May 11, 2018 - Rubin Report - Dave Rubin
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(upbeat music) | |
| We're continuing our partnership with Learn Liberty this week, | ||
| and joining me today is a senior fellow at the Mercatus Center at George Mason University, | ||
| as well as a professor of economics at George Mason. | ||
| Don Boudreaux, welcome to The Rubin Report. | ||
| Happy to be here. | ||
| I am glad you are here. | ||
| I saw you speak about a year ago in Dallas. | ||
| I wanna get the exact title of the speech right. | ||
| It was called, Can We Bring Sound Economic Thinking to Washington? | ||
| That's a tough task. | ||
| That was a year ago, and I don't think there's much sound economic thinking, or sound thinking in Washington. | ||
| Forget economics for a second. | ||
| These things don't seem to go together these days. | ||
| Washington seems to repel sound thinking, and it attracts unsound thinking. | ||
| Yeah. | ||
| You think it was always that way, or are we in unique times? | ||
| Well, we're definitely in unique times. | ||
| We're in unique times. | ||
| I was born in 1958, so I came of age right when Ronald Reagan—right at the end of the Carter administration, when even Carter is pushing for—or at least accepting deregulation. | ||
| Taxes were being cut. | ||
| Airlines were being deregulated. | ||
| Surface transportation was being deregulated. | ||
| Reagan gets elected in 1980. | ||
| Milton Friedman has this popular show on PBS called Free to Choose. | ||
| I learned about Thomas Sowell. | ||
| Everything seems great. | ||
| Oh, this world's fine. | ||
| And so in my life, in my life, there was a period in the past when the thinking was more sound. | ||
| I could quibble with it. | ||
| But compared to today, it was outstanding, because it's definitely declined. | ||
| Yeah, it's hard to imagine even that around a time of Jimmy Carter, that deregulation, I mean, that Democrats could have had anything to do with that. | ||
| And yet, it's true. | ||
| Ted Kennedy was a major force behind airline deregulation. | ||
| So there was something, I'm not sure what it was exactly, it was something in the air, starting in the late 70s. | ||
| And so, you know, I was a young man and I just sort of took it for granted. | ||
| All right, this is fine. | ||
| We're winning, and then it culminates in 1989 with the collapse of the Iron Curtain, and 1991, the collapse of the Soviet Union, and then here we are, 2018, and a lot of nonsense is back on the front burner. | ||
| Nonsense is back, so let's jump back, though, to the 70s for a second, because I watched an interview with you this morning. | ||
| Something happened to you, I believe, in 1977. | ||
| That woke you up, and I think it sort of is a nice entry into everything else that you paint. | ||
| Yeah, I know. | ||
| It is the most important day. | ||
| What happened to you in 1977? | ||
| You can come up with a couple options now. | ||
| No, I know. | ||
| The date was January 24th, 1977. | ||
| I remember. | ||
| I was in college only to please my mother. | ||
| My plan was to drink beer, chase girls. | ||
| I did a lot of the former. | ||
| I wasn't successful at the latter. | ||
| But then I was going to drop out of college and work at the shipyard where my parents worked. | ||
| So I needed a class to fit my schedule. | ||
| I needed a Monday, Wednesday, Friday class. | ||
| So I took this class called economics. | ||
| Didn't know what it was. | ||
| I took it. | ||
| And I had a great teacher. | ||
| And so she drew supply-demand curves on the board. | ||
| And she said, "Look what happens when the government prevents the price of something | ||
| from rising to its market level. | ||
| It creates a shortage." | ||
| She says, "You remember the gasoline shortages of 1973?" | ||
| I said, "Oh, yeah. | ||
| I was in those." | ||
| And I just thought the beauty of this economic explanation for the gasoline shortage was | ||
| so spectacular, I wanted to learn more about the subject. | ||
| And so in very short order, I just fell in love with economics. | ||
| I'm still in love with it to this day. | ||
| Yeah, so tell me what happened after that. | ||
| So now you have your spark, and what sort of academic pursuits did you have that got you to where you are now? | ||
| Well, I was very lucky. | ||
| Again, she was a really good teacher. | ||
| And it wasn't a famous economist at all. | ||
| She was a very good teacher. | ||
| She took great interest in her students. | ||
| She taught economics as if it was something relevant to the real world, rather than just a mathematical puzzle. | ||
| And there was another guy at my—I went to a place called Nichols State University in Thibodeau, Louisiana. | ||
| It's a very small school. | ||
| But I had another professor there who was into Milton Friedman, into Hayek, into Ludwig von Mises, into James Buchanan, who later became my colleague at George Mason. | ||
| So, I would go to his office—his name is Bill Field—and he would give me these books. | ||
| And so, I remember just tearing through these books. | ||
| And it just made so much sense to me. | ||
| I realized in reading these books that all my life—I didn't give much thought to politics, not much conscious thought. | ||
| But all my life, I think somewhere deep inside of me was a classical liberal or libertarian. | ||
| Someone who believed it is basically impolite to button to other people's business. | ||
| And not only impolite, it's downright offensive to do so. | ||
| You just said two of my buzz phrases. | ||
| So classical liberal and libertarian. | ||
| Now one of the questions I get most because I define, I say that I am a classical liberal. | ||
| If I need a label on it, that's what I am. | ||
| And people will always say to me, because I talk about many of the things that you teach about, about free markets and all that stuff, and I believe that freedom is the best way for humans to flourish. | ||
| People will say, Dave, you're really a libertarian. | ||
| You're just holding on to this definition of liberalism from 18 whatever. | ||
| Yeah. | ||
| Do you see a meaningful—how would you define each one, and do you see a meaningful distinction? | ||
| I don't see much of a distinction. | ||
| It depends on who you talk to. | ||
| Some people see distinctions. | ||
| I think what they both have in common—there may be distinctions at the margin. | ||
| Libertarians maybe tend to be a little bit more radical. | ||
| What distinguishes classical liberals and libertarians, as I do, broadly from almost any other political group, is the consistent belief that any exercise of power by the state must meet a huge burden of proof. | ||
| The burden of proof is not upon the individual to make the case for his or her freedom. | ||
| It's upon the state to make the case to override that freedom. | ||
| And I believe, and libertarians, classical liberals as I think of them, believe that that burden is a real one and it's a heavy one. | ||
| Sometimes it can be met. | ||
| But too often, the reverse is in place. | ||
| People believe that the burden is on those of us who defend freedom to make the case for freedom. | ||
| And I think it's backwards. | ||
| So basically, you view it as sort of a bottom-up way of looking at things, right? | ||
| Yes. | ||
| It's about the individual first, and the government is not giving you your freedom. | ||
| It can take it away, however, by instituting all sorts of policies. | ||
| Yeah, I'm—in this case, I am—I think John Locke was right. | ||
| John Locke wasn't the only president, but John Locke most famously made the argument in the second treatise on government that, you know, human beings have rights, and human beings delegate to the government powers that those who do the delegation believe are appropriate for the government to defend those rights. | ||
| We can quibble about how historically accurate that is, but I think that perspective is philosophically correct. | ||
| No government gives me or you rights. | ||
| Governments are excellent at offending rights and taking them away, but just because government is the protector of rights doesn't mean it gives us rights. | ||
| But just because farmers—because we couldn't live without farmers. | ||
| If no one grew food and did ranching, we would all starve. | ||
| That doesn't mean that we owe our lives to farmers. | ||
| One of the great things about the society that we live in is that it's what Hayek called | ||
| the Great Society, to be distinguished from Lyndon Johnson's Great Society. | ||
| And that is, it is a society of many, many individuals, each specialized in doing various | ||
| We're all coordinated by the price system and by the rule of law. | ||
| And so each of us makes a contribution to the welfare of others, but no one of us is utterly essential. | ||
| And that's a really good system, I believe. | ||
| Yeah, so I want to talk more about Hayek in a little bit because you do run the Cafe Hayek blog. | ||
| You mentioned the burden of proof that the government has to meet to say when it's right to actually infringe on some of your rights or basically do things. | ||
| This is where I would say the classical liberal and the libertarian positions are a little bit different. | ||
| I see some utility for the state, although I'd usually want it done at the state level, not the federal level. | ||
| And libertarians, it's sort of hard to pin on when it's enough, and you alluded to that. | ||
| When you talk to libertarians, how do you get to a place where it's not, you know, I always make a joke, it's like, eventually you'll just be in Mad Max, or the true anarcho-capitalist, which I enjoy talking to, but I view it as more of an intellectual exercise than a practical. | ||
| Yeah, I'm very sympathetic to anarcho-capitalism, philosophically. | ||
| But I'm not a blow-things-up kind of guy. | ||
| I'm way too much of a Hayekian to understand that you just can't replace social institutions wholesale. | ||
| Society has to evolve to wherever it's going to be. | ||
| Is that just from being a realist? | ||
| I mean, you could blow it up. | ||
| Well, yes, you could. | ||
| But history has a lot of really telling examples about attempts to blow up societies wholesale, and those examples have never turned out well in practice. | ||
| Among the people who will call themselves classical liberals, none of them would ever express any sympathy for anarcho-capitalism. | ||
| Among libertarians, some of them will say, oh no, I believe there's a role for the government. | ||
| But you do have people who classify themselves as libertarians who say, at least in principle, I believe that a society could exist without any formal institution of monopolized coercion. | ||
| And I am in that latter category. | ||
| I might be the one classical liberal who will do it, or maybe by that definition I'm a little more libertarian, but again, these things all get, you know, it's really sort of the narcissism of small differences in this little place. | ||
| All right, so what are some of the basic principles, you're a professor, what are the basic principles that people should know about economics? | ||
| I know I'm giving you a wide one there, but for someone watching this that's waiting for their 1977 moment, Yeah. | ||
| So, in no particular order, number one, scarcity is unavoidable. | ||
| We live in a world of scarce resources, which means that if you use some resources to do this good thing, you take resources away from the ability to do other good things. | ||
| They're both good things, but we have to choose. | ||
| Do we want to do this good thing, or do we want to do that good thing? | ||
| Second thing to note, in order to make that decision, we want the people involved, who are going to be affected, both by the loss of that which is not done, and by the benefit of that which is done, to express their opinions honestly. | ||
| How valuable is this thing that we propose to do, and how valuable is this thing that we propose to give up in order to do this first? | ||
| And to do that, you need people on the ground who are actually affected by these decisions | ||
| to have a meaningful say. | ||
| You don't want a third party looking down, making declarations. | ||
| "Oh, I think you should have that, and I think you should not have that." | ||
| So, any social mechanism that gives each of us as much of a say as possible | ||
| in how we use resources and make the evaluations about what will happen | ||
| if we use resources in this way and what we'll give up if we use resources in this way. | ||
| That's important. | ||
| Unintended consequences is another important You know, Adam Smith in The Wealth of Nations, which is rightly considered to be the starting point of modern scientific economics, he famously talked about the invisible hand. | ||
| And this is sort of an unintended consequences kind of explanation. | ||
| It's not from the benevolence of the butcher, the brewer, the baker that we expect our dinner, but from their regard to their own interests. | ||
| They don't dislike you. | ||
| They value you as a customer, but they are doing their jobs not Primarily to help you they're doing their jobs to help | ||
| themselves and you are buying from them not primarily to help them | ||
| But primarily to help you and your family and in that way everyone's a better | ||
| So this is a good unintended consequence, but you have you have bad unintended consequences as well | ||
| One of my favorite examples of a bad unintended consequences the minimum wage or raise the minimum wage | ||
| It looks like you're helping low-skill workers and you might help some of them | ||
| But in fact, you're putting other low-skill workers out of jobs and you're keeping them out of the job market for | ||
| longer And so economists and what makes a good economist | ||
| Which distinguishes a good economist from a bad economist or a non-economist is is a consistency in asking questions | ||
| also Always asking, as compared to what? | ||
| As compared to what? | ||
| Where did that come from? | ||
| How are we going to pay for that? | ||
| What did this cost? | ||
| What will be the long-term consequences down the road beyond the immediate ones that everyone can see? | ||
| So it's just a consistency in asking those questions. | ||
| You know, it's funny, as you're answering the question, it keeps making me think, well, this shows you why politics is so screwed up. | ||
| Because they get up there, all politicians on either side, and they either say, $15 minimum wage, Bernie, or Trump, I'm gonna cut taxes on you. | ||
| Or, you know, they love their bumper sticker stuff. | ||
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unidentified
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Yep. | |
| Yep. - But nobody's ever said unintended consequences in a presidential debate. | ||
| So how frustrating must that be as an economist listening to people who are not economists | ||
| who really aren't experts in much of anything. | ||
| I don't know that Bernie's ever created a business or made anyone make a dollar off him. | ||
| I'm not aware of it. | ||
| (both laughing) | ||
| Right, but that must be incredibly frustrating to hear non-pros talk about the things that you're a pro at. | ||
| It is, Dave, and you know what's especially frustrating about it? | ||
| It's not rocket science. | ||
| I mean, I love economics. | ||
| I love my profession. | ||
| I really admire the best among my professional colleagues, Milton Friedman, Hayek, but it's not rocket science. | ||
| It's just this consistency of always understanding that there are consequences beyond the immediate, that there's always a cost to something, that no matter how beneficial something is, it has to be weighed against that cost. | ||
| The simple understanding and the consistency in applying that understanding, it's not difficult, but so few people do it. | ||
| So it is frustrating. | ||
| Years ago, I joked that I stopped watching the evening news. | ||
| People my age used to watch the evening news. | ||
| I remember it. | ||
| I have some recollection. | ||
| I remember I had to stop watching the news. | ||
| I always threatened to throw my shoe through the screen because the reporters, very much like the politicians, they would report on the immediate effect. | ||
| Minimum wage is going to rise. | ||
| That means that workers will get a raise of, you know, whatever the amount is. | ||
| Well, no it doesn't! | ||
| It means that for some workers, but it means also other workers are going to lose their jobs. | ||
| Some jobs, the nature of those jobs are going to change. | ||
| Employers aren't just going to sit back and say, oh well, we've got to pay higher minimum wages, so let's just pay higher minimum wage. | ||
| Where's that money coming from? | ||
| Where are those resources coming from? | ||
| They have to come from somewhere. | ||
| Yeah, so basically your argument would be that the government's only role in the economy is to make sure we're not killing each other, pretty much, right? | ||
| Like it really, it's a total laissez-faire. | ||
| Yes, I am a very laissez-faire guy. | ||
| If property rights are well-defined and secure, and there's a strong case that government plays a role, or can play a role, in helping to define and certainly helping to secure - Property rights. | ||
| So that's where you're not-- | ||
| And contract rights. | ||
| Right, so that's where you're not an anarcho-capitalist, right? | ||
| Well, I'm close to being an anarcho-capitalist. | ||
| I'm willing to admit that-- | ||
| You're begrudgingly giving that to the government. | ||
| Yes, I'm willing to admit that anarcho-capitalism might not be an ultimately defensible position. | ||
| I am not willing to admit that free markets are an indefensible position. | ||
| However property rights come to be, however they are defined, however they are enforced, | ||
| when you have secure private property rights and freedom of contract, which includes, importantly, | ||
| the freedom to say no. | ||
| All right, bye. | ||
| The freedom to not contract. | ||
| Then, people are led to pursue, people in pursuing their own interests, are obliged to help others out. | ||
| And that's how this great society that we live in, and it is great, continues to grow and become more prosperous. | ||
| Yeah, so I mentioned to you right before we started that I've had a political awakening of sorts. | ||
| And I always say to people, I didn't really move, but the left went so bananas I ended up being friends with all these libertarians and conservatives and whatever it is, even for the differences we may have. | ||
| But one place I have shifted is that I am much more where you are economically now. | ||
| And partly that's because I now run my own business and have employees. | ||
| And have to deal with that. | ||
| And I just wrote two obscenely high checks for taxes for the year. | ||
| I mean, we are in California. | ||
| You don't want to know how much that one was. | ||
| And the federal one was even worse. | ||
| And it's like, the more successful I get, the harder I work, the more they want to take from you. | ||
| And I tweeted something about that on tax day. | ||
| And a lot of people were angry at me and said, well, this is the price to pay for success. | ||
| Would you rather be poor? | ||
| And I didn't wanna go on a major tweet storm, and you wisely are not on Twitter, but could you give me something that if I ever get in that fight again, I can say to people why that's not the right way to think? | ||
| So let me start off, though, with just asking you, have you heard the story about George McGovern when he retired from politics? | ||
| I don't think so, please tell me. | ||
| So George McGovern, when he retired from politics, I think I have the details right. | ||
| I certainly have the major part of it right. | ||
| He started the B&B. | ||
| You know, in his home state. | ||
| I already like where this is going. | ||
| Yeah, and then he encounters all these regulations, you know, labor regulations, safety regulations, and he admits, I can't remember now to whom he admits, this is a long time ago, he admits, he says, you know, I've spent all my, I'm not quoting him, I'm going from memory, he says, I've spent all my life pushing for these things. | ||
| I wasn't sufficiently attentive to the downside of these taxes and these regulations. | ||
| And so it's easy to sit in Sacramento, to sit in Washington, D.C., to sit in some you know, local government office building and tell other | ||
| people how to live and to tell other people how much money they have to give to you. | ||
| And you can be well-intentioned in the best sense of the term, but you are not those other | ||
| people. | ||
| And those other people are bearing consequences, and they know of things that you don't understand. | ||
| And so on the tax thing, I like what my friend Ed Crane said about the famous quotation that | ||
| is above the door of the IRS building in Washington. | ||
| It's a quotation from Justice Oliver Wendell Holmes, who said—I think this is the exact quotation—taxation is the price you pay for civilization. | ||
| And Ed Crane says, no, that's wrong. | ||
| Taxation is the price we pay for being insufficiently civilized. | ||
| A civilization is when we cooperate peacefully to help each other. | ||
| And so even if we grant that there is some role for government, and once you grant there's some role for government, it's very difficult to not see that there's some appropriate level of taxation to fund that role for government. | ||
| However much that may be true, that we need that, it represents a failure of us as a society to become fully civilized. | ||
| We've somehow not managed to figure out how to cooperate peacefully and voluntarily in those matters, in ways that we have managed to discover how to cooperate peacefully and voluntarily in doing what we're doing here today, in going to the supermarket and the supermarket dealing with the various suppliers that it has. | ||
| None of that is funded with taxation. | ||
| It's all funded with voluntary payments. | ||
| That is civilization. | ||
| So I like the notion that taxation is sort of a measure of how little we are civilized | ||
| or how far we have to go to be completely civilized. | ||
| To make sure we're not killing each other. | ||
| To make sure we're not, yeah. | ||
| So all right, I wanna get back to a couple things you said there. | ||
| So first, okay, I know that the minimum wage is a big one for you, and even just this morning I read another story about how Bernie wants this $15 minimum wage. | ||
| The anecdote that I keep using is that I'm traveling all over the country right now, and in almost every airport, you go to fast food places and they don't have people anymore. | ||
| They have iPads. | ||
| Now, perhaps if you could pay people less, people would have jobs. | ||
| It wouldn't be the greatest job in the world, but it would be the way it's always worked. | ||
| Now we are literally replacing people with robots. | ||
| That may be inevitable no matter what. | ||
| But to say that you have to pay people, again, even for my own business here, I get people offering to work for me for free all the time. | ||
| I want to pay people appropriately, and we do pay all our people. | ||
| But the idea that the government would force me to pay someone X amount seems completely bananas. | ||
| Yeah, so the minimum wage puts many low-skill workers out of jobs. | ||
| If a teenager is not worth $7.25 per hour, employers who are not in the charity business are not going to hire that teenager at that price. | ||
| That teenager will go without a job in the above ground. | ||
| You might find a job paying more in the underground economy, which is a different set of problems. | ||
| And so that is the major unintended consequence of the minimum wage. | ||
| There are others, but that's the big one. | ||
| And if, you know, with people like Bernie Sanders, I mean, because I speak to proponents | ||
| of the minimum wage all the time, what most of them do is they just stop the analysis | ||
| at the surface. | ||
| Oh, wouldn't it be better to be paid $15 an hour? | ||
| Of course! | ||
| So they don't want to get to the unintended consequences part. | ||
| Yeah, but I think because most of them believe, they just have this image of employers as being really rich, highly profitable operations, and so if you raise the minimum wage, oh sure it has a cost, but it's a cost that's going to be borne exclusively by employers. | ||
| But it's a fact. | ||
| Most low-skilled workers work in highly competitive industries. | ||
| They work in food retail. | ||
| They work at lawn care. | ||
| They work in supermarkets, restaurants. | ||
| These are highly competitive industries. | ||
| So there's no big profit margin there. | ||
| So when you raise the minimum wage, it's not coming out of the profits of the employers. | ||
| It has to come out of some change in the way the employers do their business. | ||
| There's nothing wrong with automation, of course. | ||
| But there's a proper amount of automation. | ||
| And if you raise the minimum wage, you get too much automation, and too few human workers. | ||
| I just want to make this point clear. | ||
| Here's another unintended consequence of the minimum wage. | ||
| Not only does it deny income to those workers who lose their jobs. | ||
| Worse, in most cases, it denies those workers What's even more valuable, namely the opportunity to get that first piece of job experience. | ||
| And so the 16-year-old who otherwise would have gotten a job without the minimum wage becomes a 17-year-old or 18-year-old who's still a never-employed person, whereas otherwise they would have had job experience. | ||
| And so it swells, artificially swells the ranks of unskilled workers. | ||
| Would there be a direct correlation, then, that once you have this whole set of people at this imaginary $15 minimum wage, they are also gonna raise prices on basic things, right? | ||
| I mean, is there a direct correlation there? | ||
| No, no. | ||
| I mean, prices may rise a little bit, because you get, you know, the economy's a little bit less efficient, so you get a little bit less output. | ||
| But the price increases aren't the major problem. | ||
| The major problem is employers will find ways to satisfy their customers. | ||
| At slightly higher cost to the employers, but at huge cost to those workers who lose their jobs. | ||
| So when you've talked to economists on the left that disagree with you on this, and I get what you're saying, that they're not taking that next step. | ||
| I'm sure there's someone out there that has made a sound argument that you just disagree with. | ||
| Can you lay out what that might be? | ||
| So there is one sound argument, one sound theoretically, one theoretically coherent argument for the minimum wage. | ||
| I like how you had to measure that one. | ||
| And that is, if employers have what's called monopsony power, which I'm going to need you to define that one for me. | ||
| Yes, monopsony power, it's like monopoly power, so a monopolist is the only seller, a monopsonist is the only buyer. | ||
| So if you're the only buyer of Low-skill workers in the market, right? | ||
| But you as an employer, you then can, and it can be easily shown, you can keep wages lower than they would otherwise be. | ||
| Too low. | ||
| And, given that, it can be then shown that if the government comes in and sets a minimum wage, then the employer will in fact pay the higher minimum wage and no employees will be harmed. | ||
| But it's a very, very strict The criteria for this are very, very strict. | ||
| And the idea that Walmart and McDonald's and Burger King and KFC and all the mom-and-pop restaurants and maid services and lawn care services that we have throughout the United States, the idea that any one of these is a lone monopoly buyer of low-skill workers is just absurd. | ||
| All right, so one of the things that you write about a lot is that the idea of middle class stagnation is actually wrong. | ||
| Yes. | ||
| We hear this all the time from politicians for, I think, my whole life that I was ever caring about politics. | ||
| It's always that the middle class is shrinking and the extremes are getting bigger, et cetera, et cetera. | ||
| But you actually take a different position on it. | ||
| Yeah, this middle class stagnation thesis is stated as if it's an established fact with no arguments against it. | ||
| It's just wrong. | ||
| I think you were born in the mid-seventies, right? | ||
| Seventy-six. | ||
| Okay, so according to this thesis, it was right around that time, mid-seventies. | ||
| I apologize. | ||
| That's okay. | ||
| It was your fault, right? | ||
| So the American middle class has been chugging along upward. | ||
| It hits the mid-seventies and then it's been stagnant ever since. | ||
| So ordinary Americans say, So goes the thesis, live no better than ordinary Americans lived when Gerald Ford was in the Oval Office. | ||
| I think this is crazy. | ||
| I mean, I have, I'm unfortunately old enough to remember the mid-1970s, and although one's own personal experiences shouldn't be a basis for scientific conclusions, they're not irrelevant. | ||
| I come from a working-class U.S. | ||
| family. | ||
| I remember how we lived in the 70s. | ||
| I remember what cars were like. | ||
| I remember what television was like. | ||
| I remember what health care was like. | ||
| Things are a lot better today for ordinary Americans. | ||
| And so I, a number of years ago, just started looking into this thesis. | ||
| There are data. | ||
| that you can find, that the people who propose this thesis point to, that lend some superficial | ||
| credence to the thesis. | ||
| But here are just some of the problems with these data. | ||
| They adjust for inflation in ways that vastly overestimate the amount of inflation that | ||
| we've had since the mid-'70s. | ||
| So, I mean, vastly undercounting the growth in real incomes since the 70s. | ||
| A lot of these data will look at household incomes. | ||
| Well, the typical population of the American household has fallen since the mid-1970s. | ||
| Today, it doesn't sound like much, but today it's about 11 percent lower. | ||
| than it was in 1975. | ||
| But that's actually pretty significant. | ||
| So the same amount of income in a household now is spread over fewer people, | ||
| and so the individual people are richer. | ||
| Meaning we're just not having as many kids. | ||
| We're not having as many kids. | ||
| We're becoming wealthier so that now, I don't know, maybe not in the last 10 years or so, | ||
| but for much of this period, younger people have been able to move out of their family, | ||
| their parents' homes at a younger age and start their households younger. | ||
| uh, uh, over. | ||
| Older people are able to continue to live by themselves rather than move in with their children. | ||
| The quality of goods and the variety of goods and services that ordinary Americans have access to today is astonishing compared to what it was just 40 years ago. | ||
| I actually spend a lot of time looking at catalogs from the mid-1970s, you know, Sears catalogs. | ||
| And then you can look at Sears.com today, and you can look at the prices that were charged | ||
| back then. | ||
| Of course, nominally, they were lower. | ||
| But then you just take those prices and you divide them by the wage that the average American | ||
| earned back then. | ||
| And you do the same thing for the prices today, and divide it by the wage that the average | ||
| American earns today. | ||
| And what you find in almost all cases is that the amount of time it takes to work in order | ||
| to earn enough income to buy a pair of jeans, a shirt, a washer and dryer, an airplane ticket, | ||
| is dramatically less today. | ||
| We don't have to work as much today as we did back then in order to get the things that make our standard of living as high as it is. | ||
| So did they just, the people that believe in this, did they just do a great sell job? | ||
| I mean, how did this meme, how did this idea get out there? | ||
| Because you hear this all the time. | ||
| Everybody. | ||
| This is one of the few things that you hear on both sides of the aisle. | ||
| Yes, yeah. | ||
| In fact, yes. | ||
| Paul Krugman says it all the time, and I think in a way it kind of backfired on people on the left, because they keep saying it, and I believe that's one thing that helped drum up popular support for Donald Trump. | ||
| Yeah, middle class Americans have been stagnating, so let's do something about it. | ||
| Let's elect Trump. | ||
| There's an interesting psychological thing there, because I think maybe most people think they're in the middle. | ||
| They probably think it, no matter what. | ||
| If they're not destitute, and if they're not worth 20 million bucks, you probably think basically you're in the middle. | ||
| So it's a way of making it about you, even if it's actually not the case. | ||
| Your question, I'm not sure exactly why this myth caught on and has held on with such tenacity. | ||
| This myth has been around now for 20 years. | ||
| It started in the mid-1990s. | ||
| And there was actually an economist, he's now at SMU in Dallas, he was at the time an economist at the Dallas Fed, a guy named Mike Cox. | ||
| And he's the first one who really started looking into this. | ||
| Let's look at various measures of living standards. | ||
| Let's look at how much ordinary people are consuming today compared to in the mid-70s. | ||
| Let's look at what happens when we adjust for income using better inflation adjusters. | ||
| My work is derivative of Mike Hawkes, is that once you start doing this, this whole middle class stagnation thing just crumbles into dust. | ||
| It's just not true. | ||
| It's not to say that there are no problems. | ||
| It's not to say that the middle class wouldn't be even wealthier had there been better policies in place, whatever you think those policies might be. | ||
| But it is to say that it's just crazy to believe that an ordinary American or an ordinary American family Yeah, do you know what basically the economics look like if you're considered in the middle class right now? | ||
| Are there really numbers that you look at on both sides and go, all right, that's what middle class is? | ||
| Because I think that's part of the problem. | ||
| It is this sort of amorphous term. | ||
| Yes, yeah. | ||
| I don't believe that they're—I mean, you know, the Census Bureau, among others, they will divide household income into quintiles. | ||
| I don't recall what those numbers are at the moment, but a common definition is you take the three middle quintiles. | ||
| So, you get rid of the top 20 percent, you get rid of the bottom 20 percent, and you have the middle 60 percent. | ||
| That's the middle class, you know, upper middle, middle middle, lower middle. | ||
| But the Census Bureau does something interesting from time to time. | ||
| So, it divides. | ||
| household income into different categories, less than $15,000, $15,000, $25,000, on up | ||
| to, I think, $250,000 and above. | ||
| And it tracks—adjusting for inflation—it tracks household incomes over time. | ||
| And you can't in a perverse way find in these data that the middle class in America is disappearing. | ||
| But it's disappearing into the upper classes. | ||
| If you look at the percentage of households in America who are earning in the lowest percentages, they're shrinking. | ||
| The only categories in which the percentage of households in the U.S. | ||
| are increasing are in the upper income Actually, I think the very lowest, it might have ticked up a little bit, like less than $15,000. | ||
| But in the great middle, they have fewer households, percentage-wise, earning in those categories today, but more earning $100,000 annually and above. | ||
| And so, in one sense, yes, it's shrinking, but it's getting richer. | ||
| There's no evidence that we're getting poorer. | ||
| There's no evidence that it's stagnating. | ||
| Yeah, so we talked a little bit in an ancillary way about taxes earlier, so I'm not an economist, but I'm going to lay out what I think is sort of a fair tax system that's consistent with all the ideals that we've talked about here, and I want you to... Okay, I have my ideas, too. | ||
| Either I'm gonna blow your mind or you're gonna tell me that I'm way off. | ||
| So something like this, this is what I've said a couple times, is that I'm basically for a tax, a flat tax, you can get rid of exemptions, let's say it's about 15%, but we can fiddle with the numbers, but let's, about 15%, I would exempt everyone making, let's say, less than like 40 grand, maybe even 50 grand, so that they have a little more disposable income | ||
| that they can do things which I think is good for them and good for the economy. | ||
| And then just because I still have a little bit of a guilty liberal in me, | ||
| I would even be willing to do some sort of progressive tax if you're over, say, 10 million a year | ||
| or something like that, even though I know it's not right and I'm sure you can get rid of that | ||
| by the end of this conversation, but there's still a piece of me that says that. | ||
| But basically saying that for the huge, vast majority of the country, 15%, little exemptions, maybe a little trickery on the high end, I think that's consistent with the sort of classical liberal idea of minimal involvement and equality of opportunity and what you're all paying in, and hopefully it would cause a slimmer, trimmer government. | ||
| So, some glimmering in your eye, and some... Yeah, so I said earlier, I think one of the distinguishing features of an economist is always, as compared to what, right? | ||
| As compared to what we have now. | ||
| That's close to perfect. | ||
| Alright, I'll take it. | ||
| As compared to what my actual ideal would be, given that we're going to have taxes. | ||
| It's not quite my ideal. | ||
| I would, indeed, get rid of the progression Yeah. | ||
| That's just the guilty part of me, I think, that still exists. | ||
| I was one of them for a long time. | ||
| So the way I look at people who earn those kinds of incomes, assuming they earn them, and most of them do, they earn these incomes in the market, that means that these people are especially good at making life better for ordinary Americans. | ||
| They're especially good at creating jobs. | ||
| They're especially good at increasing the value of my 401k. | ||
| But what would you say when people say, but they don't need eight yachts and helicopters and all that? | ||
| I would say they earn, it's theirs. | ||
| It's not up to me to say what they, they earn, it's their money. | ||
| I can't make an argument against it, I know. | ||
| It's theirs. | ||
| I mean, look, again, you know, your system is better than what we have now. | ||
| But definitely, if we're going to have income taxation, a flat tax, and I'm willing to have the exemption for the lower incomes, flat tax is the way to go. | ||
| Not only does it prevent a lot of political chicanery, you know, messing with brackets, But it is economically the better system. | ||
| When you tax all income-earning activities at the same rate, then the relative prices of different types of labor services stays the same. | ||
| When you have progressive taxation, you create greater distortions in the economy. | ||
| And that makes us, as residents of this economy, it makes us all a little bit less wealthy than we otherwise would be, because the economy has to deal with these distortions. | ||
| So what do we do about spending? | ||
| Because at the end of the day, that seems, at least when we're talking about this from a government perspective, that it's really all about spending, that you can tax out the wazoo, and regardless of whether that tanks the economy or fixes it or whatever, that that's almost irrelevant if you just keep spending, especially because the amount of debt we have, and we know we're never gonna pay it back, which is why it's probably good that we have a lot of bombs, but that's a whole other discussion. | ||
| You know, because one day, if China calls in the debt, You know, we're in a lot of trouble. | ||
| But how do you rein in spending? | ||
| Because this seems to be the thing that all the Trump people, right, they all thought he was gonna rein in spending. | ||
| This omnibus thing. | ||
| He's done quite the opposite. | ||
| And I think it's more than ever before. | ||
| It is, it is. | ||
| So I think the big question is, I don't know how to do it. | ||
| We can speculate about changing the Constitution, putting constitutional balanced budget amendments, constitutional caps on spending. | ||
| I'm skeptical of all of those things. | ||
| Government has many ways to get around these paper tiger provisions. | ||
| The problem is Americans today look to government and basically you're spending other people's money. | ||
| And so if you're spending other people's money, it's easy to spend. | ||
| My former colleague, Rush Roberts, had a piece in the Wall Street Journal many years ago entitled something like, if you're paying, I'm having steak. | ||
| So imagine we all go to a restaurant and there are different menu items. | ||
| Well, if you go to a restaurant and you're picking up your part of the tab, you may order steak, but that's because it's worthwhile to you and you'll have to pay for it. | ||
| But you might if you have to pay for you might not order sick you might order a less expensive dish | ||
| But if it's gonna be shit even if it's gonna be shared right | ||
| then based then the bulk of your extra expenditure is shared with the people you're going to dinner with and | ||
| That's true for every person at that dinner, right? And so you wind up with this bizarre | ||
| Circumstance where every person acting rationally winds up ordering too much winds up asking of the restaurant too | ||
| much We wind up asking of our government too much. | ||
| But we have to pay for it. | ||
| The resources do not fall out of the sky free. | ||
| They're coming from somewhere. | ||
| And because we're spending too much, we're taking resources from where they would be better used and putting them where really none of us want them to be used. | ||
| We all wind up using them. | ||
| I know you said before that an anecdotal story is not proof of a bigger theory, but as you're saying that, it reminds me, I don't think I've ever said this publicly before, at my brother's bachelor party, when I was a struggling comic and I had no money. | ||
| I had maybe 50 bucks in my pocket, I don't know. | ||
| I was the best man, all his friends were in banking and lawyers, and they all had money, big rollers. | ||
| We're at a fancy, the one fancy place, the Borgata in Atlantic City, the one fancy, you know, nice place in Atlantic City, and we're sitting around this huge table at a really super fancy restaurant, and all the entrees are 80, 90, 100 bucks, and I'm looking around, I'm like, you know, What am I gonna do here? | ||
| I was gonna get the chicken for maybe 50 bucks or something, and I was sitting with my brother's one friend who also was kind of struggling like I was. | ||
| And we're both saying, all right, we're gonna get the chicken for 50 bucks. | ||
| We go around, everyone's getting steak, lobster, steak, lobster, steak, lobster, steak, lobster. | ||
| It gets to my friend Josh. | ||
| The whole time he's going, I'm getting the chicken for 50 bucks. | ||
| The waitress says, what do you want? | ||
| He goes, lobster. | ||
| And then I just said steak, like that, like, and it's exactly what you're talking about. | ||
| You suddenly lose concept of what's in your pocket. | ||
| Somehow it's going to happen, right? | ||
| If the bill's going to be shared, then the additional cost to you of ordering steak is a tiny fraction of the actual additional cost of the steak. | ||
| And that's the problem with government today. | ||
| We have people in Washington spending other people's money for the benefit of yet other people. | ||
| And when you do that, you just get too much spending. | ||
| I don't know a better way to say it. | ||
| It doesn't sound very economic, I understand, but we've lost the ethic of respecting other people's property. | ||
| Once government gets money, once government officials figure out something that they fancy is good and may or may not really be good, which doesn't mean necessarily it's worthwhile, but it may be a good project, that doesn't mean that therefore we should go ahead and spend Money on it. | ||
| There's an insufficient connection between the spending and the experience of the cost of the resources that go into the spending. | ||
| How much of this do you think is not an economic problem, but a political problem? | ||
| So that if a politician was to get this, right, let's say there's some magical politician out there who really understands economics, but he knows if he goes to the Senate, so I suspect Rand Paul's kind of like this. | ||
| I think he basically gets this. | ||
| And he does fight, the best fight generally that I think he can. | ||
| But that these guys wanna get reelected. | ||
| And saying to people, we're gonna spend less on you, even though, You know, it's the best thing we can do for you, actually. | ||
| It's going to free you, one day. | ||
| And it's not going to tank the economy and make us slaves to a foreign nation and all that. | ||
| It just doesn't work politically because it's not the easy answer of, give them more. | ||
| I think it's exactly right. | ||
| Let's face it, each politician has a time frame that extends to the next election. | ||
| So in the case of members of the House, that's only two years. | ||
| In the case of the president, that's four. | ||
| Senators, six. | ||
| That's not a long time frame. | ||
| Anything beyond that time frame is irrelevant to that person politically today. | ||
| Or to make it relevant, that person has to have an ethic that is very rare and unusual | ||
| among politicians. | ||
| And people with that ethic tend not to succeed in politics. | ||
| A handful do manage to get in, but very few. | ||
| So you have people without that ethic, and they're just looking toward the next election, | ||
| which is at most, again, only two years away for a House member. | ||
| And so if the bill's coming due two and a half years from now... | ||
| If whatever other costs are going to happen two and a half years from now. | ||
| Or, alternatively, if taking some action that's going to have costs today, but huge benefits, no matter how huge, two years from now, four years from now, they're not going to take it. | ||
|
unidentified
|
Right. | |
| Because that will do nothing to get them past that next hurdle, which is getting elected. | ||
| Re-elected. | ||
| So in a very depressing sense, or in a sort of dystopian future sense, are we, in a certain way, are we on a pathway to destruction no matter what, if you think about it? | ||
| I mean, if you take that line of thinking long enough, right? | ||
| So we have a sort of weak political crew dealing in ways that are the reverse of how economically we can be successful. | ||
|
unidentified
|
You're pretty much always going off the cliff. | |
| Yeah, so despite all that I've said, I remain optimistic, and I'm not sure why. | ||
| I feel the same way generally. | ||
| I remain optimistic. | ||
| We still have respect for private property in the United States. | ||
| We're still a very entrepreneurial culture. | ||
| We still Hold politicians to some, this is less now, but to some level of responsibility. | ||
| I say that, my libertarian friends are going to kill me for saying it. | ||
| I think there's something there. | ||
| Look, the political problem has always been there. | ||
| I think the U.S. | ||
| Constitution in the past, up until about 80 years ago maybe, did serve more as a constraint. | ||
| That has largely been shoved away. | ||
| By and large, we've still prospered over the past 80 years, almost in spite of ourselves. | ||
| So there's something in the American mindset. | ||
| There's something in our gumption. | ||
| And I don't want to sound like I'm out. | ||
| Rah-rah. | ||
| But there's something about this society of ours that remains relatively open, remains relatively free. | ||
| Property rights remain relatively secure. | ||
| I think we still have something of a rule of law in place. | ||
| And what I've learned in the 40 or so years that I've been pondering these issues is that a free society is far more robust than I once believed it to be. | ||
| Which is not to excuse or justify any of the abuses that it takes, but it's really robust. | ||
| And I have no good sense of where the point is. | ||
| I don't believe it's indestructible. | ||
| But I have no good sense of where the point is where you hit that point and suddenly things are destined to go into the gutter. | ||
| We may be moving there now. | ||
| I have a 21-year-old son. | ||
| For his sake, I certainly hope we're not close to that. | ||
| But, my gosh, if you look back to the 1930s, I think things were even worse then, idea-wise, the trend of government-wise than they are today, and yet we did pretty well. | ||
| I'm glad that you just said idea-wise, because one of the things that I focus on here is talking about ideas. | ||
| They matter. | ||
| That's the whole purpose of what I do. | ||
| Do you think that these ideas related to freedom and the individual And laissez-faire capitalism and all of the things that we've discussed here are taking root again because that's how I started. | ||
| You mentioned my interview with Thomas Sowell right before we started. | ||
| And I sense it. | ||
| And again, I can only tell you what I'm personally feeling and the feedback I get and all that. | ||
| But I said to Thomas, or to Dr. Sowell, I said, Do you realize the renaissance your work is having? | ||
| And I think he's kinda just over it personally. | ||
| I think he's proud of his work. | ||
| Yeah, he should be. | ||
| Yeah, and of course he should be, but I think just on a personal note, he's kinda like, yeah, I've been doing this for a long time, and that's great. | ||
| But I really sense these things are taking root again, even though the mainstream media won't let you really believe that, and they still will always elevate the people that are pushing a lot of the more socialist stuff instead of some people with some, So getting back to something we said earlier, I think it took a lot of people by surprise in the late 1970s when the ideas for cutting marginal tax rates, deregulation, took hold. | ||
| And I think that's because people like Milton Friedman, my late colleague James Buchanan, had been working years earlier. | ||
| in helping to—at Hayek, working years early to make these ideas sound and accepted. | ||
| And they were in place. | ||
| And when the crisis of the '70s hit, those ideas had an effect. | ||
| No one knows the future. | ||
| The future is not destined to repeat itself in the way that it did then. | ||
| But there are a lot of really good people. | ||
| You're doing great work. | ||
| There are a lot of really creative young people today, refining these ideas, polishing ideas, presenting them to the general public in new and more interesting ways. | ||
| And maybe it's hope over experience. | ||
| I don't know, hope over reality. | ||
| But I actually believe that these ideas are strong. | ||
| I think they are appealing. | ||
| And they are out there. | ||
| And while today, you know, May 19, May 2018, we can't see when they'll take root. | ||
| But I think that they will, in fact, protect us. | ||
| So that is the optimist in you, and I have that too, because otherwise how could we do what we do, right? | ||
| I mean, if the answer, if you had looked at me ten minutes ago and said, yeah, pretty much we gotta go off the edge, then where are we? | ||
| Then I would have had some of the booze you have behind me, so let's just start drinking right now and just wait for Armageddon. | ||
| Right. | ||
| Look, I believe. | ||
| Here's something that I did not fully appreciate 20 years ago that I do appreciate now. | ||
| 20 years ago, I was a more hard-nosed economist. | ||
| Now ideas are really irrelevant. | ||
| They don't matter that much. | ||
| It's, you know, the institutional constraints. | ||
| I do think institutional constraints matter. | ||
| They're important. | ||
| But I've come to see ideas as By far the single most important constraint and fuel for a society. | ||
| I've been largely affected by the work of Deirdre McCloskey, who I think you... I pat on. | ||
| It was one of my favorite chats that we've had here. | ||
| Deirdre's work has influenced me greatly in her work. | ||
| She's not the only one, but she's done more than any other modern economist to make the case for the role of ideas. | ||
| And I think she's correct. | ||
| She's correct in that. | ||
| So in that, you must be incredibly hopeful then, because I feel the idea revolution. | ||
| I'm on tour with Jordan Peterson now, and I keep going up there and saying, there's the right kind of revolution happening. | ||
| We're not killing each other in the streets yet, and how does that get stopped by an idea revolution? | ||
| Yeah, so at the beginning I mentioned that I came to economics because I was impressed how economics explained the gasoline shortages of the 1970s. | ||
| So I don't know if you remember a few years ago, you know, Obama was in office, gasoline prices are rising, people are complaining. | ||
| Here's the importance of ideas. | ||
| There were no serious calls, even in the Obama administration, to go back to 1970s style price caps. | ||
| I took that as a good sign. | ||
| I'm not saying it won't happen in the future, but I believe the reason that was the case is because the economists, Milton Friedman among others, who explain the devastating roles of price ceilings on energy, those ideas were still around. | ||
| They're still out there. | ||
| And they prevented anyone who would propose such policies seriously from being taken seriously. | ||
| So that notion of returning to the 70s style price caps just never got a hearing a few years ago when gasoline prices were high. | ||
| So that's one data point that supports our optimism. | ||
| Yeah, that's great. | ||
| I mean, you know, it's a long game, right? | ||
| I mean, that's the point. | ||
| It is a long game. | ||
| I wanna talk a little bit about regulation before we wrap up. | ||
| I had, you may know him, the biology professor, Brett Weinstein, who's been on the show and he's a friend of mine. | ||
| He made an interesting comment to me the other day. | ||
| I think maybe he tweeted out and then we discussed it a little bit about, well, if you're taking the true libertarian approach and you're against all regulation, well, are you saying that you want no regulation Over the airlines, for example, to have any safety regulations or anything like that. | ||
| And what I, we didn't have a ton of time to get into the conversation. | ||
| I said, I said, Brett, very quickly, what I would say is I think airlines are in the business of getting people from one place to another and they do all their due diligence. | ||
| And if the idea of a government bureaucrat coming in to make sure that this little thing is this way, as if they have more knowledge about it than the airline people, I find that to be pretty faulty, but we sort of left the conversation there. | ||
| What is the right amount of regulation as a libertarian? | ||
| Oh, I'm in favor of huge amounts of regulation. | ||
| I'm not being facetious. | ||
| I love regulation. | ||
| I believe the best regulator is the market. | ||
| It's the competitive market. | ||
| It's consumers being able to spend their money as they choose, or not to spend it as they choose. | ||
| It's the freedom of different producers and entrepreneurs to enter markets or leave | ||
| markets as they choose. | ||
| It's the competition among producers. | ||
| That's where real regulation comes from. | ||
| The market regulates activities. | ||
| You're right about the airlines, for example. | ||
| No one has a stronger incentive to make sure that a multi-million dollar piece of machinery | ||
| doesn't just willy-nilly fall out of the sky than the owner of that multi-million dollar piece of machinery, | ||
| namely the airlines or the company that they're renting it from. | ||
| And so the competition among the airlines, the need for them to protect their investments, | ||
| that is a tremendous source of regulation, and it's a very nuanced source of regulation. | ||
| It gets it right, and it's not subject to political control or political manipulation. | ||
| So so-called government regulation is too often It's actually deregulation in the worst sense. | ||
| It's government relieving businesses of the need to be as responsive to consumers as they would otherwise need to be. | ||
| So we call, for example, occupational licensing. | ||
| That's a form of regulation. | ||
| No, it's a form of deregulation. | ||
| It deregulates the existing producers in the market from having to be as responsive as they otherwise would to consumers. | ||
| So, for example, this would be like you have to have a license to cut hair in California. | ||
| Yeah, and so if I'm a hair braider or a barber or an electrician, and if the government prevents people from entering in competition with me, that makes my life easier. | ||
| I don't have to be as responsive to consumers. | ||
| I can charge higher prices. | ||
| I can supply less high-quality services. | ||
| And so I am deregulated, in fact, by that so-called regulation. | ||
| So basically you would say it's the risk you have to take to be free, right? | ||
| So that, in other words, that if you're an electrician and I have somebody come into my kitchen, we had a little light thing the other day. | ||
| Now, yes, the guy was licensed, I guess, because he's got to be licensed. | ||
| But you're saying it's just the risk that you have to take because he doesn't want to come in here and burn my house down. | ||
| And nor do you want him to do it! | ||
| Right? | ||
| Yeah, yeah. | ||
| And so this is another unintended consequence of so-called government regulation, in that if people come to depend on it too much, they just assume whoever you call up, you know, call up and say, you know, I need some electrical work done in my house, then, well, we live in a state where electricians are regulated, so this guy must be okay. | ||
| Maybe, maybe not, but if you knew that was up to you First of all, the market supplies all these wonderful ways of verifying quality. | ||
| So if anyone was free to practice being an electrician, you as a consumer would have easy access to various mechanisms to rank various electricians by how Especially now with Yelp and all the apps. | ||
| Absolutely, yeah. | ||
| So it's a total myth to think that the government is more concerned about our welfare and our property than we are. | ||
| Who's more concerned about your house than you are? | ||
| Who's more concerned about your personal safety and health than you are? | ||
| The government might pretend that it's more concerned or that it somehow has deeper insight to what is best for you, but I don't buy it. | ||
| I think young children, they don't know their interests as well as their parents do, but once you become an adult, the presumption must be that each of us as an adult cares for and knows our best interests much better than any third party does. | ||
| I was reminded of something else right now. | ||
| I think maybe I got too many of my old economic theories from The Simpsons, because do you remember the episode very early on with Mr. Burns at the power plant, and he's leaking nuclear waste into the river, and they get a three-eyed fish? | ||
| And the whole idea being, if you just let business do what it wants, it's gonna pollute the river, and you're gonna be eating three-eyed fish. | ||
| But that's completely the reverse of everything you've said there. | ||
| Yeah, so what an economist would say to that is, well, you know, there are some areas where your actions as a private citizen spill over onto innocent third parties, so they have no input. | ||
| That's the reason people can disagree about the proper role of government | ||
| in preventing pollution or preventing third party effects. | ||
| But so much regulation has nothing to do with third party effects. | ||
| It's simply to say, you know, if you wanna get your hair braided, | ||
| you have to go to one of these people that we approve. | ||
| You're not allowed to go to that person over there who does not yet have our approval. | ||
| Well, there's no third party effect here. | ||
| And a surprising amount of regulation is of that sort. | ||
| Yeah, I mean, I remember when I bought this house and you have to have all the people come by | ||
| and the inspectors and everything. | ||
| And they're looking for these little absurd things that I'm talking with the builder about, | ||
| well, this has to be an inch this way over here and blah, blah, blah. | ||
| And it's like, there was no answer for it. | ||
| I mean, a couple times I said, well, why is that? | ||
| It's the regulation. | ||
| It's the regulation. | ||
| That's how it is. | ||
| Someone in Sacramento said this is how it should be, and that's how it is. | ||
| So another problem with government regulation is that it's one size fits all. | ||
| And I don't care how smart you are or how much experience you have in the past. | ||
| Particularly in our highly dynamic economy, things are always changing. | ||
| Different people have different risk tolerances. | ||
| One of my least favorite regulators is the FDA. | ||
| There are very few third-party effects with the FDA. | ||
| The FDA's drug regulation affects you. | ||
| And it prevents you, in consultation, if you choose, with your doctor—and most sensible | ||
| people would consult with a physician—from choosing what level of risks you're able | ||
| to subject yourself to in order to relieve yourself of pain or to fend off imminent death. | ||
| I don't believe that's any bureaucrat's business but yours. | ||
| You may make a decision differently than I do, but so what? | ||
| We all have different tastes. | ||
| We all have different preferences. | ||
| We all have different tolerances. | ||
| I don't believe that it's the government's position to say, no, no, no, your preference for risk is too great. | ||
| We're not going to let you take this experimental drug because we think it might hurt you. | ||
| I don't see that's the government's business at all. | ||
| That's your business. | ||
| Right. | ||
| And you better get as educated as possible. | ||
| I mean, this is where I would say it comes down to education. | ||
| But who has a better incentive to become informed and educated on the matter than you? | ||
| It's your life. | ||
|
unidentified
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Yeah. | |
| Right? | ||
| And yes, you can tell stories. | ||
| Well, you know, maybe you won't. | ||
| But I can tell stories, too. | ||
| Well, how do you know that this bureaucrat over here is going to do as good a job? | ||
| I'm willing to bet that you are much less likely to be Less careful with your life than this guy or gal is with your life. | ||
| Yeah, all right. | ||
| So, since you said it was a long game, and I know how much Hayek has influenced you and you write at CafeHayek.com, what are the ideas of Hayek? | ||
| I know we've actually explored a lot of them here, but if there was something that, I told you before, that a lot of my audience, they go out and they get books after and they start reading on all of this, what are some of the ideas of Hayek that you would like to impart? | ||
| That society is vastly more complex than we understand it to be, particularly a market-oriented global society. | ||
| You know, we talk about it in big terms. | ||
| We talk about the labor market, the amount of trade, you know, the GDP numbers. | ||
| All these terms and numbers mask enormous underlying complexities. | ||
| All the action that makes our society work is done at the local level. | ||
| And that's a core Hayekian insight. | ||
| And if you start acting at the higher level, the risk is that you will stamp out, you'll | ||
| stomp out, you'll smother these individual adjustments at the local level that actually—whose | ||
| consequences bubble up to the top to make it all work. | ||
| There's a great Hayek, he's not the most quotable of guys, but there's a great Hayek quotation, I'm not going to get it exactly right, but it goes something like, the curious task of the economist is to remind men of how little they know about what they imagine they can create. | ||
| Bernie Sanders imagines he can create a world where everybody gets paid at least $15 an hour. | ||
| There's other people who imagine they can create a world in which no one dies because of a drug overdose. | ||
| Well, you can't create that world. | ||
| It's far too complex, and that's the critical Hayekian insight. | ||
| The world's really complex, and therefore, if it's really complex, we want to devolve decision-making authority down to the lowest possible level, and not have people who are slathered in hubris making decisions for those of us on the ground. | ||
| On that note, I think you're an excellent communicator of those ideas. | ||
| That's what it's all about, right? | ||
| It's reciprocated. |
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