claire clare boothe luce policy concern in washington. then we're at the cato institute focusing on economic and political issues. then the senate's back focusing on a nomination for the u.s. court of appeals. >> we have to be really clear about the very many ways that we own ourselves and we own our history and that we make decisions that our history is phenomenal, vital and special. >> the former president of bennett college, julianne malvo, writes and comments on african-american economic history. and this sunday your questions, calls, e-mails and tweets for the author of "surviving and thriving: 365 facts in black economic history." julianne malveaux, in depth live at noon eastern on c-span2's booktv. >> now, blogger and political

commentator mary katherine ham talks to young activists answer how to start a career in the nation's capital. among the advice she gives them is to stay connected with communities outside of washington and keep informed of new technologies. she spoke at the capitol hill seminar hosted by the clare boothe luce policy institute. >> i'm a student at the university of virginia. i've had the pleasure today introducing mary katherine ham. mary katherine graduated from the university of georgia with a degree in journalism and worked in sports journalism before getting involved in the conservative movement at the writer and commentator. she worked at the heritage foundation and has written for such prominent be publications as the daily caller and the weekly standard and has also been featured on townhall.com. mary katherine ham is known for

her success as an articulate radio talk show person because of until march of 2012 she was co-host of the morning majority which ran weekdays in washington d.c. she's also a frequent fox news cribber and -- contributor and analyst appearing often with juan williams on "the o'reilly factor." mary katherine ran a very successful video blog known as ham nation, and her video sopranos d.c. exposing questionable washington transactions and secrets won the 2007 web blog video of the year award. her articles and videos coffer everything from -- cover everything from education to personal stories to economics and current events. she particularly loves and focuses on conservative fiscal and security issues. mary katherine is now married and continues her work for our conservative movement as the

editor at large of hota air.com. she considers herself a true feminist and is inspired by her grandmother's legacy of doing it all without government interference. i heard her speak about this earlier this summer. she encouraged me as a young conservative woman, and i was impressed with how persuasively she spoke. she was very witty and friend hi and is an an amazing example of intelligence and success. please, join me in welcoming mary katherine ham. [applause] >> hey, guys. thanks for coming back in. it is just hike the speaker to steal my thunder. [laughter] every time. a couple housekeeping notes, one, i found these raybans outside if anybody wants them and, two, this is not an alcohol monitoring bracelet, it is a we.comer the, so just to

clarify. there's a lot of weird stuff that goes on in washington, and i'm not one of them. i know the speaker probably got into a bunch of wonky policy, and he can talk about anything under the sun when it comes to that. p i wanted to get maybe a little bit more practical with advice for young folks on the the hill about thinking about starting your career in washington and maybe go through some of the things i have learned and maybe not learned while i've been here. um, first thing that you should know about yourself is that if you have come to work in washington, if you're interested in politics and you want a career in this arena as an activist or in politics in general, you are not exactly normal. just accept it now. it's okay. it's part of the game. but when you are communicating with other people, normal people -- which will be your job -- here's what you need to remember: in washington we think that a thousand things are happening every day that are

super, super, super important. to some extent, that's true. but what the rest of the world sees, all the normal people, is a bunch of -- do you know when you meet somebody who's a really big soap opera fan? and they spend an hour or two of their lives catching up on soap operas every single day, you look at them, and you say, that's insane. there's nothing happening. there's just these fake cliffhangers every single day, and they go, no, you're crazy, it's amazing. i'm invested in the characters, it's really important you pay attention all the time whereas you could tune in four years later, and stefano would be doing the same thing. that's how they look at politics. four years go by, and they don't see a lot of concrete changes that are changing their lives, per se. it's the same thing over and over and over again, and you people are crazy because you pay attention every day. it's okay not to be normal, but we have to keep that in mind, i

think, when we're here or else you'll really bore people at dinner parties and barbecues. and i think you should take the time to visit the normal people. presumably, this is what congressmen and women are supposed to do at times as well, and occasionally they forget to do that, and it really doesn't help their perspective. presumably, we were all normal at some point as well before we got into all this, and we still have that inside us, and i think we should cultivate it. i'm from north carolina, i try to get down there every now and then to check in. just being outside the beltway can be helpful for this. and most importantly, it makes whatever your fighting for -- you're fighting for up here easier to get. because if you're able to communicate with the people who are not following this every day and get them to change their minds, that's when you start achieving things here. because that's the ultimate power. having the little people on your side. not the people who read soap opera digest every week.

so i would encourage you to stay in touch with your normal person somewhere deep inside you. it exists. [laughter] second, when you're going back to explain washington, one of the things that i've thought since i moved here is that our duty -- and this comes with communicating with normal people -- is to learn washington, learn the things that are wrong with it and inform people that this is how things really happen here. i remember when i came to washington for the first time, i didn't know this. i was young. i had been covering nascar which is, basically, watching a bunch of dudes turn left perpetually, just like congress -- [laughter] but equipment really know that much -- i didn't really know that much myself. i was sort of a weirdo, i'd been in politics for a long time. certainly fairly young. but the on-the-ground reality i

didn't really understand. one of the first things i learned was that they don't read the bills, and i was like that can't be right, is that right? and i felt compelled to research it further because i couldn't believe it when people told me. and then i found out, of course, not only is that the truth, but it's standard practice. it's not even thought of as odd in washington. so i took that message back home. said, hey, did you guys know they don't read the bills? this was years before the whole health care thing -- before it became hip to read bills around that time. [laughter] i was, like, the hipster of reading bills. i was into it so early. so i took it back to my friends pack home and said -- back home and said, look, they really don't read the bills. don't you think there's something wrong with that? even if you're someone who loves the federal government and thinks it should be gigantic, don't you think they should actually do some due diligence

on every single bill they pass? and even my liberal friends back home were like, that's not right, is it? they thought i was propagandizing. i actually was not which they learned, you know, in the past couple of years. with the health care debate, i think that that on its own regardless of where you stand on the issue was a great educational moment for the entire country about exactly how this town works. because what happened is they wanted to pass it in two months, the public said, whoa, whoa, whoa, whoa, hold op. and what would have happened in two months, all the back scratching, all the back room deals, all of the not-aired-on c-span hearings and discussions and negotiations they had about it, that stretched out for a year, and then once it stretched out that long and you could see all the details, it's really, really ugly. what americans learned is, like, that's not new, that's the way that most bills get done.

you just saw it all out in the open for the first time. and that's a powerful thing. and something i think the normal people need to know. so i'm glad we went through it. so it's your chance to learn here weird things that people don't know about washington, communicate it to them. just the other day i was reading about the horrible unproductivity of this congress, and he stated valiantly how in the clinton years congress had gotten 333 bills done. well, from be my point of view and i think sensibly from any of our points of view, the number of bills passed should not be the mark of success. can ezra tell me what those did? actually, to be fair, he probably could. number one and number two and number three. [laughter] but we need to be cognizant of every single one of those 333 bills. not just us weirdoes, but back

home people whose lives are being affected should have a chance to weigh in, should know exactly what's going on. and we have gotten so bloated and so gigantic that it's almost impossible for them to do that. that's why people come to me when i'm home all the time and go, look, it's just exhausting, i don't want to be involved in. and i think, i know, but that's why we're here, to be involved partly on your behalf. but what i wish is that we could get this sucker boiled down to small enough is that you actually could be involved and you actually could learn exactly what they're doing up here. so that's our job. we're ambassadors for this weird stuff that goes on here. [laughter] and it's our job to try and fix it by convincing people it's insane. it's actually not that hard a job if you work on it. um, as far as -- what age are you guys, are you guys college age mostly? being an intern, i actually was not be one on capitol hill. i did my work elsewhere in

newspapers and stuff. but one thing i would say about being an intern if you're going to take your first job here, and it applies to all your entry-level jobs, that kind of thing, do not be above doing the silly stuff they ask you to do. i know we're getting very practical here, i'm just bringing it down. but i've had experiences where i'll just give you my first job in washington, as an example. i had a job ha this in job -- that in the job description there was nothing about going to a meeting, taking notes and writing it up. it wasn't the greatest treat in the world, it wasn't in my job description. i could have possibly put up a fuss about it, but i wrote the notes every week, and somebody at my workplace saw the writing and said, hey, we kind of like the way you write, would you like to write a column for us? so that was a big turning point for me, and i think it did teach me, look, don't sort of dismiss things that you might think, hmm

is that really in my job description, boss? doesn't mean you have to take abuse. but making yours available and making sure that you're willing to do some of that stuff because, frankly, when you're young, a lot of the people above you, it takes a lot of money per hour to get them to take notes per meeting, right? i was way cheaper, and so that was a good investment for the company. and not making a fuzz ended up paying -- fuss ended up paying off really, really well for me. another thought on basic sort of career advice, this town is about who you know. that does not always have to be a nasty thing. i remember when i got here it was sort of like i'll make it on my own, i don't need to know any people, right? and it's true, you can make it on your merit. but there's something i had not realized as a young person, that's just how human relationships work. but i will say this about making connections, in washington we have a bunch of happy hours and what not and specifically

meetings for connecting with other people who might help you in your career. your connections will be way more helpful to you if you actually have a ekg with them. a connection with them. so the happy hours are fun, the connecting events are fun, but if you only go in there all mercenary style to find somebody who's going to give you a leg up, ironically, that's not going to help you as much. if you go in and -- i know it sounds silly, but if you just be a nice person like your mom advised, it's really helpful. [laughter] so that's another one. do not with -- do not be afraid to try weird things on the job. and that's not kinky. don't look at me like that. c-span audience is freaking out. [laughter] do not be afraid to try new things. being young has an advantage. for instance, did you ever think that running a facebook page could be a marketable skill? it is, because older people,

frankly, just don't understand these things as much as you guys do. so you have an advantage in the marketplace right now that you should use. when i was coming up just a couple years ago, like, twitter and youtube ask all these thing -- and all these things were brand new. the costs of embarrassing one's self were rather low. the people were just learning it, they weren't sure exactly what to do with it, so i decided to do a weekend peeps newscast where i dressed up peeps to illustrate the news of the week. this is a very silly idea. it got hundreds of thousands of views. so having the ability to think a little bit weird, i hate the term outside the box because it's so not outside the box, meta, but having the ability to do that especially with new technologies is what's going to make you stand out. and there are going to be a

thousand new tool coming up that congress people need, that activist organizations need, that you will probably be familiar with months before your bosses. so keep an eye on that. in general, keep your head about you. that's, like, people who mess up on twitter are generally just being jerks. if you act like a nice, normal person, then you're generally okay. but don't be afraid to try out those new tools. um, and then, oh, this is one i always give too. again, very practical, but i swear. i especially give this to young women coming into politics. and some of you who have heard me speak before may have heard it because it's my hobby horse. get yourself a negotiating coach. i know that the congress in all its wisdom was going to pass a bill that would make sure no one would ever be paid less than any other man ever or something. just like they did two years ago when they passed the lily

ledbetter act that was supposed to do the same thing. i think it's all nonsense. if you are getting paid $5,000 less than a male counterpart, if that's the case, then you need to be asking for $15,000 more. and the best way to solve that problem is to get yourself a negotiating coach, go in there and ask for what you need, what you deserve and don't go to the speaker of the house and say, hey, can you pass a bill that would help me earn $5,000 more a year? that's really -- cost benefit analysis, really bad way of going about doing that. it goes for men as well, but in particular women, i think, have more problems in that situation asking for money, pushing back. and if you get a coach who will hit your helmet before the game, get you ready to go, in the end if you start early in your career, it will pay dividends throughout your career. it's a really simple thing. i did it years ago. i have a friend who's like a

real -- she does negotiations every single day. and every time i'm up for a job, we do the pep talk. what are you going to ask for? i'm like, i don't know! [laughter] but it works. but it's a favor that i have done myself and that i just encourage everybody else to give a try. it can just be a friend. doesn't have to be a class. but it will help you. and it's your right even as a young person to go into a room and they offer you something and you say, first of all, i will add the caveat maybe not on your first job, but as you're moving up through the ranks to go in there and say, look, push back a little bit. i have these certain skills. i have these things that make me different and special. i have proven that i am good at this. this is what i want. so just put that out there. and the last thing i will say, and i do want to do q&a. i know the speaker was doing photos, and i don't want to hold you guys over too long.

but the last thing i wanted to say is as conservatives i think a lot of times we get a little cowed into not thinking that what we do is just as noble as what people are doing on the other side. and i see it all the time. and i think the tea party was actually sort of a moment for conservatives to go, hey, yeah, like what i do matters, and the things i care about are righteous and, like, the things that i want to do in making government smaller and making it more simple are good things. i'm going to embrace that, and i'm going to go stand out in the park, and i'm not going to let these people tell me i'm a racist, horrible person because of it. it can be easy especially in a very liberal environment to let people cow you. but do not be afraid to think that what you are doing and believe what you are doing is noble. you are trying to make this

government smaller and more responsive to the american people. small kerr and more responsive to the -- smaller and more responsive to the democratic process. what exactly is not noble about that? it's a beautiful thing. look at it from the point of view of you wanting to actually have people with input on those 333 bills, preferably less, that go through congress every year. it's a wonderful thing. and people will tell you all the time that you're a heartless, horrible perp because you want to do it. and they're wrong. and just own it. because that will actually make you a better communicator as well. those are my sort of basic tips. i would lo to do q&a just because i like q&a on current event or advice or what have you. is that cool with you guys? all right. [applause] >> i'll start, i guess. i was just bond orerring if you

could expand on this concept of being a passionate conservative, especially as a young person, in attracting other people to be passionate conservatives that combine minded heart and share this message is really compassionate for other people. >> yeah. i think, a, knowing yourself is important. i grew up with all liberals. i went to college with mostly liberals, i moved to washington. there was a brief stint where i was at a small town in north carolina where i was, like, not completely outnumbered. but as a result, i had to learn my stuff. i had to get ready not necessarily to go toe to toe in a sort of cable news-style debate. that's not going to win people over, like, if you're out having a beer. but in a way that i could say, look, one of the ways i found most persuasive particularly with somebody who's already a liberal or somebody who's a swing voter who just has this idea aren't you just out to get people is to honestly say calmly, look, people, honest people, good people believe

something different, and here's why. and let me explain how it benefits normal folks, how it is a compassionate point of view. and i think taking that approach specifically among small groups of friends is probably the best way to reach people. and a lot of times, like, i say especially when i talk to young women or talk about women voters, and it goes for young people as well, you don't have to necessarily swing them all the way to committed conservative with you. what you want to do is hone many on some issues that they agree with you. you start chipping away at that conventional wisdom. if they start agreeing with you on one issue, then they're going to come with you some of the rest of the way later. i have a great, my best friend from home who is now with the commerce department, she believes in free trade. that was her, that was the achilles heel with her. but she's not, she's not an

activist conservative. but she is not in the same place she was before because she had this different point of view on that. and so i think tapping into that and not being, like, why don't you agree with every single issue ever, that's not going to help you as much. because with young people, especially with our peers, it's just not going to happen that often. so i like to play it soft. but when they attack you, feel free to come back. [laughter] >> hi. thank you for coming. >> sure. >> my name's pamela, i go to xavier university in cincinnati, ohio. you mentioned that during one of your first positions you had to go to those meetings and take notes, and it became kind of a game changer for you. >> right. >> what would be your advice, i mean, that kind of altered your career path a little bit. when did you figure out, or have you figured out what you want to do in the long run, and what would be your advice to college students and interns who are still figuring it out? >> i like have you figured it out, because that is totally

where i am. i didn't plan to do any of this which is, i think, part of where i ended up where i am, and i'm excited about it. but if you had asked me when i was in college what i wanted to do, this would not have been even in the realm of possibility. not because i didn't want to do it, but it would never have occurred to me to do radio or tv, i'd always been a writer. and then i found out i liked it. i think being open to those possibilities was one of the things -- because i didn't have a specific path, somebody comes and says, hey, do you want to try hosting a radio show? oh, i'll try that. i'll try tv, i might crash and burn, but giving those things a shot and not being afraid to do that helped. and that's what i was saying abouting being a person, having these skills and not being afraid to embrace that. maybe you're hosting a web show for whatever group you're working for, maybe you're

handling the twitter feed, but don't be afraid to try those new things, take those new tools in different directions, and i think that's what served me well. i happened to come up in a time where all of a sudden being a commentator was sort of a job in itself. being a personality of sorts and having a specific point of view and making it a little more fun was something that happened to serve me well with the time that i came up in. it wouldn't have served me well a couple of years ago. but i think the opportunities are multiplying as opposed to contracting as far as different things that you can do. as far as the economy goes, i do not envy you guys right now. i want to stipulate my situation was different because things were looking pretty good. but i think in activism, there's lots of places to go, so you do have some outlets. don't be afraid, i'm going to be

whatever it is in a senator's office and not veer from that. you might miss out on cool things. >> hi. my name's francesca hart, and i'm interning at the republican national committee. i had a question about, like, radio and television. i was just wondering, like, what internships and what skill sets you think would best position someone in college to possibly get those jobs once we enter the work force. >> well, it's always good to start with something, i think, generally for radio it's call screener and booker. and when you get those jobs, and you can get them on very small radio shows, but the skills are the same. they translate to every level. and just being able to sort of handle that kind of thing, the people skills, deciding what is a good call and what's a bad call, i mean, those skills are the same as far as you go, but you have to start learning them. as far as tv goes, i think, um, booking and producing for a show. they also have all the -- i

think they have all the networks, and i'm i'm sure at other places as well, i'm spooking from a -- speaking from a national level was that's what i know, they have guest greeters which is where most people start out. and then if you -- i have found, i moment to mention this. i have found the best way to get into radio or tv as some kind of commentator, and this is something that i might have done differently if i had known before, is to get a specialty. i'm a generalist that just happened by chance because i was a newspaper reporter, and i came here and just covered everything. why is paul ryan, the guy you go to to talk about budget issues? was he knows them -- because he knows them better than anyone. so finding that thing for yourself will get you, um, into those areas sort of, you know, coming around the back side sort of will get you into those areas because people will come to you because you know something

better than other people do. and that's just -- getting a specialty i think is a great tip in general for washington because i might have done things differently had i seen backwards. but it's a really powerful way to just make yourself an authority. >> hi, mary katherine. my name is laurel, i'm a policy intern, and i go to cornell university i was wondering if you could weigh in with your opinion on the question can women have it all? [laughter] >> um, i think that you do have to make some choices. i will use my own life as an example. i realized about a year ago that, in fact, part of this comes with the idea of not exactly knowing what you wallet, i realized about a year ago that part of what i wanted was to have flexibility to eventually have kids and be home with them some of the time. at least some of the time. and i still wanted to have an impact. and i am blessed that my career

as a, like, blogger, commentator, tv and all this stuff has given me a way to sort of find that path. but i'm sure that if i went 80 hours a week gung ho for the next ten years, i would be in a different position than the one i'm going to be in because i've made that decision. now, to me, that's still having it all. i'm more than happy with the situation that i have created for myself. it ended up being part of my goal. so when it comes to having it all, it does not necessarily mean to me, like, monetarily and ladder wise i must be at the very, very pinnacle, and i must also have three kids and be home with them sometimes. like, i understand that there are trade-offs that we make. um, but i think being honest with yourself about what you want to be it all is the best thing you can do for yourself. and, you know, my mom worked

probably 60 hours a week and had three kids and did an incredible job, and we never thought twice about it. never had any doubt about how she felt about us. my grandmother was -- >> we'll leave this program at in this point. you can see it in its entirety, go to the c-span web site and just look for it there. search for the clare boothe luce policy institute program. live now to the annual cato university conference focusing on economic and policy issues, political issues this morning. the forum will delve into economic growth, the origins of state government as well as public policy. this is live from the cato institute this morning. ..

>> yes. give lent of a thousand $s a year per day a thousand dollars per year in today's terms, and, of course, there were always tiny nobilities, kings and queens and dukes is and princes who lived much better, but they were numerically insignificant. if you had been born anytime prior to the industrial revolution, prior to about 200 years a the odds are as to mom call that you would have lived on the modern equivalent of 400, 600 or if you were extremely lucky, a thousand dollars a year just like your parents, just like your grandparents, just like your children and just like your grandchildren. and then a couple hundred years ago something happened. incomes, at least in the west, started to rise.

by the year 1800, incomes were rising at about three-quarters of a percent a year. a couple decades later, that was happening around the world. and then it got better. just 20 years later, incomes were rising at 1.5 percent a year. this was unprecedented, this kind of sustained growth. it had never happened before in the history of the world. since 1960 in this country per capita growth, that's per capita growth corrected for inflation, that's income per person corrected for inflation has grown at about 2.3% a year since 1960 on average. to translate those percentages into something concrete, let's think about what that means for a typical middle class family. suppose that you are a middle class person with a modest income of, let's say, $50,000 a year. then at that 2.3% growth rate that we have sustained for the last 60 years or so if we

continue at that growth rate, then in 25 years your children will be earning the inflation-adjusted equivalent of $89,000 a year. and if we continue that growth rate with their children 25 years after that, will be earning the equivalent of $158,000 a year. from 50,000 to 89,000 to 158,000 in two generations. that's the power of economic growth. and if you extrapolate that out a little bit further, then your descendants will be earning approximately $1 million per day , and i want to stress these are not some future dollars

we're talking about, that's the equivalent of a million of today's dollars. now, i don't know if we're ever going to reach ha point 400 years from now, but i do know that it's a conservative experhapslation from a centuries-old trend. it's conservative, it's conservative because it assumes that we're going to continue that 2.3% growth rate. whereas, in fact, what's happened since growth started 200 years ago is the growth rate itself has. if i had tried to explain it to somebody 400 years ago. you might also meditate on the history of skepticism. this guy in 100 a.d. observed that -- [inaudible] have long since reached their

limit, there's no help for future development. [laughter] this is the history of of per capita income in the united states. the united states is sort of a medium growth country. our growth compared to other countries has been steadier, and it started earlier than most which has been very good for us, but on average we're a pretty average country in terms of the level of growth. this is all corrected for inflation, this is all 2005 dollars, and you can see that incredible march of prosperity over the years. we have just had, of course, a pretty rocky couple of years. this only goes up to 2010, but you can see the dip this at the beginning of the crash. that's the kind of thing that happens from time to time. it happened most spectacularly in the 1930s here where we had a great depression. here's what happened in the great depression. incomes fell back to where they had been about 25 years before,

and people found it intolerable. they had to live the way their participants live -- parents lived. they had to live at a level which their great grandparents would have felt image bl luxury. we have internalized the idea that things are supposed to keep getting better. but that's a new idea. nobody before the industrial revolution thought that. today we expect our cars and our entertainment systems and computers cokeep dazzling us -- to keep dazzling us with something new. but that underlying expectation is new. in the 18th century -- here's something you never saw in the 18th century, a politician asking are you better off than you were four years ago? nobody asked that because in the 18th century nobody expected to be better off than they were four years ago. it's not just income. let's look at what's happened to

our losier time. leisure time. a hundred years ago, the average workweek was 65 hours, today it's 33. a hundred years ago, 6% of manufacturing workers took vacation. today it's virtually 100 percent. in 1910, 26 percent of 65-year-old men were retired, and that's at a time when most men didn't make it to 65. they were really old, three-quarters of them were still working. today, 90% of 65-year-old men are retired. child labor was common in 1910. boys entered the work force routinely in their early teens. today in this country it's practically unheard of. so we are working less per week, fewer hours per week now, we are working fewer hours per year, fewer weeks per year, fewer years per lifetime. the average housekeeper in 1910

spent 12 hours a day on laundry, cooking, weapon sweeping, clean. today it's about one and a half hours. here is the typical housewife's laundry day in the year 1910. of first she ports water to the stove, heats it over coal, pours it into the big tubs there, washes the clothes in the tub, wrings out each individual item separately either by hand or with a mechanical wringer and then moves on to the impressive task of ironing using the hey flat iron -- heavy flat irons that are continuously heated. the entire process in the year 1900 takes eight-and-a-half hours, she walks over a mile in the process. we know this because the united states government used to hire researchers to follow housewives around as they did their laundry and count every step. and we know from those old

research studies that doing the laundry required eight-and-a-half hours and a mile of walking. by 1940 our heroine has a washing machine, and now her laundry day is down to two-and-a-half hours, and she walks 665 feet. today nobody spends two-and-a-half hours on their laundry. you throw the laundry in, and if you have one of those new, fancy machines, it e-mails you to let you know when it's done. [laughter] it's not just laundry, it's not just cooking and cleaning and sewing. in the year 1900, most houses in this country did not have central heat, did not have plumbing, so oh routine -- other routine household tasks included lugging coal and water around the house every year. just since 1965, just since 1965 the average american has gained six hours a week of leisure. that's the amount of time that we spend in the office or

commuting is down by six hours a week for the average american. that's the equivalent of getting seven extra vacation weeks per year. that's just over the last 40, 50 years or so. so we're getting richer, we're working less, and on top of that the quality of the goods we buy is improving. if you doubt that, go pick up a 40-year-old sears catalog, leaf through it and ask yourself if there's anything in there you want to buy. there's a couple pages from a 40-year-old sears catalog. you can get this am radio with separate tone control. it weighs two pounds, nine ounces, that's twice as much as an ipad. one transistor, comes with the battery. you could get this black and white camera which takes up to eight pictures. and then you replace the film pack -- which probably costs abouts much as the camera

does -- you buy the separate flash bulbs, and you screw the flash 3wu8 b into the camera every time you want to take a picture and, of course, they come in packs of 12, and when you run out of those, you have to replace those. the only thing is these pictures are a little misleading because you're seeing the 40-year-old prices on there, and we really ought to correct those for inflation. those are what the prices are corrected for inflation. [laughter] $128 for that transdisto have radio, $210 for the camera. and i guarantee you, it takes a picture far inferior to what you get off your iphone. or it's not -- and it's not just electronics. take a product like health care. here's a shocking number. if you look at the quality of health care in the poorest parts of africa today and if you control for the effects of aids,

and there's an argument for doing this and for not doing it, but if you say aids is a special, one-time thing that is not part of the general trend of health care, so i'm going to take the effect of that out, then the health care outcomes that we are seeing in the poorest parts of africa today measured by infant mortality, measured by life expectancy, measured by pretty much anything you want to measure are almost exactly the same as what we were seeing in the united states of america in 1975. 1975 in the united states you were getting the same quality of health care that the poorest africans are getting today. and now i want to ask you which would you rather pay, would you rather pay 1975 prices for that 1975 health care, or would you rather pay today's prices for today's health care? i venture to guess there is not an informed person in the world who would choose to go back to 1975, and that's got to tell you for all the problems of our system and all the hype about rising costs, health care today is a better bargain than it has

ever been. the moral of all that is that increases in measured income, even the financial increases in measured income that we've seen for the last 200 years, grossly understates the story of how rapidly the world is getting better. henry viii had a much higher measured income than nearly anyone in this room and, certainly, anyone in -- probably than anyone in this room. he ruled half of england, but i bet you he would have traded half his wealth for modern 34ru78ing, a lifetime supply of antibiotics and access to the internet. ..

>> and we should remember, too, that in the long run a rising tide lifts all boats. here, after all, is what economic growth has done for the poorest americans. let's look at households below the poverty level in america. 98% have reprivilege raters, 67% have washers and dry yers. 96% have color thes, 75 president of those with over 300 channels. i grew up with three black and white channels. 68% have air-conditioning, many

be of the others live in climbs where air countrying is superfluous. 63% have internet access at home. these are households below the poverty level. when you survey people at that level and ask them do you have enough food, 93% answer, yes. do you have any smoke or odors that bother you in your neighborhood, 93 percent say, no. any unmet medical needs? 86% say, no. any roof of ceiling leaks? 90% say, no. it is more difficult to lead the life of a poor american than it is to lead the life of most people in this room. but it is the difference between that life and the life that everybody took for granted 200 years ago is almost unspeakably great. beyond that, if you remember those leisure gains that i mentioned earlier, i said that the average american has gained

the equivalent of seven vacation weeks per year just in the last 40 year. that's been distributed very unequally, in fact. the poorest americans have gained twice as much, the equivalent of 14 weeks of leisure. now, nobody, i think, would want to claim that these great increases in leisure fully compensate for the differences in income. but it's also true that big increases in leisure are not nothing. we don't live by bread alone. our happiness comes not just from our income, it also comes from our free time and the time we have to spend with our friends, the time we have to spend with our hobbies, the time we have to spend with our favorite tv shows. so let's -- i think it's worth keeping in mind that over the last 40 years if you're worried about inequality, you might want to keep in mind that the big relative winners in the income

derby have been the small relative winners in the leisure derby and vice versa. those people who have gained the least income have gained the most leisure. one might also point out that the quality of that leisure's been improving. fifty years ago the rich man and the poor man spent their leisure time in very different ways. nowadays, the rich man and the poor man are pretty much surfing the same internet and watching those same 500 cable channels. so there's been a great equalization there as well. when we turn to asia and africa, they are, the poor there are considerably worse off than the poor in the united states. but we are seeing in many places the same patterns that we saw in the west set back by 150 years or so. take child labor, for example. in asia and many parts of africa

, incomes are about the same as they were in the united states in the year 1840. and people send their kids to school -- to work, people send their kids to work at just about the same rate that americans did in the year 1840. moreover, we know historically the patterns in the west in the united states and in england of how people pulled their kids out of the work force as their incomes rose above certain threshold levels. we're seeing those same patterns in africa and asia. kids -- people are pulling their kids out of work as they go other those same income levels. now, you might have heard that child labor in the third world is caused by big multi-national corporations convincing people to send their kids to work against their own interests. if that's your theory, then you've got to explain why americans and englishmen were

sending their kids to work in 1840 at pretty much exactly the same rate at a time when there were no multi-national corporations around to influence. poverty is a terrible thing. poverty, it means facing terrible choices like should i send my kid to work, or should i end my kid to bed hungry. poor people in various cultures at various times have faced those questions and have pretty much all settled them in the same way. at certain levels of income, you send them to work. at higher levels of income, you take them out. it is, i think, the height of arrogance for those of us who have gotten past that stage to look at other people who are now facing that and saying you ought to do it very differently than we did. but a lot of americans take that view. this is moinaa10-year-old gallon la derek shi girl in 1992 --

bangladeshi girl. she lost her job as a result of protectionist legislation that was sponsored by senator tom harkin that closed down, ended up closing down factories in bangladesh that were not up to the standards that american lawmakers thought they ought to be up to, about 50,000 children lost their jobs as a result of that. moina was interviewed by an anti-poverty activist in bangladesh at that time. this was her take on the situation. they loathe us, don't they? we are poor and not well educated, so they simply despise us. that is why they shut the factories down. um, there is one difference, though, between us and 180 and the third world today. the difference is that when we were poor, there was nobody who was rich. there was nobody we could turn to for help. the poorest people today are turning to the relatively rich and asking for help.

and can that raises the question of what ought we do about that. that's a hard question with a lot of aspects, and i'm certainly not going to settle it for you today. i do want to say a fee -- few things that you might want to keep in mind when you think about that question. first of all, it is remarkable to me the extent to which arguments for income redistribution either across the world or within a country are literary arguments. and that's not a criticism. but they tend to be arguments based on literary analogies, metaphors. i like arguments for metaphor. the arguments for redistributing income are very heavily metaphor-laden. they say things like we ought to redistribute income because society is like a family. or we ought to redistribute income because society is like an insurance policy scheme. like i said, i like metaphors. i also like taking them

seriously. so let's look at those metaphors and see where they really lead us. let's start with a family metaphor. um, here's how this metaphor goes. society is like a family, and we should redistribute income within that family because families do not allow one member to struggle while another prospers. that's almost a direct quote from the governor in new york. families do not allow one member to struggle while another prospers. the problem with that metaphor is that families do allow one member to struggle while another prospers. they do it all the time. we know that from data. we know it from data on bequests. in families where there are great income disparities among the children, more often than

not the parents divide the bequests equally. a bequest is your final opportunity to redistribute income among the people you love the best. and most people look at that opportunity and say i don't want to do that, i don't want to redistribute among those people. so if your role is to make society more like a family to reflect the values that we observe in families, well, then your metaphor tells you we should have less income redistribution, not more. a better metaphor, in my opinion, is the insurance metaphor. society is like a big insurance contract. and the story that people want to tell here is that, look, before we were born any one of us could have been born into any circumstances at all. we could have been born smart, stupid, ambitious or lazy, we could have been born with great opportunities or with no

opportunities. and if we had had the opportunity prior to being born, we would have entered into an insurance contract that says those of us who get lucky will take care of those who don't get lucky. and the argument is made that we didn't actually enter into that insurance contract because somehow before you're born even the insurance saleman can't figure out how to reach you. but we all know we would have signed that contract if we could have and, therefore, we are morally bound by it. that is my reading of the argument that is often made. we all know we would have signed that contract if we could have and, therefore, we're morally bound to buy it. that kind of argument was the basis for john roll whose monumental book on justice, a very influential philosopher at harvard university. he wrote this extremely

influential book called "a theory of justice." i do not understand large parts of it. [laughter] on those occasions when in the past rawls is dead now, but back when he was alive, whenever i quoted it in print, i would always get a handwritten note reminding me that i did not understand it. [laughter] and he was right about that. but my best reading is that this insurance metaphor -- and i think most people's reading -- is this insurance metaphor is a big part of what underlies his whole story. well, rawls was a philosopher. i'm an economist. and since i'm an economist, not a philosopher, i would like to think about this metaphor a little more deeply. i would like to take that metaphor seriously, give it its due and see where it leads us.

the problem with an insurance contract, with enforcing an insurance contract that nobody ever signed that you've got to figure out what the terms of that contract were. exactly how much insurance would we have bought before we were born? now, we can't look at documents to find the answer to that, but we can make estimates which is the kind of thing that rawls and his followers seem never to do. the first thing you do is you ask how much risk were we actually facing back there when god was handing out the brains? you can estimate the risk by looking at the range of abilities that actual, living people have, okay? we know how smart the smartest people are, we know how dumb the dumbest people are, we know how many opportunities the luckiest have, we know how many opportunities the least fortunate have. we know the variance of outcomes, and that's a measure

of how much risk people were facing before they were born. in terms of what circumstances they were going to be born into. once you've measured that, you can ask, well, when people face commensurate levels of risk in other areas, when they're looking at the possibility of a fire or a burglary or a heart attack, when they face commensurate levels of risk with similar levels of variance, how much insurance do they actually buy? and from that you can back out how much people would have paid to avoid that risk at birth time. so you can do a quick dirty, back of the envelope calculation of all that and ask yourself what would the terms of that insurance contract have been? in particular, how many people would we have agreed -- what fraction of the population would we have agreed to support? what fraction of the population would we have agreed the say, you know, you're not earning

very much anyway, you might as well stay home, and we'll take care of you? do that on the back of the envelope. my former colleague jim khan did that on the back of his envelope, and i did id on the back of mine, and we got the same answer, so i have a little faith in it. the percentage of the population that should be permanently unemployed and on welfare if we buy the metaphor, 23%. bigger than any social insurance program that anybody has ever remotely contemplated in this country. 23% of the population should be on welfare permanently and never asked to work. that's pretty amazing. on the other hand, i said this was a quick, dirty back of the envelope calculation. and one thing it left out was it left out the fact that in a world like that there would be tremendous disincentive effect. what we would -- the rule in this world would be if you're

among the dumbest 23%, you don't have to work. the effect of that which our calculation did not account for is that everybody's going to play dumb, right? to try to be among that 23 percent. so if you redo that calculation, making the sort of worst case possible assumptions about how those disincentive effects are going to play out, then you get a different answer. .3% of the population should be unemployed and on welfare, a much smaller social welfare program than anybody has for a very long time ever contemplated in this country. so there are your bounds. if you ignore the disincentive effects completely, 23%, if you assume they're as bad as they could possibly be, .3%. where in there lies the truth. >> i do not know the answer to that. i ran out of the backs of envelopes. i don't want to suggest that either of these numbers should

be taken seriously, but i do want to suggest this: if anybody is arguing for redistribution based on an insurance metaphor, they damn well better be doing this kind of calculation, and they better be able to show you their numbers and how they got their numberses and what assumptions they made. this is the kind of thing that goes into translating a metaphor like that into an actual policy proposal. that's all the way you would want to go if you took the insurance metaphor seriously in the first place. but there are problems with that. one of the big problems with the insurance metaphor, at least as it is actually used, is that the social insurance program that we have in this country does not actually insure you against any, against any of the really bad

things that could happen to you at birth. things like being born in cuba or albania or mali as opposed to canada or luxembourg or the united arab emirates. remember, this is an old slide, this is what we learned about what poverty is like in america today. our insurance metaphor tells us that we're supposed to be inshiring people against the -- insuring people against the really bad things that could happen to you. well, being born into that, that's not so bad by world standards. so if you took the insurance metaphor seriously, and i think it is not entirely unreasonable to do that, but if you took it seriously, your conclusion would have to be that every single penny that we make in welfare payments should be going not to east los angeles, but to east

timor. another disconcerting thing about this insurance metaphor, a little disconcerting, i'll pull up another old slide, i remind you that by conservative extrapolation our ancestors are going to be making a million dollars per day. it is striking to me then that we have all these conservationists running around arguing that people like you and i living the lives we lead ought to be scaling back our lifestyles, living more conservatively in order to improve the quality of life for these future gazillionaires. that is a sentiment, the sentiment of these people is that there should be a tremendous amount of redistribution from the relatively poor -- namely us -- to the relatively rich, namely our fabulously wealthy

descendants. that's what they want us to do, okay? and often these are the same people who are always arguing that we need to redistribute more from the rich to the poor, okay? now, i have not pointed to a flaw in either argument separately, but it does seem to me these arguments are so much in conflict that when you hear the same person making both of them, you've got to wonder whether he's really thought things through. those are all philosophical observations about the issue of income redistribution. but i want to put the philosophy aside and talk about the main, practical issue with income redistribution. here's the main, practical issue: that trick never works. it never works. nowhere in history, nowhere in the world, nowhere in the world at no time in history has any program of income redistribution

as far as i'm aware lifted substantially numbers of people out of poverty. occasionally, you can somewhat alleviate the ravages of poverty for small numbers of people for short amounts of time, but i am not aware of any case where substantial numbers of people have been lifted out of above through through -- poverty through income distribution. is if you want to solve the problem of poverty, what you've go to to do is ask yourself, where's all this growth coming from, and what do we do to nourish it? here's a start. these numbers are thiess ten year -- at least ten years old. if i graph them today, the overall picture would look the same, although some individual countries may have moved around. this is income per worker. that's capital per worker. capital per worker means the value of the machinery that workers have to work with, the

sewing machines that the seem stresses are working on, the assembly lines the autoworkers are working on, the value of the capital, the machinery, the physical plant that the workers have to work with. and what you see there is a very, very clear picture, economic theory predicts this. the numbers confirm it. the more capital the workers have to work with, the more they earn. you look at that and you say, oh, okay, well, that solves the problem. all we need is more capital. well, it's a little trickier than it sounds. where does capital come from? in order to produce capital, we have to be not producing some consumer goods. the guy who is building the assembly plant, okay, is not simultaneously building an ipod for you. the people who are constructing the capital and the resources that go into constructing the capital have got to be diverted from consumption.

to say -- so we only get this stuff if people consume less. to say that people consume less is to say that they're saving more. we've got to get people to save more. unfortunately, just saving more is not enough, and here's why. the more we save, the more capital we build. the more capital we have of, the more effort, the more resources we have to put into maintaining it. capital needs maintenance. the more capital we build, the more we put into maintaining it. so with a society that just relies on saving and investment for it growth, you're going to find things peter out. you move up this ladder a little bit, but you're putting so much effort into maintaining that extra capital that it's very hard to move up any further, okay? that's why you can't just climb the ladder. you need something else to push you up that ladder. you need something else to push

you up that ladder, and it's crystal clear what that one something else is, the engine of growth is innovation. i recently had a historian tell me that the reason the industrial revolution happened when it did can be traced back to a single cultural phenomenon that the idea spread that no matter what you were doing all week, it was always worth taking a couple hours every now and then to ask yourself how to do it better. the idea that you should put a little effort into figuring out how to improve the way you did things was, at least according to this historian, the key driving fact behind the industrial revolution. innovation is the only thing we know that can drive growth. yes, you need saving, but theory and evidence tells you saving alone cannot do the trick. we need innovation. when i say innovation, people always think of these wonderful

electronic devices, they look at the iphone they're carrying, there's innovation for you. but it means more than that. it also means the farmer who invents a new method of crop rotation or the business person who invents a system like, say, just in time inventory management, an idea, incidentally, that has done more to alleviate the difficulties of poverty in this country than any idea i know of that has ever come from a united states congressman. [laughter] you can fly to tokyo partly because somebody figured out how to build an airplane, but also partly because somebody else figured out how to insure it. we need both kinds of innovation. you have a computer on your desk partly because somebody said, hey, i wonder if we can make computers -- i wonder if we can make computer chips out of silicon. but also partly because somebody

else said, hey, i wonder if we can fund start-up companies with junk bonds. take away east of those, and the computer revolution goes way. and, in fact, if you want to know which of those is more important, one good rough and ready way to answer that is follow where the money went. go back to the early days of the computer revolution in the early 1980s. microsoft's annual profits were about $600 million a year. that was also the annual income of michael milliken, the junk bond king. so the contributions there were about equally important. innovation drives growth that raises the question of what drives innovation. two things that we know of. one is education, the other is economic freedom. let me say a couple of words about education. here the great expert that i always go to for information on

this is eric hand she can at stanford university who has done the research on the relationship between education and economic growth. he estimates that if you could improve mexican schools to u.s. quality, you would add 2% a year to their growth rate. that's phenomenal, okay? that 2%, think about what 2.3% has done for the united states. this is talking about adding 2% to what they've already got. improve u.s. schools to danish quality, you'd have three-quarters of a percent growth to the rate. that's gigantic. i want to take a minute to say something about how you know that, how we figure that out. you can, of course, look at different countries and notice that the ones with good education have higher growth rates. that doesn't prove anything because we all know that correlation does not prove causation. you've got to do something a little trickier. once again, i'm pulling up numbers for illustration.

these numbers are 20 years old, and they will have changed by now, but here's what these numbers mean. a haitian -- at first i'll say it wrong and then i'll say it right so you can see the difference. an extra year of education adds 2.0% to your wages. for a mexican, it adds 2.03%. for an ec what dorian, an extra year -- that's a measure of the quality of education in the those various country, how much it adds to your wages. now, that's still the wrong way to do it because the haitian is working in haiti, the ec what dorian is working in ecuador, the japanese is working in japan, so many things are different in those labor markets, we'd like to control for that. so the right way to do this and what these numbers really mean, these are all measures of people who have immigrated to the united states and are working in the u.s. labor market.

so they're all working in the same labor market which controls for all those other differences. a jamaican working in the u.s. labor market with an extra year of earns an extra 3.5% of wages. .. some things like reducing class size are remarkably ineffective. other things like future test

scores are remarkably effective and in the really big one is firing bad teachers. hanushek estimates that if he got rid of the bottom five to 10% of teachers and i want to make sure -- make clear what that means. it means that once and once only take out the bottom five to 10% and replace them with average teachers and just do that once. within 10 years you will have added three-quarters of a% to the united states growth rate and again that's gigantic. that's gigantic. bike coming back to my earlier slide on what drives innovation, i said education and economic freedom. we talked a little bit about education. now let's talk about economic freedom. what does economic freedom mean? it mean small government, property rights, sound money, free trade, limited regulations, freedom to fail, freedom to fail

means being able to start a business that other people think is crazy and knowing that you are not going to be bailed out at the end if it does fail, because if people are offering to bail you out, then they are going to tell you how to run your business. if you don't have the freedom to fail, you don't have the freedom to succeed. if everybody who fails gets bailed out, then the people who succeed are paying those bills. there becomes no difference between the failures and successes. you need the freedom to do something that other people think is crazy and to fail when it's necessary. no marginal tax rate is another aspect of small government and in particular low capital taxes. let me say a few words about that because this is a subject that got a real --

all tax, of course we all understand that some taxes are necessary to run a policy. we also all understand that all taxes have disincentive effect and that's bad. we also i hope understand that some taxes have worse disincentive effects than others. a tax on wages discourages work. a tax on capital income also discourages work, because part of the reason people work is to accumulate things, but that tax on capital income in addition to discouraging work, also discourages savings. that is a double whammy. a tax on wages discourages work. a tax on capital income which i mean interest, dividends, corporate income, to some extent capital gains, estate taxes.

this discourages both work and savings, which is doubly bad. that insight pervades the public finance literature of the last 20 years, often called the chamblee result according to economist. one thing that i find in the general public is remarkably unaware of these days is there a something like consensus among economists. back capital tax rate in the long-run long run out to be zero. the capital taxes do so much more harm than wage taxes that you always improve the world, even for the poorest when you can replace the capital tax and the wage tax. of course you would ought like all taxes to be low but if you have a choice between the two evils the capital tax almost always works.

there's a great deal of disagreement among economists about what the transition should look like. how quickly should we go to the 0% tax rate? should it be immediate? there is also another big issue and that is this. the reason you want to set back capital tax rate to zero is so that people will invest more. but they won't invest more and less they believe you are going to keep it zero. there are a substantial number of economists who say that you will never get people to believe if you keep at it zero and you might as well not try. there are substantial number of economists who say that and it's not an unreasonable argument. no matter what you commit yourself to, people are going to know that 10 years down the line you might change her your mind and because of that you'll have that disincentive effect anyway so there is no point in lowering your taxes. so people have an argument. other economists are not convinced by that argument and say that we would get very far

by lowering the tax to zero and figuring out how to commit ourselves to it. but where the consensus lies, something very -- what we pretty much all agree is that if we could get to that 0% rate, and commit ourselves to it, that would be a good thing. the world would be better. the rich would be richer and the poor would be richer in not just the long term but the medium term if we could eliminate those capital taxes and convince people that we need it. so those are the aspects of economic freedom that i claim drive innovation and growth. how do i know that? well, for starters, here is a graph of economic freedom of the institute in canada rating countries on a scale from zero to 10. what do they mean by economic freedom? this was not a random list i pulled it. this was the list of criteria

that the fraser institute uses. this is a measure of economic freedom. this is per-capita income in various countries and you can see that there is a general upward trend there, that as economic freedom goes up, so does per-capita income. that chart of course proves once again, causation and correlation are two different things, so that is only the beginning of the investigation into now have to start looking at the data more carefully and all sorts of confounding variables and you end up discovering economic freedom is really really important and in fact more so than it appears on that graph. the ideal way to determine something like that is with a controlled environment. that is always the gold standard in science. we have exactly two controlled experiments on this. one is called korea and one is called germany. split the country in half in one goes one way and the other goes the other way and see what happens to their economic

growth. and in both cases the results were extremely definitive. the problem with those experiments is n equals two and we only have two observations. and experiment with two observation is -- two is what we got. an economist at m.i.t. and harvard had a very clever idea for how to find other sort of controlled experiments. he said, let's look at the countries that were colonies of england for example. the english set up very different political and economic reasoning in the countries. let's see whether the work that has more economic freedom prospers more. while that is not really a controlled experiment because somebody could always come along and argue, well maybe the british chose the prosperous way

to give the freedom to. but the other idea was this, that is not actually what happens. happened. if you look historically, what they did was they looked around at where are the places that have a lot of diseases like malaria and yellow fever. these diseases did not affect the natives because -- but the they affected the colonists. and the british said, the places that have malaria and yellow fever, we are not going to settle there. so we really don't care how bad things are there. let's get him -- give them the tyrannical regimes and the nonfree regimes. the places that are free of malaria and yellow fever, those are places where we might want to settle some day. so, let's make things there as free and democratic as the sort of place where we might want to live. that is kind of like a controlled experiment because

it's kind of random which places are subject of malaria and which places are subject of yellow fever. that is a random assignment. that is not the british going in and saying who is prospering and who is not. that is essentially random reason for making some places freer than others. if you look at that and ask me about specific countries, i don't have the country by country data at hand. i should've put it up here but if you look over all, what you find is that in that pseudo-controlled experiment, you find considerable evidence that freedom actually causes prosperity. freedom causes prosperity, economic freedom causes economic prosperity. what about other kinds of freedom? other kinds of freedom don't seem to matter very much. if you look at political freedom and these are all things that i think most of us would agree are good, free and fair elections, the right to organize, the existence of opposition parties, no dominant military, no dominant religion, open and transparent government, none of

that matters very much. civil liberties, freedom of expression, freedom of association, absence of terror, gender equality. none of that correlates much with prosperity. again that doesn't mean it's a bad thing. in fact it's a very good thing that they are not things that cause prosperity. freedom health is an organization that rates countries on political freedom. in this case it's not like the other graph. the other graph, 10 was high-end on this graph one is high his high soap one is the freest countries and you can see that it is true that there is some correlation there. the freest countries on average a bit richer than the less free countries but it doesn't continue as you go down, these are richer than the five's in the four's. and if you look at the data there is no serious correlation there. what matters with prosperity is economic freedom, not religious

freedom, not political freedom, not civil liberties. so, i will summarize again the causes of growth or education and economic freedom. i will point out -- education, people who are educated innovate more. the data shows that if you improve education at the higher level you get more innovation. if you improve education at the lower level, innovation can be adopted more quickly. so education at the higher and lower levels, both improve the rate of innovation going different ways. freedom leads to more innovation obviously because people have the rights to their discoveries. it leads to more savings because people will say far when they believe their things are not going to be confiscated and innovation is the big input to economic growth. i will stop there. i went a little longer than i planned to.

any questions? [applause] >> going back to the first part of your presentation, with your prospective you paint an optimistic long-term view for the world. i'm kind of wondering if you can, and i know this is kind of a big subject in itself but can you take say the european debt crisis situation and put that into perspective and say, are you still optimistic about europe? are you still optimistic about japan, places that seem to have intractable economic rob long's? >> as you say these places seem to have intractable -- and as you say all of them still have positive growth. it is a mistake i think to look at the balance sheet of the

government and draw a conclusion just from that about the economic health of the country. the government's balance sheet, i mean the effect on all of us, each one of us on average goes though something like $50,000 each of us owns $50,000 of federal debt obligation but, and that in the long run is certainly affecting our individual well-being. is also chair that we are all richer than they were 10 years ago and we are still getting richer. could things take a much worse turn? our governments capable of completely screwing things up? absolutely. we have seen that for example when government started to follow the same path that they followed in the west and most of the rest of the world and then

you see incredibly corrupt governments bring that growth crashing down and even turn it into negative with retrogression. so yeah there is no limit to the amount of damage government can do but there is also fortunately no limit to the amount of goods that free people can do, and we are very -- people talk about -- we are not broke. the government has spent a lot of money, much of which i say they shouldn't have spent. we are poorer for that. we are about as much poorer for that now as we would have been if they paid for it as they went along. they are promising from -- not to take us -- it cost the same either way so they can do a lot

of damage but there's an awful lot of welfare for them to play with. i wish they would do less damage, but i do not see at least in the west government actually bringing the whole thing crashing down. >> i am wondering about the claim of education causing growth or maybe it's the other way around, growth causing education. if you look at the curves over the u.s. of how gdp rose and how college education rose, both are those kind of exponential curves but it seems like gdp rose first, and people didn't start going to college until the early 1900's, rather than gdp growth took off in the time of edison and ford and so on in the late 1800's. >> i mean, these things, they interact in all sorts of ways over the years.

as early as 200 years ago you saw people, you saw increases in the amount of education people were getting just as a response to the fact that technology was growing and in order to use that technology you needed some education. so those individual choices to become educated definitely started, you see it in the data as much as 10 years ago. more recently, much of the evidence on education and growth is international evidence. the u.s. numbers you are quoting i don't have in front of me. i wish i did. but there is a lot of international evidence that education precedes growth, and once again i wish i had a slide to put up at the place i was pointing to, next time you are in front of the computer with a google screen, is again the work of eric hanushek who did a lot of careful work on this. yeah.

>> well, i do agree with your conclusion that economic freedom is conducive to growth, but i would question whether some of -- what you pointed out with the various english colonies was really random because if someone or a countries was more susceptible to malaria or yellow fever or whatnot, i think that might be indicative of i think other problems which also might hamper growth. >> the reason that we can rule that out is that the natives were largely immune to that malaria and yellow fever and so the people that run actually working, it was not a problem. and, the fact that they had not eradicated those things is probably not indicative of anything other than the fact than then they weren't a problem.

>> given that, if congress takes no action, the increase in the tax on capital gains is going to be 66% on january 1 of 2013, and that the increase in the tax on dividends is going to triple from 15 to 45%. do you have any forecast for us about what you think the impact will be on america if there are no changes by congress? >> i think these things are disastrous. i think they are disastrous and if you want me to make certain numerical predictions i am absolutely not going to do that, but these will be disastrous things. as i said, something like consensus among the top -- economist that all capital income should be taxed at a rate of zero. originally, in the 1980s when the idea first became current the research that we have been

showed only that would improve prosperity for the average american. more recently -- more recent research has shown that prosperity come has shown a very robustly under a great variety of -- of that disparity would invade every income class. again, it doesn't work if people don't believe you were going to keep their rates low in this kind of thing is exactly why people don't believe we will keep the rates low. whatever they are now, people are not responding to the current rate because -- and, but if you polled economists, this is one of the things and there a lot of stuff that we disagree him but there is stuff we pretty much all agree for example there is too much occupational licensure. we all agree that, we all agree that free trade is almost always

everywhere a good thing and we all agree that if you can commit yourself to low capital raids, you ought to do that and it's a very good deal if you don't. >> i wouldn't want to pin you down on an exact or centage and pardon me for giving you that impression but the 2.3 -- do you predict that we will have growth in 2013? >> the answer to that depends so much, not him of the tax rates are in 2013 but what people expect them to be in 2014, 15 and 16. i cannot begin to touch that question because i have no idea how those expectations are going to evolve. >> you implied the answer to this but i would like to see if you have anything more to add. anytime you have redistribution whether from americans roughly two americans the effect of unlike killing the goose that

lays the golden eggs for both american and a capital that might have been exported from america to other countries. what you have two say about even well for -- well for working out the poor how much less would it help if less people were to keep their money money and the best at? >> that is what i try to address with the numbers i put up there. if you make the worst possible case scenario, assumptions about that, you still end up discovering if you take the insurance metaphor seriously and if you take your issue seriously and if you make the absolute most worst-case scenario for the the -- you should still have according to that metaphor a small social net that should affect about 3% of the population. if you make more realistic assumptions about the effect of these disincentives, you would probably end up arguing to a

somewhat bigger social safety net. again, what i want to do is not make the case for any particular number, but to make the case that anybody who is arguing on those grounds for a social safety net has got enough occasion to tell you exact we what assumptions they made, what they're calculations were and what number they came up with and how they defend that number. >> i am serving in the swedish parliament. i just have one question of clarification. you said there is no significant correlation between on the one hand civil liberties and on the other hand economic growth. so are you there by saying that there is no correlation between civil liberties and political freedom on the one hand and on the other hand economic freedom in the sense that one will promote the other? >> a good question.

let me try and remember exactly what my numbers do show. i think what you will find is that if you don't control for economic freedom, then very high levels of political freedom and civil liberty are correlated with prosperity but if you get away from the very high levels the difference between the moderately free and not free at all, there you don't see any correlation at all. the interaction between the political terms and economic term is exactly what we should be asking and i wish i could remember the answer for sure. i think i do but i don't want to say anything that i'm not sure of. i'm going to look it up and i will tell you tomorrow. a great question.

>> i wanted to ask you to clarify a little bit about your meaning that freedom causes prosperity. does it also reduce poverty? are they saying the same things at the top 10% have their prosperity increased and the bottom 90% have their poverty increased less so? let me just say it this way. is there some fact which i could rely on to tell 90% of my friends that their poverty is also being reduced by freedom? >> you are right to say that average incomes go up, not to say that poverty is reduced. in pure glee though, those things go hand-in-hand. if you look at the united states again, showed you what poverty looks like in the united states today. that improvement in the quality of life from the poor has moved right along with overall growth

in the jena and in fact if anything it has moved faster. if you look at this in china, a billion people have been lifted out of poverty proves growth. i don't know offhand of any example, any substantial example, ongoing example where a society has had sustained growth that has not brought the lower end up along with it. certainly the big examples in asia, you see those things go hand-in-hand. >> i wondered if you had any comments about tyler cohen's low-hanging fruit metaphors on growth and the possibilities for growth in the future?

>> hang on. if i can figure out how to use the -- there is my comment. [laughter] >> you had some very positive statistics of living standards for the u.s. poor. but, what occurred possibly -- one could possibly argue that is not just the effect of economic growth but also the success of the redistributionist welfare state, so my question is, is there a way that you can filter out and i know can be very impaired atypical to do this but have you thought about a way to filter it out so it's a much more striking example of the correlation of how -- [inaudible] >> certainly, i think the best way i can think of to address that offhand is the very

powerful correlation that we see always and everywhere between capital per worker and income per worker on the other. i had a graph appear earlier that was almost a straight line. industrial activity, approximately two-thirds of revenue gets paid out to workers and that is, that is a good empirical rule of thumb that is going to carry you through centuries and in cultures. workers get about two-thirds of the output and that means the more output there is the more workers are going to get. and m you can do redistribution about the edges but what really affects the quality of life for the poor and think is their wages. and wages are tied to the amount of capital they have to work with. and again, you see that not just overtime but also across countries.

>> the only comment that i heard about population were really seen in the graphs because they were done on a per-capita basis. i am wondering if there are any comments you could make on population with regards to growth and perhaps longitudinal studies? >> i will spend half of wednesday talking about population and i don't want to give away my punchline. [laughter] >> thank you very much. >> hi. i wanted to ask if he thought microlensing to entrepreneurs around the world increases economic freedom? >> this microlending stuff warms my heart. i love the idea of it. it makes me feel good. whether it actually works i have no idea. i haven't a clue. i hope it does because i think it's wonderful. >> i wanted to ask about two things that seem to me to have a

great effect, and that is the impact of corruption and if you will property rights, the rule of law? >> the effects of corruption is seen most medically in africa where again countries have gotten started on that growth path, a growth path that different parts of the world started at different times and they have all kind of use that growth path. you see a special in africa where corrupt government comes in and they are able to put the brakes on a completely and turn it around. there is no question that corruption is a huge break on economic growth and i think they are all kinds of arguments about why the industrial revolution came when it did but i think there is a good piece to be made that the advent of -- and a greater respect for property rights and for economic

freedom that came with that was a necessary prerequisite for the industrial revolution. i am not enough of a historian to really defend that. but i have just finished reading -- and it sounds like, kent. >> i was wondering whether you have given some thought why the industrial revolution happened when it did happen and why only in the west? >> everybody is asked by the industrial revolution happened when it did and nobody has an answer to that. again my friend told me it was the spread of the spiral idea that it's a good idea to think about how to do things better but then you have to ask yourself why did it happen at that particular time? you could argue that sometimes these things happen pretty much ran the plate and is not a very satisfying theory. there certainly were bullet --

big letter code changes in england starting in 1888 and those changes as i understand them, speaking as a non-historian, did create a much freer climate and a much safer climate for investment. and i suspect that it quite a bit to do with it. so i mean, that is telling you that we should care about our politics and we should care about her institutions and we should be particularly concerned to preserve those freedoms. [inaudible] [applause] >> thank you, steve. we have a break and a couple of good things. we have refreshments outside. i should warn you on this floor there are limited coffee

recycling stations. they are just two so if you are going to use the toilet, upstairs has a lot more and the downstairs one level. that is what i would recommend that we will start again precisely attend:45. thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] about a 30 minute break in this daylong conference on economic and political issues hosted by the cato institute. when neighbors and we will hear from cato institute senior fellow and the of cato university, tom palmer. he will look at the origins of stating government and later a historical perspective on freedom and a discussion on public policy a little bit later. live coverage resumes at 10:45 eastern hear on c-span2. until then a they look at the congressional agenda.

>> paul cain is the congressional reporter for "the washington post." thanks for being here this morning. congress has just this week to get work done before they head into the august recess. we often see a big drama unfold right before they get ready to leave town. are you expecting at this time around? >> guest: i don't think it will be nearly as dramatic this year as in the past. in 2009 there was a rush to get the health care bill out of the house energy and commerce committee. that went down to the very last day and also crazy meetings late into the night. last year this time we were dealing with the debt ceiling hike and all sorts of high drama. this time around, it is an election year so they have really dialed back their expectations and what they are trying to pass, and they have gotten a few of them must pass things done this summer. so looking ahead, you have got a couple of things that they are trying to get done. on the house that they are going

to have a vote on competing tax plans. the democratic plan is to extend the bush era tax cuts for everyone except for those making under $250,000. the senate has already approved that by just a couple of margins. the house is going to reject god and approved the republican plan to extend the tax cuts for everyone, including the most wealthy. that is going to be their major task of the week. the senate is taking up a bill for, to try to improve the nation cybersecurity from computer hackers. it's unclear whether not they will be able to get through all the the big key amendments, but then -- there are a couple of other issues that are lurking and the drought in the midwest in the country is basically wreaked havoc out there on their economy. there has been a farm bill that has been sort of languishing in the house for quite some time.

so there is now talk about trying to do a one-year extension, some sort of short year extension of that bill. that is probably the other must pass item and there is still postal reform that is lurking out there. a couple of potential defaults set in by the postal service, one starting on wednesday if nothing is done but it's unclear whether this momentum in the house to get that done. >> host: would you like to talk about any of these issues of paul gain, democrats 20273700 erdogan and republicans -- and independent colors (202)628-0205. about how many days left of work in washington does congress have before the election? >> guest: we are looking at i think 18 days left. this week and then they go on a five-week break that is meant to be sort of a work period back home and also for the republican

and democratic national conventions and then they are back in about mid-september and because of a couple of different issues, including jewish holidays and other planned breaks, there is just 13 days in september and early october and at that point, the only thing left that they will be trying to dupe most likely is a six-month extension of government funding. they are trying to work the deals out now so that they are ready in september when they come back but mostly from here to election day, the focus is going to be campaigning for those 50 to 60 house races that are going to determine the majority and eight to 10 senate races that are going to determine next year. >> host: a recent story in national journal dealing with the new senate proposal by republicans on energy legislation and assess senate republicans aren't even pretending that new energy legislation they introduced last

thursday is meant for passage in congress. instead gop senators that the bill represents the sort of legislation they would push if they were in control of the senate in the next congress. how much of the work that is being done right now before they head out on their august recess when they can campaign is about laying the groundwork for effective messaging back home? >> guest: i would say just about all of the. everything they are working on right now is about either messaging to try to give the people a clear choice of what they would do if given full control of washington next year. , they are positioning themselves for what could be an amazingly important lame-duck section -- session in which there'll be so many issues being decided in the taxes being automatic spending cuts coming through last year's debt law, the sequestration that was very confusing to people. there has been a lot of positioning for that session.

right now, there's there is not a lot other than a short checklist that i just rattled off earlier. there is not a lot that they are even attempting to do. >> host: paul kane reporter with "the washington post." let's go to attleboro massachusetts. >> caller: hi. the reason i'm calling is, you know all i hear anymore on tv is how the government and the news and everybody is trying to divide the american people. it's like you all want to see is so divided and the fighting with each other, with the democrats dangling carrots in front of you promising the world and then they barely give you the carrot and the republicans they say the fight for our rights. but then they keep their mouths shut. it's all just to get reelected. nobody cares about us. reporters want to be ardent newest prophet so we will listen only to them but in the end all

you were doing is trying to destroy america. >> host: what is your solution? what would you do to change things? >> caller: get on the people, term limits. if you want to make a law, live with that, because none of these people live with any of the laws. you know, nobody fights for our education. it's one of the worst now. we sit back and oh, make things better for the teacher. what about our kids? our kids are our future, but wait until the next election. wait until after the election. what about now? >> host: she has a lot of anger and concern about what is happening. paul kane are you seeing congress wrestle with that? >> guest: is it's really fascinating because we are in a state, think "national journal" and others have actually quantify the statistically about the most conservative, the most

conservative lawmakers are more conservative than ever and the most liberal are more liberal than they have been a long time so there is here in the capital, there is an amazing amount of what people call polarization and i think that goes to the point about the way she feels people are trying to buy them. at the same time, the country itself has never been more narrowly divided. there is a really good chance that the senate is going to end up in a 50/50 deadlock with whoever ends up winning the white house having the tie-breaking vote. and we are at this weird point in which the closer the margins, the more narrowly divided the country is. we are almost more, people feel more polarized by at all. i think if you see the senate still returning -- retain control by democrats in the house still run by republicans

this is an issue they are going to have to tackle in the next congress. i think they will have to with the newly-elected president whether second term for obama or first-term for romney, there is going to have to be some sort of coming to grips with this in reaching compromises on some deals. >> host: david lightman reporting, is uncle sam helping or hurting the economy? nearly three out of four americans want their representatives to compromise to find solutions to economic problems and people say things like congress needs to work together and they need to work for compromise. a vocal minority of 25% including 40% republicans want to stand on principle regardless of the gridlock. that could lead to higher taxes, government shutdown or higher federal taxes. >> guest: you were talking earlier about the texas senate race, the primary on tuesday.

and they have sort of an old-fashioned establishment conservative and lieutenant governor dewhurst and ted cruz as part of this up-and-coming new dynamic wing of the conservative, the conservative wing of the republican party. back in late may, they had their first round of primary balloting. they had about 1.5 million people who voted in that race and dewhurst came out on top. he didn't have 50% so under texas law they had this runoff system and now they are expecting about 350,000 people. those three ended and 50,000 people are part of what you just referred to as stand on principle and that is why a lot of people think he is the favorite right now. and what you get is sort of this primary -- primaries become more decided by just a narrow swath of the 350,000 in texas who are

going to vote tuesday is that they can get a more hardened, more principled group of people on the right and on the left, and it makes that sort of raging to divide a heck of a lot more difficult than it would be if you had more participation from all corners, especially independent voters. ..

>> guest: what the caller's referring to is in shorthand we sometimes say that the tax cuts, that the democrats are trying to keep the tax cuts for those making 250,000 and under, and it makes it sound as if lebron james making about $25-$30 million a year is not going to get a tax cut. in reality, lebron james gets a tax cut on the first $250,000 that he would be making. the rest of his income would go up to 39% as it was back in the '90s. so my colleague, ezra klein, has written about in this extensively, and i think the average millionaire, per se, would see something like an

$11,000-$12,000 benefit under the democratic proposal. under the republican proposal, the average millionaire sees a $70,000 benefit. so it's an argument over how big of a tax cut to give the millionaires and above. >> host: we see a headline here, democratic tax plan may get a vote in the house. you mentioned we may see these unfold this week. what are you expecting to happen? >> guest: sure. the senate democrats have said give us a vote on the democratic bill, give us a vote, and john boehner has said, well, sure, we'll give you a vote, and we're going to beat it. the truth is they have 242 republicans, very few republicans are expected to support the democratic plan. they're happily -- they haven't officially determined it, but they expect to among the series of options that they'll vote on probably thursday will be the democratic bill. and you'll see a very what the

caller, christina, does not like, you'll see a very polarized vote, you'll see almost all the democrats voting for it, almost all the republicans voting against it. so they'll knock that down before they move on to passing the republican bill. >> host: paul kane, congressional reporter with "the washington post," is our guest. michael's in tucson, arizona, republican caller. good morning. >> caller: good morning, he low. >> host: hi. >> caller: hello. >> host: what do you have to say? >> caller: my question is, what do the obama administration or romney administration plan to do with the gas prices that are soaring through, across america? because i recently read an article in china they are doing some program where they find a way to reduce the gas prices. i want to know what's going to happen with the gas prices everywhere. >> guest: the caller raises a good point. i think your average person out there sees $3.50 or so a gallon and thinks that it's too high. the reality is up here they were

bracing for $4, $4.50, $5 even. there was a price spike back in january and february which was very unusual because usually you have this price hit that comes in the summer, summer driving. that came early, and it stoked a lot of fears that you would see gas prices soaring. the reality is that there's been an increase in output, and slowly but surely that price has sort of come down and now flattened out in that mid $3 range. it has taken some of the wind out of the sails for republicans that really wanted to make this a central issue. you don't hear them talking nearly as much about the keystone pipeline which was a real focus for them last fall and early winter, about building that pipeline. i think by the convention you will see a return to that because it's what they consider a really good issue that

independent voters are sort of, will be framing them, their votes on the fall. we'll see how the prices go up or down in the final few weeks before the election and whether it really resonates with voters. >> host: a story in your paper or, "the washington post," has this headline: the house is ready to take up drought relief. >> host: what are the chances these are going to go anywhere? guest: this is the one piece of legislation that has moved from sort of the back burner right up to the front burner because of drought relief. initially, the senate had passed a bill that was going to save between 23 and $30 billion, and the house was just going to move their bill through committee. and this was part of the idea

where they were trying to get positioning for the fall when they have a lame duck session after the election. and it was all about sort of bidding about whose bill would save more and be able to have that in reserve as they go through these talks on taxes and the automatic spending cuts. but instead this drought has just really hit the midwest, and both for economic reasons and really genuinely trying to help out these farmers and political reasons because the midwest has become such a key battle ground in both senate races, house races and the presidential i think they have, basically, decided that they have to do something rather than waiting for the fall. and i think you're going to see action on in this week. and, you know, the senate could in turn approve it, and you would at least have that issue lifted for about a year or so, and you get some sort of relief to farmers in the midwest right away. >> host: let's look at some numbers in this story.

the cost of the legislation which also includes disaster assistance for farm rates was put at $621 million over ten years paid for by reductions, rather in conservation programs and direct payments. >> host: that helps feed some 46 million people. so other issues coming into play here as well. >> guest: as often has happened in the last 18 months, you have a hard-line group of republican conservatives who really do not want to see any deficit growth, and the fight on these issues often becomes how do you pay for it, how do you have an offsetting cut to finance this legislation? and the food stamp issue has

always been one that's sort of befuddled the public a lot and some lawmakers too. people don't realize that so much of the usda and what the usda does is administering this food stamp program. and it has been -- it's an automatic program that you see when the economy is hard hit and there's a lot of unemployment. there's just growth in the spending on food stamps, and that has really angered a lot of the most fiscally conservative members of the caucus, republican caucus. >> host: ben joins us from ithaca, new york, on our independents line. hi, ben. >> caller: thanks for taking my call. mr. kane, last week or perhaps the week before there was a bill introduced to audit the fed, and i'm wondering if any action was taken, if you knew how the vote went and where the white house stood on that. >> guest: yes. that bill passed on, i believe it was thursday afternoon.

a colleague of mine from cnn coined the phrase that dr. no finally got a yes. he has, ron paul has been pushing this bill to audit the fed for quite some time, and it did pass the house by a fairly, by a fairly partisan vote. i don't know the exact numbers off the top of my head. his son, rand paul, the senator from kentucky, is pushing the bill in the senate. but as of now it's, it's sort of an outlier issue for the senate and is probably not going to receive a vote there unless senator paul has been pretty, pretty tough in his fights so far. so he may try to get a vote on it as an amendment to one of the bills that sort of they'll have to tackle in the next two to three months. >> host: from fox news, the final vote was 327-98. lost in the bipartisan revelry,

however, was the fact that eight cosponsors, democrats, actually voted against it. [laughter] >> guest: actually, so, i stand corrected. that was a big win for dr. paul. it was, you know, probably one of his most important legislative victories so far. now, will it become law? probably not. but the issue about the fed, its hand handling of the bailout, its role in the bailout of four years ago continues to resonate with a very intense group of voters. and i think you'll see, you know, this issue won't die. and ron paul's retiring, but rand paul will be here to keep carrying that flag. >> host: syracuse, new york. ray, republican, welcome. >> caller: yes, sir. i'm just curious why they don't do anything about the keystone pipeline. it's been up five or six times now, and president obama seems to think it's a big joke, he does nothing about it. i'm just wondering why, sir.

>> guest: i think what you're going to see is that is going to be an issue that will be decided by the presidential campaign. i think if mitt romney wins, that's going to, that's going to be flipped over. the senate will likely then change hands, and i think you'll, basically, see that that will get implemented. i think that's something that's going to be completely determined by the presidential campaign. it's just you're in a deadlock situation in which the senate does not want to pass or approve that plan. there are plenty of votes for it in the house, not enough votes for it in the senate, and if romney wins presidential, i think you'll see the pipeline will be built. >> host: jim, independent caller, atlanta, georgia. good morning. >> caller: how you doing this morning? >> host: we're good, thank you. you're on with paul kane. >> caller: okay, thank you. what i wanted to bring up was we're on the second anniversary of kenneth gladly, he was the black man beat up at the town hall in south st. louis.

nothing's been done about that, and the democrats have the seiu have him out pick him out of a crowd. if it hadn't have been for the people in the crowd, they probably would have beat him to death. also the black leaders all looked the other direction. i'm just wondering, are we going to see that again this time? i'd like to have your comment, thank you. >> guest: i'm not entirely familiar with the issue that you brought up, but i think what you'll see, you know, broadly in terms of race relation issues, you know, this has been something that obama and senate democrats have pushed. you've definitely seen a movement in terms of civil rights issues, gay rights issues. i think you're going to, i think that's another issue that will be decided largely by the presidential campaign. >> host: when we look at the presidential election and all the things that are being delayed until after -- not just

the presidential election, but the senate and house elections as well -- refresh for us, paul kane, what else is being put to the back burper until we with see -- burner until we see who wins control of both the white house as well as the bodies of congress. >> guest: you have the expiring bush tax cuts that we've talked about that were first enacted in 2001 and 2003. they expire december 31st. there's the automatic spending cuts, the sequestration, which the first hit would take effect early next year. in addition, there's a whole slew of tax benefits for all sorts of various entities, alternative energy tax breaks, tax breaks for everything from, like, bow and arrow makers to research and development. all of this stuff is coming in line on december 31st, and because of the deadlock of last summer and the real inability to strike any sort of big, grand

bargain they have basically decided that they would take it to people. that's what barack obama said to eric cantor sort of famously in the middle of last summer at a big standoff at the white house. obama eventually was tired of what cantor was saying and pushed back from his chair and said, eric, we can take this to the people. and i think that's generally, for the most part, what we're going to see happen. and it will really, the breakdown here in the capitol and whoever holds the presidency is going to determine the outcome there. >> host: are you seeing behind the scenes when it comes to decisions about the fiscal cliff, when it comes to decisions about raising the debt limit or dealing with spending issues? >> guest: you know, what we're seeing on the hill right now is the initial talks. like, some committee chairmen and subcommittee chairmen are talking a little bit, they're putting out ideas, they're

floating ideas. right now, starting today, john mccain, lindsey graham and kelly ayotte, three senate republicans, are going to do a little barnstorming of key swing states, florida, north carolina, virginia, and finishing up in new hampshire tomorrow. and they're trying to raise attention to the whole issue of potential cuts to the military. people are doing these things, but we're not, we're not at a point -- >> see "washington journal" every morning starting at 7 a.m. eastern on c-span. we are back live now to the daylong conference hosted by the cato institute. remarks from senior fellow and can the director of cato university, tom paneller. he'll look -- palmer. he'll look at the origins of state and government. >> www.cato.org. there's just a huge amount of research material you can put to good use. should also like to mention that when we go to discussion, if you're at the mike, please, make

sure you're pretty cleese to it because it's hard to hear. they're very sensitive to the range. now, the presentation that i'm going to make is a bit different from steve's, complimentary, i think, rather than being economics and numbers, this is primarily sociology. so i want to look at the onlies of the state and government -- origins of the state and government historically. but before that i want to make a little advertisement because i was very happy this morning, i got an e-mail from one of our linertarian colleagues in today -- libertarian colleagues in tehran, and that is the book "the morality of capitalism" in an iranian book shop in tehran. the translation appeared, and it's doing quite well. and then this morning reviews in two of the newspapers. so i was pretty happy about that. [applause]

and that's also a project that one of our colleagues here, rai, raaiza is active in promoting it in the arab-speaking world. so that's just a quick advertisement, and now back to our feature presentation for the day, to look at the origins of the state and the government. and let's start out with something that is really a remarkable feature of contemporary discourse. there are a lot of people who believe the state is responsible for everything. let me give you an example here. professor cat sunstein, who's not only professor of law at the university of chag, but director of the white house office of government affairs, government is implicated in everything people own. if rich people have a great deal of money, it is was the government furnishes the system

in which they are entitled to have and keep that money. so that's the academic formulation. we had a more popular one recently -- [laughter] we'll we'll just share here. >> if you've been successful, you didn't get there on your own. you didn't get there on your own. i'm always struck by people who think, wow, it must be just because i'm so smart. there are a lot of smart people out there. it must be because i worked harder than everybody else. let me tell you something, there are a whole bunch of hard working people out there. [cheers and applause] if you were successful, somebody along the lines gave you some help. there was a great teacher somewhere in your life. somebody helped to create this unbelievable american system that we have that allowed you to thrive. somebody invested in roads and bridges. if you've got a business, that -- you didn't build that. somebody else made that happen.

the internet didn't get invented on it own. >> that was al gore, as we know. [laughter] [applause] so if you've got a business, you didn't build that. somebody else made that happen. i would like to introduce them at some point to my nephew and my niece-in-law who have been working 65 and 70-hour weeks letting someone else build their business. [laughter] in colorado and putting an enormous amount of their own sweat equity into the business that obama is building. [laughter] but to be fair, looking at it in context, that statement was proceeded by somebody invested in roads and bridges. so let's be fair, he may be saying the point is you didn't build those roads and bridges, you just paid the taxes with which they were built.

[laughter] because of the businesses and the work and the enterprise and the labor in your life. so the best interpretation of what the president offered us is that he doesn't understand the first thing about marginal contributions to output. namely, the question is one additional hour of labor, one additional dollar, one additional acre of land. he doesn't understand how the world works, that it's the margin that we should be focused on. so we'll pass on, though, that's just a little bit of contemporary discourse. and look at this presumption that all the surplus is attributable to the state. and the hidden assumption that, therefore, the state is entitled to it. after all, it's responsible for it, and the consequence is they're entitled to it. you have no claim whatsoever on

anything that, quote-unquote, you have produced because you didn't do it. had you, in fact, been born in a very, very poor country, you probably would be poor. that's certainly true. i think steve landsburg made that point very, very well. if any of us had, instead, been born in a desperately impoverished country, not had education, not had health care, not had the opportunity living under some kind of tyrannical dictatorship, we wouldn't be as prosperous as we are. that's true. but it doesn't follow that the additional efforts you make within the context of a freer society somehow don't matter, that they don't count. but there's another very deep philosophical problem here, and that is the argument that all the surplus above bears survival as attributable to the state can't be right because without a surplus, you couldn't have had the state in the first place. but the very beginning, the foundation of that claim a

fundamental mistake. the existence of a state apparatus, bureaucrats, warriors, soldiers and so on, requires a surplus to be able to sustain that. but people like cass sunstein system matily argue all surplus is attributable to the state. that cannot be true. there had to have been a surplus before there could have been a state. anthony dejar say makes that point very well in his works, and i recommend a short essay he wrote. it's very clever and witty. and the essay is called "your dog owns your house," the argument being because your dog is your guard dog protects you, without that someone could have stolen your house and the consequence is, naturally, your dog is the legitimate and proper owner of your house because your dog contributes protection services to it. let's look, though, at a social i don't imagine call level, well, what is the state? and here's the definition offered by max say boar, one of

the greatest sociologists of the last 200 years. he defined the state as that human community which successfully lays claim to the monopoly of legitimate physical violence within a certain territory. so we can look at that and point out that there are groups that melee claim to monopoly of violence but unsuccessfully. mafia groups, gangsters, neighborhood gangs and so on. but also it has to be that they successfully laid claim to it, but also they laid claim to it in terms of legitimate exercise of power. that there's some reason that they should have that authority, and others should not. and then, finally, this territory being another of the defining characteristics of the state. the contemporary states' political formations are territorially bounded. this was not true of a variety of forms of organization in the

past. so the modern territorial state, and we can add to that, also, the contemporary state. almost all places in the world it's a nation-state. that is to say a state in which the territory is considered to be the natural homeland of a nation. this is, again, a modern form of the state that was not found in previous state formations. let's go back for a moment back to this question of surplus. and and first why do people have wealth. and various early libertarian sociologies addressed this comment, a very famous one in a magazine published in france in the early years of the 19th century. there exists in the world only two great parties; that of those who prefer to live from the labor of their property and those who prefer to live under the property of others. makers and takers.

people who believe in producing wealth and those people who believe in appropriating the wealth of others to -- or, rather, actually act so as to do so. a great sociologist, often heymer, a figure in this what's called the conflict school of psychology in a wonderful short book called "the state" distinguished there are two fundamentally opposed means whereby man requiring sustenance is impelled to ab obtain the necessary means for satisfying his desires. they are work and robbery. one's own labor and the forcible appropriation of the labor of others. and he considered the state to be the organization of the political means to the attainment of wealth. now, there were others who also looked at this question historically, a very important one was a man named thier ri, a

french historian again from the 19th century, who looked at the formation of european states. he wrote a most interesting book called "the conquest of england by the mormons." tracing the british state as he knew it in his day to an original act of conquest. what happened in 1066 as the foundation of the state system of britain. he also pioneered something i'll talk about in the next lecture which is the formation of civil society, or rather parallel activity in the formation of the so-called communes of europe, the cities, the merchant guilds and self-governing municipalities of europe. and he considered that to be the foundation of civil society, of civilization, if you will, and of modern freedom. and one of the things he did was to go out and collect all of the

charters that you could gather of these european cities. these were social contracts, if you will, they were constitutions. no one had paid attention to them in many hundreds of years, and he went and gathered these and then published volumes of them as the real foundations of the origins of civil society. is so let's look at what economic means have to proceed the political means, the kind of surplus available for confiscation before you can develop a state. you don't find states among hunter-gatherers. they don't generate enough of a surplus to be able to confiscate. similarly, among a very primitive agriculturalists, what you need is settled agricultural production among persons who are generate sufficient wealth, and they typically are conquered by nomads, so the experience of almost all the state systems of

the contemporary world really trace back to those states founded as nomadic peoples erupted out of central asia, typically people with horses who were able to conquer others. and these were nomads, people who herded cattle, goats or other creatures, and then were able to conquer sedentary agriculturalists. this is a very deep foundation of the political systems that we experience today. and, indeed, there's a memory of this old conflict preserved in genesis 4 and the old testament about how abel was a keeper of sheep, but cain was a tiller of the ground. of course, we know the two brothers come to blows, one kills the other. this is an echo of this ancient conflict between people who are tillers of the ground that produce these surpluses and then nomadic people, the keeper of

sheep, who conquer them and are able to then exploit them or extract surpluses from them. this experience of the o development of empires of nomads over cultivators we see in the middle east n mesopotamia. here's the depiction of a site of a settled agriculturalist, a stone site for hard vesting grain. -- harvesting grain. and in the earliest form of conquest by people with horses is the use of the war chariot. you see the first emergence of large empires and state formations. it's, essentially, a peasant's cart that has been hitch today the back of a horse -- hitched to the back of a horse, but then developed in such a way that it can maneuver, and from that platform you can throw javelin or shoot an arrow and then get

away. this gives them a tremendous advantage over people who don't have access to horses and, therefore, are not able to fire and then flee rapidly. the development of the mountain soldier or knight, this lower picture here, this is a formation knight, in which the stirrup played a role which allowed them to fight from horseback. this greatly improved their mobility and their ability to conquer sedentary people. so, you see, waves and waves of nomadic people coming out of central asia conquering those who had been the conquers from a previous wave of appropriators, few yo will. so the middle east had a tremendously enormous role in the development of political institutions. you can think about such figures as sargon, for example, establishes the great sue her yang empire. many, many things come from the piddle east. i should -- middle east.

among them are all domesticated house cats descendants of middle eastern cats. this was recently documented. these are, indeed, my two cats who are descendants of those middle eastern cats. it seems to be that cats -- and i think there may be some cat owners here -- successfully domesticated humans first if the middle east. [laughter] and what happened was when you had grain production, you had large amounts of grain. what do you get? mice. and what are very attractive to cats? mice. and those cats, adventurous enough to come and live amongst the ugly, hairless apes that had all the grain -- which is to say all the mice -- [laughter] we're able to successfully domesticate human beings and bend us to their will. [laughter] so, in effect, what you see in

this context of state formation is a transformation from what was called roving ban fits to -- bandits to stationary bandits. that's a very, very important phase in the development of political associations. as he put it in his last and, i think, possibly best book, is ther of a roving gang who finds only slim pickings is strong enough to keep other ban fits out -- bandits out, he can monopolize crime in that area, he can become a stationery bandit. now, that sounds really terrible, and indeed, it is. it is a predatory institution. but in some way it's an advance even for those who are now being plundered and robbed. if you have roving bandits who come through, rob everything, plunder, fight, burn what they can't take and then leave and then come back next year, this

is terrible. and in some sense it's an advance in the perspective of the fluppedderred when the plunderers say we're going to plunder a little bit all year long. [laughter] but the consequence is they don't destroy everything. you don't have to fight with them constantly. so paradoxically, this is in some ways an advance from the perspective even of the plundered. but we should not forget fundamentally what's going on is extraction of surpluses from people who produce it. there's a very interesting book that came out recently by an anthropologist and sociologist, james cm scott, from yale university. i love this book, i learned so much from it. it's called "the art of not being governed." and it's about those regions of the world that have not been successfully conquered. although they're claimed, they're not successfully conquered or subdued by states.

and he talks about the incentive of the state and of its rulers. some very simplistic economic models have argued that they want to maximize, well, gross domestic product. if there's a competition among states, those who can maximize gross domestic product are somehow rewarded. and scott says that's not the right way to think about it. it's the state accessible product that the rulers have an incentive to maximize. the ruler maximizes the state-accessible product, if necessary, at the expense of the overall wealth of the realm and its subjects. and the state-accessible product had to be easy to identify, monitor and enumerate. in short, accessible. as well as being close enough geographically. one of the things that scott points out is the way in which

power flows across the geography. he said if there's a friction of power, it doesn't go uphill very well. so when various waves of conquerors moved through, they tend to conquer all of the valleys and lower areas. and those who escape move up into the less desirable islands. and you can map the history of these con connections by looking at -- con conquests by looking at the sed miation of earth misties, for example. so take the southern caucuses as an example, just a small country of georgia. we'll is have a couple of georgians who are going to come and visit us tomorrow, by the way. the little country of georgia, 13 languages are spoken there on a daily basis. in each one having been pushed into its own little region in the mountains where they were able to be safe from the conquerors who swept in one wave after another. he points out that people in

that situation turn out to be very hard to conquer because they're the survivors, the unconquered ones, and they have developed religious institutions, social institutions, legal institutions, forms of agriculture that are very hard to take over. it makes them resistant to that. and i've pointed out to people today really should have read this book before the united states occupied afghanistan. because those people that have taken the country as a whole have never been subject to subjugation by foreign powers. not to persians, not alexander the great, not the the no gold empire, not the russian or soviet empire and probably not nato and the united states either. because those people have ways of life that make them very, very difficult to control, and this seems to be something that

our political rule makers cannot understand. take, example, the sociology of agriculture. systematically, state leaders suppress the growth of tubers, such as sweet potatoes and so on, if favor of paddy rice cultivation or grain cultivation. and that's peculiar. why would they force people into rice cultivationsome and what scott points out is you can't tax sweet potatoeses very effectively. it's a good source of nutrition, and you harvest it when you want it. otherwise it's in the ground still growing. but rice cultivation has to be harvested at the same time, which means you have to have large concentrations of human beings to do that. who are available to be drafted into the army. and it also mean when you do that, the local ruler and his

henchmen are there to get their share. other kinds of agriculture it may be very difficult for them to pluppedder and get their share. plunder and get their share. so we see systematic influence of the political system on a whole range of different kinds of human behavior. now, we have an actual well-documented case study in the englishment of the norman state in northern france, normandy, which later leads to the establishment of the state of england and, very indirectly, even our government is traceable in lineage to this. it's a very interesting case from the year 911. a viking pirate becomes duke rolo of normandy. he had been a pirate, he participated in the siege of paris, was exceptionally good at looting. they bought him off, they bribed him. they said, look, here's a lot of

gold if you just stop looting i all the time. but there's a problem. when you do that, they say, okay, now i have the gold, i want more. and the deal that was finally offered was, look, why don't you just settle down and loot us all year round a little bit. [laughter] you'll get more. and it won't be as costly to us. and that is the establishment of the duke of normandy. very well-documented historical case of establishment of a particular predatory state. subsequent to that in 1066, the normans, the north men, conquer england and come over with their knights. william the bastard, as he was known, william the conqueror to his add vierers, is able to defeat the english army and establish their state in england. and a number of interest things come from this as well.

the predatory state that focuses on extraction of revenue from the population, and also the english language as well. english, as you may know -- i'm told by linguists, i have no way to verify this personally -- has the largest natural vocabulary of any language in the world. any language can invent new words, germanny is famous for that, for example, but english has the largest -- and a relatively simple grammar. some of you english is your second or third or fourth language, you know how difficult it was to master english grammar, right? i run, you run, we run, they run, she runs. that was hard. right? in fairson to, say -- comparison to say, diddic or other easy languages with their 17 cases. what happens is that two languages, in effect, were merged into one. and if you listen very carefully

to the english language, you can hear the violence at its origin, an act of conquest. the normans move in, and they move in to the big houses, if you will, the castles. so you have a norman, french-speaking elite. and the peasants are still speaking anglo-saxon. so think about the english language with regard to food. if it's on your plate, it's french. the elegant, fancy people it's a french people. when it's outside in the barnyard making noises, it's almost always anglo-saxon. let's take a simple example in english. imagine that i were to invite you to dinner. i say, please, come to dinner, we shall be serving swine. [laughter] would you like another slice of pig? or a slice of cow?

the thought is rather repulsive and shocking. instead it's pork on your plate. it's a pig when it's outside where the peasants are. when it's on your fancy china, pork which is to say it's french. and similarly, it's beef when we have it on the fancy china, and it's a cow when t outside being -- when it's outside being tended by the cow herders who are speaking anglo-saxon. if you listen carefully, you can hear the distant echoeses of an act of conquest that established the modern english state. now let's look at some characteristic features of modern states that are defining features of state power. the first one is a monopolization of law. they claim to have a monopoly to be the sovereign power to determine what is law. we'll talk a little bit about that because in reality, as legal practice, very rarely do they succeed in exercising that

ma knoply. there's a great deal of law all around this that is not the product of the state. they insist on replacing customary law with imposed law or legislative procedures. they make the claim to so sovereignty -- we'll talk a bit more about what that means, it's a very important term in political thought -- and also the creation of an underlying neigh. the myth is that somehow the nation builds the state, the reality systematically every place in the world is the state builds the nation. it actually goes the other way. if you take the french nation at the time of the french revolution, it's estimated only about half of the population spoke the french language. they spoke celtic languages or other romance languages or germanic languages or basque and so on. it was the french state that creates the french nation.

it is the german state that creates thier pan nation. german nation. out of all the multitude of mutually-incomprehensible dialects spoken in germany. a german state creates a german nation. contrary to the typical myth about this. and then, also, the imposition of systems of social control. uniform weights is and measures -- weights and measures, compulsory schooling, passports and so on. and these have really permeated our consciousness as modern persons. i'll give you a simple example on the question of passports. you now cannot travel around the world without a document issued by the state. indeed, you can no longer travel around the united states without a state-issued documt. this is a very recent development in the united states of america.

but for thousands and thousands of years people went where they wanted without documents issued by the state. how was that possible? i have in my wall an advertisement from an old german magazine from the 1920s. it has a lovely engraving of a couple in a train compartment on a german border official asking in german, french, english, italian your passport, please. and it says how wonderful passports are because they give you the freedom of the world. of course, that's the opposite. [laughter] they restrict your freedom. you're not allowed to travel without the permission of the state. and this mentality people have that the passport gives me the freedom to travel, not understanding it's the system of passports that restricts your freedom to travel. i guy a lecture some -- gave a

lecture some years ago to a groove of students, and after making a presentation on classical liberal, libertarian ideas, one young woman raised her hand, and she had that look which i know very well from my cats of a e cree cur about to pounce. [laughter] her ears were flattened back against her head, she was ready for me. [laughter] and she asked, he -- she said, do you think the government should issue birth certificates? i'd never thought about that, honestly. and i said, well, never thought about whether birth certificates should be a government function. most places they were issued by churnlg registries and temples, synagogues, mosques and so on. i don't see any reason to, so i'm going to say, no. then the eyes narrowed, the ears flattened back further -- [laughter] and she said, how would you o know who you are? [laughter]

it was the remarkable, she could not conceive of having a personal identity without a government document. but somehow her personal identity was so constituted by the state you couldn't have one if you didn't have that birth certificate. i informed her, i don't have a birth certificate, and i really don't have any doubts about who i am. laugh of laugh but for her she had so internalized that mentality, she could not imagine it. and this has happened to modern consciousness, that we are so saturated with the state that it's very difficult to imagine life or institutions without it. let's look for a moment then at the theory of sovereignty that characterizes the modern state. jan bodin was a quite brilliant political theorist, and in the late 16th century he wrote his six books of the republic, and they focus on the idea of sovereignty which he defined as

the most high, absolutely and perpetual power over the citizens and subjects in a commonwealth. the iefg of the southern pour was that which was absolute, indivisible and perpetual. what was interesting was he contrasted that with the fading remnants of another idea of social order which was customary law or custom. and he dismissed it quite remarkably. as he said, custom acquires its force little by little, and by the common concept of all or most over many years, while law appears suddenly, gets it strength from one person who has the power of commanding all. that sounds like an advertisement for custom. he thought as why custom should be rejected. and law is the imposition, in

his understanding, of authority by force from above, hire aroundically imposed on society. that was a defining characteristic of law, and in his view could only emerge from a sovereign. that is to say a power that is absolute, uncontrollable, unconditioned or, we could say, above the law. whereas customary law moves little by little. it acquires its power through the consent, the convention, the general agreement of parties to agreements. they thought that was inadequate for law. thomas hobbs, somewhat better known, argued also that the sovereign power is absolute and indid bl. indivisible. he would not particularly have liked a federal system like the

united states of america. he would have said this is not a proper state because the sovereignty is defined among the different branches of government and between the federal government and the state authorities. but for hobbs the state and the sovereign power is absolute, no conditions on its authority or another way of formulating that, it interprets its own conditions which is to say there are no externally-imposed conditions on the sovereign power. this is the doctrine known as absolutism. but we see this articulated also by political figures, notably by louis xiv in his famous statement: i am the state. and there's a reason why he was known as the sun king. it wasn't because of his glorious tan or anything like that. he wasn't the surfer king. it was because of the coper any cuts theory of the universe that

was emerging at the time. the sun was the center of the universe. everything revolved around the sun. it gave order, illumination, warmth to the world, and he was arguing that was the role that he plays in human affairs as well, the source of all order. and without him, without that sovereign power there would be nothing. so consequently, the sovereign is identified as the source of law and, therefore, it is above the law. that was given voice, also, by another political figure, king james vi and 1st, king james the vi of scotland, king james the i of england, who inaugurates the stewart line in english politics and the english monarchy, and he wrote a book before becoming king of england. the true law of monarchies in which the king is above the law.

very important principle. the king is above the law. and this sets in process a whole series of activities in britain when the stewarts finally put in their place to subject the sovereign power itself to some kind of rule of law. now, lawyers distinguish between two kinds of sovereignty, external sovereignty and internal sovereignty. those are useful distinctions. external sovereignty may, in fact, have a very positive role in the international state system birdie minishing armed conflicts among states. that is to say the fundamental principle that one state does not exercise authority, military force, on the claimed territory of another state. but those border lines are significant. very bad things may be happening in savage countries like, oh, canada, for example. but the united states government

would not be authorized to use military force in canada because canada is a sovereign state. so that is the kind of limitation on state power and has a or very important role of trying to -- very important role of trying to maintain a less warlike, more peaceful international order. on the other hand, internal sovereignty, i think, is inherently ill liberal. that is to say contrary to the principles of liberty. the classical liberal ideal in contrast to that of the reichstag that is to say a law governs state. the law is supreme. not the sovereign, not the ruler, not the king or the president or the parliament, but rather, the supremacy of the law. and in my presentation this afternoon i'll talk about that particularly in the english context, the emergence of this idea of the rule of law. now, the state as we know it is the institutionalization of a

poluation or rent seeking behavior. and to understand that this is from al alfredo pareto who's another great sociologist and economist, is to understand the importance of concentrated benefits and diffused costs. because the state successfully claims a monopoly on the legitimate use of violence in some given area, they have the ability to impose rell tally -- relatively small costs on large numbers of people and then aggregate the resulting loot, if you will, and award that concentrated benefit to small groups of people. so we heard some examples. imagine that we had a tax that was going to tax every american just ten cents a year spread out over the course of the year, a tiny fraction of a cent per day. no one would notice that.

no one would pay any attention to it. you wouldn't feel it at all. but the consequence of that ten cents per year, that adds up to about $33 million. that's pretty good money. and that will attract the attention of someone to be able to gain access to it. so those who have to pay this tiny, tiny burden don't even notice it. but those who are in a position to influence the state will, indeed, be attracted by $33 million of available loot to be recontributed into -- redistributed boo their pockets. so we can look at this in terms of a whole range of behavior. not just the tax system, but even all kinds of regulations which seem to have nothing to do with distribution of economic benefits. many years ago i was challenged by someone to pick through the federal register. i don't know if anyone here reads the federal register. i strongly encourage you to do it. it's about 08,000 pages a --

80,000 pages a year. new federal regulations, rules and edicts that will effect your life in some way or another. and we opened it at random, and we found a new regulation governing broccoli. and what was were to be defined as standard broccoli as opposed to puny or substandard and so on. where did that come from? well, turned out some broccoli producer sat around to say, bob, how big is our broccoli? [laughter] and that was able to be designated as standard-sized broccoli to the disadvantage of their competitors. there was a famous case, a man who had invented a machine called the egg king which was able to break eggs mechanically without breaking the membrane so you could then store them in tubes and make omelets and is on and be -- and so on and be able to measure them out, a much

better way to transport eggs because these little round things hard to transport, you could put them into big tubes, much yeers. well, kind of by accident he found out that a regulation came out from the department of agriculture making it illegal to use a mechanical device to break an egg. and, indeed, who was behind that? the restaurant workers' union. the union of egg breakers. [laughter] who didn't like the competition from this new machine that could break an egg and then put it into a tube for transportation. he, fortunately, was able to hire only legal representation and fight against it. that little innovation was protected. all of those sad egg breakers lost their jobs and had to wander off into the countryside and die. [laughter] whatever happens to unemployed egg breakers. i suspect they just got other jobs and did things that added

more value. but that was a case in which there was going to be little cost imposed on all of us, every omelet would cost just a tiny bit more. benefits would be concentrated in a group that had a lobby in washington d.c. we were fortunate -- in this case, there was another concentrated interest, the manufacturer of the machine, who found out about it and was able to raise hell and get that rescinded. so we don't always lose those. but as a general rule whenever you find a situation where you can impose small costs on large numbers of people, aggregate their resulting benefits to small numbers of people, you will get rent-seeking behavior and transfers of income. now, the process of civilization has been substantially one of taming power, that is to say put restrictions on these exercises of power. and i'll talk a lot about that in the next presentation. it's not all doom and gloom, and

i should warn you sometimes when we talk to our friends who are public choice economists it's really depressing because they will give you every reason why the state will continue to expand forever. every incentive seems to be in favor of the expansion of state power, increasing budgets, more spending and so on, and yet it hasn't always turned out like that. there have been very, very important periods when the state has retrenched itself, when people have been able to struggle for their freedom and expand the area of free, involuntary activity. so my next presentation i'll talk primarily on the historical process by which people were able to impose some kind of limits on the exercise of state power. let me leave you, though, with a passage from one of my favorite sociologists, alexander gus, the ov. he was a very important,

prominent german sociologist. when hitler came to power, he left the country. like a number of germans, he had an idea what was coming. not everyone did, by the way. it's easy in hindsight to see these things, but there were some very insightful people of had a very strong idea of just what exactly was going to be coming and left the country. he went to turkey and taught in istanbul and then spent many years on his great work, three gigantic volumes came out in german. his son then translated an excerpt and puished it from princeton university press, "freedom and domination." he argues: all of us without exception carry this inherted poison within us in the most varied and unexpected places and in the most diverse forms, often defying perception. all of us, collectively and

individually, are accessories to this great sin of all time, this real, original sin, a he red tar fault that can be erased only with great difficult giftty and slowly, by an insight in pathology, by the will to recover, by the active remorse of all. it's our responsibility to try to think what it is to live as free persons, not to be dominated by other people, not to be bossed around. the idea that, in fact, the passport doesn't give you your freedom, this is an institution of control over you. free people don't need to have passports to be able to travel. the state doesn't grant you these things. the state may have an important role in protecting our exercise of our liberty. but as the signers of the deck declaration of independence put it, to secure these rights governments are executed among men. that has come to be recognized

as to give us these rights, it's certainly not what the american founders had in mind. we have our rights as free human beings. we may call on government to secure those rights, but increasingly governments have told us that we are, indeed, their own creations. that without them we would not be possible. and that brings us back to that awful statement from the president of the united states, you didn't build that, somebody else did that. that is part of that pathology that we have to overcome. so we have a little bit of time now for some discussion. i hope i may have touched a couple button thinking about the origins of the state and predatory behavior, so thank you. [applause] ..

>> what if, have you ever acknowledge the possibility of create a state in originators through the interaction of people -- [inaudible] and they recognize the necessity of protecting each other and integrated the state, any sort of different origin? >> did everyone understand that? i'll repeat again. correct me if i get it wrong. so the question is, the story i told about the emergence of the states we experience today is that they originate in some kind of the act of conquest. they are traceable back.

are there, or could one imagine, states that originate through a kind of spontaneous order, or through voluntary deliberate acts, securing if you will, of benefits such as the protection of our lives and liberties and so on, is that there? absolutely. the distinction i would make would be between states and government. we think state power and governance, all requires the governments of some kind of rules. we can have rules that are spontaneously derived or a marriage without any deliberate pattern. a lot of those govern our lives. think about the ways in which pathways emerge in jungles for instant. often no decided, just someone walked that way the first time and someone else followed and you get a little pathway created and can people follow it and helps them to organize their

behavior. so there are lots of rules that could emerge spontaneously. we see them all over the world. for instance, the principle of first come, first serve. that just seems to be something that emerge spontaneously. people figure that out pretty easily. or one thing that you could study all over the world, and sit down to children, give them a cake and ask them to divide it. they all figure it out pretty quickly. wind cuts and the other chooses, right? that seems to be something we all settle on pretty well. it's not so culture specific. states are not merely sets of rules. they are organizations, however. so the firm is institution, but general motors is an organization. so they have to emerge in some way through some deliberate act at some point. there are lots institutions of

governance that emerge from deliberate acts that are not predatory. think about condominium associations, business corporations, all kinds of ways to organize our lives. specifically those do not claim a monopoly on the legitimate use in a given territory. that's defining characteristic of the state. i'll talk this afternoon about the emergence of me as we'll in europe which has to that form. these are voluntary social contracts, people come together, come up with rules to govern, and their behavior. they invite people to move in, and so on, and flourish. that principle of voluntary governance is a way of kind of competition with the state principles, so we live with both at the same time. so absolutely possible, well documented. after we should be looking for the source of the civilization, to those kinds of organizations, not to those that were found in

acts of conquest. and all content restates around the world really originate and those ask a consequence, but what we need to end effect is contained them and make them behave more like civil society institutions, voluntary institutions of governance. yes, sir. >> i have done a lot of discussion with people on creating more voluntary sightings and statement solutions, and i can't get past in my own head is, let's say that we did form a voluntary society. on one side the kind of have the peaceful libertarian nerds who are happy to be peaceful, and then on the other side with people with really big guns who want to take what the peaceful libertarian nerds have. in a stateless environment, what is to stop the peaceful libertarian nerds from being conquered by the guys with bigger guns? and if the answer is an army

raised by the peaceful libertarian, then what is to stop, that mercer group from doing the same thing? >> that's actual as getting it. what is getting it was something different. a great deal of institutions of law enforcement, for example, today are not institutions of the state. so even the theory of sovereignty does not describe what we live in the united states of america. so let's take a very simply sample. and that is who is it that captures fugitives, people who jumped bail? people think the police. they don't. they don't capture that many of them. that's not their primary job or responsibility. it's bail bondsman and bounty hunters. these have a bad reputation because some trashy television shows, but the fact is that private bounty hunters, private persons, not agents of the state. they don't like violence the violence is very costly, it's

dangerous to them, not glamorous or romantic. they are paid to bring back a person by the bail bondsman. in case if you're charge, you are released on bail, you don't have the money to put up, go to a bail bondsman. bail bondsman is not an agent of the state either. not an officer of the court. a person. that person in effect low into the money can post the bond for you but this is i want your signature on this, you're liable for it, and i want your mom to sign on it also, or whatever people around you to act as sureties so you will come to court when the appointed day comes by. but then you don't. what happens then? well, the bail bondsman is out his money. he posted the volunteer that's forfeited if you don't show up. he has to hire someone to go find you. as a private person also.

the advantage is, if that person goes and hurts you, that person as a private person, is subject to your action against him for having harmed you. he has to bring you back all in one piece, healthy, alive, to the court. this is not an incentive that the police have, by the way. we should be aware of that. they have vague incented to do that, but the bounty hunter, if they hurt you, has liability for the. if he doesn't bring you back he doesn't get any money, so what -- why did they capture people? 4:00 in the morning when the people is groggy and goes outside for a smoke, they don't come in with guns blazing. they don't like violence. they like to resolve this problem, get their money without a. the consequence is that the majority of fugitives from justice our blog -- are brought back by effectively voluntary

system. it's not part of the state. so the actual enforcement mechanism doesn't correspond to the theory of sovereignty that we were taught, that everyone once in high school and so on about the state. we have lots and lots of social order and mechanisms that don't rely on the use of violence of force. asset, an obvious one. everyone's get angry about gaza. gossip is inaction important social institution. it tells us about the behavior, about the people, census little clues. this person is trustworthy and slow. credit bureaus. we could have the government out there collecting every bad debt. they don't. i learned this through painful experience win a lot of money was owed to me. the government won't collective for me. [laughter] who knew? i thought, i won, where's my money? now i have to go and collect it. so you have to hire a debt collector to go and get the money that is owed to you. one of the ways that we'll deal with this is through credit bureaus. people share information here

bob doesn't pay his debts. bob abscounded with a bunch of money. of the people are not going to loan bob money anymore. that's an extremely effective mechanism, much better than jeter prisons over after police over deader bureaus and the federal government. just that mechanism. no violence, minimal intrusiveness, yet it helps people to coordinate their behavior. so there's lots and lots of ways in which we can govern our behavior without resorting to force and violence. but the mentality, all they think is the reason you get people to behave better is by pointing a gun at the that's the only thing that will work. well, that works in some cases. there's a lot of of institutions that a free society can avail itself on. so that's what i have in mind with more reliance on voluntary institutions for social ordering and less reliance on violence and the police the last thing i

would mention, i was in a debate sometime ago on some of these questions and i did a little bit of research. i asked around, and i want to find out how many people were killed in any given year by private security guards. and how many people are killed by police, who are uniformed agents of the state. the only dated that i did find that was reliable, first off seemed virtually no one is killed in the estate by a private security guard, the malls and soul. they don't have any incentive to do that. if you misbehave at a mall, they don't club you down. they ask you to leave because you're disrupting it. you don't get beaten down. but how many people are killed by the police with the department of justice did a very interesting study, and it was police officers murdered by felons and felons justifiably killed by police.

on average, about 450 per year felons are justifiably killed by the police. interesting. and i found in the footnotes, what is the definition, anyone killed by police is defined as a felon. [laughter] and any killing by police is a justified homicide. i said, oh, i did it. this is so embarrassing that the department of justice did not release this subsequent years. but it told us was anyone the police killed in this country is a justified homicide. by definition because they were killed by the police. that can't be right. i would much rather be stopped by a private security guard in the mall budget than any uniformed policeman in this country. yes, sir. >> i was hoping to make some

comments on voter identification standards spent voter identification? >> voter identification standards, if you could comment on the? >> that is kind of an interesting point. the same people insist that we have to show our id every time we get on a train or into an airplane, i resisted when it comes to an exercise of an act of citizenship which is to say voting. i don't like the idea of a national id card at all. i think that's very, very dangerous. by do think that insisting that people show some proof that they are qualified voters any jurisdiction is perfectly reasonable, and i don't have a problem with that. i think that's a reasonable requirement. if you're going to show up to vote he should be able to demonstrate that you are qualified to be a voter. that is, is a citizen and you're a resident of the jurisdiction qualified to vote for mayor, representative in congress or

senator or governor or whatever it may be. and i do find it ironic that we are forced to carry id for every other purpose, but the same people who are so eager to do that recess the id of -- is the idea of being asked to carry id to cast a vote. >> you begin this morning when you talk about makers and takers. and the most interesting slide i saw this morning was capital invested per employee and wages, et cetera. and, however, the idea of spoliation and taking really expropriating money from the capital base with spoliation. eventually, you know, we are broke, like you said. i mean, because if you don't have capital, the wages will go up and the continued progress can't go up.

so my question is, i don't know how he reached the opinion that we were to broke. >> the reference of course to professor steve land birds comment, i think -- steven landsburg's comment, i think would disagree on what it meant to be broke but i don't think we are broke. i do think the government is broke. there's a distinction there. the problem is the government has its hands in your wallet. and has the opportunity to access all of your wealth. if you look at from the perspective of being broke, we do have resources to travel and eat into things we want to we are not broke in that sense. what i am it is the budgetary imbalance. that is, the difference between what the state has the stature to, not mrs. reconstitution but statutory obligation to pay in terms of future benefits or medicare, social security, a wide range of other things, and the expected tax revenue is

staggering. it's fantastic. so it's at least $80 trillion president value for the united states. and probably substantially higher. it is being recounted now with obamnicare and so want to try to figure out the total budgetary imbalance. it then sends the state is broken. now, they can deal with a couple of different ways. one is they can confiscate a lot more wealth. consequence is a lot less wealth will be produced in future of -- that's a very serious feedback mechanism. the other thing that they did it is to default on those expected obligations, and i can take several forms. they can default on the official government debt, and i don't think that is unthinkable. many countries have done that, and i think the united states might in fact do that in future, simply default on the official government debt. that is, all the bonds

outstanding. the other form of default is simply not paying what they promised to pay. may, in fact, jiggered the numbers, raise eligibility, have to be 75 to apply for social security, someone and so forth. and then finally another form of default is inflation. you can inflate the currency, diminish the value of the obligation. they are set in nominal terms. you inflate away the valley. that's another way of confiscating wealth. this is a particularly cool one and it falls to abortion on those who are not able to shield themselves from the fact of inflation, so typically poor people, net savers also, elderly people and someone have to be really hit very hard by the. so that's what i meant by being broke. it's not to say that there's nothing they can do. something will be done about it but it will be some combination

of more confiscation of wealth, possible default on official debt, and then simply going back on promises that were made to people on the basis of which they have made decisions about their lives, which is to say the contemporary welfare state isn't built on a gigantic lie. it was known for a long time, that these obligations could not be met. seems to me and -- fundament unjust. >> i just have one quick one and then a more significant when. the first one being about you shouldn't slide through your book in the review and i was just wondering how it was perceived oversees? >> in persian or other languages? >> mostly concerned with that, but any comment. >> the reviews are very positive. i don't read persian but my friend translated for me and it seemed gloating and to talk about wealth creation and

virtuous behavior and so on, so that seems quite a good thing. i was happy about that, and my approach on this question is, i would like to help people in iran to achieve a free society. i think that that's much more possible with this kind of an initiative from society organizations and discussion and publishing in persia and engaging people rather than cruise missiles or threats of war, which i think are likely to entrench the worst elements of the regime there, and not to leave them for more prefix i'm very frightened by militaristic rally of sorts. and i would much rather engage the in a different way, intellectual to help them to achieve more freedom. and then it's come out a number of other languages as well. i was in helsinki, finland, and we had a robust and enjoyable

debate, and the finnish addition was a big success. chinese, arabic, turkish, romanian, hungarian, et cetera, et cetera. spent into the more significant question. you touched on the basis of the state and all that throughout history, and so i'm wondering if i could get a couple historic examples as well as outlook to the future on privatized courts and polycentric law. >> the energies of the legal systems of western europe that are fairly well understood was inherently polycentric, which means the multitude of different jurisdictions that overlapped our interpenetrate each other. so even at the time blackstone and his commentaries come he articulates a number of different court systems functioning in great britain.

admiralty law and so on and so forth. there was a process within consolidation but the legal code, what was before the common law in multitude of different legal systems. let me give an example. think about the british monetary system before they went metric. it was a lot different monetary systems that grew together. anyone old enough to have been in britain and be really confused when it tried to make change? remember, my mother said it was the most confusing thing she had ever encountered, so many shillings and pounds and crowns and pans, and nothing ends up into proper multiples of each other. and at the time the english were well-known as being very honest. she would just take a handful of coins and say how much does this cost. right, lovely, one of those, two of these. [laughter] and then they would work them all out.

in the metric system. think about inches, feet. hands, right? house, all these different things and none of them added to anything that makes any sense. in some way. i don't know how many deals are in a pint anymore. they grew over time. and, frankly, i like it without i don't understand. i love the british embryo system measures. legal systems are a bit like that also. only later did people come and try to impose some rational understanding and to grow over time with the interaction of lots of systems. the best book that i would recommend on this theme by a brilliant professor, harvard law school, harold berman and it's called law and revolution, the formation of the western legal position. they look at all that different systems and sources of law that

interpenetrate each other within europe that gave us the laws that we have today. i would give you one example, one that persists, which is international mercantile law. if you do business internationally, you are governed by mercantile law, not the product any single legal system or of any state. there is no state that enforce it as such but you will find it all over the world. it emerges from the mercantile courts in europe, merchants and traders come to fares, they want to do business. they want quick just. they don't want to be in court for 40 years but they don't want an ibm antitrust suit. they said i contracted for so much cloth for this amount of money of the cloth wasn't of the right quality. we have a legal case. they wanted decision and go home. that produced a very efficient

legal system that still functions, and it did not emerge from any state. you can get a look in the united states of america today, uniform commercial code. this was passed by legislature but he was greeted by a private law bonds, the american legal institute and others, who looked at contract law and say what's been happening and contract law. what new contracts have people been writing? and they codified it, codification process does. but it wasn't the codified created it. they went out and said what is happening in the law, namely, what they are doing the and italian legal theorist put it very neatly, he said you make law when you may contract. you aren't actually creating the law. subsequent to that, legislatures will pass it as a codification. commercial code for north dakota or new jersey or what have you. but that is not what gave it its legal force and he didn't write

it. they didn't created. it's created by people in the market economy. so there are all kinds of legal systems today all around us that are not the product of the imposition of state power or force. what we need to do is to open our eyes to be able to see the amazing world of spontaneous order all around us. it's just everywhere. it's not a question like earlier question suggested, that somehow the institutions of the state could be diminished or gotten rid of and then you would be some fantasy world we have to discuss how it would work. we actually already live in a world substantially structured by institutions that were not the product of the state. and most of the legal institutions that govern our lives fall into that category. the law itself is not a product of the state. it is fundamentally a product of people voluntarily exchange and interacting. so we don't have to do any signed -- don't have to do any

scientific experiment. we just have to open our eyes in the real world we live in right now. yes, sir. >> thank you very much. my name is paul. i come from nor. i hope there are no fancy or don't we do not accept you have been to finland so we invite you next time spent actually i was in oslo before i flew to helsinki. [laughter] >> so i am a big fan of oslo, although -- [inaudible] >> sounds very good. [laughter] >> that's the point. i said i can't speak norwegian. >> that was just like excellent. my question, just to relate to the presentation of the previous speaker, last year in july i was in south sudan for the independence of that country. and the relationship between norway and i would say the most, like the donor community, south

sudan has pretty much decided by focusing on development aid and not so much on business development and those things that create economic development. so my question is, how can you create sustainable economic growth in a failed state where you do not have the characteristics of whatever -- of what weber describes in his definition? in a country like somalia isn't always you tend to fail, dependent on international committees, are there any prospects for developers? thank you. >> that's a great question. sometimes when you look at failed states you can ask why they failed, and foreign aid is one of raceway somalia sailed -- failed to i really recommend michael