03/22/13 – Sheldon Richman – The Scott Horton Show

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All right, y'all, welcome back to the show.
I'm Scott Horton, and by the way, next month I'm going to be giving a speech in San Angelo, at San Angelo State University out there in West Texas.
I will be getting back to you with more information when I have it, but it'll be the Young Americans for Liberty out there.
In case you live in West Texas and you want to hear me say these things out loud, but where you can see me at the same time.
All right, next up is Sheldon Richman, our good friend, Vice President of the Future of Freedom Foundation at FFF.org.
Welcome back to the show, Sheldon.
How's things?
Great to be back with you, and things are going well.
Okay, good.
Well, listen, so you wrote these things, and I want to ask you about them.
Sure.
Who in the heck is Frederick Bastiat?
Well, Frederick Bastiat, anybody who hasn't read him is in for a treat.
I'm envious.
Frederick Bastiat was a French writer.
He was actually also in the legislature.
He was a classical liberal who wrote about economics for lay readers.
There were no, you know, PhDs in economics back then.
Economics was still a young discipline.
Bastiat lived from 1801 to 1850, died young of tuberculosis, unfortunately.
But he left behind a very nice collection of articles and a couple of books on economics, the economic forces that coordinate and bring harmony to social life, and also a wonderful essay called The Law, which I recommend to everybody and anybody on, you know, a sensible way to think about government and law.
So he was a great advocate of laissez-faire, but, and I want to, let me stress this, he, you know, the terms left and right come from his era.
The National Assembly of France after the French Revolution put the people who defended the old regime on the right, the conservatives, and the people that were radicals and progressives, but of various kinds, and they had a lot of disagreements among themselves, but all those people sat on the left.
Bastiat sat, when he was in the legislature, sat on the left with Proudhon, who was regarded, and they were friends.
They also argued and debated a lot, but they were on the same side against the conservatives.
Gotcha.
A, that's a very important point, too, about libertarianism being real liberalism and socialism being liberalism corrupted by conservatism and all that Anthony Gregorian kind of stuff there.
It's a very important history for people to learn about.
But now, so this guy, he's about as plumb-lined libertarian as can be, only before the Austrian school even came into existence, right?
Right.
He's before the Austrian school.
The Austrian school kicks off in 1871 with Karl Menger's Principles of Economics.
So Bastiat is a sort of a disciple of Adam Smith and J.B. Say.
There were some very good French radicals in the early 19th century who, we even went beyond Smith.
They were close to anarchists.
In most cases, they didn't go all the way, but they had one colleague who actually did, Molinari.
But they were pushing the case for individual freedom, but also pushing the harmony that comes out of leaving people alone to pursue their self-interest and engage in exchange with each other.
But it had to be in a particular institutional setting.
In other words, self-interest harmonizes in the public interest when you have a particular institutional setting, which means respect for people's belongings, otherwise known as private property, people keeping their contracts, and using only persuasion and trade as a means of dealing with people and not force.
Well, yeah, I mean, you make the point in the article that, at least in his view, the only people who would disagree with him about this would be people who make the mistake to think that private property means, this is like the Rothbard versus Chomsky argument all the way down at the core, whether if owning property is stealing from everyone else, or if taking someone's property is what's stealing.
And the theory that the collectivists have is that all of this belongs to everybody, but if you build a fence around it and claim this or that belongs to you but not me, then you're the one who's committing the grand theft.
And he's saying that if they saw at least, I think the way you quote him here, he's saying if they could see that wealth comes from the private property mechanism, then they would support it, but they've just got their premises all backwards.
Anyway, you say it right.
I don't know what the hell I'm talking about.
What he's saying at that point, and this comes toward the end of the article, and it's on the FFF.org right now, it's my TGIF, my Friday column, and it's called Bastiat and the Socialization of Wealth.
What he's saying there in that quotation toward the end is that there are people who are put off by the idea of private property and free markets, people who are not communists.
I mean, this is what he says, and this is how he puts it.
I mean, he was arguing against state socialists and communists at the time, so he was arguing against them.
So he wants to say that a lot of people are attracted to an anti-property, anti-market position because they think it concentrates wealth unjustly in some people's hands.
And he shows that that's the result not of markets and free trade and free exchange among individuals, but the result of privilege, which he called legal plunder.
In other words, where the property principle is not properly observed, is not consistently observed, but the state enters and gives people access to wealth that they could not have in a truly free and competitive market.
And that's what the piece is about.
The piece is about how as competition occurs and as technological innovation advances, it takes less and less effort for all of us to obtain the things we want.
And he goes through examples of how just acquiring some everyday thing just takes less time, less labor time to earn the money to go buy the thing than it took a year ago, a hundred years ago.
And so his point is that things are becoming gratis.
Things are becoming free.
And I use the example, this is not a positive example, but if it takes several hours.
In 1900 it took, what's the example I used?
It took, what is it, two hours and 40 minutes to buy a chicken in 1900.
This was the average manufacturing worker, right, a nonsupervisory worker.
On average it took two hours and 40 minutes to earn the money to buy a three-pound chicken.
About a hundred years later, it took 14 minutes to buy that chicken.
And let's put aside quality improvements.
Obviously there are quality improvements involved, sanitation and other things.
So let's leave that aside.
Just pretend the quality is constant.
Nevertheless, it takes only 14 minutes to buy that now rather than two hours and 40 minutes.
Well, that means you're getting a certain amount of utility now from the chicken for free, right, because you had to undergo the painful effort, the labor, for two hours and 40 minutes to get the chicken.
But if you only have to do it for 14 minutes now, doesn't that mean you're getting most of the utility from that chicken for free versus your ancestors in 1900?
And he says that's the progress that occurs in a market.
More and more stuff is, we're getting more and more stuff free because as we improve our techniques and technologies, that's equivalent to letting nature do more of the work rather than human beings do the work.
It's a fascinating insight, which is, I think, pretty much overlooked in Bosnia.
So what he's saying is that wealth actually moves from the private realm to the communal realm.
These are his terms.
He's a lazy paradigm.
Praising the idea that free competition and free trade moves wealth from the realm of private property to the communal realm.
I'm using his words.
Yes, like positive externalities.
You know, lucky for me, I was born and raised in Austin, Texas, starting in the later half of the 70s there.
And so all kinds of wealth has already been produced.
It just happens to be all around me, you know?
Well, it's something like that.
The point is, as we let nature do more and more of the work, like when we started using electricity, and that began to take the place of hard human labor, that's like letting – he talked in religious terms, but we don't need to do that.
He talked about letting the services of God provide us things rather than hard human labor.
Well, we could talk about the forces of nature, electricity, rain, rain power, you know, water power, all this stuff, steam.
That displaced human effort, which means we've got things more and more free, closer to being free.
Now, you might say, well, wait a second.
If we're displacing human labor, doesn't that mean a lot of people are going to be sitting around with nothing to do?
And, of course, he points out that that's ridiculous because our wants are unlimited.
We'll just apply the labor to new things that we couldn't afford before.
It's not that everyone's going to sit around and say, oh, we've got nothing to do because the forces of nature are now producing everything.
We always want more stuff, and therefore we'll turn our labor to that, and then the process starts all over again.
All right.
And now you talked about one of the things that he got wrong was about both sides having to perceive that they're benefiting in a capitalistic exchange.
Explain that.
Yeah, this was his worst mistake and perhaps one of his very few mistakes.
This was something, of course, that was further developed or largely developed by the Austrians.
Before I get to that, it's not only that he didn't understand this.
He actually rejected the idea that when two people make an exchange, he believed that they were exchanging equivalent values.
In other words, equal values.
A voluntary exchange involves the two people trading equal values.
That's what the classical economists, and then Bastiat being largely in that school, believed.
The Austrians pointed out that if we're subjectivists, if we look at things through the point of view of the people acting, not some observer up in the sky, the two people obviously don't trade equal values, because why would they trade, right?
If you and I are trading an apple for an orange, it's only because I, who have the orange, think the apple is more valuable to me.
And you, who want the apple, think that's more valuable than the orange to you.
And so it's what's been called a double inequality of value.
Bastiat, you might say, well, come on, the Hungarian and the Austrians didn't write about this until years later, 1871.
21 years later, 21 years after Bastiat died, let's cut the guy a break.
Well, unfortunately, we can't cut the guy a break, because earlier, a French philosopher named Condillac explicitly argued this double inequality of value, and Bastiat explicitly rejected the theory.
So I have the link to an article I wrote about this a few years ago, so anybody who's interested can follow it.
Well, I mean, to me, that's a very important point, I think, for liberals to understand.
It was a very important one for me to understand, that the Carlinian theory of business is wrong.
That all business transactions amount to one guy succeeding at screwing the other guy.
And really, no, that's actually not the way it is.
That could be sometimes.
But, you know, if you take your car or your truck into the mechanic, chances are you're going to be treated fairly, and he's not going to sit there and break something else so you come back next week.
Well, that's sort of a different issue, right?
If you're introducing cheating and fraud and stuff like that, you've changed the context.
The point is when two people enter into a voluntary exchange and there's no force or fraud, then at the moment of the exchange, each comes out better.
In other words, it's a positive sum, not a zero sum, not a negative sum, but a positive sum.
Each comes out better, or each expects to be better.
Now, this doesn't rule out the possibility of error, right?
I'm not talking about fraud now, but error.
You and I might make the exchange and go our separate ways, and so I now have an apple, not an orange, and then I think, you know what, I made a mistake.
I don't know what I was thinking.
I really do wish I had that apple or whatever, whichever one I said I traded away.
So it doesn't imply infallibility.
It says at the moment of the exchange, each in his own eyes anticipates being better off.
And, of course, you know, most of the time we're not making a mistake, and then when we make a mistake, we learn from it, so it changes our future.
So, like you say, it's a very important principle.
It's positive sum, not zero sum or negative sum.
Yeah, I mean, because the thing is, I guess when I was a kid and I saw it more the Carlinian way, I mean, that really says the entire system of, you know, trade in markets is basically corrupt.
And so at that point, any government intervention in that system is no more or less corrupt necessarily, you know, whereas when you understand it the other way, then you see how it almost always is just unfairness when the government intervenes and uses their force to rig the market to do this, that, or the other thing.
Right, and you've got to keep in mind when the government enters things, government uses force.
So when government forces transactions to occur in one way or another, we can't make the same assumption because of force, right?
If the government forces you to send your money in at the time of year where people have that on their minds, and they say, hey, but you got stuff for that money, so that's why you want the money.
You got like wars in Afghanistan and other nice things, but we can't assume that that's a positive sum transaction because one of the parties was not a willing party, namely the taxpayer.
Right.
So you can't compare that kind of quote transaction to an exchange that occurs in the marketplace where people are free to say no.
Well, you know, one of the things I was interviewed by Ben Stone, the bad Quaker, yesterday, and one of the things that he was asking about the war economy, and I forgot to kind of explicitly point out about how when a congressman appropriates money, it's not his money, so he really doesn't care.
You could give him 50 bucks and he'll give you 50 billion because it's whatever, fine.
There's no accountability there.
It's not his money that he's losing.
And so it doesn't mean that any decision a businessman makes is necessarily a good one.
It just means that he's going to try to not be wasteful because there's an actual bottom line there.
Even a manager representing some capitalists, there is accountability there.
He who has the money gets to decide whether you're fired or not, you know, kind of thing.
Whereas in government, they can just piss trillions of dollars away from now until the entire society withers up and dies, basically, and no one will ever stop them, and they won't even know that what they're doing is wrong, most of these congressmen.
They won't even know that there's a limit on how much money they can spend on any of these horrible things.
Well, you're right.
The force changes the incentive system entirely.
If you have captive taxpayers, and the most a taxpayer can do to object is wait and cast his one vote when the election comes around, which, of course, means nothing.
No one vote determines an election unless you live in a very small town, very small.
The whole incentive system is different, unlike in a marketplace where people don't have to vote.
I mean, if I walk into a grocery store, and I have my choice down to either Wheaties or Cheerios, if I decide to go with Cheerios, guess what?
I walk out of the store with Cheerios.
I don't have to vote, go home, and wait for the returns and hope that, you know, 50% plus one voted for the choice I want.
I get what I want.
Now, there's one big caveat, very big.
I'm talking about a freed market, not a statist, you know, saturated market or a corporate state, very much like we have.
Because when you have bailouts and other kinds of guarantees, then all bets are off.
Then you don't get the effects I'm talking about.
Then it's more like a state.
Well, and that's the whole thing about central banking, right?
It's like the FDIC.
You can see how – well, we have to have an FDIC, right?
Because without that, no one will trust that the banks have their money, and they'll all run on the bank and take their money out.
But then nobody ever seems to really – well, outside of the libertarian movement anyway – nobody ever seems to ask, well, why would everybody not trust the banks and want to take their money out of the bank?
It's because the money – the bank doesn't have their money anymore.
The bank gave their money to somebody else, and the people who run banks aren't trustworthy.
Not without a lot of external auditing proving how much reserves they got in there and whatever.
But so instead of everyone insisting that banks run fairly and sanely and so that they can trust them, they just create this external mechanism to basically insure it all at the public expense.
No matter what bad business decisions any particular set of bankers might make.
Well, you know, even Franklin Roosevelt was against deposit insurance.
He said it would subsidize irresponsible bankers, and he was right.
Are you kidding?
Really?
I thought he was the one who passed that damn thing.
No, no, no, no.
It was being talked about before he actually was inaugurated, and he said, like my predecessor Hoover, I think it's a stupid idea.
You can find the quotation.
I think I've used it before.
It's very easy to find.
But here's the thing about...
Wait, didn't he end up signing it?
Yeah, but it was probably part of a package of bills, or maybe they convinced him to go with it.
The point is he had a good first intuition that it's just going to help irresponsible bankers.
But look what it does.
It means that you as a depositor don't need to think about your bank.
You don't need to shop around and check in the reputation and go into the bank and say, you know, show me what kind of loans you make.
I want to know whether you're sort of a conservative bank.
I'm a cautious person.
I want a conservative bank.
Another person might say, hey, I'm a little interested in higher risk, higher return.
Let me see what you do.
You don't need to do that.
There's a sticker on the window that says the government will pay you $250,000, up to $250,000 in your account, so you don't need to care.
That's a subsidy to the bankers.
If you're a banker, you don't want your customers looking too closely at what you're doing because they may go to somebody else.
But in a marketplace, you've got to care about what the customers think, even if you don't like it.
But if you get the government to give you favors, you don't have to care, or you can care less about what the customers think.
So all this is a big subsidy to the bankers.
It's not so much the fractional reserve issue about their lending out the money, because we know from the work of Larry White and George Selgin that there were episodes in history where we had essentially free banking.
Free banking, no government involvement, like in Scotland and a few other places over the years.
And there was fractional reserve, and the reserves were like 2% to 3%.
They were very low, and yet you didn't have runs in the bank because, as you would expect from entrepreneurship, there were ways to handle that.
There were agreements.
If your money wasn't there when you came for it, there was already an agreement in place that we had 30 days to give you your money, plus we pay you interest over that 30 days.
It's what you'd expect entrepreneurs in a competitive environment to come up with.
But so instead what they do basically is they take this fraud like it's an open wound, and they just cover it up with a dirty Band-Aid.
And so it doesn't heal, but they sort of paper over it.
And now here we are 100 years later, and just bubble after bubble, and a lot of people make their fortune.
But then I guess a lot of people end up proverbially jumping out the window, too.
These days they shoot their kid and their wife and then themselves because they're completely ruined when the bust comes because of this exact money system.
Yeah, that's right.
Look, I think it was Ringo Starr, the great philosopher Ringo Starr, who said back when he was facing a marginal tax rate of over 100%, everything the government touches turns to crap.
There you go.
And he was the one who could write songs the least well of the four, right?
Well, I like Ringo Starr, but yeah, he didn't write Tax Man.
I believe that was George Harrison.
There you go.
All right.
So now tell me real quick about Bill Clinton because people like him and I don't.
You wrote an article that said bad things about things that he did, and so I want to get some of that out there where people can hear it.
It's a two-parter on Bill Clinton and about the charmed life he leads.
I mean, he's got a pretty good reputation these days, right?
You don't even hear Republicans attack him much.
Hey, I got one, and this isn't in your article, but this is the Iraq war.
He went on David Letterman, which don't play that down.
That's a big deal.
He went on David Letterman, and he told David Letterman, yes, I absolutely support George Bush in attacking Iraq.
I promise it won't even take more than two weeks.
It'll be just fine, David.
Trust me, it's great.
Yeah, of course he was out of office then.
I'm talking about his time in office.
So there'll be two parts.
One will be about Iraq, so you can hold that one until that comes out online, and then you're welcome to have me back to talk about it.
The first installment is how Bill Clinton and his administration contributed to the housing bubble, and therefore the bursting of the bubble, and the Great Recession.
His HUD secretary, his second HUD, second, I believe, last HUD secretary, it was none other than Andrew Cuomo, who's governor of New York.
He was a very aggressive HUD secretary in pushing Fannie and Freddie to buy up subprime mortgages, the dubious mortgages, and then otherwise, in other ways, inflate the housing bubble by making it easier and easier for low-income people, people with bad credit, to get basically zero down payment houses.
Well, that's what the housing bubble was.
That, plus the Fed's participation, made it the perfect storm that created the mess we're still suffering from.
Well, nobody ever attributes any of this to Bill Clinton.
They attribute it to George Bush, and George Bush did play a role in it, but he came in at the tail end.
It's a little unfair to put it all on George Bush, and heck, I'm no fan of George Bush's.
But he came in 2001.
There was a lot of stuff going on to create this bubble before 2001.
And guess who preceded Bill Clinton in office?
I mean, sorry, who preceded Bush in office?
Bill Clinton and his HUD secretaries.
And so he's gotten off the hook.
The only article that I know that goes into depth, and I link to it, is a great article in The Village Voice from a few years ago that put the spotlight on Cuomo's time as HUD secretary and showed exactly what was going on there and how sleazy it was, too.
It was sleazy and politically motivated.
Well, right, I mean, basically what you're saying is Greenspan and the Federal Reserve, they're the ones who are monetizing all this debt and expanding the currency, but it's the politicians who choose which sectors of the economy to funnel all the money into.
So I guess I would ask you, if the policy had been to make sure that every American who works hard can own their own boat, would we then just have had a giant boating bubble and all our lakes would be clogged and we'd have 50,000 extra boat manufacturing entrepreneurs that the real free market would never support and that kind of thing?
Yeah, something like that.
I mean, again, it depends on the policies.
The government can, to some extent, channel where the money goes.
And like we can say today that the government is helping to channel money into the stock market.
I mean, we talked about this recently, didn't we?
The stock market is booming, and everybody wonders why.
Well, how come the labor participation rate is so low?
In other words, unemployment hasn't improved very much, and yet the Dow is booming.
And the government is able to channel money into the stock market.
The Fed can create the money, and the Fed can allocate a lot of money, too.
It has found a new role since 2007 and 2008 of being able to really direct capital very precisely into particular firms.
And that's something new.
But in general, the government policy can help push a lot of newly created money in particular areas.
And housing is where so much of that money went.
And like I said, Clinton was right there, and certainly his HUD people were there.
And it's hard to believe Clinton didn't know what was going on and probably, I'm sure, fully supported it.
And then nobody ever implicates him.
He's like the sainted elder statesman who everybody says, oh, if only we could get back to the 90s when tax rates were high and the economy was booming.
Well, someone in the chat room is asking, Clinton ended Glass-Steagall, too, but you say in your article that that's not what made the difference.
Yeah, I mean, I don't believe Glass-Steagall, the repealing of Glass-Steagall and allowing a single company to have investment banking and commercial banking functions played any role in this.
Glass-Steagall, I mean, there's an interesting history of Glass-Steagall.
It came in during the New Deal, and it came in as a result of a couple of anecdotes about one bank or two banks that on one or two occasions, I guess, pushed depositors into investing in stuff that they had some interest in, the bank had an interest in.
And there's been research papers by economists on this.
George Benson, I believe, is the man who's done so much of it.
There was no widespread practice like this.
Congress put on a hearing, typical thing, right?
They paraded one or two people in.
They found like two anecdotes or so and said, oh, we have this terrible problem.
Let's pass Glass-Steagall.
No other industrial country has a Glass-Steagall Act.
And so I don't believe the partial repeal of Glass-Steagall in 1999 made any difference.
No one can show how it played any role in the 2007-2008 recession or the collapse of these derivatives and all these mortgage-backed securities.
No one has ever shown what the link is because I don't believe there is a link.
All right, now let me ask you this, and I'll probably be mixing up apples and oranges and screwing up my own kind of devil's advocate sort of point here, but see if I can explain what I mean, right, and see what you think of this.
I know a guy who, he's not really a commie, but he's like an anarcho-commie, right?
To the left of Marx, more into freedom than a totalitarian five-year plan or anything like that, right?
But definitely comes from that kind of economic tradition.
And he had this thing that ever since FDR, the policy has always been housing bubbles, and the policy has always been shoveling money into housing because of an inherent flaw in capitalism, the way he put it, where every business, and therefore every capitalist economy by the same token, has to grow all the time at 3%.
They can't just stay the same as last year.
They've got to grow at at least 3% or they're basically bankrupt.
I don't know if he means just to keep up with inflation on a regular year or what exactly, but the only way to really guarantee that the economy is always growing, always growing, and never stagnant for a single year or whatever, is to funnel money into digging ditches and filling them back up again, only in this case it's building houses for Americans to move to the suburbs and trade among each other or whatever, that it's basically a big artificial industry propped up by the government because it's the only way to keep the capitalist economy going, because otherwise it'll fall apart due to its own inherent contradictions and kinds of things.
And then one more part of that is, and this is where I wonder whether I'm mixing up apples and oranges and whatever, maybe it's a different thing, but like you were talking about before, where technology gets so advanced, I wonder about, yeah, you're right, there's an unlimited number of wants, but if say the robots do all the manual labor or whatever, doesn't that really price a lot of regular folk, say the left half of the bell curve, under 100 on the IQ score or whatever, out of the market?
Are there enough wants to make them all economically viable, or are they what the commies call the lumpenproletariat, right?
Just lock them up and put them in prison, you might as well, because there is no place in the economy for them.
Now, that's a lot that I just tore off for you to chew on, but go ahead, what do you think of all that?
Yeah, there was a lot there.
Okay, let me start at the beginning of that question, and where you're relaying from your friend his view of the economy.
If you take the politicians out of the picture, if you take the social engineers out of the picture, no one is thinking, oh, we've got to make the economy grow 3% a year.
No one is thinking about, quote, the economy.
People are thinking about what kind of exchanges can I make to better my situation.
So if you're on the selling side and you've got a business, you're thinking how can I attract customers, how can I lower my price to win people over from my competitors, or how can I come up with something brand new that no one has thought of yet, or where are the price discrepancies in the marketplace where I can, in effect, buy low and sell high and bring buyers and sellers together, and enabling each of them to engage in exchanges that they didn't know were available to them, but for my activity.
No one is saying, gosh, we've got to make the economy grow 3%.
Who walks around talking like that except politicians and economists who are on the public payroll?
So that's ridiculous.
No one is thinking like that.
In a sense, there's no macroeconomics, right?
There's only microeconomics.
Or as I think Pete Becky likes to say, there may be macroeconomic questions, but there are only microeconomic answers.
So I have to reject the whole thing.
That's just not how it works.
No one in a marketplace who doesn't have access to tax money is going to be digging holes or paying to dig holes and have them filled up again.
Why the heck would they do that?
They're trying to produce value for willing customers who can walk across the street in total freedom.
In other words, say, no, I don't like the terms.
I don't like the product.
I'm going somewhere else.
So no one is going to be filling holes.
And notice the incentive that creates.
That means that a manufacturer in a free market now where he doesn't have any privileges or can't turn to the state, a manufacturer has an interest in using the fewest resources to produce his product.
Because why does he want to sink resources unnecessarily into a product if he can make the same thing that's pleasing to consumers with fewer resources, fewer materials?
The ecologists sort of love that, right?
The environmentalists are always crying about, we're wasting, we're depleting resources, we're using too much stuff.
Well, profit and loss induces you to use less to get more out of less, which is the Bastiat point about putting in less and yet getting more as a result of the other end of the process.
So this person just doesn't quite get it.
Now, remind me of the very last thing you said, because I don't think I responded to that.
Well, I'm sorry.
I wish I remembered Gabriel Kolko's lingo that he used in his revisionist book, The Triumph of Conservatism, where he talks about – and I think maybe he's even cribbing from the bankers and industrialists writing to each other about the irrationality of the markets, and that basically if – and you know all these arguments a lot better than me.
I'm sure they're all just silly straw men to you.
But if we let the free market do its thing, all the farmers will overproduce and completely destroy the agricultural economy because of the way their incentives are built, and all the housing builders will build us into a black hole there and whatever, that the various industries, the steel and the whoever, that they won't be able to coordinate, that prices aren't a good enough feedback mechanism for the short, medium and long term for people to make proper plans.
And so in other words, without them, for example, making sure that there's always a house building industry, that the damn thing would just stop working all the time.
It would all break down and have to be jump-started by Paul Krugman again or something.
I assume that the people that made the buggies and the wagons that were pulled by horses wanted to make sure there'd be such an industry forever.
They weren't too successful, were they?
The point is, things don't work that way.
The idea that you'd have to believe that people are idiots, but somehow politicians are enlightened and foreseeing.
But I thought politicians were people, and I thought people vote for politicians, and we expect democracy to put the right, wise people into office.
So this whole outlook is incoherent.
People don't act like idiots.
They don't act on the basis of animal spirits, as Keynes had it.
When markets have been allowed to work, and although we've never had laissez-faire, we can identify markets that have had minimal government interference.
We see people acting the way the theory predicts.
Now, I'm talking about a theory, like an Austrian theory, that takes people as they are.
I'm not talking about economic man who cares only about maximizing utility, and he's a robot who has this automatic calculator.
I'm talking about real people who are fallible, but more or less reasonable, and they want to improve the situation for themselves and their families, and they go into the marketplace to buy and sell and produce and engage in exchanges.
And when that's allowed to work, we know it works.
It's not just theory, because we've seen enough historical examples to understand that it works, but there's also a theory explaining why it works.
It's not a surprise.
Paris got fed, as Basti got his people back then when they were trying to first setting out to explain how economic order, why economic order occurs.
They said, look, Paris gets fed.
It wasn't an issue whether or not this order occurred.
They saw it all around them.
I mean, they basically understood what Leonard Reed wrote in iPencil, right?
The pencil gets produced.
This very simple thing that you yourself could never make on your own, a pencil, a simple lit pencil, is produced on schedule all the time in just sort of just the right number, more or less, with thousands of people around the world implicitly cooperating to do it without even realizing they're all involved in kind of the same project, however remote they are from the final product.
We know it works.
So I don't know what you're complaining about.
Isn't it the case that when finally Paris couldn't get fed and there were massive bread riots, it was because of the government's inflation for their war debts?
Well, sure, that's right.
And we can see that.
It's not that we just speculate that that's what the case.
The markets seem to fail.
If you look closely, you see that government is at the root of it.
And here's another thing even about market failure, which the public choice school, we lost James Buchanan just recently, but one of the fathers of public choice analysis, shows us that even if you can identify a market failure, just for the sake of argument, let's say you can identify something, there's no reason to automatically assume government can make it better because there's a whole theory of government failure, which Buchanan and others have helped to generate, which shows that if people are in government just like they are in the marketplace, there's going to be something like government failure, and we can show that it's worse than what you may be calling market failure.
Pete Beccy likes to tell the story again of the Roman emperor who has a singing contest between two contestants.
He listens to the first contestant, right?
And then he shoots the first contestant because he didn't like the way he sang and he was sure the second guy couldn't sing worse.
That's what the government, the statists imply, that if they don't like something that's going on in the market, they're already certain that somehow for some reason the government can do better.
Where's the reason to assume that?
We know that the incentives are all perverse on the state side.
We already talked about the perverse incentives of when you're spending other people's money that you get by force.
So there's no reason to assume that even if you don't like a particular outcome on a particular day in the marketplace, the government can make things better.
All right.
I'm sorry we've got to leave it there.
Obviously we can sit here and talk about economics all afternoon, but I thank you very much for your time today.
Anytime, Scott.
I really enjoyed it.
All right, everybody.
That is the great Sheldon Richman.
I'm sorry I didn't get a chance to talk about this article with him, but I'll mention it to you real quick.
The U.N. predicts huge expansion of wealth in developing world that will shift power.
In fact, maybe we'll have Sheldon on next week to talk about this.
The spread of capitalism around the world.
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Hey, y'all.
Scott Horton here for the Council for the National Interest at councilforthenationalinterest.org.
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