with a similar slope? second do think that it is possible in the united states and five years. [inaudible] >> is clear that countries can change. they shift in their levels of any quality with their health and social problems and u.s. can we see things change over the next few years and how do we achieve that change? and you are not opposing one particular strategy it does seem anywhere you get a greater equality is beneficial. we think these are small

changes, for instance in britain we have just had a 5% rise of the top tax rates and that has been controversial also change can happen. i will hand it to return to talk about the longitudinal studies. >> there are a few that look at over time of the were not very convincing but three or four of them are and two are very convincing but there are 200 studies now looking at and come inequality in different settings and time periods they're not all cross sectional but even if they were we know health changes in income distribution changes won't keep popping up together unless they are moving together. however there is a difficult problem that people with my

age and older are affected by early childhood and a lifetime of different levels of inequality in different positions and social hierarchy and every cause has a different point*. if you look at increase of violence in the point* of very low wages, of violence will rise among the young men pretty quickly. but you know, also that children who are subjected to violence will grow up to become more violent adults. that shows a little bit of the problem of how to do with that. . .

>> my question has to do with sweden. i understand until the 1930s there was great inequality in sweden. but this was unsustainable. so then policies would change that would create much greater equality in sweden, and that then altered some of the social factors that i don't know a great deal about it, and i'm hoping you can enlighten us and know a lot more about it than i

do. >> yes. my little reading i've done about sweden talks about its great equality. i believe there were a lot of labor disputes sometime between the wars in the first half of the 20th century, particularly big strides amongst timber workers. and that troops were brought out and i think fired on strikers. not long after that, labour government came to power in sweden, and remained in power for a very long period. but the prime minister and his chancellor made -- express their policy about being making sweden a classless society, what they called the people's home. and the primary schoolchildren were taught that all the way through. so swedes weren't saying that they were taught, that sweden was a classless society and the people's home. and, you know, you need decades to make these really major

differences. countries have done it that there are other examples, to. >> unfortunate sweden has started becoming more unequal with the election of all the right wing government. when we were in sweden in the simba, there was a real sense of public distress at the direction society was taking. and the three main position parties have actually formed an alliance to fight the next election. so perhaps the pendulum will ship the other way for sweden again. we will have to see. i think they have an election coming up this spring. >> thank you. i want to thank our two offers, kate pickett, richard wilkinson, the authors of "the spirit level." for those of you who want to get more involved in work on ending inequality, both kate and richard called for a social movement to end in equality. there are many ways you can do this. at the institute for policy studies, we have a program on inequality and the common good

which is both helping to bring forward new work like this, but also helping to steer people towards campaigns that both pull up the bottom. there will be many this year, everything from campaigns around the employee free choice act, to anti-poverty pro cairns, as well as campaigns to pull down the topic that will be a lot of initiatives by many groups to pull down the top by raising taxes on the very rich, as well as a series of measures around executive pay. so i encourage you to join us at ips at www.ips d.c. i encourage all to buy this new book am of the spirit level. thank you all for coming and thank you to richard and kate. [applause] >> richard wilkinson is

professor emeritus at the university of nottingham medical school. kate pickett a senior lecturer at the university of york and a scientist at the national institute for health research. find out more by visiting penguin dot c. o. .uk. >> mr. speaker, on this historic day the house of represents opens its proceedings for the first time to televised coverage. 31 years ago america's cable companies created c-span as a public service. today, we've expanded your access to politics and public affairs, nonfiction books and american history. through multiple platforms, television, radio, and online and cable television's latest gift, an extensive review archive. c-span's video library. >> in his book, "how capitalism will save us" seaforth argues that capitalism is the best system to get us out of the

current economic crisis and leaders to prosperity. the manhattan institute in new york city hosts the 50 minute event. >> and all of you for coming out here, special on a weekday evening. before i begin i just like to introduce my co-author, elizabeth ames. why don't you stand up, elizabeth. [applause] >> she was extremely helpful in researching and helping write the book. as larry indicated, this book is really very timely right now, especially after what happened in massachusetts. maybe capitalism -- [applause] >> perhaps capitalism isn't quite such a dirty word as it was a few days ago. but the book was written and easy-going conversational style, q. and a to really explain the essence of the system of american capitalism, what it is, what it is in, answer questions

about it, and addressed the hostility and distrust that the whole idea of capitalism still seems to engender. there is a fundamental misunderstanding out in the world today, including the united states, and in particular in washington and many states capitals as well. about what really is capitalism. a lot of that is based on greed, that it does bad things, that it brings out the worst in people. but as we try to explain in this book, it does exactly the opposite. the free markets do have a moral basis. unfortunately, even people are sympathetic in general to free market economics have many misunderstandings about it. and particularly the paradox noted by joseph, the great economist, is that many of those who have benefited from the system turn on the system. they feel ashamed of the system. so in essence many of us are like fish and want a. fish don't know they are

swimming in. we don't know what real free markets are about. and so because of that, we do things that end up undermining free markets. so people don't learn about free markets in colleges and universities, where they still seem markson games, british economist making a big comeback. people most india certainly don't get it. so there is sort of this mistrust and hostility, a big feeling that this is quite a moral system. so that's why we did it in a conversational style as if you are sitting around a table having a discussion with your kids or your andorre arcal or french or whatever, and discuss what it is and what it isn't and you what we call the wrath of capitalism. it also is a nonpartisan book. unfortunately, there is no virtue when it comes to political parties. we point out that john kennedy, democrat for example, got it right on the dollar, which he said should be as good as go.

got it right on taxes and trade. ronald reagan, republican, certainly got it right on taxes and trade, and the inflation. bill clinton got it right on trade and the importance of a stable dollar, or at least a strong dollar. and another republican, sadly george w. bush, did not get it right on the dollar, which has led to some of the problems, the basic problems we face today. the book draws on free market advocates from adam smith to thomas all, to many here at the manhattan institute. so in that sense, in that sense, it is an assemblage of living voices and anna smith is still the living force today. when you read them. his insight into the moral basis of capitalism. and the essence of capitalism, this is something to keep in mind when you see those hollywood clichés of these evil fat, they're always that, bloated, business types, you know, or sinister looking, it's

always a sinister looking villain, is that you succeed in true free markets only by meeting the needs and wants of other people. you can think of yourself as greedy, lusting for money. which are not going to get the money unless you provide something that somebody else wants. it takes two to make a transaction. adam smith talks about the butcher, think of it today to go to a restaurant, you want the food. restaurant would like to money. restaurant issue the food. you give them the money. you both get something out of it. so you can have that kind of personality, i that personality, the kind that makes babies cry, dogs bark when you walk down the street. you know, kind of, yes. but any true free market you're not going to make it unless you serve the needs and wants of

other people. and because the system is open in a free market, because it's voluntary, nobody makes you do things. it creates these enormous webs of corroboration and collaboration. and it works because no one is in charge. it happened spontaneously, meaning that need to of us to think of the restaurant that the restaurant assumes the farther -- farmer grows the food. the trucker will deliver the food. the truck will be made. the trouble have the fuel. the highway will be there. the restaurant will have the equipment to cook the food and people to serve. all, it's amazing of all the things that go on that we just take for granted. so that is why it underscores and strengthens morality, democracy, the basis of a free society. only free people can make these things happen, and it brings out

in essence even though we read about all the bad people and bad people exist everywhere, not just in capitalism, but human nature it has not changed for 4000 years, before even that. but it is a system so that if you want to succeed in it, it forces you to co-op rate with other people, without you even knowing it. it forces you to figure out what is another person want. it encourages you to be creative and innovative and that doesn't guarantee success. as you know, most new businesses fail within five years of inception. but because it allows for creativity, people are out there striving to do it. and when somebody comes up with something that you want, that person comes out ahead, and is rewarded, rightly so. you come out ahead, getting something you probably didn't even know you needed. we talk about the ipod economy. you know, think of it. 10 years ago if you have said the word ipod, people would wonder, is that some remake of a

movie of aliens, pod people coming? ipod? now it's up to hundreds of most people can't exist, would almost look like aliens now armed wires coming out of our ears and everything. walking around. that's the essence of the system. bad people, yes. every systems going to have bad people. but capitalism, look at the essence. it's been the most successful system ever in enabling people to discover their talents, develop their talents, expand their talents as abraham lincoln put it, too improves one's lot in life. so where is the role of government? sadly, james madison, father of our constitution, was exactly right when he observed that we are not angels. because that, we need government. the governments role in free markets is precisely to foster an environment that allows free markets to flourish. that means the rule of law,

which means laws against fraud, lost to encourage transparency, laws that enforce contracts where you don't get the government doing what it did with general motors and chrysler and going in for political reasons and tearing up contracts to make a political payoff. that's what countries like argentina have done. and have turned themselves from once were the richest nations in the world to one that is in perpetual trouble. contracts enforcement, we have lost to do with problems that price of. in terms of equality, absolutely essential have equality before the law. because i was can a mere individual entrepreneur challenge the existing power structure if that individual is not protected by the law? to many countries, we see people tend to do it here. use the law to quash new entrant, to quash competition, to keep people at bay who might upset their own arrangements. property rights, very basic.

if you own something, it belongs to you. they said in a man's home is his castle. will, thibault decision is up in court other know four years ago, it has been undermined that. we need to get back to basics of property rights. this is not protecting the rich. it's enabling people to get, a two-minute capital, take the risks and know that some is not arbitrarily going to come along and seize it from them. essential for risk-taking. so rule of law, another one, which the federal reserve is completely forgotten in this country, sound money. stable value for a currency. if you don't have a stable value for a currency, it just makes capital less plentiful and more expensive. because it's risky enough to make an investment, but if you have to worry about the value of the currency itself, it just makes life infinitely more complicated and hurts us all. think of it this way. what would your life be like if

we floated the clock? [laughter] >> sixty minutes in an hour, one day, 80 minutes and hours the next. 30 in the day after, 10 the day after. so you would have to hedges, derivatives, futures to figure out how me hours you are working each week. just make a simple. keep it stable. another basic thing, another basic principle, of course, is taxes. big topic. going to be a big one this year. what politicians don't realize, many people don't realize, taxes just don't raise revenue for government taxes are also a price in the burden. simplistic to say, but it's amazing how often we forget it. taxing income, the price you pay for working. tax on profit, the price you pay for being successful. tax on capital gang, the price you pay for taking risks that work out that the idea is a very simple one. lower the price and burden of good things like risk-taking,

working productively, trying to be successful. and lo and behold, you get more of those good things. so removing barriers to business, not only trade barriers but here at home. look at all the licensing laws that are out there. now we need licensing or airline pilots come a physicians and the like, but for braving here? i have an item in the book about two years, i think was minnesota was it, where you had to go if ever procedures to break air for crying out loud. that's restraint of trade. so all of these basic principles, removing barriers, sound money, sensible low tax rates so you don't burden people, enable people to be creative, in terms of helping the government. they never seem to realize it. rule of law, we can move ahead. government also has to respond to changes. one of the things apple is and does is bring about change. you have to bring the lost to

respond to that change. for example, late 1950s, early 1960s, xerox invents the copier. well, what about copyright laws when you can go and copy a book? so you had rise of the fair use doctrine. look at today, what digital, revolution is done, what the web has done. up into traditional ways of distributing music and video. so you need new rules, new laws on the, new thing, new laws on patents. you have to have government to deal with these things that bring about when change. the rise of the automobile. suddenly you had the rules of the road. speed limits, highway patrol, courts, insurance, the whole apparatus. so you need government to do that. of course, the government has to deal with disasters, and when things go wrong and you get a country and you have to do with that. also, safety net. i think most people would agree if people truly can't take care of themselves, something must be done.

we are a humane society. all of that is very different. i talked about rules of the road, but what he meant was, kerry has example, as you don't go 100 miles an hour in a school zone. you're supposed to signal when you turn. but that's very different from the government telling you what to drive, where to drive, and when to drive. sensible rules of the road. so that in essence in shorthand is what government is about. the thing though also is that capitalism is disruptive. when we think of economic growth, we tend to think of more of the same. no, it's not just turning up more widgets each year. it's turning out perhaps a better widget, cheaper widgets, new kinds of widgets. it also capitalism changes society. massa stays on that kind of change. this is where wisest statesmen and states women can come in to make this change, just to these

changes when suddenly something is disruptive. we mentioned the ipod in the book. ipod is a fantastic thing. gives people easier choice and wider choice of music. you don't have to buy it, as we used to call it, or a disk with 15 songs, only one of which you might want. now you can pick what you want, when you want it. in terms of tv programming, your own program now. you don't need it networks anymore. it's there, you choose when you see it. fantastic, these inventions. but look what it's done. mention the upending the music industry, not just the ipod, but what the web has done. look what did you stores that sold cds and disks. a lot of them are going under. and artists, ipod, and the web is a fantastic for artists because everyone now can broadcast music. internet radio, my goodness, thousand, tens of thousands of people can put their, hundreds,

millions can put their music on that ever could have broken through in the old system. but it also means one of the old system if you didn't get the breaks are, by golly, you have a huge studio, and music business behind you that give you fantastic promotion. now you're just one of a sealed in out there trying to figure out. so one of the things that happen, concert industry has come back again. so it is disruptive. the book tries to explain what free markets are. book tries to explain the raps against capitalism. is capitalism more? isn't a brutal? aren't the rich getting richer at the expense of other people? don't regulation safeguard the public good? is a government needed to direct the economy? what about bonuses? made up, greed and the like. so we deal with all of these things. now, what about the crisis we are in today? what of the things we discovered in doing this book is that contrary to belief of many, particularly in washington,

economic disasters invariably have their origins in disastrous economic policies from the government. not some sudden failure of the free markets. [applause] >> without exception. whether it's the great depression, numerous new regulations, massive tax increases, federal reserve, often the stratosphere, the terrible inflation of the '70s, federal reserve again, and this disaster. federal reserve, i know saying the word said, i let's get heavy, there's no more boring subject in the world and monetary policy. i acknowledge that and i will give you a travel tip. if you ever find yourself in an airplane, and coach, middle seat, on the runway am watching your life pass away, if you want

a little bit of elbow room, talk to you seatmates about monetary policy. [laughter] >> you will have all the room you want. or if any of you are single, want out of the day, talk about monetary policy and you will never see that person again. guarantee. but in essence, monetary policy is similar to an automobile. you can have a magnificent vehicle, but if you don't have sufficient fuel used all. too much fuel, to flood into. just the right amount you have a chance to move forward. same is true of monetary policy. the fed gets it wrong, you get the world of stalling or flooding the engine. the early part of the last decade, the fit start to print for its own reasons too much money. they artificially kept interest rates low. ladies and gentlemen, you could not have had a housing bubble is the fed hadn't supplied the fuel for it. it just could not have happened. anytime, especially a bank as

important as the federal reserve prints too much money, provide excess liquidity, that things will happen. in this case, it first hit the commodities market as it always does. and went into housing. the 1970s, it went especially in the energy industry and in agriculture, and a commercial real estate. look at iowa, in the 1970s they were encouraged to borrow, lan prices soar, crop prices were. this will go on forever. and in the crash came in the 1980s. texas energy, real energy space had a depression in the 1980s. in fact, every major bank in texas went under, once controlled local. every single one had to be liquidated or bought out by another bank. so it's just where it's going to happen, but when the fed makes a mistake, bad things will happen. freddie and fannie. fannie mae and freddie mac, to

government creations helped the bubble. by the end of 2007, one and a half trillion dollars of suspect paper. no private companies could have done that on such a scale. and then when the disaster hit, another boring subject, accounting. government regulation, changed. a thing called mark to market accounting deals with how do you value banks capital. traditionally, a bank bought a bond say, $40,000, for regulatory purposes it was kept on the books at $1000 less the bond went bad or the bank so the bond. middle part of the last decade, especially in 2007, the rule was changed treating it like a day trading account. so on the markets it turbans, suddenly banks capital was not just severing, something a hit from bad paper, but also from perfectly good paper where there

wasn't a decent market. so if you look at the actual losses of banks and insurance companies, do you realize that most of those losses came from book losses, artificial losses, not actual cash losses on their assets? if we had mark to market accountable years ago, remember the savings and loans disaster? commercial banks loaded with latin american loans, commercial loans, commercial real estate loans, if we had marked to market then, you take the eight top commercial, kentucky marshall back in this country, you would have wiped the capital out three times over just on the basis of their latin american loans. we weren't stupid 20 years ago. so we had marked to market accounting. every single one of those, the fed, freddie and fannie, crazy, regulatory accounting all came from the government. so where are we at today? thankfully, last year march and april, thanks to come hold your

seat, congress -- [laughter] -- occasionally something good comes from it, they put pressure on the sec, what they call the financial accounting standards board, mark to market was amended. i wish it would have been suspended or prohibited, but it was suspended, or at least modified. that's when the stock market turned, and that's when the criticism started to work again. so, where are we at now? thanks to the ending of at least suspension to mark to market, credit is partially working but not whole again. still small businesses and individuals still have a hard time getting credit, very uneven because regulators, i love it, the present goes out and says land, banks. he is not bashing him. and his own monitors go to the bank and say sure up your capital, tightened lending standards. that's very much encouraging loans. so the system is a fully working yet. and it gets to the value of the

dollar. we could dollar means weak recovery. we should have learned that from the 1970s. if you have a weak currency, you're not going to get a strong and durable recovery. you will get some recovery, economists are a strong and nearly, but you're not going to get a durable ones such as we had after the early 1980s for two decades. so, keep this in mind. a little couple of factoids. when government spending goes up, as a proportion of the economy, unemployment goes up, trans up. from the mid 1960s to the early 1980s, government spending trended up. and unemployment did as well. to the point what economists thought, well, the lowest you can get unemployment and not have not a rip of inflation is 6%. reagan came in, cut tax rates, got rid of the terrible inflation, did other positive things.

suddenly, well, eventually you can get it down to five. therefore, 3.9. now look where we are today. binge spending, now we will be lucky, 10%. we will be lucky to get it down to seven or eight in the recovery. administration will hail, great progress, seven or eight, but it ain't 3.9, which is what you get if you rein in government spending. the same thing with the stock in real terms. spending goes up over time, not talking month-to-month in that kind of thing, but a trend line up, stocks go down or stagnate in real terms. so free markets work, and let me just close by delinquent with an area where people say, well, free markets don't work. and that is health care. we have a whole chapter in the book on health care. people say, well, it doesn't work there. we need government to help out. we don't have free markets in health care. we have a hybrid system, but we don't have true free markets. think of it.

you ask people, why is there a health care crisis, they say people want more health care. people are living longer. as i get older i don't think longevity is a crisis. my heirs might but i kind of like it. [laughter] >> but think of it. in any other part of our lives, if people want more of something, people say what a great opportunity. people want more software, silicon valley, great. people want more cars, detroit would be very happy. why is the demand for more health care consider oh, my god what a disaster. huge liability. we can't afford it. because of the crazy way we pay for it. it is third party, the consumer, the patient is not in charge of the resources. think of it. you have government -- you have -- you're working. your employer offers you health insurance. that's nice, a sort of take it or leave it. so the insurance company, why have they responded? they don't worry about the employee. they want to make sure the

employer is happy with them. you the employee may not have gone say i wish the planet was different. but you don't count. you're not writing the checks. you're not paying the bills. it's the employer. so the system is geared to bureaucracies, insurance company and applause. it's not a bad system, but it's not a sustainable system. think of it this way. you go to a doctor. go to a clinic, go to a hospital. you ask what something costs. why, that means you either don't have insurance or if you're a. [laughter] >> why else would you want to know, what's it to you what it costs, you not. are you crazy? and yet anybody, everywhere else we want to know where we are going to get for our money. so you don't have true, free enterprise. you don't get the kind of constant innovation. you don't get more and more samples of wal-mart offering for dollar prescriptions. and sort of a dock in a box or

you can go for a routine medical procedures at a local facility and have a registered nurse and the quick take care of something quickly, efficiently, at low cost is something, the nurse can look you over and said all right, you've got to go to the hospital. because you don't have to go to the emergency room if you sprain your ankle or something. but yet, that doesn't exist. so can we get free enterprise in health care? of course. start offering some of the proposals nationwide shopping on health insurance, i live in new jersey. like new york we have 90 regulations. so a policy that costly 15 or $20,000 in new jersey, in pennsylvania for probably $8000. the legal to do it, why? you can buy a house in pennsylvania without insurance. you going to be, radio, using all those ads for auto insurance, progressive, geico, allstate, nationwide, all of the. was the last time you saw a similar as a guy goes on health

insurance? got to remove those barriers, get real competition. equal tax treatment. business gets a tax reduction by the injured, why shouldn't you? so if you don't like what your employer offers or employer doesn't offer anything, you go shopping on your own, not suffer a huge penalty. toward reform. what about allowing small businesses to pool together to bite insured. basic stuff like that. people say okay, that's all well and good but what about the uninsured, what about people with chronic conditions? what do we do about them? think about something even more basic than help. food. no food, no nothing. and yet, look at food. farmers grow food. private companies process the food. truckers deliver the food. restaurants, stores sell the food. not just the government said because some people can't get food we have to take over. growing and distributdisturbing and selling of food.

you would have the soviet union again. will they would be no obesity problem. we would all be starving. [laughter] >> and so what happens if people can't get food? we have food banks, we have food stamps. we deal with specific problems. why can't we do the same thing with health care? about real free enterprise in health care. and there are specific problems, deal with the specific problems. government doesn't have to take over the whole system. and can you get free enterprise in health care? you know the two examples, lasik surgery eyes because you write the check, cost less than 10 years ago. providers always trying to make it more attractive, more affordable to you. cosmetic surgery, none of you need it. [laughter] >> that's called pandering. [laughter] >> yeah. i tried it in politics, didn't work. [laughter] >> which is why we are meeting here instead of my library my presidential library.

[laughter] >> but think, think of it. cosmetic surgery, and a growth industry the united states. big growth industry, demand has grown sixfold 40. huge technological advances, yet you haven't had the kind of inflation you have had in the rest of medicine. you're in charge of paying, writing the check. so what do you do if you want a procedure done? you scope it out like you do for anything else. if you have friends can keep their mouths shut, you might ask them. and you do with it. and so that's what health savings account, removing barriers there. your employer can put the money to the account, but you are in charge of the resources. so the system is geared to you as the individual, not to third parties. it can work. so in essence, in essence, we face a crisis, but there's no reason why if we do a few things right, stable dollar, lowering tax rates, recognizing the role,

proper role of government in a free market economy. we can quickly get out of this. people, and they will get to the q&a, people have said well, it's so hopeless with all these unfunded liabilities. here's what you do. recognize that there are liabilities and there are assets. if you have the kind of vibrant, growing, innovative, economy that we had in the '80s and '90s and early part of the last decade, where the new companies could flourish, that major not only get economic growth, but asset values go up because people see a future so that they're willing to bid for assets. so you take the 1980s under ronald reagan, even though the national debt almost tripled at 1.7 could about what actually was a lot of money. [laughter] >> one point seven trillion, you know, he spent a lot on defense. was a good investment. won the cold war which nobody thought was possible. congress as usual when its own way on spending.

but 1.7 trillion. do you realize the wealth of the nation went up $17 trillion? grow the assets. americans today, even in this terrible economy, have gross assets of $67 trillion. net assets of 53 trillion. you get a 10 or 20% increase in assets, because you suddenly have people see a future, you see vibrant future again, 10, 20 to increase in assets overwhelms the stupidity coming out of washington. and then on the liability side, health care. those labels assume medicare and medicaid no productivity. you allow a little free enterprise it will flow over to medicare and medicaid. social security, forget it for my generation. but there's wealth of the nation to pay those liabilities. the key thing is make sure younger people go into a new

system where they own their own personal accounts. where that money is invested in the real economy with proper safeguards, and not, and bridges to nowhere and where else they build in that town. you do that, over time, as we go to our ultimate reward, that cost of social security will start to update. and to get a vibrant system where you make the choice of when you want to retire. the amazing thing is you have to do this properly, people end up with more in benefits than it possibly get from the current disastrous system we have today. so, free markets is about markets are people. remember that. and free people, as i pointed out, proper rules of the road, will figure these things out. people constantly figure. there's a need, how do we deal with it? how do we make it an opportunity? that's the blessings of liberty. thank you very much.

[applause] >> we will feel some questions. just wait. i will acknowledge your. wait for the microphone to get to because we're covering this with c-span to want to make sure that our television audience hears your question as well. actually, bob, what in the back. we will start back there. >> well, you mentioned joseph and maynard keynes. i would gather you would lean towards joseph, but apparently white house didn't. so how would you have worked this out between the two? >> well, as you know, keynes rose up to promise, he was, in britain before the great depression.

that's when the depression made him the icon. the depression was seen as a failure of free markets, even though it was government disastrous policies that created that disaster. free markets got the rap for it. friedrich von hayek made a huge public relations mistakes in government should do nothing instead of saying they should reduce taxes. and so keynes, that's a very for short and, for a while canes won the debate and it was seen as a stabilizer of the economy. government is not a stabilizer. it can provide safety nets for people, but don't mistake that for stabilizing the economy. stimulus programs and i will be blunt about this, never work. name me one that's ever really brought about stable, long-term economic growth. never, ever. stimulus means you take money from one pocket and put in another. it's the equivalent of taking a bucket of water from one end of april and pouring it into the other end with some evaporation between. does not increase the supply of

water in the pool. you only do that with incentives. so keynes has had a comeback. government helped with the coming. free markets get the rap and when governments make mistakes like inflation, and keynes get inflation right when he said what he disrupted social force that is, it undermines the moral fabric of the society, brings out the worst in people. use it on wall street that goes forward about wall street's terrible behavior, the way you deal with it, you can shake a fist, that's fine, but if you have a stable dollar, suddenly the trading profits and currencies and commodities go down exponentially. commodity prices are less violent in nominal terms on the dollar, which is what commodities are priced in. stable. you don't create inflation. you don't get excess profits but what happens with inflation? you always get a huge run up in the commodity prices so it looks like oil executives are gouging you. this happen in the 1970s and it happened again a few years

ago. it might happen again today. if they keep this up. and wall street can never have had the profits and bonuses and everything else if we have had a stable financial system. now, that doesn't mean we don't need reforms in a system. we've got to get rid of this idea of too big to fail. cannot have that in a free economy. that should be studied very carefully. but in terms of keynes, what do you do with keynes? you fight them with books like ours. you get debate in the public, free people, not a handful of mannerisms and washington. keynes actually thought very sophisticated men in many ways but he thought a handful of enlightened people could guide the economy, ignore the thing called politics. people are going to put pressure on government, when government has powers. and he just, that sort of glided over his head, even though he was a man of the world. so he is wrong, and by the way,

just to trumpet our horn a little bit, in 1982, which was a centennial of the birth of keynes, we did a cover story by peter drucker, the great management guru, very classic. he wrote on canes and trumpeter and at times most people i've never heard of joseph. now he is a household where but certainly much more popular than he was in 1982. keynes was to bring. and compare the two. and joseph i think one the debate. he realized it was the entrepreneur and recognize also that disruptive impact of capitalism, which is what states people should be focusing on. dealing with the disruptions not trying to either prevent them or having the government run the economy instead.

>> this is a very simple question. if you drive any kind of vehicle similar to the one that was driven in the state of massachusetts? >> my wife does, and so far i've had no word that she is going to make it midlife career change. and i tried to change, so even if i drove a truck it would not be to be more for picking up things, not votes. and i'm an educator now. i tried it twice. [applause] >> try not to stir things up. >> if you are against, or think about the market as being, you know, wiser than the government

and you wanted a stable dollar, and politics out of it, wouldn't that be better just to have the dollar be kind of a commodity that is produced by independent printers, or not by the government? >> well, don't -- is a whole theory from very learned people about what is called competing currencies. and lawrence white and others talk about it. i think for our purposes now that people are just going to say cute don't have to worry about whether i have a city dollar or be at a bank of america.org golden dollar. i think the thing to focus on is how do you get a stable value for the dollar so you're not relying on federal reserve, and daddies you have to, and this will horrify economists, and

that is you have to have a tie to gold, so if you want to be sophisticated am a basket of commodities so you don't look like such a barbarian. basket of currencies that are spread between bonds, you know, just so you show you're not quite a simpleton. i made myself out to be. [laughter] >> but gold got a bad rap with the depression. it did not cause the depression, but he got the rap. and we'll deal with it in the book. but we had the dollar tied to gold right to the early 1970s. it was called the bretton woods monetary system. and hard to work until we blew it up. it wasn't just president nixon who did it. there was a whole idea, no idea we didn't need to have this anymore. so since the government has a monopoly on the money, the creation of it should be tied to gold. why? because it has a steady value.

you can destroy it. you can't eat it or drink it, so it's all that's been supplied is out there so you don't get supply shocks. it's like a blessed. not perfect but better than anything else we have out there. and the federal reserve itself has been around 96 years, and the dollar has down and died in 96% did so having humans try to do it does not work. the fed should have only two jobs. stable dollar, and dealing with panics. period. and in terms of gold, just to show we can be modern, you don't have to own an ounce of it. all the fed would have to do is look at the price and pick a range so we don't look like we are inflexible. pick a range, and just picking numbers are between say, 850 and $900 an ounce. so everyone knows it goes above 900 the fed will tighten it if it goes below a 50 it is going to loosen up. period. done. in between they have something to do each day.

[laughter] >> give them some employment. so yeah, you do need a gold base. and bernanke, he buys into this falsehood that gold cost the depression. it didn't, but that's another subject for another time. but you need stability. absolutely need stability. >> i'm almost at a loss, because it is a unique experience to agree with everything. snarkier odyssey a bright man. [laughter] >> i knew you would say that. but i'm not totally at a loss. i'll give it a try. i was intriguing pleased that you mentioned that capitalism has a moral basis. the founders asserted that man has rights, and that to secure these rights governments are instituted among men. in my mind that's a purely separation of state and

economics. would you expound on the moral basis of the capitalism and tie and individual rights with everything else you said? >> well, to succeed with a free market, as we pointed out, you do need to satisfy to serve the needs and want of others. and it brings out your creativity. and it's also, if morally precisely for that reason that allows you to develop their own particular talents. and because it creates not just wealth in terms of a bank account, but in more and more kinds of occupations and jobs, it gives people a chance to develop talents that may have been irrelevant 50 or 100 years ago. take michael jordan, the greatest basketball player ever. if you didn't have the basketball, try baseball, he didn't get very far with that, and what else? you know, but because there are

so many things that people could pursue, he could find something where he had a very unique talent, very profitable one. so in that sense, by giving people such a range of choice, they do have if they wish they pursuit of happiness, discovering what is unique about themselves, and being able to develop it. and the nice thing is, and that most system is your success is not at the expense of others. you are not robbing a bank. you are not shooting somebody, plundering their farm, and that kind of thing that our founders understood that we are endowed with certain energies and ambitions. particularly hamilton and franklin. and how to devise a system where those energies and ambitions can be constructed instead of something just have to be reined in. because it leads to destruction. and that's what commerce is about, precisely because it serves the wants and needs. you have to have a basic value

of morality. if people don't believe in the rule of law, then all bets are off. if you believe that you should always try to cheat your neighbor, the system is not going to work. you're not going to get very far. so you do need that basics of core value that it had the basic core values, then the system, in effect, reinforces those values, it rewards looking to the future, it rewards collaboration and working with others instead of going off in a cave and shooting everybody. and so, hamilton understood. franklin understood it. so here we have the seeming care docs. united states, the most commercial nation ever invented and given also the most philanthropic nation ever invented. people think what a contradiction. no. both serve the needs and wants of others. different skill sets, all acknowledge that.

but two different ways of serving the needs and wants of others. so this idea of you make your corrupt bargain and commerce and then you make up for it by giving it all away, no. you give it away because you are trying to serve others in a different way. that's what it's about. so two sides of the same coin. they're not poor of us. they are two sides of the same coin. america exemplifies a. we don't know it. serving the needs and wants of others. i make it sound like a very pretty system. people are not always pretty. the nitty-gritty of day today, and our founders understood that, which is precisely why as you pointed out you have separation of powers. you have a checks and balances. they feared passions. they want government not to be efficient so that you don't get these violent swings that they were horrified by the 30 years war, the passions that led to that. so they understood our limitations, but within those

limitations they created a system that enabled people to, they can put, i appeal to the better angels of our nature. >> i am michael myers, new york civil rights coalition that the definition of free market is astonishing. i think it is aspirational as opposed to reality. how do you have a free market in the land and society that is tied to everything, including for the reserve to care, policy, the food subsidies and other subsidies to private enterpris enterprises, through bailouts of the corporations. it goes on and on and on. the government is in effect a central part of our economy. and not to even mention tax problems and policies of the government but cause. how do you in this reality, the

framework of modern american society, say that this is a free market environment? >> well, despite what's happened in the last couple of years, in the context of the real world, even though there have been a lot of assaults, people still have more scope to do things in this country than most of the country. you look at western europe, japan, stifled by tax. stifled by regulations. which is why they all try to immigrate here. and britain, and a recent years, was moving in that direction, which is why sarkozy, when he ran for president several years ago, noted that the seventh largest french-speaking city in the world was flooded. all of his entrepreneurs were going to london. they couldn't hack it in the thicket of france's regulations. so you don't get perfection, but part of the reason why we did

this book was precisely to arm people to do battle so you can start fighting back. remember, before the great depression the federal government was 3 percent of the national economy. spending with equivalent of about 3%, states were more. but small potatoes by today's standards. because the depression was seen as a catastrophic failure free markets, plus the catastrophe of the first world war, the whole moral strength of the west was dissipated. got to totalitarian movements and rocks ours still here today. look at the philosophy of al qaeda and others that it's not mistreated the koran, marxism, totalitarianism came out of world war i. so bad time. but that doesn't mean we can't be we occupy the high moral ground. and rollback of these areas where government is not playing a constructive role. and that's what i've always

thought, especially after 1994 when the gop, republicans won control of congress, one of the things i think we failed to do was focus on the big things. there are a ton of junk programs in washington, tens of thousands. focus on the big ones, the corrupt tax cut, half of the lobby in washington recalls around the tax code. you get rid of that, something like the flat tax, huge game against the leviathan. on social security allowing younger people to have their own personal accounts with proper safeguards. huge assault against the leviathan. health care, same thing. education, same thing. having parental control of education. you win the battle and those four areas, health care, education, tax policy, and social security, by golly, we are with the rest, we can deal with. and the federal reserve, that

was created on the idea of dealing with panics and elastic currency. well, we know what happens when it asked the currency. it just becomes very, very elastic to where everything, you know, becomes worthless. so we have to have proper safeguards there. and so yes, we have a lot of imperfections. but we can certainly deal with the worst of them. and give a lot more room and scope for free people. the nice thing is, once it starts to happen, that starts to reinforce itself. and understand that when disasters happen, it's not sudden failure free markets. it's usually a failure of government policy. not malevolent, but by golly, the result is a disaster. and that's what we've got to keep in mind. and don't be bashful about fighting back. they't