked to some people recently about Bitcoin. So I'm going to ask you about it.

It's sort of the ultimate decentralized economics. Any, any opinions about Bitcoin? What do you think about this idea of taking the monetary system out of the, even the hypothetical control of centralized institutions? And, you know, regardless in some sense of the specific merits of Bitcoin, it's a revolutionary idea in some sense. What do you think about it? Right. So I think it's a fascinating case study,

and I think it took a lot of us economists by surprise. I think if you had asked me before it was, you know, in 2007, could something like Bitcoin exist? I think I would have predicted, well, no, because how would it get off the ground? Like, why would people accept it? It just, it seems like it's a circular problem. Like, how would anyone know what it was worth?

And how it did get off the ground? As it first, it was almost free. Like, it was, you know, somebody gave a bunch for two pizzas or something, and then it just kind of bootstrapped. So that's how they got around that problem, I would say, which, you know, I didn't think of, or I wouldn't have thought of, if you'd asked me ahead of time. So, right, although it's a classic free market, you know, why not invest in it if it's pennies to the dollar, so to speak, because there's some potential upside. And so, yeah, the market took care of that in some sense. Yeah, so I, so what, you know, the intellectual problem they saw, because Hayek had a famous essay where he was arguing for, so what he said is, you know, free market types have tended to focus

on commodity money, like gold and silver coins, and contrast it with fiat money, like government paper, because historically the government paper would crash and the hard money, the gold and silver was sound stable currency. But Hayek said, maybe that's wrong, maybe just because historically, paper money has been issued by governments. What if you had private firms that could issue name brand currency that was just paper, but as a private company,

so you had name brand recognition and they would compete with each other. So in other words, to privatize central banking, let's call it. And so he had a whole essay on that. But even there, the problem was you had to trust, the reputation or the honesty integrity of the issuer of whatever those paper notes were. So I think the virtue of Bitcoin is, Satoshi figured out a way to make it so that there's a sense in which the system keeps track of itself and there's no one in charge of it.

Yeah, it's completely distributed. Right, and how do you safely spend money keeps track of itself and there's no one in charge of it. Yeah, it's completely distributed. Right. And how do you safely spend money and solve that problem to accurately transfer funds if nobody's in charge of the whole ledger? So that was like the intellectual masterpiece in terms of what he did and then now. So that's what's new about it.

And yes, it's now that it's off the ground. Yeah, to answer your question, yeah, there's a growing number of people who are Austrian enthusiasts who are saying Bitcoin or cryptocurrency in general is great. I'll say for sure, I like it because it shows the public that you could have privately created money. Just like with Uber and Lyft, to me, that's the easiest way to get the public to see. You don't need to have government medallions for taxi cabs.

Because before Uber and Lyft, people might have just, oh no, it's for safety. You can't just have a free market and rides because the cab you might shoot you, or you know, rob you at gunpoint or something, or you know, be driving. Right, and that didn't happen. Well, you know, not eBay is interesting that way too,

you know, because eBay, to me, is an absolute miracle. I mean, I know it's a less robust platform than it once was, but I mean, it was free enterprise at its most wildly unregulated and it produced this incredible explosion of value because people could trade frozen capital. You know, your junk in your basement was now worth something to someone. And the cynics said, well, you know, I'll send you broken junk and you'll pay me with a check that'll bounce.

And that didn't happen. You know, they put in place brokers, escrow agents to begin with, not eBay itself, but they were available so that you could insure your transaction. And what happened was the bulk of the transactions were so honest, like 99% of them are 98.5% of them, that the escrow agents weren't necessary. So, which was extremely interesting in my estimation, and Uber and Lyft are very interesting examples of that as well, because they seem to be at least as safe as taxis. In my experience, the Uber and Lyft cars are usually in better shape than taxi cabs.

And generally, it's a more pleasant experience, yeah, and it's cheaper and it provides instant, or did provide instant employment to people which was a real miracle in my estimation. It's like, you were unemployed, but you had access to a car. It's like, you had a job right then and there. Remarkable. Remarkable. So just so I think the average person could understand the possibility of, oh, yeah, maybe we don't need the government to have a cartel operation with taxi cabs in the name of

protecting the public from unscrupulous drivers. Likewise, I think with cryptocurrency, people seeing that and seeing how it works and realizing, oh yeah, maybe it's not, it shouldn't, we shouldn't just take it for granted that, oh, clearly, the government provides courts and police and money. Obviously, the government has to be in charge of issuing money, because otherwise, that to me, that's what one of the virtues of, you know, cryptocurrency is that people can at that's what one of the virtues of, you know, cryptocurrency is that people can at least see an example of something that was obviously had nothing to do

with the political system. Yeah, well, it does definitely seem to be a currency whose fundamental underlying philosophy is in line with the fundamental underlying philosophy of the Austrian school of economics. Certainly, the one reason I'm going to stop is I just do want to acknowledge that interlindel- underlying philosophy of the Austrian School of Economics? Sure. Do you want to reason I'm going to stop is I just do what I can now. There are some Austrians are divided on that. So some are really okay. Love commodity money and they think no gold and silver and they think Bitcoin like no that that makes no sense that's crazy. That's just like a big bubble. So I don't endorse that but I do want to just say that. There are Austrians are divided. Yeah, well, I guess the affinity is that it's a distributed currency that hypothetically capitalizes on distributed computation. It's not under the control of any centralized bureaucracy.

Whether or not it's the proper solution to that problem. So there's room for intelligence to face about that. Any Austrian, you know, Norm is going to say, go ahead and do what you want. And then I want to shut it down, obviously. Like go ahead and do it if you want to. I'm just, you know, I personally wouldn't invest it. Like that would be their view. Right.

And you're right. Right. The, the Bitcoin enthusiast though, they would say there's a sense in which it's even harder than gold because, you know, it hits the 21 million and that's it. Whereas in principle, we could go get an asteroid that has a bunch of gold. in which it's even harder than gold because it hits the 21 million and that's it. Whereas in principle, we could go get an asteroid that has a bunch of gold. So maybe gold actually wouldn't be the best money for the next 200 years because of some discovery or some innovation and chemistry where they can just make gold pretty cheaply. Out of seawater, for example. Whereas Bitcoin, just it's very nature mathematically, it's got a fixed limit.

And so there's a sense in which that's really hard, if it were to become money. All right, well, I think that's probably a good place to stop. I've been speaking with Dr. Robert Murphy. This is his book, Choice Cooperation Enterprise and Human Action. And today we talked about the Austrian School of Economics

and many other things. And thank you very much. It was very educational as far as I was concerned. I'm much more solid in my understanding of perhaps economics in general, not that I know anything about it yet. But that was very helpful. And I appreciate you taking the time to speak with me.

And wish you luck with your book. And I appreciate you taking the time to speak with me and wish you luck with your book. And anything else you'd like to add before we close up? Oh, I mean, I would just thank you for this opportunity to talk with you. And I was very excited to do so. And I just want to mention I've been watching a lot of your lectures, and I'm a big fan of your work and appreciate what you've been doing.

No, thank you. Thank you very much. All right. you