>> up next congressman eric cantor introduced arthur brooks at an event held by the american enterprise institute here in washington d.c.. mr. brooks argues that the government policies have weakened the american traditions of entrepreneurship, personal responsibility and upward mobility. this is about an hour, 10 minutes. [applause] >> good evening carl and thank you very much and welcome. it is a real pleasure for me to be here to make an introduction of someone who i know needs no introduction here at aei. i first met arthur brooks several years ago, shortly after becoming the minority clip. i will never forget the discussion that we were supposed to have for about 15 minutes that lasted perhaps an hour when we first met in my office in the

capital. i was struck down and have continued to be impressed by arthur brooks and his ability to come, in a very concise way, were -- articulate what it is that we are about as free-market conservatives, as people who love liberty and treasure the freedom on which this country was built. and i heard arthur's story down, and you know the fact that he and his wife were there, which is unbelievable for me to imagine because of his current duties but all the more impressive, all the more impressive because he really, he really showed me then and this was about the time when he arrived to the battle. we were created to excerpt the battle in "the wall street journal" and other publications.

i would come along with many of my colleagues, devour those columns, just waiting for the release of the book. when we got the book, we saw very quickly that we weren't going to be disappointed, that the battle lines were drawn by arthur brooks. he so clearly has been able to spell out the two different visions that exists in this town today and frankly reflect the choice that the public is going to make this election in november. and it was really stunning to me, earned success is a phrase that i have used and continue to use if not once daily, several times a day, because it does really reflect who we are as a country. again, arthur's walk through life that has landed him where he is proof that his theory is a

demonstration of earned success works but it is proved. it's true. so when i'm i am out across the country and i'm talking to folks who are having a tough time, talking to folks who don't quite filter all the sort of noise that is coming out of washington today, what's so easy for me to say is this election season that is upon us is so much more than just about jobs and the economy. it is really a question of existential import for us as americans as human beings. and i do say that this is an election, which is very much focused on who we want to be as a country. and that is where you earn success theory comes in, because

all i have to do is look at my own family, and how it is that i was so blessed to be standing in front of you today. my ancestors were my grandparents frankly left eastern europe at the turn of the last century. they left because they were not able to reach their potential, to earn their success under the czarist regime and eastern europe and russia at the time and they were subjected to extreme anti-semitism and religious persecution. at when they came over here, luck would have it, my grandparents were married, it loped, made their way down to my hometown of richmond, and there they began a family without any formal education, opened a grocery store. shortly after their two kids were born, one of whom was my father, my grandfather died and left my grandmother with two

kids. she was an early 30s. she was thercñ?ñ? widow. she happened to be jewish in the segregated south. what was she to do? what she did is take advantage of the opportunities that this country gives all of us. it's the opportunity to go out and work hard and with a little bit of luck, a lot of dedicatio. and she was able to live the american dream. just like i think all of us or most of us who tell the same story, that we all came from somewhere because somebody made a decision that they were willing to go out, take the risk and go and earn the success for the future of themselves and their families. that is what arthur has done for me in so many of my colleagues, because as he is unveiling "the road to freedom" it is now the comparison.

's principles apply and it has crystallized the debate. you have done a phenomenal service for the country of allowing all of us to go out there and be defenders of economic freedom, to be defenders of the free market and free enterprise and versus the alternative frankly that we see so many of our allies pursuing and ending them up in a real cul-de-sac. so it is my real pleasure to be here to introduce someone that i call on regularly and i have told them already, we are going to call on him so much he's not going to know what hit him. without further ado, the president of aei, my good

friend, arthur brooks.íñ?ñ [applause] [applause] >> thank you, eric. what a wonderful and gracious introduction. i would like to thank you all for coming and say goodnight. [laughter] my guess is it's not going to get that much better for me tonight after hearing such a wonderful introduction from my friend, eric cantor. he is a real patriot doing yeoman's work today in the house. he is doing work for all americans. he is doing work not just for economic freedom but for the opportunities that people will have now and we hope their children and grandchildren will have in the future. his endorsement means so very much to me. here at aei as most of you know we are an institution that's been around since the late 1930s. we are dedicated. our mission says we are

community of supporters that believe together are dedicated to the ideas of maximizing liberty and increasing individual opportunity and fighting for the free enterprise system to get the most people the best life. now i would like to tell you that due to all of the wonderful work that we have been able to do here at aei, that we are winning the debate. i am completely convinced that the work that has happened at aei in the past 74 years has made it clear, the facts we have uncovered has made it clear it is the best for the united states and it truly is america's gift to the world are go but i can't tell you that we have won every debate. the reason is because we have not won enough parts. my view is that we have got the word but we are missing a lot of the music. that is what i want to talk to you about tonight. we are a little bit, and those of us in the free enterprise movement, are a our a little bit

i think flight -- there are these three friends i want to tell you about to open it up. three friends who have been golfing together for 15 years. the highlight of their week. one of them a psychologist. one is a priest and one is a free-market economist just like me. well, one may morning they go out for their weekly golf game, a beautiful may day and they get stuck behind the slowest to some that they have ever seen. the skies are for putting every green. it takes him five minutes to collect their clubs even though they have a caddie. now this is frustrating for our three friends and they start making comments. by the third hole, loud enough for the twosome to hear. the priest says, i pray i never get stuck kind of twosome this slow ever again, that sort of thing. a couple of holes go by, still too slow in when phoning me the

three friends march up to the caddie and they say listen you have got to let us play through. this just isn't right. the caddie says fine but do you realize how rude you have an? 10? do you guys know who they are? three? three friends they know. remember last year when the town orphanage burned down? remember the two firefighters who pulled out all the orphans but in the blaze they lost their sight in the accident? they? they said, no. yes, those were the two firefighters. all they have left is his golf game and they are completely dedicated that they go a little slower so have a little respect. the psychologist says, i can't believe i dedicated my life to helping people and i guess i have learned a lesson here. the priest says i have a contrary hard and i'm glad for that. their free-market economist thinks about it for a while and he says, it would be more efficient if they played at night. [laughter]

that is us. too often that is us. the facts are right but we are not going to win any hearts this way. i want to talk to you about a paradox of government and how i think we can solve it. there's a huge paradox today that is the america majority believes the best system for america despite the ups and downs, the government is too big and trying to do too many things. 70% of americans believe the greater price system is best and about 70% of americans also think the government is too big and must be scaled that. now, that sounds great if you are a member of the free enterprise movement but here's the thing you've got to keep in mind. we are not acting as if we believe this so for example, our institution and aei formed in 1938 was formed in no small part in reaction to the fact that the government was gobbling up the enormous amount of american gdp

that amounted to 15%. 15% of american gdp. it was an outrage that was expense used by state, local and federal government. i look at that stat and i say take me back to the good old days. today it is 36% and it's going up. by the year 2038 according to the congressional budget office, it will be 50% of american gdp, 50% of our gdp will go through government. everyone every one of us here will work on january 1 through june 30 to pay for a government we don't particularly like. something is wrong. something is wrong. some people say we are tending toward being a european democracy and that is wrong because in fact we are ready are one. if you look at any meaningful measure of the size of government, we are already on the scale of the european-style social democracy so we need to explain this paradox. americans say they love for enterprise and europeans don't say they love for enterprise.

when 70% of americans say they love free enterprise, typically 30% will say they love free enterprise. there is a liberal explanation and a conservative explanation and there is a correct explanation so i'm going to give you all three. the liberal explanation is that we don't really want free enterprise. we are just sentimental. we just like the idea of limited government and what we really want is a good social democracy. we want a social welfare state that it's all kinds of goodies. now the conservative explanation is that no, no, no, we do love for enterprise. we just haven't been convinced enough by the facts. we haven't gotten enough data and snazzy powerpoint charts in front of the americans to help them understand how fiscal consolidation works and tell them about how balanced budgets worked in finland 1996 and get all that good stuff in front of americans and finally the tide will turn on this whole

argument. now i know that is not true. how do i know that explanation is incorrect? i'm the president of the american enterprise institute. [laughter] if that were true we would have one. we would have won and we could do other things. besides continually fighting the fight for free enterprise as we are. the right explanation in my view is that we do indeed love free enterprise. we know it's part of our culture. we know essential to our culture as a matter fact, at our defenses so that given the fact that they tend to be focusing on materialistic impulses, don't stand up in the face of moral arguments against the free enterprise system that we constantly hear and consequently we lose the debate. if we want to win the debate for free enterprise we have to start making real and really good moral arguments. now, why do i believe that? because experience tells us that

materialistic arguments always lose to moral arguments. think about your own life. maybe you are like me. maybe you're the only conservative in your family, like me and at thanksgiving time, it's always really kind of rough. you are around the thanksgiving table and people were turned to you and say hey, capitalist guy. defend the free market system after the 2008 financial collapse. you say whoa. it was not the free enterprise that was at fault. it was exactly the opposite. ..

>> it doesn't matter that i'm going up against this. doesn't matter. i lost the argument because i was making a cold, materialistic case going head-to-head with a hot oil case. this tells us something, and it turns out that my experience and perhaps your experience too is back up by a bunch of research these days about moral arguments. start with brain science. one of the things that we know is the most amazing part of the brain is the premedial frontal cortex that processes these great things. one of the things that it does is it helps you make executive judgment. when you drive to work in the morning and decide whether or not to go right or left, and you

make explicit decisions based on traffic patterns, you're able to do that, take the road that looks fastest to get to work. the same part of the brain that helps you process moral judgment. what's that entail? well, we do that all day long, too. you get to work, and the colleague says, "do you like my tie? you have to make a decision. [laughter] make him feel good or tell him the truth? that's a moral decision. you go between moral decision and judgment all day long, and it's processed by the circuitry in your cerebral cortex. if you are confronted with a judgment and moral decision at the same time, what wins out? we know the answer to that too. john height is a social psychology at the university of virginia who wrote a wonderful book called "the righteous

mind," and it talks about moral judgment. he's the world's leading expert on moral judgment, and when talks about when you are confronted with a deeply moral decision, it blows the surface. if there's a deep miranda rule topic, that occupies your brain and attention. you say, prove it. okay. let's prove it. i'm going to give you an an experiment that john height uses with audiences. i'm so sure it's going to work after i tell you a story that 90 seconds from now, you can't process anything other than a moral judgment. i'll occupy your prefron call cortex. furthermore, if you don't remember anything else, you'll remember this story this time next year. let's see. there's a family like mine. my wife, esther, and i have three kids.

my daughter's 9, sons are 12 and 14, and the family in the story is like mine, three kids, 9, 12, and 14. the family is at war with itself. every family's fighting about something it seem, and the family in this story is fighting over something common. the kids want a dog. mom and dad don't. they say, come on, why can't we get a job? because you're too irresponsible. i know who cleans up after it and who will walk it. we're not getting a dog. the same thing happens to this family happened in my family. kids win over mom, and there's a coalition against dad; right? [laughter] so this family goes down to the pound; right? dad doesn't -- i know how this is going to end. go to the pound together, pick out a puppy, and they name her muffin and bring her home. turns out, mom and dad were

wrong. muff fin is a great dog. as a matter of fact, guess who loves muffin most? dad. why? because nobody else is happy to see dad come home from work. [laughter] you know, we go on for years like this, and it brings the family together. nothing brought the family together more than muffin. happy to have the dog. one saturday afternoon it's august, a beautiful day, and the youngest child, by this time is 11. leaves the front door open. there's a squirrel out in the front yard, and muffin sees it, runs into the street, and was hit by a car, killed in front of the whole family. never heard a story like this at aei, did you? the kids are screaming, mom is crying. dad's crying because he loves the dog the most. kids say, dad, what do you do? dad picks up the lifeless body, and they bring her in the house, and they decide to cook her and

eat her. [laughter] yeah, i said to john height, you got tenure for that? [laughter] this is a problem with american universities, my friends.. [laughter] so he asked the audiences was that the rights thing to do? everybody says, of course not. that's wrong. it's wrong to eat the dog. how come? a bunch of the cold calculated reasons why it might be okay. it's a high quality protein source. [laughter] nobody, you know, this is like really in the news, the obama thing, i know -- [laughter] you know, it's legal. the dog wasn't hurt. it's their dog. people eat dogs in other countries. go through all of this. yeah, yeah, i know. it's still not right. why? people can't say why. i bet right now, you can't say

why it feels wrong to do something like that. well, okay. that's how public policy arguments work too. if you're confronted with a moral case, and all you've got is a materialistic rejoiner, guess who wins in tell people that, hey, in finland, fiscal consolidation worked better because of tax decreases and spending cuts. what we do in the united states today and the little girl in the car has a face that everybody is seeing, and you're going to lose the argument. just go tell everybody they should eat their dog because that's equally persuasive. what does all of this mean? it means we have to come up with a moral argument, not just make the case, but say what's written on our hearts. we're here for a reason. we believe in this stuff for a reason. we have to be able to save it, and that's what i want to talk about today. our founders knew this. they were moralists. our founders were not materialists. think about what they wrote.

think about the second paragraph of the declaration of independence. you know it by heart. that we are endowed by our creator with certain uninalienable rights, and among them is the right to life, liberty, and the pursuit of happiness. nothing about money in there. it's the moral covenant between our founders and our nation, and they would be scandalized to hear how free market is talked about today. we're not making the moral case. now, occasionally, we remember. occasionally, we remember the moral case accidently, and we win. for example, when i was a kid growing up in seattle, washington, we had variable lights, and one of the neighbors was on welfare. fortunately, we were not. my dad had two jobs. the reason he did is because he hon earsly believed that welfare was hobble -- horrible for poor people in the 1970s. it was, people were unorganized.

we don't really know, and, you know, the car, two houses down, there were chickens in the living room, which at that time, was normal. turns out it's not. [laughter] we tried that, you know -- [laughter] and, you know, the central claim my father made was that it was horrible to be on public assistance and support people on public assistance. turns out, everybody knews that. he was not a visionary. everybody knew that in america. the only people who were not saying this were politicians in the 1970s. they were talking about the fact that the welfare system was a close sal waste of money. so what changed? the answer is there was an idea, an idea in a book, a book by a scholar named charles murray, and he's a scholar at the

american enterprise institute and wrote "losing ground" in 1984. that book made a central claim that was not that the system was a waste of money, which it was, but rather the welfare system was hurting the people it was supposed to help, and that was immoral. that lit the fuse. for a long time, it took 12 years before that translated into policy and before it was the conventional wisdom of democrats and republicans, and a democratic president who signed it into law. that's what it was, 12 years. every public policy infliction takes 12 years and requires leaders and those who love their country, patriots, fight for at least a decade. that is the danger of anybody who makes the claim that the changes we need are only about 2012. we have to understand that they are about 2013 and 2014 and on, and that's why aei exists. it exists because in a decade, we'll fight the fight for you.

okay. back to welfare reform. it became the law of the land because scholars, citizens, and then legislators realized it was about morality, not money. here's the question. what is the moral case for free enterprise today like the welfare reform case? what is the pursuit of happiness? is it making money? now, i kind of gave away the show a second ago because i noticed it was not in the declaration of independence talking about money. think about it. economists asked the question, does money mean happiness? the answer is, as your mother told you, no. this leads to all kinds of odd and some seemingly ill general ogical behaviors. what do people do? they do terrible things. waste money gambling. work all night long. negligent their families, cheat brothers and sisters out of

inhair tans. it's hobble and scandalous. the pursuit of money, mistaking the pursuit of happiness, leads to procurious things we find in literature on happiness. i wrote about happiness. first work i did for aei as a visiting scholar was called "gross national happiness," and what i found in the book that i proved in subsequent research, is that the odd thing about men that the unhappiest average age that men experience. what do you think? i think men, turns out women don't have it. women are much, much more happy, and they don't have dips. they are generally happier throughout their lives than men are. you'll be happy to know. what is the average unhappiest age in a man's life? what do you think it is? for very clear. i recreated the data analysis myself with protocols.

what do you think the average, unhappiest age in a man's life is in america? somebody said 40, another 50. let's take the average. 45. 45 is the average unhappiest age in a man's life. why? the psychologists give family explanations. for example, 45 is when your wife figures out that you are boring; right? [laughter] that's it. 45 most likely to have a teenager in the home; right? misery; right? turns out that economists have a really good explanation for this that's consistent with all the data. the economic explanation is basically that's when people figure out they were chasing the wrong thing. men in their late 20s, money and success move together. it's like a soup highway with -- super highway with neon lightses, cruising, and not focusing on anything educational. around age 45, men say they

realized that they kind of missed an exit somewhere along the way, an unmarked exit. they missed the exit that goes off down a road towards something they really wanted. the question is this. what is it on that exit? when we look at the data, and we asked what makes people happy, especially men in their 40s, incidentally, 45 really does come up after that for the rest of your life. i'm 47. it's going to be good from here on out. [laughter] those of you who are 43, sorry. [laughter] what is it off the exit that we really, really crave? the answer is what eric told you in the introduction. it's success. now, that's not a term that we just sort of made up. it's something that popped out of the data on the subject of human happiness. when people say that they have earned their success, you can predict that they will be the happiest people in america. let's earn success.

it's the belief you created value in your life and value in the lives of other people. when people say they earned their success, they become much happier than their neighbors, friends, and families. for example, using data for the general social survey collect the by the university of chicago, if you find two people who are exactly the same, they both feel they have earned their success, and they are the same in age and education and race and religion, the same college, same residence, everything, other than one earns eight times as much money as the second. you'll find they are equally likely to say they are happy about their lives

>> we're looking for the wrong thing. a key point about earned success is that it has to be earned. work and sacrifice mean everything. there's an unmistakable connection between sacrifice and happiness. there's a big literature on sacrifice and happiness. for example, there's a wonderful study you may know about. it's my favorite study on sacrifice that involves children and a bag of marshmellows. there's a psychologist, famous psychologist from stanford named walter mitchell who in 1972. ed to figure out if kids could delay gratification. he took kids in the laboratory between 4-8. he put a marshmellow on the table. you can eat it if you want, but i'm going to leave the room for

15 minutes, and if i come back and it's here, i'll give you a second one. right? kids say, okay. easy; right? two-thirds failed within 30 seconds. [laughter] right? it's on tape. find it on the internet. some kids are trying to discipline themselves, banging their heads on the table. [laughter] i got to get to the second marshmellow. interesting enough. here's where it's really interested. he followed up 15 years later to see how their lives turned out. all the same; right? no. the kids who couldn't wait at an average sat score, 210 points lower than the kids who could wait. the kids who couldn't wait were likely to drop out of college, abuse drugs and alcohol, more likely to be divorced and commit crimes. there was a direct link that he saw between the sacrifice and the later success of the individual. maybe you say it's not causal just because they didn't eat it,

means they had a successful life. [laughter] so how do we understand the causality of this? the answer is we talked to entrepreneurs. i'll tell you about a conversation i had with charles shwabb and what it was like to found the successful company. what'd he tell me? i don't have any idea. one day when it got so bad, i took out a second mortgage on the house just to make payroll. tell me about your success. he said, i am telling you about my success. that's my success. that's what it's about. i had the same conversations with dozens of entrepreneurs, and they always tell you the same thing. they always tell you about the sacrifice. sacrifice leads to success. now, when there's no sacrifice, when there is no earned in the earned success, what do you get? the answer is something else.

you getted learned help. learned helplessness is the case in which merit doesn't lead to reward and bad behavior dunned lead to punishment. in laboratory testing with a social psychologist at the university of pennsylvania who has done studies on this, he has shown when people learn helplessness, they become passive and depressed, and their quality of life diminishes. that's a big deal. he did a lot of test work. people figured out that no matter how often they pulled the lever and the dials came up on the slot machine had nothing to do with the nickels. as soon as they figured it out, they stopped playing. they didn't want to be playing anymore. they were passive and acted depressed. why? people need to earn their success and people hate learned helplessness. it turns out. once again, what do we need? we need a system that allows us

to earn success and avoid earning helplessness. we need a system that allows us to be rewarded for our merit, a system that allows us to keep what we earn. that is the free enterprise system. earned success is the first moral promise of the free enterprise system to all of us. now, a lot of reasonable people will object. they october because they say, it sounds great and i'm happy for you that you earned success. eric talked about this, this sort of weird -- that i had, played the french horn professionally 12 years before going back to graduate school and somehow ended up president of the american enterprise institute. it is a little weird. when i quit, when i decided to quit playing the french horn, i called my dad, and i said, dad, i decided to take up another line of work. he didn't go to college. i'm going to go to college and become an economist, and then get a ph.d. and become a

professor. he said, what are you talking about? i mean, you're on top of the world. your life is great. you know, you're making money. you're married. you are starting a family. why walk away from it? i said, dad, i'm not happy. he was silent on the phonal. finally, he said, what makes you so special? [laughter] the answer is nothing, i'm just an american. i figure this can be done. i figure it can be done. turns out it worked out okay, but some of you might object that's only really going to work for certain people. it's not fair to earned success is not distributed to everybody. the relatively few, the wealthy are the ones who enjoy earned success. the poor are left behind. we need to deal with these objections. let's examine them one at a time. first start talking about fairness. fairness is the light pursuit of happiness tiff of this --

motiff of this political season. you'll hear it again and again and again. lately, the president of the united states has gone on and on about fairness. he talked about fairness 14 times in the kansas economic policy speech. i practiced that for two hours. appreciate it. [laughter] he talked about fairness nine times in the state of the union speech and january. he goes on ceaselessly about fairness. on the side, free market advocates scatter at the first mention of fairness. why? we can't win. we win on efficiency. we can't win on fairness. we're not supposed to talk about fairness. according to saint mitton friedman, fairness is a subjective con cement, not something to define. stay away from it. now, this the -- he's a genius, and i'm not, but i don't agree with that.

i think it's wrong. the reason i believe it's wrong according to the latest research on moral judgment, people crave fairness and doesn't matter if they are liberals or sen trysts or conservatives. everybody craves a moral system. we never ask what is it? there's an economist that has been good in laboratory experiments investigating what fairness is. they do this with what they call an ultimatum game. a subject walks into the lab.areo and is given $10. second subject walks in and sits across the table. the first one with $10 has to decide how much of the ten he'll share with the new friend. now, if the person on the other side of the table doesn't like the offer, he can reject it. if he rejects it, both walk out with nothing. if he accepts the offer from the first player, they both walk out with what they were offered.

okay, so i walk in, i have $10, you walk in and i say i'll give you four, fine, done. you get four, i get six. on the other hand, you get one, forget it, buddy, that's not fair. we walk out with nothing because you spited me. okay, now, an economist, like me, would predict if i over you a penny you'll take it because it's better than nothing. that's nonsense. in the united states, the average offer is $4, and about 10% of the time it's rejected. okay. it turns out this experiment has been done all over the world, and you find dramatically different results. as a matter of fact, there's different results between new york and los angeles. they they coorpt more in los angeles, and they don't cooperate in new york. nearly as much. it's an 8 point difference in the rejection rate across the coasts. what's the country that has the highest rejection rate and lowest offers? the answer is our beloved spain. my wife and i were married and

where we lived for years, and spain, the average over is $2.50, and the rejection rate is 30%. my wife says that explains doing business in spain. it's not cooperative. okay. why do people think that it's fair to share? that equalitity is fairness? that's what people talk about in these experiments. the reason is because the $10 was not earned. it was given away. my economist end changed the experiment. he did a variant with college students. the person who got the ten bucks, to get it, he had to sing a song in front of the class. ten bucks, sing the bear went over the mountain. ♪ the bear went over the mountain ♪ that's mortifying. for some reason, i just did it. [laughter] you have to sing a song. he's not parting with that $10 turns out. the offers are really, really

low. they over little to the partner when they feel they earned. the offers are almost never rejected when the other person sees that it has been earned. they don't think it's fair anymore to share. they don't think it's fair because the resources were earned. now, another way of looking at this, the world value survey in 2006 asked this question of 4,000 americans. imagine two secretaries of the same age doing the same job. one finds out the other earns more than she does. the better paid secretary, however, is quicker, more efficient, and reliable at the job, and your opinion is it fair or not that one secretary is paid more than the other? 89% of americans think it's fair that the secretary who is more efficient and faster is paid more. the numbers in europe are 25% lower. americans believe that rewarding merit is fair if resources are earned. bottom line.

89%. overwhelming. if resources are unearned, however, americans believe that fairness means spreading the wealth. this is the definitional difference of our time. it's not whether one party is more fair than the other, but whether we believe americans earned what they have. that defines whether or not we believe that the american economy is fair. which do you believe is true? turns out 70% of the americans think that by and large, not perfectly, but by and large, we earn what we have, and therefore we warding merit is the right definition of fairness, and the president's definition of fairness is incorrect. okay, now, think about this intuitively. eric talked about his an ancest. why did they come from russia in 1900? i bet it wasn't to get a better system of forced income redistribution. [laughter] it was to earn their success. it was to be treated fairly for the first time; right?

imagine some guy in vietnam says i want to get to america, and there they have cash for clunkers. [laughter] forget about it; right? look, you want to know what earned success and real merit based fairness is about? talk to an immigrant. that's why they come to the country in the first place. now, the second objection is not beyond whether or not earned success is a fair system, which most americans say it is, but who it benefits. who benefits the most when we reward earned success? it's easy to say, well, the rich do; right? the rich get rich, and we have seen a runup in apparent income inequality over the past few years. statistics are complicated on that. we can talk about that later if you like. it appears the rich have been doing well over the past few decades and earned success really only helps wealthy people, not the poor. that, it turns out, is manifestly false. the best recipient of an earned

success merit society, the best recipients of the free enterprise are the poor themselves. how do i know it? go back to 1970 and compare that around the world with today. turns out between 1970 and 2010, the worst poverty in the world, people who live on $1 or less, that has decreased by 80% as a percentage of the world's population. you never hear that. it's the greatest achievement in human history, and you never hear about it. 80% of the world's worst poverty has been eradicated by 1970. it's never, ever happened before. what did that? what accounts for that? united nations? [laughter] u.s. foreign aid? international monetary fund? central planning? no. it was globalization. free trade, a boom in international entrepreneurship.

it was free enterprise american style. if you love the poor, if you are a good samaritan, you must stand for the free enterprise system, and you must defend it not just for ourselves, but people around the world. it's the best anti-poverty measure ever invented. now, will it suffice? will free enterprise suffice to help all the poor? the answer, of course, is no. what i talk about in the book is the need for strong, reliable social safety nets for the truly poor. the problem that we have in america today is that relief comes from the safety net approve the to the middle class, evens the risk out of life, equalizes for the sake of equality. the safety net today that we actually do need for people who are the least among us is threatened the most by an

economy that is under threat, when we damage the free enterprise system to the extent we are careening towards a greek style debt crisis, maybe not this year or next, but we know it's going to catch up with us given the spending and irresponsible spending we see today. when that happens, who suffers most? go back to the old home in barcelona, 20 years ago, and today, there's homeless people. today, 52% of young people can't find work. today, the overall unemployment rate is 25%. today, 46% of adults under 35 live with their parents. misery. who is hurt the most? the poor themselves. the social safety net will be destroyed if we destroy the free enterprise system as we are on a path ultimately to do. let's summarize. the free enterprise system allows us to earn our success. it's the fairest system definedded how americans define merits, which is merit-based,

and it's the system that's best of lifting up the free among us. that's the reason free enterprise is not an economic alternative, but a moral imperative. now, the structure of a winning argument for free enterprise is this -- you get 30 seconds. you get 30 seconds -- i talked for 30 minutes, but you get 30 # seconds to convince your sister-in-law at the thanksgiving table that incidentally that's the battle in november. that's the battle in november that every american defines the system and defending the system that we love, not just the election. you get 30 seconds to make your case. you have to start by establishing your morals, do it in terms of earned success, true fairness, and lifting up the poorment only then can we talk about data and policies. that's a hard thing for me to do. a really hard thing for me to do. i'm burdened under the weight of a ph.d. and hard not to go to the data.

i want to do it because i have the data. i want to, but it's not the right thing to do because i'm going to lose. it's not what is written on my heart. here's my conclusions. the economic trend towards social democracy cannot be reversed. we'll lose the great gift from the founders as a system that dig my mys us as individuals and lifts us up. aei's followers and staff and supporters and friends, all of us here tonight, are dedicated to the long hall for this fight, the highly moral project. that's the reason we're a community of scholar supporters and the reason we do what we do. it's a fight for what's right. it's a fight for ourselves, for our kids, and for people we will never meet. i'm honored to be in the fight with you. my last words tonight are, thank you. [applause]

>> what's standing between us and conceptions is alcohol is questions and answers. if you prefer questions and answers, i'll be delighted. we have microphones. you put your statement in the form of a question. [laughter] then you tell me your name and maybe where you are from, and then we'll be off to the races. who wants to kick it off? the first is the most difficult. right here in the front. sam? >> thank you. that was one fantastic --

really, i mean, -- >> thank you, any other questions? [laughter] >> that was not a protest either. i think about what is hot today, what movements are around, and the one movement that -- i can't seem to fit into your frame work is environmentalism. global warming alarmism, the notion that somehow the polar bears drowning homesteaded their icebergs and now humanity is unfairly taking it away or what do you see driving that in the frame work that you presented to us? >> well, one of the things i have not talked about much, but there's, i mean mercifully that i have not talked about this evening with you is there's a long chapter in the book about what i believe is the proper role for government. the deal with a lot of these issues, and to get back to the proper role of government consistent with this notion of a morality of the free enterprise system is there's no better author to read than frederick hayek. he's iconic among conservatives,

but truly a great economist, one. greatest of the 20th century. what should the government do according to hayek? two things, a minimum basic safety net. that's right. hayek says that. crazy stuff. i 4 a friend of mine, a strong libertarian, and he said, look, as a safety net, conservatives and libertarians don't have to be against a safety net. hayek said that and writes back in the e-mail just this, brits with a squish. [laughter] a minimal safety net. the other is dealing with cases where markets fail. marketings fail sometimes. now, the burden is really high to get involved in the markets. you have to have a source of market failure, the markets have to feel, the government has to be able to intervene cost effectively. there's a huge barrier, and generally speaking, when we see a source of failure, the

government shouldn't get involved for good reasons. one of these cases was a case of what economists call extraalties. that's a case of where individuals or firms they affect the well fair of the others outside the system, and pollution is an example of that. the trouble is this. every time there's pollution or climate change that the government should be involved? the answer is of course not because we don't know whether or not the markets actually is failing or if the government can make things better, and if they can, we don't know if they can do so cost effectively. sam? >> yeah -- [inaudible] >> if there's no impact on climate, it seems to me that hundreds of thousands of environmentalists in their medial prefrontal cortex would be devastated, feeling something was taken away from this.

i guess i ask you for an explanation why nay are wedded at the emotional level, this moral and physical level to the notion that humanity is bad for the earth? >> uh, yes. there's a lot of people more eloquent on this subject, slightly different than what i'm talking about. again, i recommend your interest, the righteous mind, john height, talking about how people deal with science. believe me, it's not rational. it's not always rational. why do people feel the problem is humanity and consequently put themselves against humanity? i have a hard time looking in the hearts of others bus that's hard for me to relate to. in my view, one of the key moral preaccepts of a good economy is one that lifts people up. that's -- lifts all up. one that's anti-human can't

relate to that. i'll leave that to those better equipped. i join you in your discomfort. yes, right here, sir. >> bill johnson. i understand that, you know, the little girl in the car, we can make the case that, okay, we have to get mom a small apartment, and not the suburban home that the welfare state now pushes for and win that moral argument, but too often they go for the expensive thing. the little girl needs a heart transplant, and it's going to cost $200,000, and why shouldn't she get the same treatment as warren buffet. how do we beat that? >> well, what we to decide on a minimum basic start r standard, and if we can't decide, then we will make some decisions, we will all over the place. decide that old people should be able to have all the medical care in the world with absolutely no constraint, and doesn't matter if it crowds out vaccinations for kids in

poverty, basically the decisions we make, not making decisions means making decisions. this comes down to true moral leadership. this is the reason that we need true moral leadership because we have to make hard decisions. it's a decision to not make a decision, and it always goes to those who can scream the loudest. you know, if we make a decision that that girl in the car needs a heart transplant and we have to give it to her. she's not getting it. that turns into people retiring today taking three times out of the system than they ever paid into it. that's how it folds up unless we are unwilling to make hard decisions. it's easier to have a closed forum mathematical solution this is what we do, a to b to c to d, but sometimes it's really moral courageous leadership, and this is one of those cases. yes, sir?

>> i'm from the jefferson institute. the earned success, the resource of happiness. you made a compelling case, but i'm familiar with the study of over 100,000 people who found that it was love, the presence of people in your life who love you and when you love spells happiness. i was wondering how yo resolve that? >> sure. thank you. the happiness studies are wonderful, and that's the reason i wrote a book on the subject. earned success is a big driver, not the only one. there's other things we need. i'll tell you what what charles murray calls the four institutions of meaning in our lives. faith, family, community, vocation. those are the things that give us true meaning, and those are huge sources of happiness. earned success is a big deal, but it's the winner of happiness designing our economic lives and policy. putting together our personal lives and policies, we have to

resolve those around the institutions of faith, family, community, and vocation, which is to say work. that, of course, relates to earned success, but to say earned success is explanation collusion of all else is inaccurate and unfortunate if that leads us to somewhere off the line. >> john, independent economist. i was thinking that one of the reasons that people that are recipients of redistribution are not always happy because they have a sense they didn't earn it. i have another question. it is a moral question. that is that not considering the min mum safety net or when we get to redistribution, and i start voting benefits for myself that are from somebody else, it's not different from

stealing, and i wonder if there's not a moral case against that activity, and not taking the minimum minimum, but once it benefits me as a middle class person. >> yeah, is there a moral case against voting for your own benefits or defending your own nest? for sure. as a matter of fact, this is the reason there's so much moral rebellion against earmarks in congress. that's exactly the reason. people recognize that that's improper to do something like that. the danger that we have in this country is that we are going towards a system where we have more takers than makers to not put too fine a point on it where about half of the american -- half of american wage earners have not federal income tax liability or more alarmingly, according to the tax foundation, upwards of 70% of the americans take out of the tax system than they put into it. we'll hit a point where it's not in anyone's interest to not careen totally into the welfare state. at that point, all bets are off

and everybody loses because everybody gets poorer. how do we avoid that? well there's time, we make the moral case. we talk to people about what it means. for example, we have a fairness crisis in the country. what is the fairness crisis? it's that we're stealing from our kids. that's immoral to be stealing from our kids because we have a system that rewards public sector workers more than the private sector carried about according to the research center here at aei. that's not fair. we were corporate cronies to bailouts, carve outs, and special deals. cronyism is nothing more than than the spouse's statism. we know that. it wouldn't exist without statism. that's not fair. we have an unireness crisis in the country, and until we address that in moral terms, we're in danger of the situation that you identify which is precisely the problem in greece today. right here, then over to this

side. >> daily beast. over the last few decades, there's been emerging evidence to suggest at median average incomes in the country have not been rising. do you think that's an example of earned success and action which is to say that if they have not risen, they have not earned the rise, or do you think that if earned success is in the country, there's higher median wages? >> good question. the fact that there's been apparent stagnation in the middle and lower class, how do we deal with that fact? a couple ways. i urge you -- i recommend your interest, the work of jim, our blogger here, runs the enterprise blog, renamed ae ideas in a few short weeks. he points out it's more than just pre-taxed wages, the way we should work with income inequality, but looking at government benefits, what happens with taxes, ect., ect., and that greatly shows the

arguments that wages are stagnant. look at the blog to understand that. particular to the point, say that mobility has not been high enough. mobility is the key concept. president of the united states or any key politician talks about it, he's wasting our time. the problem is mobility. that's what everybody really cares about. when you focus on income inequality. you always talk about how to bring the top down inevitably. you talk about mobility, then you talk about people at the bottom. what we really care about are people in the bottom, 20% of the income distribution, because those people have octoberively seen less income than economic and opportunity mobility over the last few decades. doesn't matter how you look at the data. you will see some lessening of mobility in the bottom 20% of the population. read charles murray's new book "coming apart," a new best seller this spring. there's the bottom 20% that are margin alized. what do you do? the question is not does earned

success matter or not, realm or not, it's what are we going to do to increase mobility among the bottom 20%. we need a school system that exists for kids, not grown ups. it's a civil rights crisis. it doesn't hurt my kids, but kids in the bottom 20%. that's not right. everybody knows you're not supposed to hurt poor people. you don't know that, you were raised by wolves. everybody knows don't hurt the poor. the school system marginalizes the poor systematically. schools say they need more money. it's not true. we spend men and don't get the -- we spend the money, and we don't get the results. two, we spent the blessings of the entrepreneurial culture for ourselves. we have not thought in a meaningful way how to share the entrepreneurship culture with the 20%. what are we doing to bring them into the entrepreneurial culture?

what our chief economist here at aei writes about is the fact that when you're in an economic crisis like today, one of the first things that happens to people who where long termed unemployed they think about ways that they can strike out on their own. we're getting in their way. talk to small business people trying to strike out on their own, and the first thing they talk about is the fact that the regulatory system is out of crock. they don't know what the tax regime is going to be. they don't know what environmental policies are going to be. they don't know what labor policies will be. we're in the way of people who should be able to start their businesses and act entrepreneurially. what are we doing to create labs in rural areas so people think the way that most of you do, and the answer is we're doing almost nothing or maybe nothing. it's not right. the third is we don't talk openly about culture. we don't talk about the institutions of meaning. we don't talk about the fact that faith, family, community, and vocation are values not evenly distributed across the population. until we talk openly about

culture issues, don't have to be religious about it, but talking openly about the facts, systematic as a society to marginalize the 20%, we'll continue the dependability and we'll have a worse situation 20 years than today, and that's not right. over here. >> i'm franklin from colorado christian university and the centennial institute. my question is about the comment about having 30 seconds to persuade someone with this view point, and appealing to their emotions and moral side of the argument. with respect to the occupy movement as much as a fringe as it is, how would you pursue going towards them, and are they just simply too educated from the start or that battle fought in education or is there a pitch you can make to an occupy member? >> great question. no, they are not beyond redemption.

are you kidding? they are making a big strong moral argument. they are right in the wheel house saying the american economy is not fair. you know what? they are right. they're reacting to the fact that the american economy is gained to the powerful, gamed to people who have disproportioned access to the tools of government that can turn public policies in their favor, too big to fail, tax bailouts and things that normal people, ordinary people, most of you, don't have. that's what they bridle against. where nay are wrong is the diagnosis of the problem. the problem is not that we have too much free enterprise, but that we don't have enough free enterprise. start by saying you're right in your discomfort and moral outrage, but you're wrong is that where the problem comes from. let's discuss it. start off with fairness, and then you talk from basically the same moral perspective, and this can, in my experience, can be a very constructive conversation.

>> i recommend your new book coming out june -- >> 12. >> june 12th. his new book about the opening up of the soviet union. it's one of the most powerful defenses of the culture of freedom, and it's power around the world and not just in the united states. truly, he understands the moral case for freedom. he's not going to criticize me now because of what i said. [laughter] >> no, i have very little to add to that. thank you very much. [laughter] actually, what i was thinking is, indeed, based on the research, not just the net, but into the moral triggers of the movements in the world starting with the fall of the soviet union all the way to the arab spring and also to the grass roots movement in russia today and the 3r0 tests, and -- and the protests. i was waiting for a word that inevitably i discover as i peel

the onion one layer after another, getting to the heart of the these moral triggers, and that's dignity. i wonder, i mean, aren't you, in fact, talking about dignity, arthur, in your brilliant talk? you use morality, of course, but isn't that the key component of it? as you -- would you recommend that word for the 30-second debate at the dinner table? >> indeed. excellent point. earned success is about the dignity of individuals. it's about treating people, treating people equally means treating them with equal dignity. the beginning of your book talks about the fact that it was the lessening of the dignity of individuals to ground people down in the form of soviet union until ultimately there was a moral rebellion. it's the key con cement, the reason earned success matters.

i completely agree. i completely agree. >> one question to ask you to piggy back on leon. it seems there was a tension between two different things. on the one hand you say that a lot of people get that -- the chickens in the living room and so on, but on the other hand, you say we have to have a safety net. why would it be bad for some people, but then not bad and not corrosive or harmful to the dignity of the people at the very bottom? >> that's a wonderful question, neil. how is the requirement of the civilized society having a functioning social safety net not possible for the concept of every individual because we all deserve to earn our success? the answer is that there is a balance between relief and opportunity, frequently, and we have to come to what that balance really is. relief matters. ultimately, the problem that

franklin roosevelt referred to as a narcotic destroyer of the spirit is where we reach above basic belief, and we start equalizing returns and getting rid of risk in society so that what was immediate relief becomes a permanent dependent lifestyle, where we destroyed the dignity of individuals where we don't give them opportunity beyond relief to earn their success, and that's the balance that we need to find. we can't find it until we actually adjudicate moral ground. there's an imprecise answer, but that's the ground we have to cover with the real debates of our time about how we are supposed to deal with the poor. where does relief stop, and where does an opportunity society start, and what do we need to do to make sure that one doesn't crowd out the other? i hope we find the answer to that. we're not going to start until we start defending the moral case for free enterprise. in fact, karl is standing next to me and probably has a message -- [laughter] the message is that it's time for us to go to the reception.

thank you so much for coming tonight. [applause] >> silver opal, and no one in america knows about, but, againe the suspicion was raised when i realized the back of the car was a little lower to the groundhe than the front. given the rules of engagement, you can'the just shoot someone because they looked suspicious. well, sir, scott, why did you shoot him? well, i got scared. you got scared? so you killed a man?

well, yes, sir.ared i have a gun. like, you can't do that. given the rules of engagement, you can't just shoot someone unless you know they have a weapon, you know they areve aiming, or you know they'vegage killed someone, or they are -- i should say they are in the action. gimp the rules, i couldn't shoot someone that looks suspicious. i knew the best thing to do was to yell at him to get out of the car. as i did, i looked over the left shoulder, facing him, and i was in the lead striker vehicle, hai metal up to my name tape, all around me, and i was inside the striker standing up, and i stilp had my m-4 on, looking cool, had my caff lar on, doing everything i was supposed to do. was looked at him and said, hey, get out of your vehicle. i knew he heard me because he lookedded over the shoulder, straight at me, and raised his

hands off the steering wheel and then put them back down. nothing happened. like, okay, well, maybe he understood or maybe he's saying i don't know where i'm at.i i'm lost.ke, i didn't know. i yelled at him again. he raised up again off the steering wheel and shook his head know and let the foot off the brake. i had to make a decision. i shot two rounds to the front of the vehicle with the m-4, and, boom, my world went black. i woke up a week or so later in walter reid medical center. my life forever changed. my world went black, not onlyal physically, being blind the rese of my life. shrapnel entered, cut my left eye in half, entered the frontal lobe, and metal went into the right eye, through my cornea, back of me retina, and took off my optic nerve.

i saw nothing but blackness, was told that i would never be able to see again. my life went physically black that day, but also spiritually black. i no longer believed in god. everything i did, everything i believed in no longer meant lo anything to me.eli i remember one of my best friends, edward, came into the room, before one of my surgeriet said, hey, scott, say a prayer. i said no. i don't know how to pray. on i don't know god. the room was dead silent like is there cock roaches in the room? you would have heard them. my wife went back to her room realizing, you know, i had been married to an awesome man, and r still am, and i'd be fine being married to a blind guy, but being married to someone who

didn't believe in what hemarr believed in before, that's b something different. she began to pray. friends began to pray all around the world. for me, it was a choice that i o had to make. it was a personal choice i 4 to. make. i had support. friends came into my roomi ha singing songs christian songs, and doctors thought the room was creepy because 20 people came out of the room. t i thought the room was huge, but i guess it was a match boxcar.e. i had support. it came back to me. i had to choose to make a difference. my company commander called me every other day to see how i was doing. we were friends.that my brigade commander called me up every week to see how i was doing. something that doesn't normally happen in an organization, have top leadership call you to see how you're doing? the support that i had was amazing. it was awesome.he t pe l