>> you can see that live at noon eastern on c-span. back here on c-span2, more discussion on nuclear issues with a preview of next week's nuclear security summit. later today booktv primetime, live simon johnson talks about the boom "13 bankers" "on the

brink" and also also bill and janet cohen on "race issues." all this month see the winners of c-span studentcam video documentary competition. middle and law school students submitted video on one the greatest strength or challenged the country's facing. watch every morning on c-span just before washington journal. and at 8:30 during the program, meet the students who made them. for all of the winners, go to studentcam.org. >> he gives his thoughts on how the economic recession has forever changes capitalism in the u.s., what free market systems have to do to survive in today's global economy and what it all means for the

conservative movement. from yesterday, this is about 1 hour and 20 minutes. we'll show you as much as we can under the u.s. nuclear discussion gets underway around noon eastern. >> welcome to the bradley lecture titled conservatism and the new capitalism. for many people in the free enterprise movement, these have been difficult time. over the past month and couple of years, we see government boring and spending that seem out of control. in the same of stimulus we see little else beside social engineering and pork barrel spending. more years, in the free enterprise movement we have warned that this kind of behavior leads to unintended consequences. we've shown that's the case. there are unintended

consequences of the type of behavior that we see today. it's depressing to see what appears to be a lack of listening to the lessons that we think we've taught. maybe even the idea that people haven't learned what we thought they had learned. well, irvin today says that we really need a new set of arguments. he's going to tell us what they are. irvin steltzer has had a career that if i were to describe all of his achievement, it would take up all of his speaking time. irvin is the director of the hudson institute economic policy studies group. he's currently a columnist from the "sunday times of london." he has author and edited many books. he's been on the faculty of

several university, including cornell and new york university, he's well known as the public intellectual and the free advances of enterprise and capitalism. and we're delighted and honored to have an old friend here to speak to us about conservative and the new capitalism. irvin steltzer. [applause] >> thank you. it's nice to be introduced. excuse me, can you hear me in the back? it's nice to be introduced by someone who's young enough to not be surprised to be listened to. i well you, i approach the assignment with trepidation for a couple of reasons. the distinguished scholar that is proceeded me, this is a very distinguished series were

students of the still gush philosophies. that's not what i am. my theoretical tools have been bent out of shape in the real world in which second best reigns. i'll try to avehicle code the effect of lecture like this at this over by overstating a proposition or two in the hope that outrage will keep you awake. i'm good at that. the commissions i've had with reality makes me far less certain than the experts who have come before you or who's materials you read. so that those of you who have come for certainty can leave early, i was never certain that keynes had it right.

i'm not now certain that those who believe they are following their masters voice by boring and spending have it right now. i'm deeply suspicious of people who profess to know what cure for our current predicament this man would have had. i can't imagine a brilliant investors like haines surveying america headed towards a debt ratio and recommended spending as a reaction to that circumstances. but i don't know. i'm not sure that free trade which appeals to so many of my conservative friends is a good idea. i'm not sure adam smith it right or retaliation for revenge which

he thought thought was a nice virtue. remember, he was less interested in expanding the division of labor efficiencies in a pin factory to the world than he was in increasing the wealth of nations. which is a very different thing. i think there's a lot of wisdom in joseph's emphasis on the role of creative destruction. but i'm not certain how to treat the social cost of that special form of creativity. in fact, joseph himself worried about the social cost involve in destroying existing structures. i'm not even certain that monetarism is the panacea that margaret thatcher admirer contend as they decide how they are going to measure the money supply. m1, m2.

i remember going to a lunch. she said do you use m2 or m3 to measure the money supply in [laughter] >> but i'm not certain that we can ignore monetary measures. and i'm not certain that shouts of second best should cause economist to back their kits and go wherefore it is economist go. i'm rather purveyed the attempt to realize the unrealizable. the best maybe a invitation to the worst. the parols of ewe taupism is messy. second best is messy. it's realizable. best is neat and somewhat unobtainable. and most of us, and i suspect most troubling to the audience,

i'm not sure uncertain consequences is the reason to leave market power. for several reasons. doing nothing has unintended consequences as the recent turmoil shows. adam smith's invisible hand. in fact, we those the unintended continues sequences. not all unintended consequences are undesirable. i don't think we have to fear them so long as we have modest goals. if we are a little wrong, we can fix it as we go along. he pointed out it's a utopian fantasy to think we can eliminate all of capitalisms court. i just think, i don't know, i don't worry as much as unintended consequences as other people do.

i was encouraged in this in a conversation that i had with irving some time ago in which he said he read an essay by robert in which the con september of unintended consequences was tribed. and he said here i was planning to change the world and i realized i could not know the consequences of the changes i was suggesting. and then i said yeah, but you went on to change the world and to found the public interest. so you weren't paralyzed by the fear of unintended consequences. they were out there. you know about them. had he decided to stand before history yelling unintended consequences we wouldn't have had the public interest. i think that's something that conservatives really should think about. that's only one reason why i don't live in terror. another again -- you have to

understand when i came to washington, i was a blank slate. i came here because irving crystal said you've done in no, about thinking. come to washington. and i had. he and his wife had a profound effect on me. he talked about the role of government and legitimizing and delegitimizing behavior. i think the success of government legitimize the behavior that we saw on wall street. i think it is to president obama's credit to delegitimize. although the motive is not a careful reading of his works. and the power he has to do so is more than just a chance. that's an interesting example which did not take any

government money to the fury of its shareholders. it's leading executives have define up large portion of the bonuses. another leading banker in america who was entitled to 70 million because of the performance of his investment bank and i don't name -- goldman sachs -- decided to take it all in deferred stock to be cashed in over fife years. i think there is something to be said for the role of government in legitimizing or delegitimizing behavior. it apparently works. let me end the excuse. i've told you why you should leave. this excuse for abandoning government is evil for an outline of principal, it's conservatives can support. two final thoughts. i'm here to stimulate thought, to open discussion, to do what charles murray calls a thwart

ex. -- experiment. that means i don't really mean it because it was a thought experiment. that's really true. james buchanan wrote it's helpful to take bold charges. i plan to do that. second, i mean no disrespect for the great proponents of limited action in the economic sphere. but they lived in a society that no longer exist. adam smith and others. he wrote at a time when shame was a break on economic behavior. when transactions often occurred between parties on representational capital which is a concept unknown. it was the most important asset. that was then, this is now. i don't think we can waiver our copies of the wealth of nations

who would expand the role of government and expect that academy to have the force of waiving at a vampire. in fact, smith, if you read him, was quite an exponent of significant government action. he would rely on markets of the sort that we no longer have. the markets that now function. nor can we rely on the religious rerival. ahead of goldman sachs argued he's doing god's work. which is the first work of god and man known to the world. those of us who admire thought feel comfortable relying on something more down to earth than a religious revival. i got past that paragraph of you staring at me. but that's okay.

a kind of new capitalism rooted in old varities, adapted to the way we live now. i think it's under -- it's absolutely imperative that we are to take that task at a time when capitalism is under such severe attack and strain as arthur mentioned, the democratic call tappism is under attack. now that's not to say that i've been sensitive to milton friedman's warning that the bulk of the community almost automatically favors any expension of government power, as long as it's advertised to protect individuals, protect the environment, or promote equality, a term he puts in quotation marks. i will try to avoid that trap. let me start with an undenial fact. capitalism have been unrivaled

and to distribute those goods and services more wildly than any other system which with societies have experimented. carl marx, he and his partner when he was out fox hunting said during its rule of scarce 100 years, it's created more productive forces than all of the proceeding generations together. that's certainly true. they had that right. not how the results would be distributed. they had that wrong. the poor live better than most of the middle classes and far better those in the economies of africa and the middle east. despite the vast natural resources of those regions. russia, india, china, the challengers of american prosperity and might have a long

path to travel produced by capitalist economies and prove the limits to growth like russia and china or bureaucrat heavy economies, like india, can duplicate the performance of the american economy while maximizing the scope of freedom. i don't think there's a bit of evidence that the economies can accomplish what dynamic capital ism has accomplished in america. what do i think the role of government is? let me try five suggestions to you. i've arranged them in the order of mounting the fences to conservatives. so that the first one will be easy and then it gets harder and harder. i actually mention there were taxes somewhere. but you'll find out.

first, government has competition. economic and social function, as i have argued in the book that the american enterprise and carl beauman was nice enough to public some time ago. it forces firms to vie for consumer favor by offering better and better products and an open economic system which is important and gets the preventive from blocking the entry of upward thrusting newcomers, thereby contributes to the social smoke. that means prosecuting cartels, preventing behavior, refusing to allow merger, all of what the antitrust laws are all about. now i recognize that the argument that i've gotten is that it's difficult to tell the difference between good old competition and predatory

behavior. i think that exists in the minds of academic critics, those of us who have worked the area know how to distinguish those things. the facts determine it. i could give you a lecture on that. but the six people who would be remaining here aren't sure. even they would be bored. the obama administration has criticized it's predecessor, now that's not news, for the lax enforcement of the antitrust law. the news is he's probably right. conservatives do not hop on the bandwagon for really not only consumer interest but for two other reasons. one is if you replace the invisible hand, competition. if you don't foster it, you're going to get regulation. that's the only alternative.

even hyak pointed that out. the only return is the control of monopolies by the state. i think that we should keep that in mind when we get a little annoyed by some antitrust case that we think is picking on some great big efficient company. we also, i think this is probably more important as i get into my social science as opposed to economist mode. it's very important not to fore close for newcomers. we had a mobile society which prevents the kinds of class war fairs that you see in other constructed societies. and you go try to start a business in france. it's -- believe me, it's very, very difficult. it's even difficult in britain which is supposed to be a more open society. and i'll give you personal experience. i opened an office in

washington, unfortunately, and i opened an office in london the same week. here i found a tiny piece of space i liked, signed the lease, got somebody who knew how to spell and butt my name on the board. 40,000 pounds later after jousting with the tax man and every other person i'd never met, i was also in business. if we don't keep our society open and mobile, i think we're going to be in very, very serious trouble. the -- now again, i'm not arguing that these laws are, you know, easy to enforce. but i do think that they can be done, it has been.name historically. and i think conservatives would do well to rally around that flag. because it means less government, not more. if you keep competition moving, you don't have to have the

regulatory structure that wellian king, who's here, and i have washed in industry after industry after industry. that's one thing conservatives can do. can you picture them testifying for the expanding budget? it's hard to imagine that. yet, they are wrong. second, where effective competition is impossible, we need regulation. you can't get out of that. there are, their remains something called natural monopolies, not airlines and telecommunications, but the transmission of electric power over long distances, distribution of natural gas on the street of our cities. those are bound to be monopolies , at least during which price

gouging is possible for a very, very long time. there you need government direct control of prices and profit levels. sorry about that, but you need it. and you have to do it as best you can. thanks to technology, we are capable of withstanding the howls vails of destruction. we used to think the airlines couldn't tolerate competition. we know that because we have to buy new luggage when ours got lost. sooner or later, monopolies attract regulation. ask the insurance companies who spent decade sheltered by laws that prevented state competition and exemption from the antitrust law. look where they have got. they have to the point where they will have their premium regulated if they were public university. they would have been better off with a competitive structure.

there are areas where regulation might enhance, where regulators might see the regulate as clients to be protected from competition. there might even be some corruption, although i've been around regulation for a long time. i haven't seen, well, i won't say any, no significantly large. i've seen stupidity, bad acts, i have seen the kind of corruption that other countries see when they have direct regulation. e.g. the closest i ever came was, you know, in new york city, the taxicab fares are regulated. mayor asked me to redo tax regulate. i have several bright ideas. like charging more in peak periods, so that more cabs would

come out. what i didn't realize is they had total income goals. so the highest the fares, the quicker they went off of the street. i also didn't realize when you start fooling with this, you better stay as far as away from statin island because there are people who do not appreciate interferences with the income levels. so again, we do create a government of men, not laws. we create regulations because they write regulations that are very difficult to get courts to review. but the alternative is unregulated monopoly power which is offensive, i think, to most people and will, as an alternative, as it has in other places, lead to naturalization. i think that is the worst of the evils. i suggest that this kind of

neoorthodoxy that i'm suggesting is preferable to just say no when any regulation of economic activity is suggested. third, i think government has an obligation to see to it the social cost for private production and consumption, they are internalized. the course of those decisions. if gasoline cost $3 a gallon, but doesn't include the cost of global warming or the consequences, those cost should be internalized. so that the consumers bares the full course. now let this audience which i'm detecting is souling beginning moving its lips, and becomes -- goes from sullen to mutinous. let me make two points, taxation

is less susceptible to government failure than regulation. if you have regulation, you build self-sustaining bureaucracies which is what happens when we try to control the emissions. i don't begin to tell you, that is unless you are a lawyer or consultant, that's a nightmare. and taxes on the other land, you sort of them them and leave. but it really isn't as onerous as the tax on gasoline. fuel efficiency standards are set by chuck schumer who lives in new york. i don't know if he walks to the super market, he sends his staff or whatever. they hate cars. these people hate cars.

come out west. we drive 40 miles to get a pizza. so the notion that you just -- you load $1100 on the cost of a vehicle because you feel like it, better off to pay the gasoline tax. then everybody would pay the same. the president's car gets 10 miles to the gallon. but it is quite heavy. so i think conservatives should prefer taxes that incorporate the cost of the social cost of externalities in the products consumers buy. you think we should be the last to have the consumers passing their cost, their private cost on to society as a whole. now, the question, of course, of identifying externalities, there's no easy thing.

but i mean you can do it with as much accuracy as can carol browner identify the emissions from your lawn mower. so i wouldn't worry too much about that. here's the hard part. that was easy. that was easy. what do you do with the externalities are positive? which gets you to the housing market. now with the housing market, it creates such angst, especially in this building that i hesitate to do it. margaret thatcher favored. this was a long-standing conservative objective. why? because it produces positive externalities. it produces more stable communities, better sch