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

Well, good afternoon, ladies and gentlemen.

Welcome to another episode of the secular Foxhole podcast.

Today we have a returning guest.

Brian Simpson is a economics professor at

National University.

Is that correct, Brian?

Correct.

Now, is that.

Let me ask you this.

Is that affiliated with the Navy or Air force, or is that just a.

No, it's a private, not for profit university based in San Diego.

But we have employees and faculty around the US, and it's mainly online.

But we do have classes, offer classes in the San Diego.

For some reason.

I thought it was affiliated with one of the

military, but that's okay.

And Brian is a returning guest, because the

last time he was here, we discussed his book, the Declaration and Constitution for free

society.

And today we're going to discuss an earlier

book of his called markets don't fail, and which I wholeheartedly agree with, or even

more.

Yeah, positive.

And Martin, here, Markus, are always right.

Right.

Yeah, they succeed.

Yeah, that's true.

That's true.

They do succeed.

Shall I go ahead and continue, Martin, or do you want to.

Yes, please.

Please do that.

All right.

So, Brian, what topics do you cover in markets

don't fail?

Sure. Yeah. Now, the book focuses on topics that are covered in most contemporary

economics, what they call principles, textbooks.

In virtually all, or at least most of those types of books, there's typically at least one

chapter that addresses topics concerning market failure.

And it's from these topics that come the chapter titles of that book and the topics

that I focus on.

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.

I see.

I see.

And what is your central message of the book?

Yeah, the central message of this theme is, in one sense, contained right in the

title.

The free market does not fail, but succeeds

both morally and economically, because the rights of individuals are protected to create

a free market.

And this makes possible the production of an

abundance of wealth and the flourishing of human life.

So.

Okay. Okay.

Book really provides a compelling economic, moral, and even an epistemological

defense of the market by showing why the typical market failure argument is false and

how, in fact, free markets succeed.

What is the proper definition of capitalism?

And why do you think it's so misunderstood today, especially in our universities?

Yeah, I mean, it is misunderstood, not only misunderstood, but I'd say it's really

hated by actively university professors, and university professors are to a great extent

advocates of socialism and communism and at least generally the welfare state, especially

in the US.

I'm more familiar with that.

But I think that's true virtually around the world.

And I think it's misunderstood and hated because of the wide acceptance of the altruist

code of morality and collectivism within the universities.

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.

Go ahead.

Yeah, I have some here, some thoughts about last time you were here, episode 51 and

the book you wrote then and what you have learned from that, but also for this book now

that we are talking about and also your, you could say second book and you mentioned there

about the anti.

Yeah.

What's going on in Middle east and so on.

It's interesting that I have found that it's a think tank, free market think tank and for

freedom of expression in Lebanon.

So it's interesting what could happen there if

they will see the light and it will be a free market.

So some thoughts about writing these books and also what's going on right now, for example,

in Argentina.

Have I read your book and books?

Well, I guess I can focus first on Argentina.

I don't think they've read my book.

I don't know if Javier Millay has read it or

not.

I know Sim Ayn Rand and he's read a lot of

Ludwig von Mises and Milton Friedman as well.

Lift.

And Friedman philosophically has problems, but he does have some good economic

ideas.

But what I see going on in Argentina, yeah, I

think it's a good thing.

I mean, Javier Millay, he advocates and is

implementing many free market economic policies, such as radically cutting government

agencies.

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.

Agreed. Agreed.

I think just as a broad overview, I think it's

he and the people who voted for him against what the entrenched bureaucracy and of course

the, the universities there.

Right.

So it's, it's sort of a, maybe it, hopefully it won't be a pitched battle.

Well, but yeah, he's faced a lot of opposition, but he's able to, he's been able

to get some things done in terms of reducing spending and departments and things of that

nature.

So I can talk now about my books because,

Martin, you'd asked about what I learned from my books and really from, from all the books.

So there's, markets don't fail, that's the first one.

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.

So, okay, that's good.

That's great.

Let me say, culturally, it seems like every economic calamity is blamed on both capitalism

and or the lack of regulation.

I consider this false.

And do you also think it's false? Yes, because I think certainly the financial

sector is the most regulated sector on the planet.

Yeah. And that as an economist, that's one of the first areas of the economy my mind

goes to.

And that's what money banking in the business

cycle focused on.

The business cycle and recessions and

depressions.

And in fact, I say at the beginning of that

book that it's really an extension of markets don't fail because it's claimed by many

economists that recessions and depressions are a failure of the market.

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.

I was about to say even those, if they happened, they would be much shorter in

duration because the mechanism is there to correction.

It's already there.

Right.

And people could act very quickly.

There wouldn't be sort of the perverse incentives created by government interference

where, for instance, when you bail out financially troubled financial institutions,

you perpetuate problems that exist in the economy as opposed to sort of eliminating

those defunct companies or companies that aren't well run and allow people basically to

get on with their lives.

From there.

So that to me, that's like, I'm not going to call it crony capitalism.

I call it crony socialism.

Right.

I use the term crony collectivism.

Yeah, crony capitalism is a contradiction in terms.

Crony collectivism or crony socialism, that's a redundancy.

But in today's, you know, intellectually corrupt environment, philosophically, you need

those redundancy, like Ayn Rand mentioned, with individual rights.

Well, rights themselves are only retained by the individual, but you have to use individual

rights because of problems philosophically in our culture.

Yes, let's take some chapter titles and go through some of those.

What do you say now? Of course, Google now is under the antitrust

boot.

What do you think of antitrust laws?

Well, antitrust laws, I mean, they create monopolies, they don't create more

competition.

The antitrust laws, they were created, so

started out being created in the US, and other countries and areas of the globe have created

them as well.

European Union now has antitrust, various

antitrust laws as well.

They were a reaction, though, in the 19th

century in the US, in part a reaction to companies growing, large corporations

especially.

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.

Well, that's pretty thorough.

Thank you.

Brian.

What does your book say about the regulation

of safety, quality and working conditions? I mean, of course, under Biden, I think the

labor unions are growing, and I've never been a real fan of labor unions, but maybe at one

time, maybe at one time they had a. But I think I don't see it today.

Yeah. And the problem I think always has been with labor unions is that they try to

use force to achieve their ends within the market.

So now we have in the US what's known as the National Labor Relations act, which restricts

the ability of employers to hire outside of unions.

It can force employers to hire union workers if a majority of workers vote to unionize in a

work location.

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.

Yeah.

And Brian, where you have your latest blog post that you talked about, you had a

presentation regarding trade and immigration, and I could see that coming from, as an

American in spirit, but in Sweden, regarding the, the swedish version of FDA and also with

different supplements and also different drugs and nootropics and other things like that.

So that getting complicated.

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.

Right, right.

Yeah. I mean, it seems like a lot of drugs

often are on markets outside the US before in the US.

I don't know if that's generally true, but it's true with some drugs that I've heard of

and I think could be due to the very strict requirements of the FDA.

And that's not a beneficial thing in my view, because it's killing people.

On net.

More people are killed than saved.

More people are harmed than then benefit from the FDA.

And so on net, it's basically killing people.

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.

You're right.

Government interference.

And the medicine is all but wiped out.

Health care.

Right.

Yeah, coming worse and worse, that's for sure.

All right, here's one of Martin and my favorite topics.

What does the book say about environmentalism?

Well, yeah, that's a big subject, too, as well.

Yes, it is.

Yes.

So, you know, environmentalism, people, environmentalists, they basically want to

sacrifice people to nature.

They believe nature has intrinsic value, value

in and of itself, apart from the value that it represents to human beings in terms of taking

resources from nature and using those resources to produce products.

Like using oil to produce gasoline.

No, they want to preserve nature, preserve raw

nature, basically, the animals, the plants, the rocks and the dirt.

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.

Yet it's egoism that is portrayed as walking past, drowning children with your

nose.

In the air.

Instead of altruism, frankly, you can't live consistently altruistic.

You have to.

Yes.

Anyway, let's go back to your book.

What did you mean by, quote, the politics and

economics of externalities? I'm not even familiar with that term, frankly.

Externalities, externalities.

Yeah. That's a chapter in the book, and it's a

prominent theory in economics.

So, yeah, before I can really talk about the

politics and economics of externalities, it might help to understand what an externality

is.

Sure, please.

Yeah.

The basic idea, though, of the politics and economics is though, looking at the

economic implications of externalities, and then how laws based on externality theory

would be implemented through the government.

But an externality, there are two types of

externalities.

There's what are known as positive and

negative externalities.

A positive externality is a benefit you

receive from others that you don't pay for.

So an example would be immunization creates an

external effect.

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.

Yes, exactly.

I was about to say they could probably sell it

between themselves.

If it's just like one small incident.

Yeah, if it's a small incident, larger incidents might be a little bit more

difficult.

But the focus, yeah, the focus should be on

protecting rights, not worrying about every single external effect we have on others,

because there's been a proliferation.

And environmentalists use this quite to

justify government interference, the creation of CO2, allegedly causing global warming and

the alleged destruction that's supposed to come from 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.

All right, well, I think in one of your last chapters or one of your closing chapters,

and here's another term I'm not familiar with, what is asymmetric information and what does

that mean?

Yeah, asymmetric information.

So that's, that's a topic that focuses on how

people having different information can change their behavior.

And it's really something that exists in the division of labor, by the nature of a division

of labor.

And economists will claim that we should get

rid of asymmetric information, or at least limit asymmetric information.

And implicitly, that's really an argument against having the division of waiver would be

disastrous.

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.

Or you make a lemonade stand off ultra.

Yeah, yeah, you can make that.

That's what would happen in the market.

Yeah, but that's not what this argument says.

And, you know, we don't see used car markets

break down.

So, you know, this is a theory that just, it

doesn't agree with the facts and it's not based on the facts of reality at all.

There are all kinds of ways and methods you can use to determine the quality of the car.

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.

Brian, great.

I do have one final question about your book,

and then I'd like to ask you your view or your opinion on some famous or infamous economists.

Sure.

All right.

What do you hope the reader will gain from

reading your book?

Yeah, from reading my book.

Yeah. Marcus, don't fail.

Yes.

Or any of your books reading.

Marcus, don't fail.

Well, focus on Marcus.

Don't fail.

Yes.

Yeah.

I think the main thing would be gaining a better understanding of economics because

these are fallacies that exist in terms of claims that markets fail because the markets

allegedly won't create better products and working conditions or will lead to monopolies.

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.

Very good, sir.

Very good.

All right, let's talk about some economists that have.

What do you think? Or who was John Maynard Keynes?

And why are his economic ideas? Why do they seem sacrosanct or be beyond

question today?

Right.

Yeah, he was a very influential 20th century

economist, died in the mid 20th century.

And his ideas were popular.

They rose in popularity quite a bit during and after the Great Depression, and they're still

extremely popular today.

So with regard to the Great Depression, it's

believed by many economists that his policies helped pull countries out of the Great

Depression.

And some even believed he saved countries from

becoming much more socialist in the wake of the Great Depression.

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.

So let's go to the austrian school.

What do you think of Karl Menger and Ludwig

von Mises? I mean, obviously unknown.

All but unknown today.

Yeah. Yeah. Outside of the small circles.

Yeah.

Great economist Carl Menger, the founder of

the austrian school, was one of the three economists that independently identified the

law of diminishing original utility.

I would more appropriately call it the law.

The law diminishing marginal value, which focuses on how prices are determined in the

market.

He discovered that independently.

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.

All right.

Yeah.

I listened to a cassette course on western economics with Karl Menger as one of

them.

So. Yeah, yeah, yeah.

He was the founder of the school.

And Ludwig vamises is the.

Well, I would say in terms of developing the

economic ideas, he was best there.

He's probably not the most famous austrian

economist.

Friedrich von Hayek would be the most.

He won the Nobel Prize.

He wasn't as consistent of an advocate of the

free market, of capitalism.

Friedrich Hayek wasn't.

But Ludwig Vamises was a very consistent advocate of the free market and developed

through.

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.

Okay. And you mentioned basiat and Jean peptide.

I'm starting to read more of say's work.

Again, all but unknown.