A Conversation with Brian P. Simpson on Why Markets Don't Fail

So, you can see the topics in the chapter titles, but it covers monopoly, the antitrust laws and predatory pricing, externalities, or externality theory, the regulation of safety and quality of products and working conditions. It also covers environmentalism, economic inequality, so called public goods, goods, and asymmetric information. So, those are the main chapters focusing on the alleged failures of the market that I show and felt. What? The market doesn't fail.

But then there's a chapter on the first chapters on capitalism, socialism, and the mixed economy, where I compare and contrast those political and economic systems. So there's a total of nine chapters.

And really the general abandonment of reason in the universities and the culture. I mean, the latter in terms of abandoning reason, is seen in the acceptance of subjectivist ideas, skepticism, the belief that we can't be certain of anything, that reality is basically whatever you want it to be. And postmodern philosophy as well, which embraces the idea that there is no objective reality and no objective means to understand the world.

And this leads to really a growing tribalism, which we're seeing in the form of, well, in the US.

Again, I'm more familiar with, but as so called identity politics, which basically translates to racism and nationalism and sexism and various other forms of collectivism, where people associate with a group that they feel like they belong to, and usually with the abandonment of reason, it's usually a more concrete bound, perceptual level association like race or nationality, where you're born or the color of your skin, with racism and so forth.

And I think we see evidence of all this in the lashing out against Israel and the support of Hamas and palestinian terrorists. That's a part of the hatred of capitalism and the abandonment of reason and the rejection of western values like individualism and individual rights, and the embracement of primitive values, mysticism and tribalism. And really a primitive form of collectivism. Altruism is incompatible with capitalism. Altruism says it's a virtue to sacrifice yourself to others.

Capitalism protects the rights of the individual so that you can pursue your own happiness. Say really, egoism, rational egoism, is consistent with that. Your life belongs to you. You have the right moral rights, and it is moral to act in your self interest, to pursue your own happiness. And capitalism enables that to happen. You don't have to live for any group like the race or the gender, like collectivism dictates.

So I think those ideas, collectivism, altruism, and really mystical ideas, the abandonment of reason are rampant on college campuses. And that's why the hatred of Kathy and complete misunderstanding with regard to Brian.

I read the Ministry of culture, he's cut, and the state news services, he's cut and he's cutting, radically cutting government spending as well, which the government, the argentine central bank, creates a lot of money, inflates the money supply massively, and that's why prices have been going up so radically, I think somewhere in the order of maybe 300% a year or so. And he wants to dollarize. He hasn't done that yet. I don't know if he'll be able to do that.

So he wants the official currency to be the US dollar, which I think would be extremely beneficial economically and be much more free market oriented. Even though the US dollar is a fiat currency compared to what Argentina has, it would be much better. And he wants to eliminate the central bank there in Argentina, which would be beneficial. Those are the sources. And the government's desire basically to provide lots of subsidies are the sources of the massive increase in the money supply.

He's eliminated rent controls too, and many government subsidies, like fuel subsidies. So he's made some big changes, and even though they've resulted in short term economic pain, he has explained that in the long run things will get better. So he understands how these benefits work themselves out. You might not get the benefits immediately. Some benefits. I think the rate of increase in prices is starting to come down. So prices are still going up fairly rapidly from what I've read.

But the rate of increase has decreased, which is a good sign. Interest rates have fallen, rents have actually fallen and the rental supply of housing has risen. I've read that the Argentine, and I've seen the argentine peso has actually appreciating. So he allowed it to devalue at first in the market because it was overly valued, but now it's actually appreciating. And the government has achieved its first quarterly budget surplus in 15 years. So he's moving them in a good direction.

I mean, I don't agree with some of his more fundamental ideas like he is an anarcho capitalist. Anarchy in my view is incompatible with capitalism. But if he's not focusing on that, I mean, they have too much government to pare back, I think. So what he's doing I think is good in terms of reducing the size and scope and power of government. He opposes a woman's right to obtain an abortion, which unfortunately that fundamental right he opposes.

But given the context of Argentina and the benefit to Argentinians and also just being able to see how these free market reforms will benefit Argentine, if he's able to implement significantly more of them, that will be beneficial for capitalism and of course for Argentina as well in the world in general.

And then money banking in the business cycle that was a two volume book that's actually divided into two standalone books and then a declaration and constitution for a free society. One thing I learned early on, and I've applied that in all the books, is really to provide the clearest case for the ideas your trying to refute or address. And so I go to the sources that most clearly describe those ideas and I use a lot of examples and quotations from those sources. Sort of let people speak.

Let the people who advocate those ideas or who most clearly express those ideas speak and present those ideas as much as possible, because that ultimately makes it easier for a writer and readers understand those ideas. And it makes it easier, I think, for me as a writer, to refute them, you know, like when you're addressing ideas concerning market failure.

And so we need government interference in the form of a central bank or regulations of the banking system, or so called fiscal policy, which is taxing and spending policy by the government to manipulate what's happening and manipulate conditions in the economy. So it's claimed that markets fail when you need this government interference. And that was a long topic.

I would have included it in markets don't fail, but it, you know, it required a book in and of itself to address, because it's just really not true that the market creates recessions and depressions. I mean, I wouldn't say you could completely eliminate recessions and depressions or the business cycle if we had a complete free market in the monetary and banking system.

But we could certainly make, certainly lessen the amplitudes of the swings in the economy and make the business cycle on recessions and depressions much less significant if we move to a free market in money and banking.

And there was fear that this would create monopolies, according to one view of what a monopoly is, where you have a large seller that dominates an industry, and what the antitrust laws, though, end up doing is restricting competition. They prevent firms from entering or dominating an industry.

And even if it's based on voluntary trade, my view with regard to monopoly says that, well, if you achieve your dominant position, if you dominate the market, but it's based on voluntary trade and your own superior productive ability, that's not monopoly, that's a part of competition and that's beneficial.

And we see that the benefits of large, very competitive companies like Walmart or Google or Meta or whatever it might be, they have to be really competitive, develop good products or keep prices low, or some combination of that, and we all benefit that from that. That's a part of competition. So the antitrust laws, though, were a reaction to that. For instance, one of the laws, the FTC act, declared unfair methods of competition in commerce illegal. Unfair.

It's not even defined really what's unfair. So some people might consider it unfair if a company opens up and drives you out of business through their own superior productive ability. That's not unfair, though. That's a part of competition. That's a part of production and voluntary trade. And so if the antitrust laws are used to restrict those kinds of companies, to restrict a Google or a Walmart or a Microsoft, or an IBM. At one time, it was used to restrict their competitiveness.

They're actually creating monopoly by restricting competition, because monopoly in its essence, is a restriction of competition, and competition is basically production and voluntary trade. And when the laws are used to restrict superior competitors, they're restricting that production and voluntary trade, and that's what they're used largely to do, to restrict superior competitors.

I read one time, I think I mentioned this in markets don't fail, that about 95% of antitrust cases are instigated, really by competitors or companies that can't handle the competition. Like for instance, with regard to the Microsoft case, they were initiated by, or at least instigated by some microsystems, which made it compete system, and Netscape, which had a competing web browser at the time.

So now the government's usually prosecuting them, but the instigator, the ones running to the government for protection, are usually the ones that can't handle the competition. So they actually restrict competition. They initiate physical force. The sound view of monopoly to me is where we understand monopoly as the government initiating physical force to reserve a market or a portion of a market to one or more sellers. And that's what the antitrust laws do.

So the law in a free market, as an employer, if I don't want to hire union workers, and workers are just trying to agitate for a union, I can fire them if I want to. I could choose, obviously, also to deal with a union if I wanted to, but I could fire them. And you can't do that today in the US due to the National Labor Relations act.

But even before the National Labor Relations act that was passed in the 1930s, the unions used to use the mob to use force against employers to try to get their way. So they've always used force, and that's the real problem I have with labor unions. Labor unions as such, they, they could exist in a free market. People could try, employees could try to unionize. But again, like I say, employers could fire the union workers if they want to.

So there won't be this power on the part of unions to violate the rights of employers and non union workers as well, and initiate physical force. And that ties into regulation because that's a form of regulation, that National Labor Relations act, which ultimately raises costs to businesses because that's what it does. It gives unions artificial powers to negotiate higher wages. They can get higher wages for their members.

Ultimately, that means lower wages for non union workers and higher prices, though, for people who are buying the goods that union workers produce. So it means higher costs, higher and higher prices. So a lower standard of living overall. And that's what regulation in general does. We don't need regulation to improve safety and the quality of products. I mean, that's what competition does. Competition sets the standards.

And we see just all the unbelievable new products and the improvements of products like the iPhone, for instance, and smartphone technology in general, and computer technology in general. We didn't need regulation to improve that or create it. And regulation generally is the government using the initiation of physical force to achieve some end that, that politicians and government bureaucrats want to achieve. So it involves imposing requirements or standards that people might not want to accept.

So regulation generally raises costs and makes it harder to produce. A prime example of that is in the US, the Food and Drug Administration. So it regulates pharmaceutical drugs, among other things, and it makes it much more costly to produce those drugs. It takes much more time than it otherwise would, I believe, like eight to ten years to develop a drug that you can bring to the market and far more money to develop those drugs.

So you end up with a lot of drugs that are just never developed because it's just too expensive and the companies just don't want to spend the money. It's a very difficult business developing drugs. They often start, I've heard, with maybe 2000 chemical elements and compounds which they start testing.

And then as they go through testing those chemicals and then perhaps testing on animals and clinical trials and so forth, they might whittle that down to one drug that cures some disease or helps with regard to some disease and of course is safe, so it's very expensive. And the FDA regulating safety and effectiveness of drugs just makes it much more expensive. So I've seen estimates that the FDA kills more people than it saves because of its regulation, because it makes things so costly.

It keeps many drugs off the market that could be beneficial to people but never come to the market or are delayed in coming to the market. So a lot of people die or are harmed due to that. I think the COVID pandemic is a great example of that. In the US, they had mapped the DNA in early January of 2020, and we didn't have a vaccine, at least in the US till November of 2020. But they could have used that DNA knowledge probably to have a vaccine maybe in May of 2020.

And so you had about a half a year where people, you couldn't generally get a hold of a vaccine and. But could have many people died, of course, during that time. And they could have been saved. To me, with regard to pharmaceuticals, you should be able to use them. You want to do that in consultation with a doctor.

But it might be worth the risk to some people if they haven't been fully tested, to use some drugs and try them out if they're in a very high risk category or something for the disease.

And you have that, like in North America, you have some drugs could be legal in Canada and Mexico, but it's not okay to use them in America and vice versa. And also the prices are very regulated, so it's no competition between.

That's not beneficial at all. And markets like Canada, I know, yeah. They have a lot of price controls on their drugs and medicine in general. And so you have a lot more shortages as a result of that, of those drugs. But sometimes I've heard of people in the US buying drugs in kindling, but I don't know how easy that is to do, to take advantage of, of those lower prices. But I mean, the higher prices in the US are also due to the government's provision of healthcare.

And that drives up demand and prices for healthcare, pharmaceuticals.

That's what they want to preserve. That implementing that would be in a consistent fashion, but it would be completely disastrous. I think it would lead to. If we had consistently environmentalist based government, it would lead to misery, poverty and mass murder on a scale that would make socialists and communists look like friends of humanity.

But along the way here, we have a lot of regulations in our mixed economy here and mixed economies around the world, a lot of regulations that make it harder to produce. You get lots of lawsuits based on laws that exist. We have the Environmental Protection Agency at the federal level in the US and based on laws that, of course, the Congress has passed, but enforced by the EPA, and lawsuits that environmental activists will engage in.

It becomes much more costly to produce goods to, for instance, build housing in certain areas because you'll face a myriad of lawsuits from environmental groups that try to restrict that. So in California, where I am, you have a California coastal commission which regulates building on the coastline. And it's just much more difficult to build on the coastline and much more expensive.

But even if you go inland from the coast, it's much more difficult to build, especially when you get into less populated area, because they'll declare it'd be declared conservation areas. And so if it's any kind of an area that, where there hasn't been a lot of building, that environmentalists will often sue to make it harder to build in those areas. And, of course, the production of oil, drilling for oil is very difficult as a result of environmental regulations and lawsuits.

So it harms our ability to predict, it lowers our standard of living as a result. This is all driven by that belief that nature has intrinsic value and the human being should be sacrificed to nature, but it's just not true. Nature has no intrinsic value. Nature derives its value from our ability to acquire resources from nature and produce goods that benefit our lives. And this morality of sacrifice I mentioned, it's a destructive code of morality.

And I discussed that in detail in markets don't fail. If you act on altruism, the belief that self sacrifice is a virtue, if you act on it consistently, your own death would be the result. And to the degree that you act on it, though, it's going to undermine your ability to live, because it's about sacrificing to others. And if everybody acted on that consistently, we'd all basically destroy our own ability to survive and flourish. So it's far worse, I think, than even socialism.

Because at least with socialism, there's a superficial appearance that people are at least sacrificing to other people. So it's a superficial appearance of helping, benefiting other people. But with environmentalism, human beings have taken it, been taken out of the picture altogether and sacrificing to nature. So that's particularly harmful and destructive.

If a lot of people around you are immunized from some infectious disease, even if you don't receive the immunization, you're gonna benefit from that, because since everybody else will be less likely to get the disease, that means you'll be less likely to get the disease. So it's that positive effect from the actions of others. And the claim is that because of externalities, you get too few of these kinds of goods provided, like immunization.

Also, you could think of like a lighthouse as considered to have positive externalities. Even if you don't pay for it, you can still use it. If you own a ship or a well manicured lawn and garden, you can walk by it and enjoy the beauty without having to pay for it. So too few of these are claimed to be provided. So the claim is that you need the government to subsidize the provision of these goods or provide them itself. So that's positive externalities.

Negative externalities are a cost imposed on you by others that you're not compensated for. So pollution, say, from the use of the internal combustion engine or steel mills, or whatever it might be, that's said to create a negative externality of cost on you. And it's claimed too many of these types of goods are provided because the cost, the external cost, is said not to be accounted for.

So the claim is by economists that you need a tax, the government, tax the activity, or just restrict its production. The claim is. And so you have these two types of externalities. The fact is, though, with regard to the economic implications, if we had to compensate everybody who created a positive externality and make everyone who creates a negative externality pay, it would lead to economic stagnation.

We would all, for instance, have to be compensating those who come up with new products that are not patentable, or that you can't copyright, such as, say, the idea of buying goods on layaway or frequent flyer miles, or the first one to come up with the idea of a drive through at a fast food restaurant. You can't patent or copyright these types of products, but it's created a positive external effect.

They do, in the sense that others can use those ideas, and they weren't the first one to think of them. So they receive a benefit for which they don't compensate the original creator of it. And it would just lead to a proliferation of cross payments, really, between people. And another example of a negative externality is the idea of the original Henry Ford, for instance.

He would, according to the externality theory, have to compensate buggy producers and horse breeders, because he drove a lot of them out of business. People voluntarily purchased his product instead. And he made automobiles affordable for most of the population. So people were giving up their uses of horses and buggies, and a lot of them were driven out of business. So that's allegedly a negative externality.

And again, it would just lead to stagnation, lead to economic regression, in fact, where we'd go backwards in terms of our standard of living for all these payments. That would have to be made. The only ones that might flourish are lawyers and accountants for keeping track of who owes what and suing people to exact payment.

But really, with regard to externalities, the thing that needs to be focused on or understood is that only things that violate only negative externalities, that violate individual rights are the ones that people should be compensated for. And you need well defined and protected property rights for that, and a legal system to implement that. So, for instance, say a case of a rancher's cow, a strain onto a farmer's land and eating some of the farmer's crop.

Well, you know, if you have a proper legal system that protects rights, the farmer can sue the rancher in a court to get an injunction imposed on the rancher. Or there might be voluntary agreements that arise. Maybe the rancher pays the farmer or something like that.

They claim that's an external effect and externality of capitalism, or noise pollution or pollution in general, they talk about. But generally status, it's a very, the concept of externality is very status. Collectivist education is said to create a positive externality. So the government should provide that because it benefits people who don't get educated. If you go to get educated and you gain knowledge and are more productive as a result, you're going to benefit others.

And so the claim is, well, the government should provide it then, or subsidize it. So there's a lot of forms of government interference that are rationalized based on externality theory, but they're, and just quickly on the positive side there with positive external effects. Individuals should pay others only for benefits that they voluntarily contract to receive from others. If the government has to force people through subsidies to increase the supply, that violates rights.

And it's not beneficial either. To the extent that, you know, if people are not willing to pay voluntarily for these goods, then they shouldn't be provided and they're not underprovided. And forcing people to pay for what they don't want, that violates individual rights and decreases satisfaction and well being in the economy.

And there's a lot more I could say in the book, I talk about how the concept externality is invalid because it lumps together these things, violating rights and protecting rights. But the only consideration in this context that should exist is whether or not individual rights have been violated. And the government should only act when rights have been violated. We shouldn't be looking at just whether there's an external effect. If that were the case, we'd also have to. I use an example and.

Well, what about the external effects of plastic surgery? So should men be forced to subsidize plastic surgeons to do more breast enlargement operations? Positive effect from that. You know, it's just, it would be crazy, the absurdity, because it's an in.

But asymmetric information, it exists when either the buyer or the seller in a market exchange has some information that the other person in the transaction does not have. And it leads allegedly to a couple of problems, which, you know, it's claimed to lead to these problems, but it doesn't in most contexts, or some things can be done to mitigate the situation. So it leads to what's called adverse selection.

When, when the parties on one side of the market who have information not known to others, they do what is called self select in a way that adversely affects the parties on the other side. And so there was an article called the market for lemons written by an economist, George Akerlof. And he actually won a Nobel prize for his work in this area. And it just, it's not a sound argument at all. And unfortunately, it shows the problems, the economic profession.

I think he should have been laughed out of the economics profession, but instead he was given a Nobel prize. But he says that the markets for used cars would break down because of this self selection and this asymmetric information. The idea is that, well, as a buyer of a used car, you don't know about the quality of the cars in the market. So you're not going to offer as much money because of that uncertainty.

But what happens is the claim is that that leads to sellers of the best cars to withdraw their cars because they're not going to get the money they think is necessary to compensate them. But that leaves more lemons or low quality cars in the market. And so that means that the buyers would offer even less, which again, leads to the sellers of the better cars to withdraw theirs from the market. You see where this is going. You'll have nothing but so called lemons or low quality cars on the market.

And the market would allegedly break down. And of course we don't.

You're trying to buy a used car in terms of, you know, there's, well, you can drive it, you can even take it to a mechanic and have them inspect it. Or, you know, you might just look at the brand name. If it's a high quality type of automobile, then, you know, they tend to be higher quality. You might look at the service records. You know, that's, people often keep the service records for their vehicles just in case they want to sell it as a used car.

And you can say, yeah, yeah, I've been doing regular maintenance and so forth. It's an argument that some economists make, but it's not a good argument at all. It also has said this asymmetric information is said to lead to what's called the more moral hazard problem, where one party to a transaction changes his behavior in a way that's hidden from or costly to the other party. So an example would be like, if you get health insurance, the claim is, okay.

Now I'm not going to take care of myself as much because I don't have to pay for my health care. And again, or if you get insurance to protect your home from fire damage, oh, so I'm not going to be as careful about whether with the use of fire or my electrical system in my home because I have insurance. And the thing that people would act like this, it just makes no sense at all. I mean, whether you have insurance or not, nobody wants to go to the doctor.

Nobody wants to get sick, nobody wants to have a broken leg. So you're still going to be careful. And, of course, insurance companies have ways to get you to be more careful, though. They will charge deductibles so that you have to pay for the first amount, maybe the first $1,000 in expenses or $500 in expenses, or they'll have copayments or make you pay a percentage, or they won't charge you at all for preventative care quite often.

So that gives you a little incentive to do the things to prevent you from needing more extensive health care services. But it's just absurd to think that people would act. Businesses have strong incentives to get you to. To figure out what you want as a buyer and to get you to ways that they'd like you to act. So. And information, you know, because this asymmetric information does exist. Producers have specialized knowledge in the division of labor that consumers don't have.

They use all kinds of means to try to show you that they're doing a good job through warranties and guarantees and brand name recognition. So you build a good product and a good reputation. And, you know, I know when I buy, say, a Toyota automobile, going to last for a long time, because they've lasted a long time for many decades.

So there are all kinds of ways to provide information, and it's in your incentive, if you want to make more money, to provide the information that consumers want, because that will help get them to buy more of your products. So we wouldn't want to eliminate the asymmetric information.

And the profit motive provides a strong incentive for people to provide or obtain information because we won't want to eliminate it because it would mean getting rid of the division of labor, which would be horrible for our standard of labor.

So these are all fallacies that are out there and in the mainstream, because these are a part of, like I say, at least one chapter in every contemporary economics book will have a discussion on these topics.

And so understanding the benefits of the free market and understanding that not only is the free market beneficial from an economic standpoint, that it leads to a greater ability to produce wealth and a higher standard of living, but that it's morally right that it protects, or the rights of the individuals need to be protected to establish a free market. And that's a fundamental requirement of human life.

And there's an integration between, and economics and morality and political philosophy here. What is beneficial morally in terms of egoism and acting in your rational self interest? When laws are implemented to protect individual rights, which is what is needed, that leads to beneficial economic results. It protects the freedom to produce and further your life and well being. And the opposite is true as well.

There's an integration here between altruism, collectivism, or government interference, and the economic disaster that results from that, a much lower standard of living. So if you believe self sacrifice is a virtue and you implement laws based on that, that sacrifice the individual, the end result would be a socialist society, and that sacrifices people on a massive scale. It leads to misery, poverty and death on a massive scale, and mass murder.

So it's no accident that you get those effects if you understand the fundamental moral issues at hand.

But really, I think people like him because on the surface, and many people do because he's, and many economists, because on the surface at least, he's not an advocate of outright socialism, but greater government interference in the economy. So he calls for greater government spending in the economy.

He believed that, that recessions and depressions were an inherent feature of capitalism, and he thought that you needed more government spending to maybe not eliminate, but at least lessen the effects of the business cycle and recessions and depression. So he wanted more spending and government spending and more government controls in the economy to mitigate the effects of the business cycle.

I mean, I think during the time of the Great Depression, so that was in the 1930s, I think many economists were not happy or uncomfortable with the prevailing economic views before keynes, which tended to be more of the classical economics, which were more free market oriented. So classical economists like Adam Smith or Frederick Bastiat or Jean Baptiste say tended to be more of an advocate of the free market, and they were uncomfortable with that.

I think the growing tide of collectivism and Marxism was convincing people that they didn't like at least the free market. So they were uncomfortable with that, but they didn't like outright marxist socialism. And so keynes opened up the so called middle of the road, the mixed economy. He wanted more government interference, not complete socialism.

But if you read his most famous work, the general Theory of employment, interest and money, if you read the last chapter of that book, he advocates pretty strongly for maybe not complete socialism, but leans fairly close to socialism. I would say he advocated for what he calls the euthanasia of the rent year, basically getting rid of financiers. He wanted a comprehensive socialization of investment, which basically means the government taking over investment.

He didn't like stock markets, although he didn't make actually a lot of money in the stock market. He thought they fostered too much short term investment. He liked long term investment. So he wanted more government intervention to lessen the effects of stock markets, which, of course, would be disastrous. I mean, short term investment is extremely important to keep markets liquid, and that's important to give an incentive for more.

For more capital to come into those markets and for businesses to be able to raise capital. So that would be detrimental to our standard of living. So that mixed economy, I would say, leaning towards socialism. I think that's what people like. And it wasn't outright socialism. That's what they liked during the Great Depression and that time period going up to world War two. And I think they still like it today.

Many economists, I think the majority of economists, Keynesians and those who don't claim to be keynesian, they embrace many keynesian ideas because, for instance, fiscal policy, using taxes and government spending to manipulate what's happening in the economy, that's basically a keynesian type of policy. And most economists, even those who might consider themselves advocates of significant aspects of the free market, will embrace fiscal policy.

The other economists were Leon Valras, I think it was a french economist, and William Stanley Jevons was an english economist. They all independently discovered it around the late 1860s, 1870s and initiated what's known as the marginal revolution. But that certainly was an important discovery. But, yeah. His founder of the austrian school, he was an advocate of more limited government. And he was an aristotelian as well.

If you read his book, Principles of Economics, the first chapter, the first sentence of the first chapter says something like, all things are subject to the law of cause and effect. I remember reading that book for the first time. That's the first sentence in the first chapter. And they're like, wow, this is going to be a good book.

He's got an enormous amount of writings, through his writings developed a lot of important economic truths and certainly deserved a Nobel prize in economics. Even more so, I'd say, than Hayek.

But say, yeah, a great economist as well, consistently advocated for the free market, but he created say's law, which is a very important economic truth. The idea that supply constitutes its own demand. And basically what that says is that it doesn't say whatever. It does not say whatever you bring to the market, whatever the supply of goods you bring to the market people will buy it. It doesn't focus on the individual level.

So if you try to sell a bikini in Alaska in the middle of winter, that's not going to create demand for your product. But what it does say is that in order to have more real aggregate demand, so demand at the level of the economy as a whole, you need more supply. That's the important truth that he identified. And so, yeah, certainly a very, very good economist and Frederick Bastiat as well. So both, he's a french classical economist.

He was an advocate of the free market and wrote economic sophisms. Was an important essay showing the benefits of free trade and the fallacies of the people embraced during his time when they tried to argue against free trade. And so he's known for that. But he's also known for an essay that he wrote on what he called the seen and the unseen and known also, he referred to it as the broken window fallacy, the idea that destruction can stimulate an economy.

He said, well, you have to look at what is seen and unseen. So if somebody breaks a store owner's window, people see the glassmaker coming, replacing the window and so forth. And they say, see, it stimulated the economy because there's more work for the glassmaker. But what they don't see is they don't see perhaps the tailor, the suit maker, who has less work.

So he's twiddling his fingers in his shop, because now the store owner who had his window broken, he was going to buy a new suit, but now he had to pay for this broken window, and he doesn't have the money any longer to purchase the new suit. So there's no, you know, destruction, he said. And I can't remember, I can't quote him, but destruction, he said, doesn't create prosperity. It doesn't stimulate the economy.

You may create more business for one group or one person, like the glassmaker in the economy, but you reduce business and demand for other products, like with regard to detailer or the soup maker. And that's an important truth to identify. It's an important method of thinking because I would say many economic fallacies are embraced by people who don't understand this broken window fallacy.

And that's why with virtually every economics class I teach, I start out with talking about that broken window fallacy. I use Henry Hazlitt's presentation in this book, Economics in one lesson. But he got it from Bastiat.

And he's got some other writings to essays and some other short books though that he's helped me just in an unbelievable fashion, understand economics, but just some of the truths that he has identified. For instance, his identification of what he calls the primacy of prophets doctrine, and his critique that he provided of what's known as the primacy of wages doctrine. So this is an idea that Adam Smith first wrote about.

The claim is that wages are the original and primary form of income in a primitive society, what would be called a pre capitalist society. And Marx latched onto that and used that, in part at least, to claim that's an identification of how capitalists exploit workers. Because wages were the primary and original form of income, and profits are taken from wages. And so that's one way that capitalists allegedly exploit workers. And Reisman identified that. No, it's not true.

Weight or profits are the primary and original form of income. Because before capitalism, before there's any capital, there's no costs in the economy. There's just people appropriating things from nature and selling them. And what they receive is all revenue. And because there's no cost, the revenue equals the profits. So all the income they receive is profits. And so it's not the case that wages are the primary and original form of income. And. And profits are not deducted from wages.

In fact, it's the other way around when a business owner or somebody starts to become a capitalist and they start to hire workers. Now wages are deducted from what was all profits originally. And so to me that's just from an economic standpoint, that's an extremely important identification. His net consumption, net investment theory of profits, which shows that the profits at the aggregate level come from the consumption of capitalists.

Because that's the only spending that really, or one of the few forms of spending that doesn't show up as a cost to businesses. And so he's not saying that, well, we need more consumption to have a higher standard of living. He's just identifying the accounting at the aggregate level, the level of the economy as a whole, of where profits come from.

And that's just it enables one to have a much better understanding at the aggregate level of what's happening in the economy, obviously, at the individual level. He even discusses this in detail in relation to this net consumption, net investment theory of profits. That it's producing good products, working hard, building a good business. That's what generates profits for the individual business.

But in terms of the accounting at the level of the economy as a whole, it's consumption on the part of capitalists through, say, dividends or withdrawals from their business. And that ties into his. I'll just discuss one that there's so many I could discuss. But one last important identification.

His aristotelian system of aggregate economic accounting, which he calls the gross national revenue view of accounting, which is compared to what he calls the heraclesian view of aggregate economic accounting, which is what's widely accepted today. The gross domestic product view of economic accounting. He shows the problems with the gross domestic view of economic accounting.

And puts forward his own gross national revenue, or what could be called gross domestic revenue view of keeping track of spending in the economy. And it relates to his theory of profits. He's had many, many ideas that were original with him, or some were original with others. But he developed them in a much more comprehensive and cogent fashion that, yeah, I owe him for my career in economics. Really.

With a casino, the money you lose is kind of like paying for the pleasure of the experience of gambling and the possibility of maybe winning. But the stock market, it's about raising capital. So equity capital specifically, which is extremely important for businesses. Without stock markets, it would be much harder to raise capital. So it's about producing wealth ultimately. And it makes it possible for businesses to gain access to capital in a far less expensive fashion.

Far easier fashion, and that increases the ability to produce wealth. So businesses can make ipos initial public offerings in the market, and that's how they raise the capital from shareholders. Then they can use that capital to produce. And then, of course, most of the trading takes place in what is known as the secondary market in the stock market.

So it's not the businesses issuing ipos, but it's people who already own the stock buying and selling the stock from each other or selling it to each other. And that, of course, is extremely important to create liquidity in the market. And it makes it possible for more funds to be invested in the market, because you need that liquidity.

If you're, say, a retiree and there was no stock market, but you own shares in some company, well, it might be difficult to sell those shares now with a very liquid stock market. If you're a retiree, you might need money to spend. You can easily sell those shares and then live off that money. So a very liquid and that short term investing that McCain's hated is extremely important to creating that liquidity, and it brings far more capital to the market than otherwise would exist.

And it just dramatically increases the productive capability. It dramatically increases the capital intensity of our economy, which is extremely important for production and our standard of living.

And also from last time you were here some years ago, Brian, I think, looked at the stats, and it was like 185 downloads or individuals that could have been listened to that podcast and earned value from that. And then we talked about Fountain app, and we gave away, thanks to a fountain app, 50,000 satoshis. And thanks, Brian, that you have signed up for account on Truefans FM. So we could give you a split tier when we published the episode.

So when people streaming Satoshis, listening to the podcast, or sending a digital telegram with a booster and a note, you could get the split of it, and then we could continue with this work with this podcast and create more supply of, you know, episodes from the Foxhole, the secular Foxhole. So thanks again, Brian.