Welcome to Keith's night. Don't tread on anyone in the libertarian Institute today. I'm joined by David L bahnson. He is the chief investment officer and managing partner at the bahnsen group. His book is there's no free
lunch, 250 economic truths. Here's my interview with David Bronson. What is economics and why is it important economics is the study of human action around the Ian of scarce resources, so as a basic definition goes, I think it captures the most important things in defining, the field that it is about human activity, and specifically, the way in which humans act around the reality of scarcity. So, those basic concepts pack quite a punch, but it does
Define the field of economics. When people look at economics, they don't usually think that it's usually well GDP or the stock market. Can you walk us through how Robinson Caruso on the island all by himself faces economic decision-making? Yes of Robinson crusoe's on the island by himself. Then he is acting out of the objective of self-preservation as making decisions to allocate resources in the most rational. And preserving manner possible.
The Robinson Crusoe is not on the island by himself. And is there with one other person and Robinson Crusoe has in his possession. Bananas the other person as water and they decide, they want to do a trade to provide food to one and beverage to the other on its own organically with no law with no regulation with no brick-and-mortar.
Marketplace to individuals, freely act and what we call that is a market and our belief is that markets are not imposed legislated, created markets, organically happen when two people act and of course, their actions reflect their own sometimes subjective taste, sometimes their Necessities, but they certainly all come out of self-interest.
Interest in the desire to either Elevate one's quality of life or in some cases like the deserted island scenario that us economists love using just to simply survive. But the point is is that defining economics Lee I have is very important and avoiding economics being defined the way that you alluded do is also very important because the second one starts to finding economics as econometrics GDP. Inputs, mathematical inputs and formulas and spreadsheets.
They not only have they dehumanized the field but they have implicitly allowed for this mistaken idea. That somehow one can optimize economics by mere. Empirical observation by data inputs by feeds that they can depersonalize and essentially set the table for the Real planning of an economy. But the reality is that because economics is at its Central tenant about the human person, one cannot centrally planned such a thing and one certainly cannot reduce it to me or mathematical inputs.
That are devoid of the, what, why, when where how human beings function? Please walk me through those two different approaches when it comes to something like the minimum, Or but, maybe State Health Care could be a better
example. Some people will say, well, what we got to do is we got to look at a country like Sweden where the state's heavily involved in medical care and then other countries, maybe Singapore, Hong Kong and America and then we're going to study these the people in these countries. And then we're going to come up with a standard as to what constitutes good health care. And that's how we find out what's good health care is or the effects of the minimum wage.
What is it? Alternative way to find out the effects of the minimum wage if we're not going to places and studying the results. Well, I think that in both cases, there's a sort of political connotation here that has to do with something very different than the basic economics of it. But to the extent that the question is just simply how we want to evaluate the efficacy of certain policies. I believe very much that we To
observe policies. Now, of course, when I say that, I don't mean merely the intent, but I also mean the actual outcomes in the end, the product and the byproduct one of the limitations though, as Basquiat taught us with the broken window fallacy, that most economic fallacy comes from observing only that which is invisible and Not Invisible, observing that which is short-term and Not long term in visiting the effects on some, and not the effects on all.
So to properly, understand things like the minimum wage. We first have to understand the concept of price Discovery. We have to understand the concept of the knowledge problem who has the knowledge to appropriately determine what the clearing price saw to be between producer and the consumer or in this case, an employer and a labor. Um, so there are sort of philosophical Concepts that have a social context. Why do they have a social context? Because economics is about human
activity. It's about human cooperation. So it is not merely a condom metric. So I think there's a number of angles. I had taken answering your question. But how we evaluate policies has to be hold a stick visible and invisible short, and long-term some and all parties. He's impacted, but it also allows for empirical observation. We can look to the quality of healthcare. Now, of course the Quality Healthcare may very well be non-economic.
And the way in which we look at it, one country may have a particular economic structure in place for how they pay for healthcare, but may have really bad health care because they don't have good. Doctors, another country may have a different mechanism for financing Health Care. Might be a really good one. My might be bad health care or good health care. Just again, depending on the medical outcome. So you have to have separation of categories in the way. You look at these things.
I love the title. There's no free lunch because that gets to the heart of so many of the major issues. When it comes to, there should be free college. There should be free. K through 12. There should be free healthcare. It's like okay one side thinks
that it should be free. That means everyone should have it. So that must mean there's another side where they just want to exclude people from having this thing, walk me through how you would talk to someone with the mindset of we can just make this free with the Federal Reserve. Is digits into people's accounts and this way everyone can buy this thing called college education. For example, how is that not
free? If the state's printing the money into our accounts and we're simply buying the product for free. Well, first of all, the Federal Reserve is not doing that with college. The the government is state, is providing the funding and asking that it be paid back and the state the College providers are being paid the money. So it isn't funny money. It's real money. And the colleges are being paid
that now. They could forgive the debt of the person who borrowed it, but it wouldn't change the fact that the money had already been spent, the colleges are not willing to provide the education for free, but, but regardless of that, I guess it's quite important. When we talk about there, being no free lunch. And when people talk about wanting either free medical care. Are free college free, this free that that of course, they don't mean free either.
It's a matter of changing who the payor is and that's fine. But that is different than referring to something, actually being free. So then the question has to be, what is the optimal situation in socially and economically? Should the person who is receiving the good or service pay for it? Should someone else be compelled to pay? For someone else, receiving a good or service. We have traditionally in a
market economy. And in a free Society recognized that the most logical payer of a service is the person receiving the service, and when they cannot afford it, we have needs based programs, which I believe in a very robust Society of Charity and philanthropy, but I do, but I don't confuse charity for compulsory activity when we force one to pay for the goods. Services of somebody else. We haven't prescribed anything
charitable. We've prescribed something that is actually coercive and the opposite of how a normal person would Define charity, but when it comes to the question about free, what we have done is push prices up at levels. Never thought imaginable, all in the name of trying to create
Freer Healthcare or higher. Education or lower cost of housing because when you subsidize something, you get more of it and we have subsidized three things at a massive governmental level at scale in the last 40 years. And these are the only three things in our entire society that have experienced substantial price inflation in a period that is mostly been known until the last year or so for a
great moderation of inflation. And that is housing, higher, education, and Healthcare, not coincidentally, the only three things that the government subsidizes at scale. There's a girl, famous Antonin, Scalia quote, the transformation of Charity into legal, entitlement has produced donors without love and recipients without gratitude. We you explain taxation is coercive therefore putting it in a separate moral category. What are some of the secondary effects that Haslett would have us?
Look at when it comes to the effects of having a welfare state Beyond also higher prices. Well, what I would say is the first The most important I couldn't live with all the others as bad as I think they are. And as unfair, as I think they are, the number one component. Is that the welfare state, Rob's the recipients of the welfare of their god-given dignity. I don't believe the welfare state is Affordable, but I'll put that aside for a moment.
I don't believe the welfare state is just for people like you or me to be asked to foot the bill. Bill for the welfare cost provided to others. I don't think the welfare state is efficient that lack of a work requirement. The administration of it, the rampant abuse and fraud that takes place.
But when you put aside affordability, Justice and cost as if those three things don't matter put those aside, you're still stuck with the real fatal error, which is that it treats people made in. Image of God as if they are, merely recipients of others largesse as opposed to actual productive, agents created with an ability to be Innovative. And to be productive. I think it robs them of their
dignity. I think it's dehumanizing, and it is the great moral iniquity of the welfare state mentality. What do you say to the mindset? That the free market is the institution which Rob's people of their dignity by turning everyone and everything into a commodity that can be monetarily purchased. Yeah. Well, I think that, if I understand the question correctly, well, you know, repeat the first part of it for me. The wording you used is
interesting. The free market system, turns everything into a commodity that can be purchased monetarily. Therefore, that is what really Rob's people of their dignity and Living. Well, spiritually, how do you, what do you say to that mindset? Yeah. I mean, of course on the merits of just the basic facts, it's totally untrue. The free market is completely incapable of turning love between a mother and daughter into a commodity. Aditi. The free market is completely incapable of turning.
The act of human compassion, 14 towards their neighbor into a commodity. The free market is incapable of turning the virtues. Those great character traits that we exhibit in the way. We cooperate and transact and Society into Commodities to the extent that the free market takes goods and services that have values the free. Market enables free human beings operating, under the rule of law without coercion. It enables them to set up right pricing mechanism. That is a glorious thing.
It provides a lot of information to people in the decision-making process. It enables us to enhance quality of life for others. It enables us to meet human needs in a more efficient and productive manner. It cannot make a commodity though out of scarcity. T. Now, water and sand are more available in our society than other raw materials that are much more rare. So, the market is unable to commoditize or, or solve for the problem of scarcity.
And the market is certainly unable to make a commodity to turn into crass, that which is unclear ass virtue, relationships loves things of that nature. But what the market Does not do in.
Those regards is exactly what the central planner attempts to do in those regards and fails miserably as the entire 20th century as a testimony to what I love about this book is that I could just turn to any page or any section and learn something in like 30 seconds or at least be reminded of some of the great wisdom that we have inherited. One of my favorite quotes was a Thomas L, call you chose the most. Most basic question is not, what is best but who shall decide
what is best? Walk us through why that's significant, please. Well, I alluded earlier to what Friedrich Hayek called the knowledge problem. It is my belief that when decisions are made in in a market economy that are being made by people who have more time and place knowledge than a central planner ever could time and place. Circumstances that individual actors have better. Optics towards the situations
that face them. That require decision-making, whereas the central planner because of the broad dispersion of knowledge in a society can never. Before they plan before they act have the knowledge necessary to make efficient decisions, but what soul is getting at there? There goes even beyond the knowledge problem, and it gets into the incentive problem. What one might call skin in the game. My View is that disinterested third parties, lack, both knowledge and incentive.
And as nesam Talib is written in recent years skin, in the game, cannot be defined merely on the positive front, meaning those who will benefit from a good decision. You know, we look at trade and we say, well, you know, What this person's obviously buying something and paying for it because they think they're going to benefit from its receipt.
However proper skin in the game, also requires someone to hurt, if something goes badly, if they make a bad decision and the decisions that get made need to bring pleasure when they're done well and pain, we're done poorly. And that's something that a disinterested third party, like a central planner is Totally incapable of bearing, their lack
of skin in the game. Not only does not give them positive incentives for advancement, but it doesn't force them to deal with the negative repercussions of bad decisions. So lacking positive incentives, lacking negative incentives and lacking the basic knowledge to Steward the Affairs of society. I can think of No Greater error than And to delegate decision-making in society to someone in that position and that's exactly what central
planners are lobbying for. What is the difference between the federal government giving power to the state governments who give power to the county governments versus wall, Mart CEO gives regional managers power and those regional managers give local managers power. The progressive might look at this and say this is all top down ruling but we need is the workers of the world to unite. So therefore both of those systems, the free market and the
state. Of this knowledge problem, where some people have way too much power for things. They're totally distant from what is it? The difference between those two? Well, of course, the fundamental difference is that in the case of Walmart decentralizing their processes their operating out of a profit motive. If Walmart decides to put the power of Bentonville Arkansas over, what is the most
profitable? Herbal, efficient, and, and beneficial to the bottom line of the company that not only can their board of directors, be removed. Can shareholders remove managers, can the board remove managers who make the conscious decision to utilize, and Steward and Harold power over profits. But but you also theoretically have a system in which the Bottom-up people that they're reporting down to our decentralizing power down.
Do ideally, can tell them which decisions they can make most officially which ones they can in a power environment with the federal government example, no such structure exists. They cannot Steward the Affairs of the economy because they do not have the incentives to do. So. Now I happen to think that the analogy Is still on the margin, a good one for a basic business practices of subsidiarity.
I like local Walmart's having decentralized authority to make decisions beneficial for their store, apart from the regional level, the state level and what you might call the national level. But of course in any organization, they're going to formulate a hierarchy a management system that is going The theoretically serve the needs of the shareholders and optimize, what makes most sense for the administration of the company's Mission?
The delivery of goods or services to the extent a company becomes guilty of the same thing. I fear with the government, which I think happens in Corporate America all the time, there is recourse for such suboptimal Administration, you can and You see this all the time. You see shareholders lobbying for the removal of overly bureaucratic managers.
Why do they want to do that? What is the thing that they are watching when they are underperforming because we take for granted in a for-profit entity that they have the ability to, and the obligation to maximize profits, to optimize the delivery of goods and services with the government. Everything is rooted in the exact. To sit. There is no assumption to be. We can debate what level of bureaucracy and Central Central planning is necessary within a private organization.
But with the government we take for, granted that there is no need for such things. Subsidiarity is thrown out the window entirely, and I go back to my prior point. The reason is that power is held off as a means unto itself, an end unto itself and, and Company at Walmart. Could never get away with something like that. They would lose to competition and consumers and shareholders alike would hold them accountable. That's the beauty of a market economy.
When people look at capitalism. It's usually seen as greedy dog-eat-dog. Very focused on materialism. You have a great quote in here. Capitalism is a system that begins not with taking but with giving to others, how can You say, such a thing capitalism's about greed and pursuing your
self-interest. Well, I believe that capitalism properly understood is about self-interest and that market, free enterprise system that I advocate for Define self-interest as antithetical to greed greed, where one holds a callous disregard of one's neighbor, has no In whatsoever, in an economy of greed in a system. Agreed. There's no reason to stop where one may committee legality fraud, coercion. As long as one can properly. Avoid getting caught.
It's devoid of any system of morals or Transcendent truth. Generally in a market, economy is difficult to do because one will get caught, but to the extent one, could just be become very clever, at not getting caught. They violate a basic code of morality and I believe that when we talk about self-interest that we need to talk about it, in the burkean sense of an enlightened self-interest that cares about community that holds in high regard.
The concept of moral formation. So I Don't hold to a highly secularized or humanistic sense of morality. I desire that are market economy, be administered with a greater pursuit of virtue and character and discipline. However, in the state and encounter capitalist systems, I remain mystified by one by one believes that those things operate, devoid of greed by the obsession, with a power. Religion over economic self-interest. It does not strike me that we have achieved the Holy Grail of
good moral living. The former Soviet Union. The CCP in China State actors that generally run on autocratic basis, that are tyrannies, have not. Additionally been known for their great benevolence where I say that market economy is a mode where we can serve our neighbor. Is it to tala G? It is self a testing Lee true that in a market economy. One must first identify, then meet the needs of another human. In order to have access to a Profit Stream.
One can do so more efficiently than Someone else and turn the knobs up or down on the way in which they exhibit greater service, to others greater patients with employees, higher regard, for their personal lives, greater amount of flexibility, in the way one deals with a vendor, the specific decisions will still operate out of a constructive freedom and yet allow for, I true morality. That is not compulsory, which is the only kind of morality one
that is not coerced. But fundamentally, I go back to the two people on an island. We spoke about at the beginning of our talk that if economics is the study of human action. You cannot avoid the fact that human beings are going to have to interact with one another in a market economy. And that what most but still imperfectly promotes. Also cooperation is a system in which one benefits by meeting the needs of others. Great points there.
It's not like you look at Congress and say, well, those are the selfless people in society. Do they think that Congress like works at a monastery and is a bunch of volunteers, who refused to take any money for themselves or or any fame or any Fortune of of course not? That's why books like this are so. So, vitally important, you mentioned the work of Deirdre McCloskey a number of times throughout this book. Where they're generally getting into what's referred to as the
hockey stick of mankind. Where you have very little economic growth up until say around the year 1800 and you have drastic growth after that. What do you say is? What caused the hockey stick of economic growth throughout human history. Well, there really isn't any ambiguity about what caused the hockey. Stick growth after the enlightenment was indeed.
What? What Saskia, first is the great enrichment, is the embracing of a modern economy after the development of classical economics, that allowed basic concepts of private property, and individual, human Liberty to become some of the guiding precepts of how Society was organized in the United Kingdom and eventually the United States. So the Anglo World adopted Certain social contracts that allowed for the rapid promotion of a market economy and therefore greater human
flourishing to come with the classical school of Economics that rejected. The mercantilism you had prior basic, Birthright views to economics to feudalism. There were four centuries entire. Systems of thought that were incredibly limiting and the ability to meet human needs and benefit from meeting human needs through the development of Greater goods and services.
When you all of a sudden married, the ideologies that stemmed out of the Enlightenment, the social contract, and of course, the kind of development of the American Experiment in particular, you you really poured accelerant on the idea of economic enrichment coming out of human Freedom shortly thereafter. Let's call it 100 years. The this incredible ideological phenomena was met with the Industrial Revolution. Now the it is my argument that since the Garden of Eden.
This has been the story of Economics, which is raw materials that already. Stood being met with human Ingenuity, resulting in advancement of civilization. But there's no question that after the ideas of the American experiment were met with the technological. Advancements of Industrial Revolution. That we really saw some of the greatest hockey, stick growth, this great enrichment. The mycoskie refers to in the
19th century. Ever thought possible, and we haven't exactly slowed, the pace. It's in the 20th and now 21st century is either. I'm trying to get a solid definition of Regulation. I think the closest thing that I came across was a what was an article at Cato. The original meaning of
regulate. As in the Constitutional authorization, to regulate interstate commerce was to make regular in this sense regulations, provide customers information and help people make informed decisions so that they can protect themselves from dubious products. When you hear that. And is there anything that screams out to you? This is a unique thing that only the states can achieve or can we achieve regulation in the
voluntary sector as well? Oh II believe that significant amount of Regulation can and in fact is obtained in the private sector that before we feel the need to provide a bureaucratic definition or a sort of administrative definition to To regulation we have to remember what a market is producer. And a consumer are engaged in regulation with one another, the ability to not buy a product the ability to adjust Jamaica, formulated decision around one's reputation.
Now, you can make this more formal with Good Housekeeping, seals of approval with voluntary trade groups with Consumer Reports. Journals trade Publications. There's any number of forms in which privatized regulation takes place. But where we talk about State regulation, we get into the Restriction of activity. And again, there may be some forms of Regulation that we decide we will tolerate as a society, you know, for example, that we're not going to win a free and moral Society allow
people to refuse to serve. A good or service to someone based on the color of their skin. There's a certain civil rights regulation that we've said, we will allow as a society. And and then working downhill from that. There may be other forms of Regulation less striking less obvious than those of civil rights, that may or may not have a place, but fundamentally most regulation is As the restrictions around voluntary exchange that are imposed by a disinterested third party.
So our basic assumption around regulation should be one of high skepticism. That's not to say that all regulation is bad, but it is certainly to say that most regulation is unnecessary and that Human Action being what it was what it is. All humans are engaged in a constant Act of Regulation themselves and yet they're doing so with more knowledge. More incentives than a disinterested, third party, like, Washington DC is doing in 1986 Thomas, Soul wrote a book, civil rights rhetoric verse
regality. I believe is the title and he said that proceeding, the Civil Rights Movement. You saw black literacy Skyrocket, you saw black entrance into professional Fields, increase at a higher rate than they did after the Civil Rights Act, after before the Civil Rights Act in affirmative action, so Ed. You saw a black family, staying together more. You also saw an increase in income among black households at a higher rate than after affirmative action.
Legislation took place. Do you, are you of the opinion that this need for discrimination? Legislation is actually unjustifiable or would you support something like affirmative action and civil rights legislation? Well again, I think that there were about two totally different things, the Civil Rights Act of 1964. 64 that prohibited one in the Public Square from refusing, service to a member of another race.
I think, is in the public interest of a free and virtuous Society, that's categorically different than affirmative action. In fact, I would argue affirmative action in most examples or administration's thereof is itself. Highly discriminatory. It calls for by definition, the determination of a policy based
on the color of one's skin. And and so to me is very counter to the notion of civil rights that is looking for a more, genuinely free and open Society. So I would bring a very different point of view about civil rights, then as then I would with affirmative action. But the role of the state, in these things ought to be very limited in case of affirmative action, which is race-based quota systems.
It ought to be none at all. And the reason is not only because the state is a bad administrator of such things, but that because the very notion in my opinion, generates race based outcomes as opposed to meritorious ones which ought to be The pursuit of a racially, just Society. If I had to say my favorite quote of yours in this book, that there were so many to choose from, but use specifically said, the vast majority of poor economic
policies. We have seen over the years do not come from those who disbelieved key principles, but rather those who fail to consistently apply the principles, they claim to believe in to matters of application. Please give me an example of a principle that someone believes in but does not. Not apply it. Consistently where? Where they absolutely should. Yeah, there are so many examples here. We can take the remainder of our
time. I think a great prevalent one in kind of public policy has to do with Healthcare, where one says, they desire better Quality Healthcare and they desire that to be at a lower price and they've already established they believe in principles of supply and demand and competition.
And yet then That when it comes to health care for some totally inexplicable reason believes that competition reputation Market forces would not produce the higher quality of service and lower cost that a market economy, produces and every other aspect. And so one is sort of making an exception to the rule. Without justification. I do believe this also to be the case of minimum. Wage laws where one says, we believe that a price is to be discovered between a voluntary to voluntary actors.
Neither, one of which is being is operating under a gun with that, with with no threat of coercion or compulsion. And yet we believe that somebody in Washington d.c. Should set the clearing price for a wage between a worker at a restaurant. In South Carolina and the new owner of a restaurant in South Carolina and it strikes me as a grotesque violation or principle. That one would otherwise recognize they believe in.
Now I can go on and on two principles around credit and sound money principles around the optimal allocation of resources. I have no problem with people who believe in the cause of a free enterprise.
Economy, recognizing the need for some legitimate function of government, but when one operates as, if the expenditures of even the legitimate functions of government, do not come at some cost that they do not extract from what would otherwise be a more optimal allocation of resources by extracting from the private sector. We at least have to recognize the principle. That it is a sort of necessary, evil, in a free society. And I think that that's where we get ourselves in a lot of
trouble. Forget these general, time-tested principles. Alexandria Cascio Cortez. And Bernie Sanders went to go speak to a group of Amazon employees who were attempting to form a union. And the general statement was were the ones. Here we show up. We do all the work Bezos. Basically just sits back and collects a check and all these people are making billions. We need more money. What would you say to someone? Who says the workers who show up
to the physical facility. They should be the decision. Makers, not someone like Bezos who doesn't do any work. Well, of course, every it's barely worthy of a response. But to be as gracious as I can be, the work that Bezos did was in formulating, the entire architecture of the business to allow for them to be there to begin with and so the principles of private property. Extended the ownership of a business and the right to make decisions about the direction of
a business. And the labor also has tremendous rights. Number one of, which is the right of portability, the right to go work somewhere else and utilize and leverage Market forces to their own advantage. And we're company a is not treating them well or giving them enough role in These are giving them long enough, lunch breaks, or paying them generously enough in salary or bonus compensation, or, or stock options, or whatever. The case may be Company B or companies C or company D may
very well. Choose to do. So, and employees, as free market actors made in the image of God, have the ability to take advantage of choice and competition to pursue a different outcome. They cannot be compelled to work for a company. Company treating them poorly, certain companies, choose in their own management structure and corporate philosophy to allow greater decision-making from employees than other companies do sometimes, it's circumstantial.
Sometimes, it's even token, but the fact of the matter is that the general primary responsibility comes down to the management of a business and to try to take away. That right and have a disinterested third party, determine who should be the decision maker in a business is a form of theft. It's a form. It's a theft of the control of private property. In this case, the business interest of an e-commerce retailer, or of course, we can apply this to any number of
other companies. So the distinctly marxian notion that the worker is at odds. With the employer or the entrepreneur, or as Marx called it. The capitalist that there is an internal intrinsic struggle between the proletariat and the capitalist is a distinctly Marxist idea. And one that does not stand up to the testimony of history and the great social cooperation. They comes from employers and employees transacting freely to Gather for the betterment of all economic and existential
interests. Ludwig von mises wrote a book planning for Freedom, where he says, what makes wages rise is capital investment and competition. Whereas I had always thought it was every few years, the state steps in raises. The minimum wage organizes unions, and that's what pushes wages up. How do wages rise in a voluntary system wages rise in a voluntary system for the same way that any price mechanism functions and Is
it is wages. Are a reflection of the agreed-upon clearing price between a employer and employee. And as the employee becomes more vital to the profits of the employer, the employee generates greater leverage where it is more indispensable and skilled and specialized labor. The labor has even more advantage. And so, it is constantly subject to Market forces, and Market forces or subject, competition, competition. Puts downward pressure on prices sold to a consumer, puts upward
pressure on wages. Paid to a laborer. In the sense that the labor has when one sees the profits of a business. Another producer is incentivized to come in and enter the same space and And try to compete for talent by offering more wages. This is hardly a mystery. We see this in free agency and professional athletes.
We see it as Hollywood scripts, often times, by the way, reflecting a distinctly socialist view of the economy, our society and yet ironically agents are out pounding the pavement to get the greatest possible. Wage for their clients. The actors, the stars of a movie. Who after their agent, competes to get them from 15 million up to 20 million dollars in a, in a performance fee, the actor then comes in and plays their role in a script that denigrates the idea of Market activity.
The irony is rich, Fa Hayek wrote a book, The Constitution of Liberty in which he says I just lost it. Sorry. Our rapid economic advancement is in larger, part and result of inequality and impossible. Without it progress at a fast rate. Cannot proceed on a uniform front but must take place in an Echelon fashion. Why is it that inequality is actually able to create more wealth for people at lower income scales as And to inequality just benefits the
rich. Well, the first thing we have to do is Define inequality and generally most in the classical liberal tradition have understood that our aspiration for equality as codified in the Declaration of Independence is in that pursuit of life, liberty, and happiness, that the equality meaning the right to life, liberty, and the pursuit of happiness. Is enshrined in our Declaration of Independence as equality, of opportunity. And equality of outcome, is not something that we view as a
noble aspiration. For the very simple reason that it is not a theoretically possible Pursuit that exact equality cannot ever take place when we are dealing with the subjectivity of A stand appetites when we are dealing with Des differences in output and effort and risk, taking, I'm fond of using the example of what we would happen. If we took all of the Capital stock in the world and divided
it up perfectly evenly. Just right, we're gonna have a great reset of wealth equality and that whatever the total amount of capital Lambda. Land cash value is in the entire world. We're going to divide it up, equally by the number of citizens or or the population. If you will, it would take something in the range of about five seconds to have wealth inequality, because almost immediately, there would be some stewarding more wisely than
others. Others making different decisions that the free activity. Human beings would create a dispersion of result immediately. And so, any quality is not to be thought of as good or bad, unless we're referring to the quality of opportunity. That is encapsulated in the concepts of life, liberty and pursuit of happiness.
But if we're talking about equality in terms of a paycheck or a balance sheet, we're talking about something that cannot and never has and never will exist, and would not be beneficial. So to anybody, if it did exist the quality of effort, what would would be a complete and total non sequitur to this notion of human flourishing. And so because we believe in different. Tastes different efforts different risks, we necessarily agree and believe in different outcomes.
So this is as much a logical conversation as it is an economic one. And and to the extent that what we want is a greater equality of opportunity. It would behoove us to eliminate the central planner who plays, such a vital role in the cause of cronyism that exist to actually. Enshrine in equality, instead of allow for continued fostering of innovation Ingenuity Ergo
competition. When I watch the G7 and people like Justin Trudeau or Emmanuel macron, even Michelle Obama and Barack Obama. Some of the most powerful people on planet Earth, get up there and on the stage talk about equality. Whereas there is the least amount of equality between him and everyone else not only in that room. But in the world you have a general theory as to why people with the greatest amount of power actually preached, the doctrine of Quality of all
things. Yeah, I have a very good idea why they do. So, but it doesn't come from an ideological commitment to the concept that comes from the self protected agenda of power. That by preaching a concept of inequality. They preached the concept of aggrievement and that, as long as one believes that you can govern the Affairs of society under the The pretext of there being an oppressed and an oppressor, then you are be who
you are. Shall we say, catalyzing votes in your favor all the while leaving a continually distressed Society to show for it. So I don't think that the talk of inequality, from leaders, like Trudeau reflects any different understanding of human nature than the understanding I've shared with you today. I think it stems from the self in the business model if you will of politicians, and I think
it's unseemly. You discuss in the bookmarks, verse freedmen, as far as the lesson of the 20th century or lessons that we've learned after 1945, when it comes to real world examples. I get the theory, I've read the books show me where I can go, where I could see the free market working and places that have more state-controlled economy's doing worse off. Where are the empirical examples? Oh, why thinking in the 20th
century? We see the general failure of soviet-style Communism to deliver on the meeting of needs of the working class. That was the great promise of Marxism was to deal with The Angst. That was an errant in the proletariat. And because a market economy, delivered, many, many. Many tens of millions of people satisfied in their work, in the fruits, of their labor, in their economic advancement, that came from there were and the Socialist Vision.
Resulted in such a incredible and systemic dissatisfaction. I think that that argument became one of the easiest ones to make in the for the cause. Milton Friedman versus the cause of Karl Marx, but I would add that even if one is looking Beyond worker satisfaction to a more generic dare. I say econometrics, you know, you talked earlier about GDP for me, you know, they'll of measuring things with some kind
of inputs. Well, I don't think history is totally ambiguous here about where greater GDP growth. Came from that as somewhat primitive parts of the world very much. Mired in third world conditions embraced on the margin greater Market reforms, they experienced incredible growth of prosperity and such that Global poverty saw. Greater reduction in, 25, 30 40 and 50 years out of Market, out of embracing of Market mechanisms. Then we had seen in thousands of
years combined prior. So the testimony of history is very clear and at this point the great debate is no longer about whether or not we believe that a market economy or Ilysm creates a greater outcome. Now. We're just simply debating as to who ought to be in charge of the administration of these things. And it's a debate I intend for our side to win. Final question, sir. Thank you so much for your time. What do you think is the greatest contribution to the field of Economics by Adam
Smith? Well, there's no question that Adam Smith is most known for his contribution. The concept of self-interest, his famous quote about the butcher Baker and Brewer that we have our dinner at night because
not of their benevolence. But because of their own self-interest, did he enabled us to see the ways in which as a kind of classical economists that market forces generate a mutually beneficial result in a free Society, but I would argue that we're Smith. Is that the biggest influence on me and indeed where his thinking is most vital is when one synthesizes, his two, great books.
First theory of moral sentiments and second The Wealth of Nations to where the general concept about self-interest is married to our understanding of moral formation in society, then leads to not only the intrinsic, good of a free Society. Sia T, but our ongoing Noble aspiration for a virtuous Society. I think that Smith's work on this synthesized objective is vital and why Adam Smith is the greatest of the classical economist.
The book is there is no free lunch, 250 economic truths by David bahnson links will be in the description below, mr. Bonds, and thank you so much for your time. Thanks so much for having me. I enjoyed the conversation.