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Podcast episode

Jimmy Carter the Great Deregulator, AmFest, MAGA & Migration, and Why Competition? w/ Darren Brady Nelson  – EP269

Gene Tunny and Darren Brady Nelson discuss the economic legacy of President Jimmy Carter, highlighting his deregulation efforts, particularly in aviation, which led to increased competition and significant cost savings. They also touch on Carter’s appointment of Paul Volcker as Federal Reserve Chairman, credited with fighting inflation. The conversation shifts to the America Fest conference in Phoenix, where key speakers included Charlie Kirk, Tucker Carlson, and Glenn Beck. They discuss the tensions within the MAGA movement, particularly around immigration policies. Lastly, they explore the intersection of Christian economics and competition, emphasizing its ethical foundations and the potential for a moral case for free markets.

If you have any questions, comments, or suggestions for Gene, please email him at contact@economicsexplored.com.

You can listen to the episode via the embedded player below or via podcasting apps including Apple Podcast and Spotify.

Timestamps for EP269

  • President Jimmy Carter’s Legacy and Deregulation (0:00)
  • Carter’s Economic Policies and Personal Anecdotes (5:16)
  • America Fest Conference in Phoenix (14:36)
  • Trump’s Speech and MAGA Movement Dynamics (27:46)
  • Christian Economics and Competition (36:34)
  • Darren’s Critique of Mainstream Economics and Antitrust Regulation (51:22)
  • Regulatory Challenges and Natural Monopolies (55:55)
  • Final Thoughts and Future Directions (59:26)

Takeaways

  1. Jimmy Carter’s Deregulation Impact: Carter’s policies in aviation, trucking, and beer production revolutionized U.S. markets, creating long-lasting consumer benefits.
  2. MAGA’s Immigration Debate: Tensions exist between Bannon’s nationalist stance and Musk’s globalist vision for high-skilled immigration policies.
  3. The Role of Competition: Darren highlighted the economic and ethical importance of competition, criticizing overreach in antitrust regulations.

Links relevant to the conversation

Mises Institute article “Jimmy Carter’s Legacy Is Much More than Good Deeds Done in His Later Years”:

https://mises.org/mises-wire/jimmy-carters-legacy-much-more-good-deeds-done-his-later-years

The previous episode with Darren:

https://economicsexplored.com/2024/11/10/trump-2-0-w-top-wisconsin-door-knocker-economist-darren-brady-nelson-ep261/

Great Reset discussion with Darren from 2020:
https://economics-explained.simplecast.com/episodes/the-great-reset 

Larry Reed, President Emeritus of FEE, speaking about the Parable of the Vineyard Workers:

https://economicsexplored.com/2022/02/05/price-controls-to-fight-inflation-a-bad-idea-infrastructure-lessons-from-potus-21-ep125/

Darren’s articles in Concurrences on competition and antitrust (paywalled, alas):
https://www.concurrences.com/en/page/recherche/?recherche=darren+nelson#

Alfred Kahn’s Economics of Regulation:

https://www.amazon.com.au/Economics-Regulation-Principles-Institutions/dp/0262610523

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Transcript: Jimmy Carter the Great Deregulator, AmFest, MAGA & Migration, and Why Competition? w/ Darren Brady Nelson  – EP269

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:00

Gene, welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny, I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode. Please check out the show notes for relevant information. Now on to the show. Hello and welcome to the show. It’s Saturday, fourth of January, 2025 here in Brisbane, Australia. However, it’s Friday, the third of January in Milwaukee, in the USA, where my guest is based, and it’s Darren Brady Nelson coming back onto the show. Darren, good to have you back on the program. Thank you.3

Darren Brady Nelson  00:55

Thank you. Am I? Am I now in first place, or is that other?

Gene Tunny  00:58

Yeah? Oh, you’re definitely in first place. I think you’ve been in first place in terms of number of appearances for a long time, so

Darren Brady Nelson  01:08

not in quality, just but quantity. I’ll take.

Gene Tunny  01:12

Very good. Wow, yes, yes. I mean, it’s all about consistency, isn’t it that? Yeah, absolutely. Okay. Very good. Well, Darren, thanks for joining me. I wanted to chat with you about a few things. I mean, first we had the news about President Jimmy Carter. He died earlier this week, lived to 100 impressive innings, and you sent me something interesting on Carter being a great deregulator. And I wanted to talk to you about that. I also want to talk about the America fest that you attended. You’re in Phoenix, Arizona. That’s a turning point USA event. And then Doge Trump 2.0 what’s going on there? And finally, there’s an article you wrote recently on why competition. So I want to, want to touch on all of those things to begin with. Can I ask you about President Carter? Now Carter’s seen as well. Often this presidency is seen as an unsuccessful presidency, the presidency of malaise, the presidency before the Reagan administration. You sent an article on Carter being a great deregulator. So there were some positives that came out of the Carter administration. Can you tell us about those, please? Darren,

Darren Brady Nelson  02:30

well, I mean, I always think of two things, and I often even I kind of forgot about, you know, one of them, you know, then the article is about the second thing, which is about deregulation, essentially that, I mean, you think of deregulation in the US, you know, around that time, you probably would have thought, you know, Reagan, obviously, rather than Carter, I guess, you know, Carter would have, you know, certainly had the reputation, and Reagan, I guess, ran on that to some extent of you know, Jimmy Carter being a big government guy. And, you know, and maybe, you know, philosophically, perhaps he ultimately was, but, but the reality is, you know, two things that he did, obviously, was he did start the deregulation process in the US, particularly in transport, I believe, rail, trucking, aviation, and those are huge things, obviously, particularly aviation, you know, that really, I mean, I mean, all of them are, obviously, but I think aviation really is something that, you know, your average american really would have saw the benefits from, you know, maybe rail would have been a little bit more indirect, you know, kind of it might have been part of because they weren’t really deregulating in terms of, like, sort of so much transport, you know, like Amtrak, it would have been more kind of to do with, with freight, and people would have saw some of those benefits. But, you know, would have been kind of a little bit more indirect, same with trucking. You know, trucking would have fed through and, you know, lower prices and better services and all that to consumers, ultimately. But the aviation thing was the thing I think that really stuck out. And, you know, which later came to Australia. And perhaps I’m not, I guess, 100% sure, but you know, Australia usually, often does look to the US to, you know, to get some of its ideas both good and bad. So and the other thing just quickly to mention was that Carter appointed Paul Volcker as the head of the Federal Reserve. And you know, for mine, at least in my lifetime, I think he is by far the best Chairman of the Federal Reserve in terms of being, you know, someone was, you know, a very responsible person of the Federal Reserve, and, you know, having to do what he had to do to, like, try to fight inflation from the 1970s and then, you know, once he did that, to not then just go back to, sort of like, easy money. So sorry, I covered kind of probably more ground in just that introduction than. Than you were looking for. But

Gene Tunny  05:01

good, that’s good. I think it’s a good point about Volcker. I think most economists would agree with you on Paul Volcker, certainly. I mean, Greenspan’s legacy, he’s been his reputation was essentially wrecked by the financial crisis. If it weren’t for that, then he would have been the maestro. I mean, that’s what people were calling him, but, but since the financial crisis, I mean, and he’s seen as the Greenspan put they talk about. And, I mean, Greenspan’s policies are seen as having helped bring about that, that crisis. So I agree with you on Paul Volcker on airlines, I think you’re right. I mean, Australia, we had a two airline policy, and that wasn’t changed until the 1980s so we had the same problems, the restrictions on competition. Now, Carter introduced, it looks like it’s the Airline Deregulation Act in 1978 so that prohibited states from regulating air carrier prices, routes and services. So I think at one time in the states there, I mean, there are rules about how many airlines could compete in a particular market, and it was seen as, oh, this is better for consumers, because then you don’t have all of this terrible competition which is undermining the viability of the airlines. I mean, that’s how they thought, right? You’ve seen, well, you know, you

Darren Brady Nelson  06:19

don’t want the consumer to have too much choice. That’s just, you know, too difficult. Well, isn’t that?

Gene Tunny  06:23

Wasn’t there that scene in The Aviator with, with Alan Alda playing the the rate was he a regulator or a senator, and Alec Baldwin was playing one trip from Pan Am, and they were basically making the case. So this is justifying the regulation of the of the airways, and because they they wanted to crush Howard Hughes, who was trying to compete with them.

Darren Brady Nelson  06:49

Oh, okay, yeah, yeah, seen that movie. Sorry, yeah. Oh, you’d

Gene Tunny  06:52

love it. It’s great film. I mean, DiCaprio is an amazing actor and, yeah, but there’s that, that little, that sort of subplot there about the airline regulation and Alan Alda playing a senator. And I’m pretty sure that’s the avian I put a link in the show notes. It was really good. It’s worth, worth seeing. And I think there are some, sorry, so

Darren Brady Nelson  07:16

I was gonna say one. I forgot to mention the deregulation this. This one might, you know, be something that bit closer to your own heart, perhaps, is, you know, that his deregulation efforts extended to the production of beer making, making the kind of, you know, the particularly the craft beers and all that sort of thing. That industry kind of really grew in the wake of that, which is something I didn’t even realize I knew about the aviation stuff, and that’s really important, obviously, but, you know, it’s interesting that it even extended to things like beer, you know. So,

Gene Tunny  07:48

yeah, well, I mean, that’s important industry for Milwaukee, isn’t it, really, I mean, are you the beer capital of the USA?

Darren Brady Nelson  07:55

Well, they might have been against it because, you know, you know, they like the big, you know, like Miller was here. Miller still is here in Milwaukee. And there were other ones that, you know, have since probably really turned into craft beers, actually, industry interestingly, off these bigger like, there were Schlitz and Old Milwaukee and Pabst and all these other ones that, once upon a time were, you know, quite large beer companies, and, you know, I think they’ve kind of shrunk to become almost, you know, mid tier, possibly even, you know, more competing with the craft beers than they are with like Miller and Budweiser, yeah, yeah. So possibly, maybe walk ins weren’t all that keen on the deregulation, yes, yeah, yeah.

Gene Tunny  08:39

Good point. Okay, well, yeah, it’s an extraordinary legacy, and I’ll put some some links in the show notes, or estimates of how much it saved in terms of air airfares. I mean, airfares, certainly here in Australia, used to be prohibitively expensive, and you’d rarely fly. I mean, it was just so expensive, even in the in the 80s and and so there’s a story that Karen Chester tells she’s a former Treasury official here about how her mother, she couldn’t go visit her, her dying father or in Perth because the of the prohibitive airfares at the time. Just tragic story. And now, in real terms, they’re much cheaper. So many, you know, many poor, many more people flying. That’s the same as in the States. So and Alfred Khan. Was it? Alfred Khan, the economist who was an advisor to Jimmy Carter, who was an important figure in that story, Darren, yeah, I

Darren Brady Nelson  09:39

believe so. And you know, when I’ve, you know, my early days as an economist, you know, out of university, I first started doing sort of competition policy at New South Wales treasury. But then my second job was at the Queensland competition authority, doing, you know, regulation of of infrastructure and all that sort of stuff. And, you know, the, the first kind of textbook. That I kind of read was Alfred Khan’s, you know, he’s got, like, a super thick two volume, you know, sort of book on on the economics of regulation. And Volume Two, I think, was largely devoted to this sort of stuff. You know, a lot of these deregulation, deregulation efforts, particularly, you know, the current administration’s deregulation efforts that. So you know that that’s where I first cut my teeth on regulatory economics and the economics of deregulation as well, sort of thing. So the Queensland competition authority was trying to do kind of both, you know, like be a part of, you know, in, you know, as their name suggests, you know that maybe you help competition and where it can be, you know, sort of introduced or helped along, if you like, that was kind of, you know, their their dual mandate. I think all the kind of Australian state regulators kind of had that, you know, and the ACCC at the federal level now, you know, now they’ve kind of not so much involved in that sort of thing anymore. They kind of straight up regulation rather than being involved in deregulation. But at the time, when I joined the QCA, they were certainly, you know, trying to do that sort of thing as well.

Gene Tunny  11:11

Yeah, yeah, yeah. I’ll put a link in the shop. It

Darren Brady Nelson  11:15

was the textbook, basically. And that feel,

Gene Tunny  11:19

yeah, yeah. And do you have any memories of the Carter administration? Were you living in the States at the

Darren Brady Nelson  11:24

time? Oh, I was a little kid. And, yeah, but not really, you know, my kind of, you know, Reagan’s. I have stronger memories of Reagan because, you know, I was getting a bit older, so thing as a kid, so starting to remember Reagan more than than Carter. But, yeah, kind of small memories, you know, but you know, as a little kid, you know, peanut farmer or something, you know, and his brother and his brother Billy and his Billy beer, right? You go look that up. Yeah,

Gene Tunny  11:53

I vaguely remember all the bad news, because I think when I was first became conscious of the the news was probably late 70s, early 80s, and the news at that time coming out of, well, I mean, worldwide was just terrible. I mean, and you know, Carter had there was high inflation, wasn’t there, particularly after the revolution in Iran, and then because of, you know, impacts on the oil market, and then the hostage crisis, which just went on with the hostages from the American Embassy in Tehran, which just went on forever. And, I mean, that was, yeah, that was probably

Darren Brady Nelson  12:26

my first memories, along with the peanut farming and the fruitless sort of stuff you know about him, you know, being, you know, from a back his brother being a redneck who liked beer, yeah,

Gene Tunny  12:37

yeah. So, yeah, you’re right, yeah. So it’s interesting. He’s got a mixed record on the economy, good on the micro, but generally people think the macro story under Carter was was was poor and but his post presidential legacy has been extraordinary. Many seems to be much loved. He’s built houses for homeless people. He when He goes on flights, he shakes everyone’s hands. Yeah, it seems just to have a really quality, decent man. So, yes, I think an extraordinary, an extraordinary life

Darren Brady Nelson  13:14

well, and it’s funny that what the article I sent to you was from, you know, the Mises Institute. There’s another one which I could share with you. Won’t be too hard to find. Is there was an article there about, basically, the author was suggesting the last, if you like, you know, intellectual or debate, was actually Carter and Reagan, you know, like, you know, good debate about issues and policy, you know, not this kind of, you know, attacking each other and attacking each other as people and, you know, all that sort of stuff. You know, there was, there was levity, obviously, at times, you know, in the debate, you know, between Reagan and Carter, I think they even had some, at least, that levity carried over into the next election, 1984 with Reagan and trying to remember the film Mondale. That’s right, Carter is vice president. So, yeah, you know, times have changed, obviously, not always for the better in terms of, like, the quality of presidential debates. So, you know. So someone’s making the case. You know, basically the, you know, that was kind of the, the, the high watermark appeal of presidential debates was Reagan and Carter and, you know, in 1980

Gene Tunny  14:32

Yeah, okay, I love to check that out. That’s, that’s probably, that’s probably true, Alrighty, now, Darren, what was America fest? You went to this America fest conference in Phoenix. Can you tell us about that? Please?

Darren Brady Nelson  14:47

Yeah, so I think we talked about it, you know, like my the last time I was on the podcast that I was, you know, the door knocking economist, you know, there’s probably not too many of us like. That I’m guessing so, so that was for, essentially for turning point Turning Point action. It was a strange marriage, and I think I may have explained at the time, you know, between Turning Point action and Elon Musk’s America pack. So, you know, Charlie Kirk runs Turning Point action and turning point USA Turning Point space, kind of using the American parlance as a c4 it’s kind of, you know, more of a think tank type of outfit, although, you know, they do a lot of, sort of, like educating on on university campuses, and now they’ve extended that to sort of high school level as well. Turning Point actions, a straight up. You know, get out the vote for the candidates you like, right? Yeah, that’s a c4 sorry, yeah, I believe that’s, am I getting this wrong? No, but is that the c3 My apologies, my I think I need to drink some more coffee or something, but it’s all right. So, you know, they’re totally different types of organizations, and so anyway. So to make a long story short, all the people who did, you know, helped out on that election were offered the opportunity for, you know, free airfares and free hotel and free admission to America fest, which is put on by, you know, Charlie Kirk’s organization. And so it’s kind of like a, you know, if you’re aware of CPAC, you obviously wear CPAC Australia. CPAC Australia is obviously trying to do what CPAC us does, you know, big conference for not just conservative, just anybody, if you like, on the, you know, the right side of politics, whatever that means, you know, center right, whatever, conservatives, libertarians, including kind of, you know, modern day populists on the right. I mean, populists are in the left and the right. You know, over time. You know, that’s kind of a nebulous description populism, but you know, so in Australia, that would include, obviously, you know, Liberal National Party, folks, but include one nation libertarians, all that. And over here, obviously it’s, it’s Trump and, you know, Reagan conservatives, you know Ron Paul libertarians, whatever. And so America fest. I mean, you know it’s not, it’s basically trying to do what I guess CPAC does. And I don’t know the whole ins and outs on why it started out, they thought they needed this. And, you know, to, I’m not sure if they’re trying to be a rival to CPAC, or just, you know, or maybe if you like the markets big enough, and they wanted just another one, the way they hold it in Phoenix, it’s got a, you know, a more blatant, you know, America First type approach, you know, which is kind of a little bit more in line with, you know, the Make America Great Again movement, mega movement, not to say CPAC, not on board with that, because, you know, they are. I guess, if CPAC is trying to, maybe trying to combine that, but keep the establishment Republicans kind of still around, maybe an America fest is, like, we don’t really care about the establishment Republicans, you know, in fact, we want to push them out the door. So they’re probably a little bit more explicitly, you know, mega Not, not, not exclusively So, but they’re certainly, you know, they’re happy, obviously, probably for libertarian types, you know, like, you know, Ted Cruz is kind of bit of a more of a libertarian type, and, and he spoke, there’s certainly, you know, they’re definitely not for the establishment types and Mitch McConnell’s and and certainly not the Liz Cheney types, right? And certainly not the neoconservative types. So anyway, so that, and they hold it in Phoenix. I’m not sure how many they’ve had, I think they’ve had several or more. So basically, I think they took what was good of CPAC and they’ve added to it. There was certainly more energy. It was actually interesting, a bigger than CPAC in Washington, DC, which is saying something, because that’s pretty big, you know, that’s I’ve ever seen, was CPAC until I saw America fest. So

Gene Tunny  19:01

how many people? You’re talking 1000s of people. Oh, boy, oh, boy.

Darren Brady Nelson  19:05

I think the main hall holds 10,000 but the whole, but the whole, you know, conference area is bigger than that. Still, you know, so still, yeah, I don’t know what the numbers are. And, you know, we could probably find a link that maybe sort of said what those numbers might actually be, and I can share that with you where the audience can look that up. But, you know, the biggest thing I ever seen was CPAC, until I saw America fest, and it kind of reinvigorated me too, because I was, I was kind of getting sick of CPAC To be honest, you know, like not to say it was bad or whatever, I just kind of was getting sick of it. And this kind of, you know, the opening night of America Fest was like, you know, pretty Wow. Okay, you know the three key speakers that, I mean, there was more than three speakers. But I mean Charlie Kirk, like, I mean, I was impressed by Charlie Kirk coming in, but, wow, I was even more impressed by Charlie Kirk seeing him speak on the night. He was kind of the opening speaker and, you know, and then one of the last speakers on the opening night was Tucker Carlson, and I’ve been a big fan of Tucker’s for quite some time. And, you know, he certainly delivered as well. And and on the very last night of the conference, Glenn Beck was also, I thought, an amazing speaker as well. And they had plenty of other amazing speakers. We can talk about some of that, including one of the breakout speakers who talked about Marxism, was was amazing, and he’s an academic, and often academics aren’t very amazing speakers, as you probably have experienced yourself. You know, it’s not an easy thing to be someone who’s like, sound on what they’re talking about well and actually interesting at the same time. And who was that? Oh, boy. I mean, it’s really bad that I forgot the fellow’s name, considering he’s from Hillsdale College. He’s got a, he’s got a, he’s originally from Lebanon, so he’s got sort of, you know, you know, maybe I’m being a bit saying he’s got an Arab sounding name, and that’s probably offensive to Lebanese ago. Wait, we’re not Arabs, you know, but, and I think they’re not Lebanese, they’re kind of like a different sort of people’s group than strictly Arabs are, and then they obviously had that interesting mix of like, you know, kind of a bit over half the country’s Christian, and then slightly under half is Muslim. But I think it was originally from Lebanon, because even after the talk, he was talking to someone from Lebanon. He was speaking, you know, in Lebanese, which I understand, is a different language from Arabic, so um, and it sounds different too. So, but anyway, the interesting thing about him is, like, even though his speech was labeled, you know, Marxism, and you know, that obviously gets people, you know, kind of in to see that it was actually more about Jean Jacques Rousseau. Then it was actually about Karl Marx. Yeah, and I knew a bit about Rousseau, but I didn’t realize the importance of Rousseau to the left and he was making, he said, All Marx did was fill in some of the gaps. Rousseau is a guy who, you know, was really leading the charge on the ideas that were, you know, if you like, stuck with today in the 2020s they’ve come to fruition. Yeah. Well,

Gene Tunny  22:25

one of will Durant’s volumes in his history of civilization, I think, is Rousseau and revolution, after the after the age of Voltaire. And so Rousseau is one of those thinkers is associated with the French Revolution. And, yeah, with I mean, yeah, certainly, the Marxists wanted to have their own revolution whereby they get rid of the bourgeoisie, didn’t they? Whereas the French Revolution was, it was against the the aristocracy at the time. Yes, yeah, interesting. Okay, I’ll have to check out his work. And Donald Trump spoke at that event, didn’t he?

Darren Brady Nelson  23:03

He did, and I was, sadly, I got distracted by a pair of Aussies and and I didn’t. And I can tell you more about that. I didn’t. So I didn’t actually get into the main hall to see, you know, the orange MAN there, and, you know, live. So I had to actually just watch them on the big TV screen. So basically, they set these up similarly in CPAC, you know, they have the big main hall, obviously, all the big there’s lots of razzmatazz and all that. Then there’s like an exhibition hall where a lot of, you know, people just, you know, commercial people offering different services, go, hey, you know, here we’re here. You know, either come buyer service or, you know, think tanks go there and say, Hey, join us, or whatever. And then there’s a media row, which is pretty exciting and interesting. So, you know, you have the TV stations and radio stations and podcasts who do their shows live from, you know, from there. So that’s very interesting, too. So you can sit there as an audience and kind of watch this. And some of them you can will interact with the audience as others, they’re not. You’re just kind of watching them. Yeah. And so, so, yeah. So basically, you know, one of the one of the in the exhibition hall was a so not all the media is actually in media rose. Some of the kind of smaller podcasts are in the exhibition area. So one of them was an Australian podcast couple, and so I kind of came across them. They had an Australian flag up so that obviously. And I’ll get you a link to their, their podcast, you know, for for your for the audience, and,

Gene Tunny  24:39

yeah, what do they cover? Do they do politics or economics? Yeah,

Darren Brady Nelson  24:42

their angle is basically doing American politics, but from an Australian perspective, right? And they, and they come over here for big events like this or, you know, and I think they’re going to stay here roaming around until the inauguration, so they’ll end up in Washington. In DC for the inauguration. And, you know, very, you know, like, very cliche Aussies, they were like, you know, just super friendly and super, you know, and I kind of got to know them, and, you know, ended up having, you know, lunches and stuff for them. And sadly, I was chatting so much that the queue to get in to see Trump, you know, it got cut off. Basically, there was, you know, obviously, once it was full, that’s it, you know, you can’t get, but there’s more people in the overall sort of conference than that can fit into the main hall. Yeah, that’s, I’ve actually been, I went to the, the Milwaukee, um, Trump rally right before the election. So, you know. So, you know, it wasn’t, I feel bad for people who actually, that was their thing. They came there Trump, you know. So I’ve seen Trump another, you know, a number of times in person. So, you know, wasn’t as disappointed sort of thing to not see him in person. But, you know, but some people paid money to get there and they’re not from Phoenix, you know, that would have been kind of a real bummer, so I felt kind of sorry for them. Yeah, and there was a few, I’ve met a few other Australians too. So, you know, that was nice. See, there’s probably a lot more Aussies there than I actually ran into. So yeah, it was, oh, actually one of the Australians I did run into. This was a good story. And I think he’s been living in the US now for quite a number of years. And I don’t know perhaps he’s actually married to an American is there’s a quite a popular Catholic podcast, podcast called

Gene Tunny  26:36

pints with Aquinas. Oh yes, yes. It

Darren Brady Nelson  26:38

runs it as Matt Fred, and he’s an Aussie. Ah, yes, yes. I wanted to the, you know, these breakout sessions on, you know, Catholics and, you know, voting and that, you know, I’m was raised a Catholic, but I’m a Protestant nowadays, but I’m still interested. I’m not an anti Catholic, and I find it interesting. And I just went in there, and I sat at the back. And lo and behold, Matt Fred’s behind me. You notice? You notice my my jewel flag? Yeah, you have that, you know. And I told him the story, you know, Brisbane, blah, blah, blah. And then we had a little bit of a chat. Then he wasn’t an official speaker. He was actually there because his son wanted to be there. He’s got a 17 year old son that’s into all this sort of stuff and but, so we had a little bit of chat then. But then later on the day I went out of the conference, I got a good coffee, because you couldn’t get the greatest coffee in the conference. And you know, at the hipster cafe that I was I was talking about, yeah, to go back in, they said no outside coffees. And I go, Okay, fine. So I went to just go drink my coffee, you know, and he was sitting there smoking a cigar, and Matt, that is, and then I said, Oh, you mind if I sit down with you, and we had a good chat for 20 minutes while I drank my coffee and he smoked his cigar. And, you know, we talked about Australia, we talked about Trump, we talked about Catholicism and Protestantism and all that sort of stuff, and and podcasting, and, yeah, it was, it seems like a good, good bloke. Very

Gene Tunny  28:08

good. Well, as I think I’ve mentioned before, you’ve you have a radar for finding the hipster cafes, Darren, whichever city you’re in, so I’ve benefited from that at times. So very good. Now. Can you tell me? Was there any policy discussion at America fest? Did you get any insight into what could happen in the second Trump administration, particularly around migration? Because it looks like there’s a civil war within Maga at the moment between Steve Bannon, the people, you could say are nationalists or Nativists, versus Elon Musk and Vivek Ramaswami, who could be perceived as globalists. Do you have any insights into what’s going to happen? There any any thought, any insights into policy you got from America first?

Darren Brady Nelson  28:58

Yeah, look, I mean, America first wasn’t, you know, much of a policy oriented conference. And so true CPAC isn’t either it’s a lot of you know, it’s a lot of you know, celebration if something’s happened, or getting people you know, fired up for whatever is coming up. Now, look, I don’t know enough about Steve Bannon positions. I never got the feeling it was a nativist as such, like, you know, the one thing that I know Bannon, ramasami and musk agree on is the illegal immigrations that’s got to stop, right? Yeah, not just stop, but it’s got to be reversed. Basically, we can’t have, you know, and they’ll do it in sensible tears. I believe you’re going to, I’ve seen, you know, gangs and criminals, people who are literally, since they’ve arrived the they haven’t just broken the law to get here. They’ve been breaking laws, you know, inside the country too, and particularly the courageous ones. So they’ll prioritize this, you know, obviously, murders, rapists, etc, etc. You know what? You know they. Might come to a compromise with people who’ve, you know, peace, you know, who are peaceful, and they’ve entered and, and they actually did come here with families, as opposed of just, you know, child traffickers and all that sort of stuff. So look, I understood it was over those, those visas for, like, you know, highly skilled and targeted, yeah, you know, Bannon had a problem with that, is that? Is that? Oh, yes, yes,

Gene Tunny  30:21

yeah. But he was podcast the other day, because the the progressive commentators online are, they’re they’re enjoying this. They see this as a civil war within Maga, because you had Ramaswami come out and say, we need more h 1b, visas. Yeah, they’re the ones that Silicon Valley uses, like high skill, particularly bringing in high skilled Indians to work in Silicon Valley. And he, he writes, he wrote a tweet that was probably, you know, badly. He should have thought twice about it. It didn’t go down well with with Maga, really. He said that, oh, we need all of these people on H, 1b, visas, because Americans are, you know, a lot of Americans are lazy and won’t work hard. They’re not entrepreneurial, not not well educated. And that was just, yeah, that caused a bit of a firestorm. And then Steve Bannon on his show, he said, I will, you know, I’m going to fight for control, or something of the GOP. I don’t know the exact words, but he’s essentially saying, Look, we’re going to take on mask and Ramaswamy. We were here first. Well, he in terms of the Trump, you know, being supporters of Trump, where Maga, we’re not going to let you take over Maga. So I think it’s an interesting conflict there between musk and Ramaswamy, who who have a different outlook from that of a lot of the people in Maga, a lot of the supporters of Trump who see, who wants something different from Trump than what musk and Ramaswamy want?

Darren Brady Nelson  32:07

Yeah, look, I think, in a nutshell, I don’t think there’s going to be any sort of civil war, no. And to be honest, also, Bannon influence is just not anywhere near it was in, you know, 2016 2017 I think you know Ramaswamy is gonna certainly, if he hasn’t, he should really go out there and apologize for those statements. That’s just those are, there’s not, I mean, they’re not only offensive, they’re not even, that’s not completely accurate. Anyway, you know, the US is India as the entrepreneurial hub of the world compared to the US over history. No, there’s no comparison, like a really, Johnny Come Lately, you know, to that world. And obviously there’s some good stuff, and they’ve done some good reforms in India, but this is, you know, pretty recent sort of thing. So it’s not like the country that we look to for great entrepreneurs over the past 50 years. No, so you know. So I don’t think there’ll be a civil war. I think they’ll find a compromise Trump, Trump will, you know, Trump’s a strong leader. He’s going to sort this out. They’ll find something that, you know, not necessarily, that Bannon can live with, but I think something that at least your average mega supporter, it’s probably not like up in arms over these visas. But then, you know, when Swami says what? He says, Yeah, they’re gonna be up in arms about that sort of comment. And, you know, Musk, Musk comes from, you know, kind of a, you know, originally, you know, a Democrat type background, if you like. And he’s kind of become, you know, either he’s become more conservative over time, or he can just say the Democrats have become so out of touch with their previous base. Either way, you know, must not going to, he’s not going to be leaving the camp, and Ramaswamy is not going to be leaving the camp, and even Bannon at the end of the day, even if he doesn’t get what he wants on these visas, it’s not going to be, you know, he’s not going to, sort of, you know, be a constant thorn in the side. I would think, to, you know, President Trump. I think, you know, I think things, the compromises, will be reached. And, you know, maybe this on this issue will be one that they disagree, to disagree on. Basically, there’s bigger fights to be had. I think they’re going to fight. They’ll realize that, right? There’s far bigger fights, which is why they have the musks in their camp and the Tulsi gabbards and RFK juniors and stuff. There’s a bigger enemy to be fought, right? The weft type, globalists, you know, you know, rather than, if you like the musk type, small g globalist, if you, if you, if you like,

Gene Tunny  34:43

wow, okay, yeah. Well, we’ll big difference

Darren Brady Nelson  34:47

between that, because the big G globalists are not like, Oh, I just want to have access to better workers. It’s a far more nefarious globalism than than Musk’s type of globalism,

Gene Tunny  34:59

raw. But okay, well, I think we’ve talked about the great reset in the past, and, you know, whether there’s, whether there’s a conspiracy there or not. I mean, I don’t really think there is a conspiracy of any kind there is, because

Darren Brady Nelson  35:11

you can just go on the weft website, and it actually has a black and white it’s like, it’s not like a conspiracy theory. If it’s like, literally sitting there on their website, you know, like that. It’s not even a theory. It’s this is what they want to do. You know? You can say, like, oh, they don’t really want to do what they just said they want to do. Okay, fine, that’s fine. You can have that position, but it’s literally in black and white and reports, and you can go find it today easily. Yeah, they’ve

Gene Tunny  35:35

definitely said some silly things, right? The whole thing about you will, what is it? You will own nothing, and you will be happy. I mean, that’s just,

Darren Brady Nelson  35:43

I’m talking about statements. They have reports on what their is, you know, like it sets it out, you know, like, you know, you know, when someone says what they say, you know, the default should be able to believe what they said, you know, unless some reason not to.

Gene Tunny  36:00

Yeah. Well, I’ll put a link to our conversation on the great reset. I’ll have to go listen back to that. Yes, okay, well, yeah, look. I mean, I’ve got no idea what, exactly how economic policy will play out under Trump. I mean, I think it’s, it’ll be interesting, because there is that tension there, and we have to see how, what you know, how high the tariffs go up that are imposed on China, that are imposed on other countries, whether Australia gets an exemption. I mean, presumably we will, because of our, our strong relationship with the US. But, yeah, we just have to, have to wait and see about that. Okay, Darren, can you tell us about your article? You wrote an article. Why competition for concurrences journal? Can you tell us about that? Please?

Darren Brady Nelson  36:49

Yeah. Look, concurrences is essentially kind of an anti trust, you know, well, not just a magazine. It seems to be kind of bit of an association of particularly lawyers, antitrust lawyers, but also maybe other professionals in the field. And I can’t to this day, I can’t even remember how they approached me, but I remember in 2020 they kind of approached me and asked me to write a forward for one of their, you know, sort of their magazine that comes out, and I kind of wrote about anti trust economics, and kind of did a mix of, kind of like, you know, you know, I did kind of, here’s kind of a the mainstream kind of view on on this from an economics perspective, and then here’s kind of the free market perspective. I think the free market perspective is the better one. But anyway, laid it out and and then, you know, they kind of come back to me, you know, here and there to, you know, you know, ask me to write this or that. And earlier in the year, they were planning on doing a book entitled, you know, why competition voices from the antitrust community and beyond. Just to give it a little bit more context, they’re kind of focused on North America and the European Union, but they’re obviously open to kind of, you know, others around the globe as well. And this was going to have, you know, one of these books where, you know, each chapter has, you know, different author. I mean, they can be co authored or whatever, but they’re kind of in different themes. So my, the chapter that I wrote was, you know, basically, I think I entitled it, you know, kind of competition, economics, evidence, policy and ethics. Again, I kind of try to do, you know, a combination of of, kind of, you know, kind of, what’s the mainstream sort of view, and then kind of a free market view. But interesting enough, when I kind of proposed, you know, I thought, oh, you know, like, you know, as a Christian, as I kind of mentioned, I thought, oh, you know, how about kind of, also, because I’ve increasingly become interested in, kind of Christian economics is kind of even a different thing than than you get from the mainstream and the free market kind of way of looking at things. I thought, oh, you know, maybe this is an opportunity to write a little bit also from, you know, what, what is, what is this? You know, what does competition look like, you know, from a Christian economics point of view. So to my surprise, they went, Oh, yeah, that sounds interesting. Go ahead. So, so, you know, kind of, my, my, my chapter is kind of a mix of those three things wrong. Yeah, you know Christian, yeah. Sorry. Go on, I’ve got

Gene Tunny  39:27

to ask you about that. So, how is economics any different for a Christian versus a non Christian? I

Darren Brady Nelson  39:34

mean, well, it’s a complex thing to answer, because a lot of you know, you know, Christian economics is really just economics written by a Christian, right? So, so they kind of throw in some stuff or, you know, but, but interesting enough, there actually is, if you like, an actual proper Christian economics in the sense of, it’s built up from Scripture. It’s built up. From the Bible itself. Usually, you know, the better ones are people who’ve actually also been there are trained economists, you know, either, you know, from a mainstream perspective, or maybe a free market perspective, or maybe a bit of both. So, you know that, you know, so you kind of, kind of get some interesting feedback, you know, kind of from that. So, you know, like, for instance, you know, Gary north, you know, was, was, I believe, you know, trained in the usual kind of mainstream economics. Over time, he kind of became more an Austrian School economist. But then, you know, he also then tried to build up Christian economics, you know, purely from the Bible, as well as someone who was interesting enough, a trained theologian as well. So, you know, the Bible is, just like, you know, amazingly full of economics, you know, surprisingly full of it. And not just you know, like the parables you know, like the parable of it once or something that you know, probably sorry, the parable of the what’s all right, the talents, oh, you know, yeah, give me that one, you know, like, you know, where you know, a master gives you know, three of his servants, you know, he’s going to go away for a while. And he gives you know one, like one, one talent to go and do something with. And then another two talents, another five talents, you know, you know. So that, you know, there’s not just kind of, you know, they’re ultimately not. The main point of all these things is never just purely to make an economic point. Obviously, in the Bible, it was a more obviously theological point to be made. But, you know, it’s interesting to see just how much economics is in there, you know, as a teaching tool. Because, you know, obviously people can, you know, relate to, you know, least kind of economics in their own life, not necessarily, obviously, you know, the way we as economists necessarily think of things, but obviously economics touches everybody’s life. So, you know, I just wanted, you know, I’m certainly very much a, you know, a Padawan learner and not a Jedi in this just as of yet, okay, you know, I’m kind of, but I just thought it was a good opportunity for me to, kind of, like, write something and just, you know, give me the opportunity to learn more about it myself. Because obviously, you learn you know more from doing, you know, from writing and researching, than just, kind of just reading something, right? Yeah. So, you know, it was kind of a good you know. And I thought, you know, ethics is kind of interesting, too. And ethics, particularly, I don’t know, I find kind of secular ethics, kind of wishy washy for the most part, it’s kind of a lot of just like, how do I feel about things, you know? Like, if I’m from the left, I kind of feel these things. And if I’m on the right and not a Christian, I kind of feel these things. So I think, you know, whether you think Christianity or, you know, the is real or not, you know, it’s certainly more black and white than a lot of these kind of secular ethics is right? And as a Christian, I think it’s objective, right? And I think you go off into secular ethics, it’s kind of very subjective. So I thought it was an opportunity to kind of explore bringing, you know, that there’s an ethical element to economics, at least, you know, from a Christian perspective. And there’s not a, you know, there’s not a tension between the two. They’re kind of wrapped up together. They get like property rights is a concept and not just an economic concept, you know, like, Thou shalt not steal, is both economic and ethical at the same time.

Gene Tunny  43:29

Yeah, yeah, okay, okay, I think I see where you’re coming from, just on the parables. Someone you introduced me to, if I remember correctly, was Larry Reed at Foundation for Economic Education. When he was on my show, he talked about the Parable of the Vineyard workers. The vineyard workers,

Darren Brady Nelson  43:48

oh yeah, the martial, martial value, really, isn’t it? Yes,

Gene Tunny  43:52

yeah, where he’s paying them different amounts of money. And I think Jesus says, Oh, that’s okay, if it’s a fair bargain, if they all are better off because of it?

Darren Brady Nelson  44:03

No, it was. It was basically, it wasn’t even that. It was just like, well, you agreed to it, you know, like, yeah, exactly. So it was actually, I think they were paying the same amount, but these people came in and worked nowhere near as long hours, or, you know, towards the end of the day, and these other people have been working the whole day, and they’re just getting the same pay, you know, I think that’s

Gene Tunny  44:22

right. Okay, gotcha, yeah,

Darren Brady Nelson  44:26

qualifying it by going, Oh, well, as long as it was fair, you know, like it, you know, some nebulous way, he was basically like, you know, is it not the master’s money to decide what he does with it, right? And if he wants to do this bargain, because he needs more workers to come in. And, you know, it was actually strangely in line with, you know, the whole marginal revolution, you know, right, okay, fascinating. It was kind of like a marginal value,

Gene Tunny  44:53

Okay, interesting. I’ll have to put a link to that episode. I have to go to do it actually, to make sure I know the story. It’s quite embarrassing,

Darren Brady Nelson  45:02

that stuff too. But it was something slightly different. But it was, yeah, it was interesting, because then you often, like, people, you know, go like, well, he, he flipped over the the money changers, you know, sort of thing. Therefore he’s anti, you know, markets and anti exchange. No, that that point was to do with the temple and the Pharisees. You know, Jesus didn’t have a problem with commerce. He didn’t run around knocking over exchange tables everywhere. He had a problem with the way that the Pharisees and others are running the temple and, you know, turning it into a farce, you know, sort of thing totally different. So, yeah, yeah, you know. But the thing so, you know, it just was a great opportunity to throw some, I think Christian economics, to me, actually was even surprising to myself as an economist, was like taking the best of the mainstream and taking the best of the free market and not literally building on it like that, but it actually, I found it actually even more insightful, if you like, than even Austrian economics was, yeah, or, you know, neoclassical economics, you know, it had a lot of, you know, you know, good overlap with them. But it was, you know, yeah, I thought it was really interesting. One thing

Gene Tunny  46:15

I remember from Milton Friedman might have been in freedom. It was, it may have been in free to choose, or Capitalism and Freedom. I can’t remember the exact book, but he talks about how there’s a there’s a moral case for free markets, for competition, as distinct from the, you know, the the efficiency case that economists make for free markets is that the case you’re making, you’re saying there’s actually a moral case as well as an efficiency case, correct?

Darren Brady Nelson  46:42

Yeah. And I think the, you know, the Chicago school or Austrian School eventually get down to a level where it’s, it gets a little bit Sandy, you know, like the base wanted to argue an ethical, moral reason for free markets. Eventually it just runs out at depth, right? And I think, yeah, the Bible takes it to a level, you know, that that’s on a solid foundation, that’s literally on a rock, you know, of course, obviously not everybody’s gonna agree with that, if they not a Christian or even a Jew, who can, because they can also go down to the same you know, a lot of this is in the Old Testament too. You know, the, if you like, the ethical, moral foundation for, for, you know, least, largely free markets. But also found that the Christian economics finds doesn’t have the tension between the individual and the collective like the secular Do you know, like the free markets often go into kind of hyper individualism, and then, you know, the left wing ones go into hyper collectivism, right? Christian economics finds the right balance between those two. You know, really marries the individual and the group together better than the secular economics does.

Gene Tunny  47:57

Interesting. Love to think about this some more. Darren, I mean, I’m not, I can’t see how it would affect the laws of economics or or how we would apply economics in practice, but I could see how it could affect your judgments regarding what is good economic policy. I can see that I’d have to wonder though. I mean, what is it? I mean, is there anything superior about I mean, this, I guess, is a bigger conversation. But like, we can’t leave out the Chinese or the Indians or people in other parts of the world who aren’t Christian, can we? Or aren’t predominantly Chris that aren’t Christian countries. So where are they? I mean, they’ve obviously got economists. They’ve got economics. Economics is relevant to them. How to is this just something you that augments your understanding of economics? Or do you think it’s something that’s

Darren Brady Nelson  48:46

essential? Originally, I thought it was augmenting. I think it’s ultimately essential, and it and, you know, if, if the Christian worldview is correct, as I think it is it the God of Christianity is everybody’s God, right? So, so, and the laws that were set, you know, that God created all the laws of this world, right? Sorry, the the natural laws, which say, and I believe he created the economic laws of this world, right? So, and, and there’s good evidence for that. It’s not just a, you know, just a blanket statement, trust me, like we, you know, we told you it was this. So believe us, you know that that, I mean, we’re obviously going to go into a totally different thing. But the world of, you know, Christian apologetics and evidence, which this Christian economics, kind of also kind of overlaps with, it’s not just like these statements that you know we’re right and you’re wrong. Just trust us. You know, there’s a lot of, you know, natural world evidence for this stuff. So, you know, as a Christian, I argue these laws of economics are, you know, the ones that God himself put in place. And he put them in place for a reason, and they’re not in conflict with ethical sort of. The moral laws that he also put in place, and they applied, all of humanity, and all of humanity is welcome. You know, it’s not a case of like, Hey, this is for us, and that’s for you over there. It’s a totally different story, whether you believe it, and you know, whether you’re, you know, saved and all these sorts of things. But you know, and God’s, you know, in the Old Testament is blessed many people that that weren’t Israel as well. So it was never even like only the Jews get the benefits of this. No, it was something that was meant to benefit all of humanity.

Gene Tunny  50:34

Okay, interesting perspective, Darren. I love to come back to that. I mean, I but, yeah, let’s, let’s, let’s leave that there. I want to know what’s your main argument in your article? What’s the main thesis of your of your piece on for in this wire competition volume?

Darren Brady Nelson  50:56

Yeah. I mean, what you know, basic competition is a good thing. Very good. It’s a good thing economically, like efficiency wise, but it’s also good ethically. That’s, that’s, that’s in a nutshell the argument and I, and I draw from, I think, the best of mainstream economic because I’m not in there. In my antitrust article, I was criticizing mainstream economics, and this one, I was just taking some of the good stuff that I thought, you know, it’s still not in conflict with free markets or Christian economics, and just kind of tying it all together to go, yes, competition is a good thing. Yeah,

Gene Tunny  51:28

why were you critical of mainstream economics in that antitrust article?

Darren Brady Nelson  51:34

Well, we can consider a link to it, but you know, even some of the languages that it uses, it kind of presupposes that competitions, you know, either an unattainable thing, and thus government has to intervene, or it’s, you know, using words like power, you know, like, that’s, you know, like, well, free markets aren’t about power, really. They’re about, you know, voluntary exchanges, you know, they’re not the use of power, right? You know, no one’s forcing you to do anything. So, you know, market power. Look, I can understand it, and I there’s some validity to it. I’m not saying there isn’t a beast that’s kind of like that, but to use the word power is almost kind of misleading. And obviously, you know, like using a benchmark, like perfect competition, that they, on the one hand, acknowledge can never really exist, but at the same time using that to judge actual markets, which is what they all do. The a, Triple C does it. The the Department of Justice does it. They all use the same benchmark to go to then intervene. It’s like, Well, you said that this isn’t possible, that you’re using it as a as an excuse to intervene. That’s why I’m getting and you’ll see that in my antitrust article, which is, you know, available, yeah, so

Gene Tunny  52:50

you against all economic regulation, all antitrust action. Is that the position? Um,

Darren Brady Nelson  52:57

yeah, okay, not sure enough. It’s been misused and abused so much that I think it’s not something you know, and it’s usually political, even in Australia, but it’s more so in the US. It’s usually used against people who actually, really, you know, like, even, you know, the people that they supposed like Standard Oil. Well, okay, fine, Standard Oil, at the time, dominated its market. That’s true. But guess what? Prices were going down and quality and quantities were going up. So why were you intervening? Because even under, supposedly under the anti trust laws, you know, even if you are deemed a monopoly, that’s not good enough, you have to be abusing your monopoly power, and if your prices are going down, you’re not really abusing your monopoly power, yeah, yet, yet, they intervene, right?

Gene Tunny  53:48

And I saw in your your article, you had that chart about how all of the the industries that are heavily regulated, their prices have gone up at a faster rate than general prices, than CPI inflation, I think that’s, you know, that’s, that’s certainly something that advocates for regulation need to explain. I mean, the case they’ll make, of course, is that, well, they would have gone up even further if we weren’t regulating. So, you know, what’s the counterfactual? That’s what they’ll that’s what they’ll argue, I suppose, and I

Darren Brady Nelson  54:21

but the thing is, they go up. If you got out of there and you allowed them to go up, and you weren’t getting in the way with all your regulations, they’re good. Someone’s going to come into that market. And I’ll tell you that, you know what? They won’t even do it because, you know, I forgot what that limit. I think it’s limit pricing or something like, you know, we’re monopolists. Are always on the lookout for, oh, if I raise them too much, I’m going to get an entrant, right. So, so, yeah, I don’t know. And the antitrust authorities never go after the regulations that help people monopolize or cartelize their industries. So they basically, they hurt, they make it. They create. It in one hand, not necessarily the antitrust authorities themselves. Government creates these monopolies and cartels and then no pretends to come to the rescue, you know, with the antitrust authority, right?

Gene Tunny  55:10

So you don’t believe in the whole natural monopoly argument, do you? I think we might have chatted about that in

Darren Brady Nelson  55:15

a mainstream economist like Bom will, kind of, you know, kind of heavily question that too, and I believe he’s correct. You know, like, because you know, if you got a natural monopoly, and if you’re you can really produce at a lower cost than two or more others. So what you know, you know, basically the arguments like, so what you know, like, if, but you know, if you can’t, then someone’s going to enter your market unless there’s a, you know, a government created barrier to entry. So even bolmo, you know, mainstream economists recognize that. But even

Gene Tunny  55:50

for water infrastructure or electricity infrastructure, if

Darren Brady Nelson  55:55

you’re a natural monopoly, why do you then, why do you need the regulations that make you a natural monopoly? So you’re not a natural monopoly, you’re a government created monopoly. So monopoly like 99 out of 100 times, right? So, so prove to me that you’re a natural monopoly. Take away the regulations that don’t allow anybody to compete, and then if no one’s competing, then let’s, let’s, you know, then, then the regulator maybe does his thing in that situation. But it never happens that way. They always create the monopoly, or the cartel, and then the regulator comes afterwards. That’s exactly what happened in the US. You know, there was competition in water and sewage, there’s competition in electricity, natural gas, railroads, all the rest. And then some of them couldn’t hack the competition, and they went to get franchise monopolies, and in return for that, you had to have a regulator. Okay, so history is against this concept of net, and they invented the concept decades afterwards, you know. So that’s suspicious in itself, you know. So don’t know. I don’t believe in natural at all, please. Okay,

Gene Tunny  56:55

that’s interesting. That’s good to good to explore these things and and discuss them. One thing I do like about what Lena Khan’s been doing, although she’s getting sacked. I mean, she won’t be appointed. I think Donald Trump will have a different federal trade commission chair. She’s going after the companies that lock you into Subscriptions. Okay? I think that’s a that’s a that’s a really good regulatory action, and Australia is looking at doing that too. The the fact that you sign up to something online, and it’s easy for you to sign up, you give them your and you give them your credit card, but if you want to cancel your subscription, you have to ring someone up. They just make it incredibly difficult to cancel a subscription. And what Lena Khan said is, no, it’s got to be as easy to cancel as it is to sign up. And I think Australia is going to adopt the same thing. I think that is a really good thing to do, because it’s terrible how they do that. And companies which should know better, which should have which should protect their reputation, like the Economist newspaper or magazine in London does that too. I mean, the, you know, the Murdoch papers do it, but okay, probably expect that from them, but for the economists to do it, that’s just disgraceful. So I think that’s actually a good initiative of of the regulatory state, so to speak. If

Darren Brady Nelson  58:23

I wouldn’t be surprised if there was some regulation that made it easy for them to do that in the first place, because that’s usually what happens, usually because, because the regulatory states just constantly building on itself and has all these unintended consequences. You know, just unintended consequences built on unintended consequences, etc, etc, and it’s constantly overriding the common law that would probably would have dealt with that, you know, in a more efficient manner once upon a time, but the common laws been almost just pushed out the door. You know that that would usually not be, you know that would usually break contract law because you didn’t come, you didn’t come to a contract. You know, you can’t just, like, assume I’ve subscribed to your your service, something like that. That’s not how normal contracts work, right? So I would suspect that the, you know, the regulatory states, come to the rescue after it actually created the problem the first place. But I don’t know that for a fact. I’m just those things, having worked around this sort of stuff for 30 years, it’s usually the case, but I can’t say for sure. Well,

Gene Tunny  59:26

I think it’s good to be have that suspicion that you have that as something you certainly want to investigate. I agree there that that’s worth that’s certainly worth considering. Okay, Darren Brodie Nelson, we’ll have to wrap up soon. Any final thoughts, anything you want to come back to to discuss,

Darren Brady Nelson  59:43

oh no, look, you know, appreciate the time, and it’s always fun to kind of, you know, cover, you know, quite different topics. And I imagine, I don’t mean I can’t imagine, there’s too many sort of two economists talking about the kind of variety of stuff that we tend to talk about.

Gene Tunny  1:00:00

Well, I don’t know. I mean, maybe, maybe not, from the angles we talk about them from. I think certainly the the unexpected, the unexpected angles that that we come at things from, I think is, yeah, that that may be that may be unique. Anyway, Darren, it’s always, always a pleasure, and enjoy getting your insights and into what’s happening in the in the US particular. And yeah, well, thanks again for appearing on the show, and look forward to speaking with you in the future. Thank you.

Darren Brady Nelson  1:00:38

Thank you for having me.

Credits

Thanks to the show’s sponsor, Gene’s consultancy business, www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts and other podcasting platforms.

Categories
Podcast episode

Efficiency and Externalities: A Q&A on Market Failures – EP254

Show host Gene Tunny responds to listener feedback about the private versus public sector’s role in wealth creation, particularly addressing externalities like environmental harm and whether governments should fund facilities like Men’s Sheds. He also explores the efficiency of the private sector compared to government spending, weighing the evidence on both sides.

If you have any questions, comments, or suggestions for Gene, please email him at contact@economicsexplored.com  or send a voice message via https://www.speakpipe.com/economicsexplored.

You can listen to the episode via the embedded player below or via podcasting apps including Apple Podcast and Spotify.

Timestamps for EP254

  • Introduction (0:00)
  • Externalities and Market Efficiency (4:47)
  • Government’s Role in Addressing Externalities (11:30)
  • Coase Theorem and Market Failures (19:43)
  • Government Spending and Efficiency (26:31)
  • Men’s Sheds and Government Support (32:51)
  • Scott Prasser’s Critique of Government Spending (39:43)
  • Balancing Government and Private Sector Roles (45:49)

Takeaways

  1. Externalities in Wealth Creation: Private markets can overlook externalities such as pollution or public health impacts, justifying government intervention in some cases.
  2. Incentives for Efficiency: Due to market competition, the private sector generally has stronger incentives for efficiency, while government projects may lack the same discipline.
  3. Government Spending Criticism: Many government projects, particularly those done for political reasons, are inefficient and do not consistently deliver expected benefits.
  4. Cost-Benefit Analysis is Crucial: Government spending should be evaluated through thorough cost-benefit analysis to avoid wasting public funds.
  5. Coase Theorem and Market Solutions: While private negotiation can theoretically resolve externalities (as per the Coase Theorem), it typically does not work in practice due to high transaction costs and imperfect information.

Links relevant to the conversation

Relevant previous episodes:

Government vs Private Sector in Wealth Creation:

https://economicsexplored.com/2024/07/05/government-vs-private-sector-who-generates-wealth-ep247/

White Elephant Stampede:

https://economicsexplored.com/2022/10/17/white-elephant-stampede-w-scott-prasser-ep161/

Coase theorem paper – “Does the Coase theorem hold in real markets? An application to the negotiations between waterworks and farmers in Denmark”

https://www.sciencedirect.com/science/article/pii/S0301479711003331

Urbis review of Men’s Sheds:

https://www.health.gov.au/sites/default/files/documents/2022/01/review-of-support-for-the-men-s-shed-movement-current-state-report_0.pdf

Beyond Blue Report on Men’s Sheds:

https://mensshed.org/wp-content/uploads/2022/05/Ultrafeed-beyondblue-Mens-Shed-in-Australia-Final-Executive-Report-2013.pdf

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Transcript: Efficiency and Externalities: A Q&A on Market Failures – EP254

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Scott Prasser  00:03

The governments love to, love to announce iconic projects. When I hear the word iconic, I run a mile. Okay, this is Danger, danger, or this is going to be a landmark, or they want to have a vision. I don’t want governments and visions. Thank you very much. It’s usually the wrong ones, and so it’s this thing of meeting the electoral demand to be doing something, instead of saying nothing can be done. Okay, that in some cases it’s not government’s responsibility to do it, and if we do anything, it doesn’t, doesn’t have any effect.

Gene Tunny  00:40

Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode. Please check out the show notes for relevant information. Now on to the show. Hello and welcome to the show this episode. I want to respond to a question from a listener about a recent episode, government versus the private sector who generates wealth. And then I also want to respond to some feedback from another listener about a previous episode. So I really value getting your feedback and your questions. It all helps me think about what I should cover on the show and the types of guests you want to hear from so please keep it coming. You can get in touch with me via the contact details in the show notes. So yep, I’d love to hear from you before we get into it. Thanks to Lumo coffee for sponsoring this episode. This grade one organic specialty coffee from the highlands of Peru is jam packed full of healthy antioxidants. There’s a 10% discount for economics explored listeners. Details are in the show notes. Okay, the first thing I want to do is to cover a great question that came from a listener named Mark. I’ll read out the email that I received from Mark. I’m a non economist in the Queensland public service, and as such, very much. Enjoyed your recent ish episode, government versus private sector who generates wealth? One of the arguments in the podcast was that consumers demonstrate how much they value goods and services produced by the private sector in their purchasing decisions, and that these purchases are evidence that the sector is generating value for the public sector, though it was pointed out that government spending is often inefficient and can even create a net loss, for example, because of poor discipline on business cases or spending. And Mark goes on to note, this seems to be comparing the Theory of Value slash wealth creation in the private sector with the practical realities of it in the public sector, and it ignores the externalities in private markets. Is it fair to say that, in practice, the private sector can produce profits and services that create harm to society, ultra processed food, tobacco products that cause environmental harm, etc, and this needs to be factored into an evaluation of its ability to generate wealth. And Mark goes on, this is a bit of a long winded way of raising an old argument. I guess. The response is, these harms are a result only of market design, and companies are merely following the incentives placed upon them. I’d be interested in your views, including, how do you think government should respond to the issue? So that’s a very good question. And I thought, yep, I should respond to this in the podcast. So my my quick answer to Mark’s question is yes, it is fair to say that the private sector can produce products with harmful effects. And Mark indeed gave some examples there, and he he mentioned the important concept of externalities. So these are external costs on to others other than the parties to the transaction so things like pollution, etc, or it could be cost to the public health system. So people, you know, if they smoke too much or they drink too much, then that will end up costing not only the individual who makes the choice to do those things, but others in. The society. I’ve covered externalities in previous episodes, but I probably should have mentioned them in the government versus the private sector episode, because, yep, they are an important qualification to the presumed efficiency of market outcomes. That’s absolutely correct. What I might do is I might play the segment from the episode that Mark has asked about, just so we can, I can think about exactly what I said, and we can talk about that, and can provide some more more commentary on in response to Mark’s observations and his questions. Okay, so let me play the relevant clip now. But generally speaking, and this is the point I will often make when I’m thinking about, well, when I’m talking about these issues, the incentives for efficiency are better in the private sector, and I think there’s a lot of evidence for that that came out of when governments were reforming public enterprises in the 80s and 90s, we learned about the significant efficiency gains that can come from that when governments outsource more of activity, outsourced more activities from the public sector. Clearly, there are failures. I’m not going to deny there have been challenges. There have I mean, there have been those botched privatizations in the UK, for example, particularly in rail and it looks like water, so I’m not going to be too I’m not going to be unrealistic or just assume, Oh yes, the market is always going to do things better. But I think generally the evidence is that the private sector is going to be more well, it’s got greater incentives for efficiency, because if you’re not efficient, you go out of business, whereas governments could, you know, governments keep going, and we tend to see that well, I mean public sector unions, for example, or construction unions, which where they Have a lot of members working on government projects, they can be very, very influential and affect the efficiency, affect the costs and the efficiency of government programs and spending. I think that is something that is worth thinking about here. I should make the standard point that economists always make, that it’s important to crunch the numbers. So we always should be doing cost benefit analysis of programs and projects. In some cases, we want to do a comprehensive cost benefit analysis. In other cases, it’s maybe it’s a much smaller amount of money, and it’s more of a it’s not the full blown let’s, let’s do a comprehensive economic study where we’re trying to estimate all of the relevant costs and benefits. It might be more of a desktop exercise. A simpler type of analysis, but we should be thinking whenever we’re spending money on on government goods as government purchases of goods and services. We should be thinking about the costs and benefits, the pros and cons, and to the extent that we’re not getting that those net benefits, to the extent that we’re not getting to benefit to cost ratio above one, a return on investment, we’re effectively burning money the government is then detracting from the wealth of the community, in my view, because that money would probably would have been Better if that activity was not done if it was, if it if some other activity occurred, possibly in the private sector. And I mean, the last governments have funded many poor projects. They continue to do so, whether because of politics or they they think that there’s some social benefit that mean, or equity benefit that means that the project should go ahead. Okay, so that was a clip from my government versus the private sector episode, and that’s what Mark was was asking about. Now, even though I didn’t explicitly mention the concept of externalities, they may have been in the back of my mind when I was when I was talking there, particularly when I was talking about the need to consider all relevant costs and benefits. I’ll note that I did try. Talk about the externality, or I’ve talked about externalities, and specifically the externality relating to greenhouse gas emissions in another recent Tish episode. So episode 243, the revival of industrial policy. Should governments pick winners. So what I might do is I’ll play a clip from that episode, because I think it, it does help provide that fuller picture when we’re thinking about government versus the private sector. So I mean my presumption, and this goes back to Adam Smith, right? I mean that if you’ve got two parties engaged in in trade or in exchange, you assume it’s mutually beneficial and that it adds to the well being of the community. Now, of course, if there are third parties that are affected, then that presumption is won’t be won’t be realized. I mean, we have to think about how these the actions, how the trade, how the exchange, could affect third parties, and particularly if there’s no scope for them to negotiate, for the third party to come into the negotiation, whether because of, well, there’s a lack of knowledge or there’s transaction costs involved. So what I’m alluding to there is the Coase theorem, which I might talk about after I play this clip. Now, what government should be doing is, to the extent that there is this externality from greenhouse gas emissions, we should put a price on that externality, which is the idea of a carbon price. And you know, you can do that in various Well, a couple two main ways. You can have an emissions trading scheme. You can, you can create a market, and then you have a carbon price that falls out of that. Or you can have a carbon tax. And those are alternative ways of of putting a price on carbon dioxide emissions, or and CO two equivalent emissions. Now you know that most economists would say that is the best way to do it if you’re going to do something about it. And you know that’s sending the signal to the market that there’s a cost to the environment of of this pollution. And you know, you leave it up to the industry to sort out the most cost effective way to reduce those emissions. You don’t go and, you know, actively promote particular solutions and and in Australia, there’s a there’s a growing concern that maybe we’ve been pushing too hard on renewables policy measures and subsidies, etc, have favored renewables, and we had, we’ve had too fast a pace of development, and that’s creating issues for the reliability of the electricity grid. Okay, so I was using a carbon price as an illustration of one way that governments can address externalities, and that is through corrective taxation. That’s that’s one way the the carbon tax, or it could be setting up a market based mechanism, such as an emissions trading scheme, which would impose, and you’d have a carbon price drop out of that. And there’s a debate about, you know, which is, which is the better mechanism, but both sort of pretty much get you to the same outcome. We won’t go into the into the specifics of that debate there, but the idea is to have the the cost of the externality internalized, to bring it into the decision making of the firms and the households in the economy. So that’s, that’s the idea. And I mean, climate change is one obvious example. I know there’s a controversy about, you know exactly how we should respond, how we the pace at which we respond. I was just using that as I recognize that controversy. I’m just using it as an example. And you can think of various other examples. There’s a debate about whether we should impose a specific junk food tax, so a tax on sugary drinks, and, you know, other items of junk food to help prevent or to reduce the incidence of overweight and obesity, diabetes, etc. And that can be viewed as a. Corrective tax, of course, you might have to think about any equity issues there, particularly if poorer households are more likely to consume those those products that have been taxed then richer households. But the idea is that a corrective tax might make sense there and correct the well, the the outcome, the sub optimal outcome that comes from private decision making. On the other hand, you could think of, or you could think of some activities that would be under supplied by the market naturally, and that there could be a case for governments to promote so that’s the other side, or the other possibility, that there could be a case for a subsidy of some kind to subsidize activities that are that are considered beneficial. Now, I think this is, you know, this can be problematic because I think often subsidies come about because of lobbying. So there’s political considerations. I think the case for subsidies can often be weak. Some people, maybe some people, argue that the EV subsidies are justifiable from an efficiency point of view. Maybe they argue, or they possibly do argue that, because there’s such a well you need a critical mass of EV users, so electric vehicles to support the all the charging infrastructure, maybe there’s a case to subsidize the purchases of Ev. So you’ll find at different times various various people in the policy debate making an argument on efficiency grounds for subsidies, and that’s that comes out of that same framework of of market failure that the externalities are part of. You can think of like, typically we talk about negative externalities, such as pollution, but you can also think of positive externalities, so I might have to have another episode where I go into some examples of of that. The key point is that, yep, Mark is correct. I agree with him that the the existence of these externalities is an important qualification on the efficiency of market outcomes. One example of a positive externality that has just occurred to me is the so called Knowledge spillover. So there’s recognition that the knowledge generated by businesses, the R and D that they undertake, that can spill over to other businesses, and you know that’s that’s beneficial to society, and hence that can justify subsidies or favorable tax treatment for research and development expenses. And you do find that in various countries. So, I mean, if we think about the or the development of, you know, various products, there’s R and D that that goes into them, and the whole community ends up benefiting from that, because not everything can be patented, not everything can be protected. I mean the idea of the smartphone, for example, that that Apple invented with the iPhone, while it can protect its own proprietary technology, the the fundamental idea of, or the concept of having, of having a smartphone, of demonstrating that that is indeed possible, that has provided benefits to to other businesses, to the community, because we end up with with competitors copying that concept. So there are these, these external benefits as well. And I think we might come back to this issue of externalities in a in another episode, because there are some really juicy issues to cover. And I’d like to give some really well thought out examples there. The other thing it would be good to talk about in a in a future episode is this concept of the Coase theorem that comes from Ronald Coase, who’s a Nobel Laureate, who was a British economist, but ended up, you know, spending most of his working life in the. The US. I’ve previously done an episode on Coase regarding his theory of the firm, but he’s famous for another theory which is received the name of the Coase theorem. And what that theorem tells us is that in certain circumstances, the private sector agents that are affected by an externality can actually negotiate and reach a an optimal solution, and that optimal solution doesn’t in any way depend on the allocation of property rights, whether it doesn’t depend on whether a particular party has has a right to pollute or a right to to be able to extract A resource free of pollution. So it’s quite a powerful fear, and this idea that you may not need government to impose corrective taxation or a subsidy or regulation, you can have private sector actors figure this out for themselves, and that it doesn’t actually matter who, what the allocation of property rights is. It’s a very powerful concept, and it’s it’s very much consistent with the Chicago School view. So if you’re regular listener, or you study economics, you know there’s this thing called the Chicago school, people like Milton Friedman, George Stigler, which is associated with very pro market or laissez faire thinking, and the Coase theorem fits rather, you know, it’s compatible with that. And indeed, Ronald Coase was a professor of economics at the University of Chicago Law School. So he’s definitely part of that, that Chicago school so very powerful fear, and we might cover this in another episode. I mean, the challenge with it is that, I mean, it’s very elegant, it’s a great theory. It’d be extraordinary if, if it really did work out, it’d solve a lot of our a lot of our problems. But I guess the general consensus among economists is that while you you can see some examples of this happening in practice, and you can see these negotiations, they’re not necessarily widespread. This is not a general solution. This is not a reason. We should just say, oh, let’s leave everything to the market, because the conditions for the Coase theorem are very stringent, so they’re very tough conditions. And there’s a paper that I’ll link to in the show notes. It’s a 2012 paper from the Journal of Environmental Management. Does the coast theorem hold in real markets an application to the negotiations between water works and farmers in Denmark. So the water works are the the businesses or the utilities that are providing water to the town, and the farmers will there. They’re doing things on their farm that can affect the quality of the water through the use of pesticides and and fertilizers. And so there’s a an externality there. And so what this study looks at in Denmark is to what extent private negotiations between the water works and the farmers can help resolve the the externality can can lead to what you’d say is an efficient outcome, and what it concludes Is that okay, so it considers the results of Danish Water Works attempts to establish voluntary cultivation agreements with Danish farmers. A survey of these negotiations, I’m reading from the abstract of the paper, a survey of these negotiations show that the Coase theorem is not robust in the presence of imperfect information, non maximizing behavior and transaction costs. Thus negotiations between Danish water works and farmers may not be a suitable mechanism to achieve efficiency in the protection of groundwater quality due to violations of the assumptions of the Coase theorem, the use of standard schemes or government intervention, eg, expropriation May, under some conditions, be a more effective and cost efficient approach for the protection of vulnerable groundwater resources in Denmark, right. Oh, okay, so, yeah. That’s a that’s a bit of a negative finding about the Coase theorem. I mean, it’s incredibly elegant, and I think it’s an important concept to learn as an economist, but in practice, it, it doesn’t really seem to to help us out a lot. But let me come back to that in a future episode. I think it probably does warrant a whole episode on its own. And yeah, that’s something you want to hear, hear about, or if you’ve got any views on the Coase theorem, or if you know of any, any studies or examples that you know show the a better result for the Coase theorem, then, then let me know. I’d love to I’d love to hear them, and I’d love to hear from you. Okay, we’ll take a short break here for a word from our sponsor.

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Gene Tunny  26:20

now back to the show. Okay, so talked about externalities before we go on to the the other part of this episode, I want to go back to this point about there being this presumption that the the private sector will be more likely to be efficient and to provide what people want than the government. I guess I’m a little bit biased. I think that is true, and partly this goes back to, you know, when I first started learning about economics and studying economics. It must have been when I was in high school, and I remember my mother picked up a copy of Milton Friedman’s Free to Choose at a flea market somewhere. I think it was. And I remember reading that and just being struck by the incredible logic that that Milton and Rose Friedman advanced in that. And there’s a, there’s a great quote from Friedman. I found this on the net. I’m not sure whether this one was in free to choose, but something very similar would have been, and that this, certainly this concept is, is in Free To Choose. And Friedman’s other books, like tyranny, the status quo, and this concept, or this, this quote, which I think you know very much, summarized very well, summarizes his thinking, if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government, okay, so he’s talking about spending other people’s money on other people. And that’s the, that’s the situation where the people doing the spending have probably take the least care. Okay, so we’re, we’re going to be most careful and make the best decisions where we’re spending our own money on ourselves. So in the case that that Friedman’s talking about, there’s little incentive to economize or control costs, to ensure the money spent effectively, to maximize the value for for the recipients. I mean, I guess there is some, there is some pressure, because governments, they do have to, ultimately, there is a budget constraint, so they have to, I suppose they have some concern about the effectiveness of the spending, but it’s not as great as it would be if you’re spending your own money on yourself. I think that that’s fairly intuitive, so what we end up with is that we just end up with, you know, quite a significant amount of of wasteful, inefficient spending, spending that’s done for political reasons to get a political win for the government. I think we all can concede or accept that that is that something that happens. Okay? And then I’m just thinking you might if you think about that as a quadrant, so you’re either or a matrix, and you think of the different quadrants in the matrix, there are four different possibilities. You’re spending your own money on yourself, where you’ve got the most care and concern. You’re spending other people’s money on other people where you’re you’ve got the least concern or care. And then there are situations where you’re spending other people’s money on yourself. So if there’s a gift that someone will gives you money, say at Christmas, and then, therefore. I mean, I guess you do try and maximize your well being, but maybe you’re not as careful with your spending decisions. Maybe you see psychologically, even though this is not economically rational, maybe you see it as, Oh well, it’s a gift. It’s free money in a way, and I can afford to splurge, or I might buy something that I wouldn’t if it were my own, you know, if I had to work to to get the money. I mean, I certainly know that when I get gifts of gift cards for for books, I’m possibly more willing to experiment and buy a book that I I wouldn’t normally do, or I’ll just buy more books than I would when I go into the bookstore at one time rather than save that up for another time. So perhaps I am less discerning or less careful, but I’m still not completely careless. And then the other quadrant, there’s the quadrant of when you’re spending your own money on other people, so you’re giving a donation, or you’re, you’re, you’re engaging in some charitable activity, and sure, I guess you want to, you do want To make sure that you’re not wasting the money, but perhaps you’re not as careful as you would be if you had to spend it on yourself. You might, you might think, Oh, well, this, this will do. This is enough for I’ll make the judgment as to what’s best for the people. I’m, I’m, you know, buying this, this item for these clothes for, you know, maybe, oh yeah, they’ll, they’ll be happy with the socks I get them for Christmas. Yeah. I mean, I think we can all think of examples of where we we spend money on, on other people, and maybe, maybe we don’t put the time or attention into it that we’d put into it, we’d put into the decision if we if we were spending the money on ourselves. So I think, I mean, that’s going to differ for different people, of course, and maybe I’m over generalizing, but I do think that Friedman’s way of of thinking about it is useful, and I certainly agree with him about how I think we spend our own money on ourselves with much more care than the government spends other people’s money on other people, right? Oh, okay, well, that was, yeah, that was actually, there’s quite a lot to think about with, with Mark’s comment and his his questions. So Mark, thanks for that. Please continue listening, and please write in with with future comments. And indeed, if you have any reactions to what I’ve what I said today, I’d love to hear them. I’ll go on now to some feedback from another regular listener, John. I mean, John provided me with a heap of comments, and unfortunately, I don’t have time to cover them all in this episode, particularly since I spent so long talking about what Mark what he commented on. So sorry, John, but I will, I will respond to one of your specific comments, and John is, John’s pushing back or on some of the more free market or more libertarian guests and views that, that that I’ve had on the show. And this is, I think this is an interesting comment, and yeah, I’ve got some thoughts on it, so I want to read it out. I’ll read out the comment first, and then I’ll play the audio that that John’s responding to. One of the bits of audio John wrote, government does not necessarily mean centralized. There’s the Men’s Shed, which is a counterpoint to the criticism your co host on the ATA. So that’s the Australian taxpayers Alliance podcast made. I can’t remember who that was. It would have been John Humphries or Saxon Davidson, I imagine, but I’ll I couldn’t find the bits of audio that John was talking about. But anyway, I can imagine that’s that’s the sort of thing they would have would have said. And John goes on some central money, but also real dispersion of decision making and autonomy. Equally, your guest on the white elephant stampede episode. So he’s talking about Scott prasser there. So equally, your guest on another podcast criticize the Men’s Shed. Now, if there’s a credible cost benefit analysis that said that says the Men’s Shed is not useful, well, fair enough, but I’d be really surprised. The Men’s Shed supports a local repair. FA I’m involved with and maybe you’ve seen their things around made for the community. John concludes, while we’ve while we have personal freedom, the government has a legitimate role in helping us make better decisions. I understand we have lower rates of skin cancer from the slip slop slap campaign and a lower road toll resulting from government initiatives over drink driving and seat belts. Yes, I think that’s a fair points from John. That’s that’s absolutely, absolutely correct, and definitely the data supports that. I’m just thinking of an example in my state, in Queensland and Australia, there was a lot of controversy, gee, maybe it was in the 70s or the the 80s, about the introduction of making a compulsory for people to wear seat belts. And, you know, people had could rationalize not wearing seat belts in all sorts of ways. Oh, that, you know, cost us a lot of time, or it’s a distraction and it’s or won’t help us, because if you’re in a crash, then you’re actually better off being thrown out of the car. I mean, all sorts of odd rationalizations for not wanting to wear a seatbelt. And there was a there was a famous study, I’m pretty sure it was by Alan Layton. Yeah, Alan Layton was one of the authors a famous study on the effectiveness of seat belt legislation on the Queensland road toll. And this was an Australian case study in intervention analysis. So this is a paper that was published in 1979 in the Journal of the American Statistical Association. Alan Leighton was one of the co authors. He was at University of Queensland at the time. He went on to have a distinguished career as an econometrician, a great guy and what they did was that they found so they used some time clever time series analytical techniques. I’ll put a link in the show notes to this paper. It’s it’s a great bit of work. They showed that the long run legislative effect was quantified at a specific level of the explanatory variable to be a 46% reduction in deaths. Okay, so the seat belt legislation did have a significant impact, and it resulted in a major reduction in fatalities. And I think you’d be I think that’s probably a case where some type of government paternalism is is justifiable. So look, if you’re a regular listener of the show, you probably figured out I’m not an extreme libertarian or anarcho capitalist. I would describe myself as a classical liberal. I do believe in in liberalism and freedom, but I do accept that in some cases, there could be a role for some paternalistic policy measures. And I think John is is on the right track there regarding Men’s Sheds, I must say, I forgot that the Men’s Shed came up in in one of my podcast episodes. So, I mean, they seem reasonable to me. I have a couple of friends who are involved with Men’s Sheds. So the idea is that men generally of a certain age, I think it tends to be mature age, and senior men, they may have had some issues in their lives, and they get together, and they will do all sorts of, you know, manual, manual work. They’ll do some gardening, or they’ll do some woodwork or some metal shop, and it seems to be something that really helps them out with their mental health. And, you know, men need friends, and I think there’s a concern that just with developments in society, that men don’t have the traditional networks or support that they once did, and particularly with the rise in divorce so so many men, their social life is essentially organized by their wives, and so if they have a divorce, then they’re in all sorts of trouble. They lose their network, their their social support. So look, there could certainly be a case for the Men’s Sheds. What I might do now just go back to the the bit of the episode that John’s reacted to, so I can understand his feedback more fully and also understand what what Scott said in that episode. Now, Scott’s a great guy. He’s a former academic. He’s a former ministerial advisor. He’s. And he’s one of the editors of the 2022, book from Connor court, titled white elephant stampede case studies in policy and project management failures. And we talked about all sorts of big projects that turned out to be white elephants, like desalination plants, etc. I forgot he mentioned Men’s Shed. So let’s, let’s go back to that, and I’ll offer some thoughts after I play the clip.

Scott Prasser  40:27

Government is involved in too many areas. Okay, the government tries to do too much, yeah, and the government is seen as the savior of so many things. So if government could not be involved in so many things and just focus on it, on the core business, what should be, you know, good infrastructure, good roads. And what sort of thing so government is, is often called upon to be doing things now, politicians reaction to that is, something’s got to be done. This is something we can do, right, okay? And they have no concept of of financial limitations. So governments often, we saw that during the covid thing, where governments were running around doing all sorts of things. Sorts of things which were completely against the evidence. Just remember, in Queensland, we were formed by the Chief Health Officer. We and it was mandated we should wear a mask in our car. Just think about this. And we should wear a mask walking around a park. Just think about this. Now, I didn’t do that. I refuse to follow the law. So that’s an example where governments have got to ratchet up activities, to do things. Also, governments love to love to announce iconic projects. When I hear the word iconic, I run a mile. Okay, this is Danger, danger, or this is going to be a landmark, or they want to have a vision. I don’t want government visions. Thank you very much. It’s usually the wrong ones. And so it’s this thing of meeting the electoral demand to be doing something instead of saying nothing can be done. Okay, that’s, in some cases it’s not government’s responsibility to do it. And if we do anything, it doesn’t, it doesn’t have any effect. So, you know, it’s like, you know, why does the Commonwealth government spend $5 million on men’s work sheds? I mean, what has that got to do with the Commonwealth Government? There’s like, a little mini, a mini white elephant, because they want to be seen to be giving out money for some minority group calls or something. So it’s politics. It’s politics. The other factor is that all the organizational things inside organizations, group think happens, yeah, okay. Now, if you worked in the public bureaucracy like me, it’s sometimes very hard if you if you want to be the lone person that says, I think that’s a dumb idea. Yes, right? Yeah, it doesn’t go well with the rest of the team and the hierarchy, which so you’ve got to have in the bureaucracy someone willing to say no. Right now, our public services have become politicized. That is, people are on short term contracts. They give the government what they want, not what they need. So this sort of Once Upon a Time, treasuries would have said, and that’s why, under Joe, we had permanent public servants. Okay? Job Peterson, Premier, there were permanent public servants. Queensland didn’t have a zoo. Queensland didn’t own a bank. Okay? Queensland didn’t do all the crazy things that Joe won’t do, because the treasurer Leo hilcher and crowd will say, No, Joe, you’re not going to have it right now. I don’t think that happens anymore, because all the senior public servants are on five year contracts. They want to get their contract. We knew they will give in to the political will all the time. So that’s one of the one of the issues that helps help throughout, why we’re getting more of these things, and why Frank and fearless advice is no longer being given. I don’t want to sound too precious, but it is. It is very hard in the bureaucracy. If you’re in the hierarchy and you want to get a promotion in the future and you write a memo to the premier. This is a really dumb idea, and I have done this myself, and I have saved the taxpayer money, I can tell you right here, and that’s because I had a very good director general in the Premier’s department. But it’s hard all those organizational factors, the political factors and government and all the interest group pressures now, interest group pressures on wanting to get something from government. Australia has always looked more to government than other countries. You know, we’ve always we founded by government. Australia was founded by, you know, sending out convicts. Here it was a government, yeah, thing in America. America was founded by people trying to get away from government. They want a religious freedom. Okay? So there’s a difference, yeah, sort of context. So all those factors have driving that. Plus, I think economic theory, more, you know, modern monetary theory, so it says, oh, spend as much as you want. It doesn’t matter. It’s all right. You know, there’s no, there’s no limitation on what government. Can spend. So the idea of balanced budgets, being careful and frugal, has sort of gone by the by, if you like. So all those factors, to me, are contributing to this sort of galloping syndrome of white elephants.

Gene Tunny  45:17

Okay, so I think Scott made a lot of a lot of very great points there. And I think that observation he makes about the differences between Australia and the United States and how they were they were founded, I think that’s, that’s rather that’s rather clever. That’s a really good insight there. And perhaps that does explain some of the reasons for differences in in policy choices. Who knows? I’m not a political scientist, but I thought that was a rather. There was a there were a lot of insightful things that that Scott said there regarding Men’s Sheds. Look, I honestly don’t know whether it makes sense for government to to to subsidize them or not, or to provide funding to them. I mean, my my bias, would be to say, Well, look, this government really doesn’t have a role here. I mean, if men want to get together and have Men’s Sheds, then then fair enough go for it. Does the government need to provide some support? Well, look, I mean, there could be a case. I wouldn’t rule it out completely, but you would need to have a it’d be good to see a cost benefit analysis of subcard. Does it make sense to provide funding for the Men’s Shed? Does this help improve mental health outcomes so much or sufficiently that it justifies the government chipping in some money? Look, it’s possible. Maybe it does. Maybe it improves well being. It avoids health costs in some way, it prevents suicides, it it prevents alcoholism, which leads to all sorts of problems. Who knows it? They could have some positive outcomes. And it looks like there have been, there has been a little bit of of research, but that’s not, it’s not no comprehensive studies, or CBAS, from cost benefit analysis studies, from what I can see, I’ll link to a couple of those in the show notes. I think there’s definitely a rationale for the Men’s Shed in how they address social isolation and help improve men’s health by getting them working together, collaborating on woodworking, metalworking, gardening, community projects, etc. So I think they’ll provide some benefits, and I’ll link to some studies that I’ve found. So there’s a report that was prepared for Beyond Blue back in 2013 and what that shows, or what that finds, is that there are clear health benefits associated with Men’s Sheds, Particularly when compared with less socially active men and they have some some data here. So it looks like it’s it’s from a survey shows that the shed members scored significantly higher physical functioning, physical roles, general health, vitality and mental health in non shed members, as measured by this, this survey instrument, it looks like that they use. So there’s some, some evidence looks like it has a, yeah, I mean, they may well be statistically significant. I’d have to think about the the sampling error around the reported stats. But I’ll put a link in the show notes there. You can check that out. There’s that you know that would be of interest. If this is a report by there’s another report by Urbis review of support for the Men’s Shed movement, current state report. And, yeah, generally, it reports on how well it argues that these Men’s Sheds are valuable spaces for men to get together, reducing socialized isolation, improving well being. They have the men the Shedders, so that’s what they call the people who go to the Men’s Shed. They have increased engagement with and across communities, and they recognize that the shed, the Men’s Shed, as a social amenity available to the whole community, thereby increasing social capital within communities. Okay, so some benefits, but these are things that are, you know, could be a bit they are intangible in a way. They’re difficult to measure, but I’ll put a link to this day. Be in the show notes as well. And yeah, thanks John for your comments. And yeah, if you want to, I’m willing to have a chat about Men’s Shed sometime in the future and all of the issues around them. It’s interesting. Yeah, I’d never thought there’d be a big controversy about Men’s Sheds. But yes, I guess it’s a it’s something that government has been contributing a little bit of funding to. It doesn’t look like it’s a huge amount. And yep, as with all government spending, we should be thinking about whether that is a good use of public funds or not. And there can be legitimate debates about what we’re spending money on, and whether that money should be spent on something else, or indeed return to taxpayers. Because, I mean, the the tax burden is seems to be ever increasing, and we have to think about whether spending by governments is is essential for the community. Well being Righto, thanks to Mark and to John for their comments, for their questions. Really appreciate them listening. If you’re listening, you have your own thoughts on either the episodes I talked about today or other episodes. Please get in touch. I’d love to hear from you. Love to reflect on your feedback and to help clarify concepts, provide examples. So yes, please do get in touch. You can find my details in the show notes. Okay, I’ll wrap it up there, and I’ll talk to you next week. Thank you, righto. Thanks for listening to this episode of economics explored if you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact@economicsexplored.com or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you, then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week. You

Obsidian  52:20

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Credits

Thanks to the show’s sponsor, Gene’s consultancy business, www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts and other podcasting platforms.

Categories
Podcast episode

The Invisible Hand: economic, religious, or mystical concept? w/ Dan Sanchez, FEE – EP185

The Foundation for Economic Education’s Dan Sanchez argues that the invisible hand is a legitimate economic concept and not a religious or mystical one, as some critics of economics claim. Dan and show host Gene Tunny discuss the efficient organization of economic activities by the market mechanism in a decentralized way, without the need for a central planner. The conversation turns to TikTok and economic engagement with China. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What’s covered in EP185

  • Introduction to this episode [0:06]
  • Dan’s article on the “invisible hand” [2:06]
  • The production of a pencil is like an orchestra without a conductor [5:25]
  • Is the invisible hand the hand of God? [8:34]
  • What is the problem with central planning? [12:27]
  • Central planners don’t like the idea of economic laws because they circumscribe their utopian dreams [15:45]
  • Dan’s views on big tech [19:23]
  • Is there a case for regulation or a ban on TikTok? [23:32]

Links relevant to the conversation

Dan’s bio: https://fee.org/people/dan-sanchez/

Dan’s Twitter handle: @DanSanchezV

Dan’s article on “How Atheist Anti-Capitalists miss the point”:

https://fee.org/articles/how-atheist-anti-capitalists-miss-the-point/

Von Mises book on the economic calculation problem

https://mises.org/library/economic-calculation-socialist-commonwealth

Article about problems with Soviet shoe production:

https://www.econlib.org/archives/2009/09/soviet_shoes.html

Bio of 19th century British free trade advocate Richard Cobden who Dan mentions:

https://en.wikipedia.org/wiki/Richard_Cobden

Transcript:
The Invisible Hand: economic, religious, or mystical concept? w/ Dan Sanchez, FEE – EP185

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. In this episode, I chat with Dan Sanchez about the invisible hand, the efficient organisation of economic activities by the market mechanism in a decentralised way, without the need for a central planner, the great Scottish Enlightenment economist and philosopher Adam Smith observed, every individual neither intends to promote the public interest, nor knows how much he is promoting it intends only his own security and by directing that industry in such a manner, as its produce may be of the greatest value, the intense only his own gain. And he is in this as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Is the invisible hand a legitimate economic concept or is it instead of religious or mystical concept as some critics of economics argue? My guest this episode, Dan Sanchez argues vigorously against those critics. Dan is the director of content at the Foundation for Economic Education. The foundation is one of the world’s leading pro free market think tanks, and it’s been operating since 1946. Okay, let’s get into the episode. I hope you enjoy my conversation with Dan. Dan Sanchez, from the Foundation for Economic Education. Welcome to the programme.

Dan Sanchez  02:06

Thanks, Gene. It’s great to be here.

Gene Tunny  02:07

Excellent. Dan, I was keen to get you on the show to chat about an article that you wrote for fi recently in the world in the last few months. So how atheist anti capitalists missed the point why they’re wrong, to sneer at the invisible hand and, and our pencil. To start off with Dan, could you just explain what you were reacting to? So what was the sneering that was being done at the invisible hand? And, and eyepencil, please,

Dan Sanchez  02:40

yeah, well, I tried to make it evergreen, partially because this is a criticism that is levelled at eyepencil and about free market economics in general, a lot. And another thing is that I just didn’t think that the I don’t even remember the author of the book that was in the latest smear, and the latest attack on Leonard Reid’s eyepencil was then I just wanted to sort of make a blanket case against that kind of line of attack. And what the line of attack is, is that is that free market economists believe in the invisible hand, that there’s a line and a pencil that says, Since only God can make a tree, I insist that only God can make me. And therefore free market economics is invalid, because ultimately, it is based on faith instead of reason. And that it relies on some kind of a supernatural divine intervention for the free market to work. So it was that line of attack that I wrote my article to counter attack.

Gene Tunny  03:55

Rod, okay, I didn’t realise there was that line in eyepencil, I’ll have to go back and have a look at it to see the context. eyepencil is a great article that explains how no one no one person knows exactly how to make a pencil. There’s all of these, you know, hundreds of or however many people 1000s of people involved in the supply chain and the production from the growing of the timber, and the mining of the graphite, and the assembly of all the components into into a pencil. And that’s all coordinated by the market system. I mean, what Adam Smith and you know, the, the invisible hand, this is this metaphor from Adam Smith. That’s about how he sees as there’s, it’s almost as if there’s an invisible hand at work in how the market coordinates people and we owe our DNA to the self interest of the butcher and the baker. So yeah, that’s what that’s broadly speaking, correct. isn’t enough characterise that, right?

Dan Sanchez  04:57

Yes, that’s exactly right, Leonard. Reid is actually the founder of the organisation that I work for the Foundation for Economic Education. And he wrote this classic essay I pencil. And really what it is, is it’s a, written from the perspective of a pencil, like the pencil is the narrator. And the pencil is giving his family tree, his ancestry. And the point that he has to make is that, as simple as he is, like a pencil is not a super high tech product. But as simple as it is, its production is vastly complex, really, involving millions and perhaps 10s, and millions and hundreds and millions of people in its production, because you might think that the components are relatively simple, because there’s wood, and then there’s the lead and the eraser, but each one of those components had to be manufactured. And oftentimes, those the capital goods that were used to manufacture that they have to be manufactured, and it just keeps radiating out and out. And when you really trace what it all that goes into the production of a pencil, it is an orchestration of millions of people. But it’s an orchestra without a conductor. And that’s the, that’s the marvel that eyepencil really reveals is that there’s no mastermind, there’s no central planner, a lot of people would like to be central planners, they’d like to centrally plan pencils, and they’d like to centrally plan everything, but it is way too complex for them to be able to do that. And yet it happens every day without a central planner, because of the market price system. And, and that market price system is very orderly. But it’s not order that comes from the mind of any single participant of it, that that it’s an order that emerges out of the interactions of all these people pursuing their own little corners of order. And so there’s a transcendent order that emerges out of that. And so Adam Smith and Leonard Reid characterise that as, as sort of like an invisible hand, because all these wonderful things are coming out of the market, like a pencil, that wasn’t the intention of any single participant of it, a lot of people involved in producing things that go into producing a pencil, don’t even realise that they’re contributing to a pencil. So like someone who is, you know, manufacturing an axle that goes onto a truck, that ships the wood that ends up in the pencil. That person never thinks about his work as contributing to pencils. It’s not his intention, it’s not his order. But the market price system coordinates that all so that he actually does very effectively contributes to a pencil. And so like Adam Smith said, that it’s as if an invisible hand is ordering people’s actions to yield results. That was not any intention of their own. That you could see that that Leonard Reid and Smith and and also Frederick Basia that you could see like the hand of God in that, and that’s where the critics pounce because the critics say, Aha, you’re talking about God so therefore, everything that you’re saying is invalid. But in my article I explain how, how that actually is not a valid criticism.

Gene Tunny  08:57

Broad Okay, so we’re Smith and last year and read with a religious Did they say they compared the market mechanism to the to the hand of God is that what is that correct?

Dan Sanchez  09:09

Yes, they were all they were all Christian. And Leonard Read had that line that I mentioned, Frederick Basquiat in one of his essays warned against, quote, rejecting the order, God has given it, referring to the market and cautioning against social schemers who, who want to reject that order. And so a lot of free market thinkers see that there is something divine in it, that the order of the the world including the social order, is because of God it was created by God. But the thing is, is that even people who maybe are atheists and who who disagree with with Basquiat and read, they have no cause for disagreement with their conclusions, because as I explained in the article, the way that they reach their conclusions, was not through recourse to any kind of divine intervention. And it was not like God exists, therefore, the free market or anything like that, they reach their conclusions through economic reasoning, and through observations about human nature. So when, when Adam Smith explained the invisible hand and the workings of the market, he talked about the division of labour and exchange and prices and incentives and, and the logic of the market, resulting in that. Similarly, when Leonard Reid talks about eyepencil, and the wonders of the market, again, it’s all about about human action and exchange and the prices that result from it and the coordination that results from that same thing with with Bostian. And they think of that order as having been created by God, but, but they don’t say that, like, it relies on continuous divine intervention all the time. And they don’t rest their conclusions on, you know, holy scripture or anything like that. And so, in my article, I compare it to Sir Isaac Newton, Isaac Newton was also Christian, and was also religious, and also saw something divine in the physical order that he was describing. And that, I think there’s a double standard here, because these, these critics, they, they wouldn’t then say that, you know, Isaac, Newton’s physics were invalid because of, of his, you know, religious perspective. Because his optics and His laws of motion and everything that they were derived from using reason and using experiments and using observation, and they don’t have that criticism for him, because they don’t have an axe to grind against physics, they have an axe to grind against capitalism. And so they’re going to level this unfair attack, in this case and not in the other.

Gene Tunny  12:27

Yeah. Yeah. I was just thinking, Dan, I mean, I first came across eyepencil, I think it must have been in one of Milton Friedman’s books, because Friedman might open one of the chapters in Free to Choose talking about it, I can’t remember exactly. And Friedman love that example. I mean, the way Friedman always explained it in terms of the market, it provides us clear signal is that price signal that, and that’s all you need to observe in the market. And if if there’s a shortage of say, timber than the price of timber is going to increase, and that’s going to send a signal to the loggers to, to harvest more, more timber. So, yeah, he talks about that efficient signal. And, you know, 30 or 40 years ago, there were, it was much clearer that that was a better approach than central planning, because we had real life, socialist economies, the centrally planned economies still, that were failing to produce the goods and services, the consumer goods that that people wanted. And I might try and dig up some of those examples of those, you know, just the inefficiency of production, the failures to when you got central planning, and you don’t have the market to tell the factories, what needs to be produced, you have all sorts of bottlenecks and problems in production. So yeah, but we seem to lack that now those it’s not as clear anymore, because we’re not in that. There’s not there aren’t in real life. I mean, maybe there are some in Cuba and North Korea, but we don’t see we don’t hear a lot about them. But we’re very conscious of what was happening in the in Eastern Europe and Soviet Union back in the day. I don’t know if you have any reflections on that at all.

Dan Sanchez  14:12

Yeah, and even in those cases, the Socialist quasi socialist economies aren’t really fully socialist because they have recourse to market prices that are generated from capitalist economies. So the problem about socialism that you can see in eyepencil, in Leonard Reid’s discussion of central planning and my pencil but also in Ludwig von Mises is explanation of the calculation problem is that without market prices, production is just arbitrary that that there’s there’s no way of balancing one production course of action against another course of action because you just don’t have prices and you don’t have the the gun either profit and loss to know whether, you know whether one line of production is any better than another. And so it’s just arbitrary. But but at least if, if you have a socialist economy and the capitalist economy exists elsewhere, at least you can use those prices as a as a rough metric to have some kind of rationality in your production. But in a completely socialist world, it would be utter chaos, like there wouldn’t even be that so it would be even worse.

Gene Tunny  15:34

Yeah, you know, it’s good. You reminded me of that. Sorry, Ludwig von Mises the calculation problem, I’ll have to refresh. My understanding of that. It’s a very good point that that he makes there. Okay, there’s one thing I wanted to dive into with your article you write that those who try to dismiss eyepencil do not want to admit that they or their favourite social schemers cannot outsmart or outdo the transcendent order of the market, those who sneer at the invisible hand won a free hand to remould society as they please. Okay, I largely agree with you what I just want to ask you about your thoughts on, there’s a lot of concerns. Now. I mean, there’s concerns about inequality, and housing, I mean, we’ve got their housing prices are out of control, a lot of young people are concerned about whether they’ll be able to afford a house, there are a lot of particularly the millennials and the Gen z’s. They’ve got a more favourable view of socialism than then older generations. And I’m always conscious, I don’t want to have a not that I’m a boomer. But I don’t want to have that burger mentality. Like there are a lot of people who are so try to see where people are coming from. There are a lot of people who think that the market, this is a problem with the market. This is why we’ve got all of these issues. How do you respond to that? Do you think it is such a transcendent order? If we do have this perceived issue of inequality and lack of housing affordability? How do you respond to the people who are critical of of capitalism, or neoliberalism or whatever you want to call it for delivering these outcomes.

Dan Sanchez  17:24

So a lot of the times what central planners or would be central planners, what they want to do is they want to basically pander and demagogue to people to pretend that they would be able to outdo the market, and provide them with more goods and services than then the market would provide. And so they don’t like the idea of economic law, because it puts a crimp in their plans, because it it shows that there are just some things that can’t be done, just like in the realm of physics that, you know, there’s a law of gravity, a president can’t walk off the presidential palace and expect to be able to fly. Similarly, a president can’t impose price controls, and expect there to not be shortages. It’s like these these economic laws, circumscribe the utopian dreams of these demagogues and the central planners, you know, that relates to housing as well. So for example, rent control, central planners don’t want to believe in economic law, because economic law means that they can’t impose rent control, without creating housing shortages for the very people they pretend to want to be able to provide for. So that’s why they are really averse to any kind of notion of a transcendent order any kind of order that that is beyond what a central planner can can encompass, or some kind of an ingenious social reformer can’t outdo, but they do get away with it to a large degree, they are able to put one over on the people to make them think that they can outdo the market. And so they do manage to do a lot of interventions. But then those interventions create a lot of these shortages. They blame that on the market, and then that buttresses their case for even more intervention if people don’t actually understand economics. And so So yeah, it’s true that there are housing shortages, there’s lack of options for living, housing is unaffordable, but it doesn’t make any sense to lay the blame on the free market. Because when you when you trace what is causing these problems, especially in in certain areas in particular is that you, you see policies like rent control, and you see policies like zoning restrictions and all these anti production policies that that put a strict limit on the production of new houses. And if you have fewer houses, then they’re going to be more expensive. Again, it’s an economic law of supply and demand.

Gene Tunny  20:22

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  20:28

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, where we work all over the world. You can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  20:57

Now back to the show. One of the other concerns I hear expressed from people who aren’t sympathetic to Foundation for Economic Education, is this point about monopoly. There’s a growing concern about monopoly in well, in tech, in particular, surveillance capitalism. How do you think about that? I mean, is that part of the transcendent order? Or is that is that something malignant? There needs to be policy action, perhaps antitrust action against? How do you think about that?

Dan Sanchez  21:29

Yeah, I think a lot of the problems that we’re seeing with big tech, again, can be traced to government intervention, we saw with Twitter files, how much the FBI has been in Twitter’s DNS. And I’m sure if we ever had the YouTube files or the Facebook files, that, you know, we’d see the same results. I think that it is really short sighted, especially for conservatives to want to use the power of government and antitrust policy, to give the government even more power over these big tech companies, and expect that to solve the problem when when, if anything, that’s just going to give the government more leverage to be even more censorious against critics of the government. And so it just seems really, really short sighted to me. And the answer is to free big tech in the tech industry and social media and media in general of government and influence. Because if there wasn’t so much intervention, a lot of these behaviours, they’re doing it because of government pressure. It’s not because of, like a market demand for it. And if that government pressure was was released, I think people like freewheeling conversation and don’t like censorship. And and I think market demand would leave these these big tech companies to either them or their competitors and their successors, to not be abusive in their practices. And a lot of times big tech companies, like incumbent, like already dominant big tech companies, they actually like regulation, because it places a heavier burden on upstarts than it does on them. Yeah, even if you want, you know, giants, like like Facebook and YouTube to go under, again, you know, because of abusive practices. Again, the answer is to get government out of it. So that there’s less regulation, and there’s more room for competition.

Gene Tunny  23:32

Yeah, fair points, has feed on any thinking on tick tock, because it’ll mean tic TOCs, a company that there’s a bit of concern about in terms of privacy and security issues has feed on and you thinking on that? Is that is that a special case where there might be case for regulation, or a ban of some kind?

Dan Sanchez  23:50

Tick tock? Like, really, I think the reason why there’s so much pressure on banning Tiktok. For one thing, again, it’s anti competitive. The biggest supporters of a ban on on Tik Tok are Facebook and YouTube, because basically, they want to crush the competition. But the actual bill that would ban Tiktok doesn’t only ban tick tock it gives the government sweeping powers over monitoring and censoring the internet in general. And really, I think it is a a Trojan horse, on one hand for these big tech companies to to eliminate competition and on the other hand for governments to have even more power regulating speech, because ultimately, the biggest threat to our own civil liberties is not China. It’s the American government. Thankfully, it’s the American government that that is having this constant siege on our liberties. And this is just this is just part of that really.

Gene Tunny  24:56

That’s an interesting perspective. I thought I’d ask you Here’s it’s I mean, one of the things I’ve been trying to figure out through my conversations with people is, is China and how big of a threat is China? And does that mean we need to decouple from them? No, that’s not what we’re talking about today. I’ve had conversations with different people. And I know that the it’s a huge concern that a lot of people are really concerned about national security. But yeah, I think that’s a that’s a good point you make about the legislation and the wider reach that it could have. So I might have a closer look at that. That’s been great. Dan, thanks so much for your time. Are there any other points about your article or what you’ve been thinking about lately, you’d like to get across before we wrap up?

Dan Sanchez  25:44

Yeah, I mean, something that about I pencil that is brought to mind by the whole question of decoupling from China is that, you know, what the eye pencil story is, is a story about this vast division of labour, that is at the root of our prosperity, that millions of people are coordinating through the market system. And because of that vast coordination, that vast division of labour, because of the efficiencies of that, that is why we have hot, such high living standards, that we can have this huge population, but living better than any time in human history. And China is a big part of that. Because China, and having integrated with the global economy, that contribution to the division of labour, That is a big reason why we are as prosperous as we are. It’s also a big reason why the relations with China aren’t even worse. Because when peoples are interconnected through trade and through exchange, then that does create an interdependence. But that’s actually a good thing. Because that is what prevents wars, like once people are completely separate, then the only way that they can benefit from each other is through violence is through war. It’s like, there’s a saying that if if goods don’t cross borders, armies will, and that kind of separation, if anything, it would lead China to become even more totalitarian. Because it would create such a like a crisis situation and in times of crises, like the tyrants get are able to gain even more power. And so one thing that, you know, Leonard Read and people like Richard Richard Cobden talk about is that the more that exchange and the diverse division of labour knits people together, the more peace and cooperation and harmony and prosperity it creates,

Gene Tunny  28:00

here so Richard Cobden, an English radical and liberal politician, manufacturer and campaigner for free trade and peace. Yep. Okay. So very good. I’ll put a link in the show notes. So I remember, I’ve read some of his stuff many years ago, but it was a good, good reminder. So very good. Dan, thanks so much for your time. This is this has been really great. And I loved your thoughtful piece on on Smith, and Bastiat and what the the atheist ad capitalists get wrong. So that was excellent. And yeah, again, thanks again and keep up the great work and yeah, hope to see more of your stuff in the future.

Dan Sanchez  28:40

Thank you, Gene. I really appreciate it. Very good.

Gene Tunny  28:49

Okay, I hope you found that informative and enjoyable. I was really impressed by Dan’s insights into the invisible hand and his passionate defence of the free market. I think the main takeaway of this episode is the efficiency of the market mechanism in organising the production of goods and services. The invisible hand is a beautiful thing. Dan describe the market is bringing about a transcendent order, because the results transcend the intentions and efforts of particular individuals in the economy. As Dan noted, Smith, Bastiat and read demonstrated that transcendent order using economic reasoning and empirical observations about human nature, that demonstration did not rely at all on religious premises. Whether those men saw in that transcendent order something literally divine has no bearing on the validity of their reasoned demonstration of that order. I fully agree with Dan on that point. Dan has certainly given me some ideas for future episodes. It’s probably worth talking about the economic calculation problem posed by von Mises in a future episode. Von Mises argued socialist economies would fail because of the huge computational problems they faced They will have to centrally plan and direct the flows of resources across various industries and the distribution of products to consumers. Something the market mechanism does in an efficient decentralised way. In a future episode, it would also be useful to explore some of the failures of central planning in the former Soviet Union. There are various stories about recurrent shortages of bread and toilet paper and about uncomfortable and unfashionable shoes no one would wear but it would be good to delve into some specific well evidenced examples. I’ll see what I can do. What do you think? What either of those future episodes interests you? Let me know. And please let me know what you think about what either Dan or I had to say this episode. You can email me via contact@economicsexplored.com. Thanks for listening. rato thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact@economicsexplored.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if you’re podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

31:33

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Credits

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Podcast episode

EP88 – Evolutionary Economics with Brendan Markey-Towler

In Episode 88, Dr Brendan Markey-Towler returns to Economics Explored to speak with host Gene Tunny about the important insights of Evolutionary Economics, a sub-field of economics which owes a lot to Joseph Schumpeter’s perspective on economic growth emphasising creative destruction. Brendan is the co-author of the 2020 book Economics of the Fourth Industrial Revolution Internet, Artificial Intelligence and Blockchain, published by Routledge. He has a PhD in Economics from the University of Queensland.

Links relevant to the conversation

What is evolutionary economics – Brendan’s Medium article

Books with chapters on Schumpeter:

Grand Pursuit: The Story of Economic Genius

The Great Economists

The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers

Nelson and Winter’s 1982 classic:

An Evolutionary Theory of Economic Change

Veblen’s article:

Why is Economics not an Evolutionary Science?

Please send through any questions, comments or suggestions to contact@economicsexplored.com and Gene will aim to address them in a future episode.

Joseph Schumpeter (1883-1950)