germany or france has to have a big army of 100 years ago. if you try to maintain big armies in peacetime, that usually quickly to go bankrupt. what you say about the parallels of the roman empire, you are right, but on the other hand, there's a lot of other stuff going on as well. i [inaudible] >> is my biggest turn because you are affluent, a poor kid from texas, there is a big disparity and that is what is happening. [inaudible] >> yeah, this again is sort of long-term. we see this going back a long ways. the most famous purpose may be the debates during civil war when you could hire someone else

to go for you, which created tremendous conflicts. a lot of argument on different sides of the issue. one of the things people sometimes say is what you're saying of course is probably true. but it is much more true for the enlisted soldiers than the officers, which does disproportionately draw from the middle class. ..

staffas mercenaries. they gained their freedom. that really did have some bad affects in china, no doubt about that. really complicated issues. as you can probably tell, the way i am rambling around, it's one i have not thought about enough. thank you. thank you. [applause] >> thank you very much. [applause] >> you can purchase books, and we will have a signing here. [inaudible conversations] >> well, thank you. [inaudible conversations] >> should be handled differently , but i have a general philosophy. its starts with the basic premise that i approach everything with, which is

economic freedom. here is my guiding principle. come to buy from that comes four factors. one, does the commission had authority to act on a particular issue? what has congress given us and statute? is it harmful to consumers? should -- is the solution tailored in a particular problem that we are addressing and not regulate by analogy? fourth, even with all those three elements, the benefits of regulation outweigh the costs? hell i am approaching each issue individually. but you tend to take each issue as they come before you. >> new fcc commissioner michael o'reilly monday on that communicators' at 8:00 p.m. eastern on c-span2. >> up next on book tv "after words" with guest host kevin williamson of the national review online. this week burton folsom and his

latest book "uncle sam can't count." .. the best and worst government investments in bailouts from the days of george washington three today. this program lasts about an hour. how -- >> host: professor burton folsom, thank you for joining us and welcome. before we move on to your very interesting book, wanted to ask you a little bit about the process of imposing it. i noticed you have a co-author and colleague with a suspiciously similar surname returns up to be your wife. as someone with a little bit of experience in the subject of being married and writing books, i am amazed that this ended in a book rather than, say, a divorce or a trial separation or something like that. how intense and weird is it to write a book in that particular sort of way? >> guest: the key is not to write on the same chapter at the same time. if one of us will work and do

primary work on one chapter. another does the work on the other chapter, and then we turn it over for eds to one another. we were able to do that and finished the book. anita's been my wife for 35 years, and she knows this material as well as i do. researching or at least listening to me talk about it. so we discuss the ideas. often she refines and. and so she is a definite cut-out there in the writing and thinking through this book. >> well, congratulations to you both on the bravery of taking on such a process and making it work. they're is a line from ad german playwright which is often attributed to goring. when i hear the word culture i reach for my revolvers. i often have roughly the same feeling when i hear the word investment in the context of politics. it looks like asbestos boondoggle and probably an outright rip-off coming down the

pike. stop before it gets started, but this has become, and that 21st century, a normal part of our political rhetoric, the idea that government is not only an investor, but the chief investor in society in many ways, making critical investments and offering industry guidance in everything from making cars to windmills -- >> guest: yes,. >> host: but it seems to have started with beaver pelts, at least in the most formal sense. i want to start by challenging a little bit, your title, which is "uncle sam can't count". i would argue that ankle san can and does count, but what he is not counting his return on investment. he is counting votes instead. that is a different sort of thing and not exactly what we normally think of. if you sort of give me the broad outline of where this starts and where it goes. >> sure.

"uncle sam can't count," the implication of the title is these investments, as you referred to, are not successful, money losers again and again and again. the limits of government are very clear in the constitution. you have administrator functions or enforcing contracts, this sort of thing, coining money, and then you have national defense. when the government sticks to those functions it has at least a chance to do well, those constitutional functions. when it rolls into the area, as you refer to it as investments and economic development sparking economic growth, the record is absolutely terrible, and it starts with beaver pelts and george washington who is a great president. i teach fat hillsdale college, the history of american presidency, and washington is a great president, but this investments that he made in fur trade was a disaster. and it often starts, these subsidies or investments, with the idea that it is either going to spark economic growth and be

something that will really benefit the country or it will protect the country, sued on national defense. that is what the fur trade was for washington. he was concerned that the british were going to encroach on an american territory during his first term. the british were still in canada, of course. but that they might come down through bats and a company into the united states effort. a government for company being set up test trade with the indians, that would then establish the united states presence and the british would not come down off. so we subsidize the for company. and it is a disaster. the encroachment occurs right where the for companies located because they are terrible at trading. part of it is the leaders of the fur company, and by each time to time by the time you get into the 1800's the work is almost comical. it really is. subsidies are disastrous, but they're is a chemical element that we need to think about. he gets the idea that we need to

sell the indians ploughs and farm equipment when the indians are really hunters and gatherers . mckinny is determined to sell of farm equipment and he says, we need to branch out and cultivate. he buys several grosses and then also even that chinese mandarin dress. and he is surprised that the indians don't want to buy the chinese mandarin dress and all this paraphernalia that he has put into his fur trading operation. well, pretty soon the british have come in and the indians are preferring to trade with the british. fortunately a private investor, john jacob astor, the first american to be worth $10 million och. the fur trade and competitively comes into the market and, in effect, moves the british someone out.

finally in 1822 congress abolishes thought the government operation there that was fun in the fur trade, and that subsidy is refunded, but you don't read about in the textbooks. we did not learn from it, and that is the problem. >> host: the idea of beaver pelts being a critical national resources brings to mind dr. strange love a little bit. [laughter] >> host: it sounds crazy in retrospect. but from the point of view of the late 18th and early 19th centuries. at the time there were, i think, you know, at the time what seemed like plausible and good arguments for. the ways in which those subsidies went wrong, i think, would have been at the time hard to predict. so could you go into maybe a little more detail into the ways the subsidies actually produced the opposite results that they were intended to?

>> guest: well, the intentions are often good. i thought your point was interesting about "uncle sam can't count". well, he can count votes, and we see that element in all of the subsidy. a lot of it is well intentioned. we believe we can spark economic development. the volunteers. running a terrible line way up. he crashes to of the four ships that he had. and so within the federal government, even though of private steamship operator, cornelius vanderbilt, has come onto the scene and has cut prices, receives no federal subsidy, and is operating successfully. congress funds collins because they say he needs the money to be able to compete with a vanderbilt. well, you run support operation and eventually he goes bankrupt,

and congress is very frustrated. kelly m. spence, kevin, $11 million on subsidies by the time right before the civil war when our total national debt was $50 million. >> host: back when $11 million actually meant something. >> guest: it really meant something, yes. >> host: to these subsidies mainly cause businesses to make bad business decisions because they take away the element of competition on its equity element of having to go out and actually do -- actually deal with one's customers or are there other kind of miss incentives that they create that cause these industries to perform badly? >> guest: i think focusing on the incentives is very good. but by taking away the competition's, you take away any innovation or any incentive you

might have to really produce a competitive product at a cheap price. by having the government involved, it creates among the person receiving the subsidy weather is the fur trade operators of the steam ship operators or later the transcontinental railroad, it creates within the person receiving the idea that government is the focus here, so we need to please the politicians and then more money will come. and so that removes you from competition. the first entrepreneur, cornelius vanderbilt with the steam ship, the fur trade, james j. each hell with that transcontinental railroad. all of those people are very cautious -- cost conscience. trying to produce a product that was going to have to be marketable into it at a competitive price. they're watching the cost.

conscious of the competition. and in the case of the entrepreneurs who succeeded, that made the task much more difficult, and that is a concern, i think, today. we may be knocking people out of the market by subsidizing the wrong people. >> host: biological evolution the as charge of evolution. to my star when the metaphors. the marketplace, the mechanism of evolution is death as well. you know, you bring out new coca-cola and masses of people decide they don't want it or my favorite example, a partner. no we wanted to buy it despite all the marketing genius, and

development people believing that it was a great product and people were just going to run over themselves to purchase of. and when you half of subsidized industries, and to some extent also charter industries like the credit rating agencies which essentially are the federally chartered oligarchy, you remove that element of business failure from the equation. and so the normal instrument by which businesses and industries get more productive, more efficient, and better able to connect their customers with the goods and services of the want is interrupted. so it is not just a matter of application, and this is where we often go in this debate. if we only have the right people , the right policies in these things would have worked out differently. it is actually something that interests the fundamental mechanism of development and innovation. so your thoughts on that speech

to the implications of what you say, for example, cornelius vanderbilt had received a steamships subsidy he might have failed. the incentives would have been different for him and he would have made different decisions. that is possible. in the case of vanderbilt, some entrepreneurs, i think steve jobs would be one of the better modern examples, we quote him in the introduction to the books. entrepreneurs are the crazy ones who believe that they can accomplish something that cannot be done before. they almost believe that there is a market there before there is any evidence that there's a market. they know what you want before you know you wanted. that kind of entrepreneurial is essential to this country's history. this that possibility is that you get that person office when you find somebody else to do something very traditional. you don't get the kinds of innovation that you get when you let entrepreneurs in a marketplace decide and try to compete for consumer interest.

>> host: of one of the stories i would like to focus on little bit which have very much in toward in the boat and something had not known about is the story of samuel langley who was there government-funded competitor to the wright brothers. >> guest: correct. >> host: in developing the first flying machine as there were none of the time. and you look at langley's biography and his resonant, and he seems like the obvious guy to put in money on because it is a stellar rise in may. harvard observatory, naval academy. he is the head of the smithsonian institution. i think he was the third secretary in the history of that. he was sort of like george h. w. bush when he was running for president. you could not possibly have had a better resonate and misguided. so if you or someone who is outside of the marketplace, not an investor, was making investments with of the people's money, it seems like it will be a safe bet over these two yokels with their bike shop, you know,

and playing around on the hills of and kittyhawk. you know, a couple of know what the spirit of course, it ended up being precisely the wrong decision. >> guest: just like a river where seems to be the most logical president's, elected in 1928 with all this foreign policy experience, the vast experience, engineering experience, success in creating wealth and so many different ways it would seem to be the logical man, but he was not. henry ford would not seem to be a logical person to popularize the car, someone who grew up on a farm, poor background, his parents did not last long. so ford is up being the one to make the move. you can't tell who has a good ideas and to has the perseverance. there's a lot that goes into it. and langley, your point is exactly correct. the united states had the view in 1900 that because the germans

, french were all experimenting and even the english with an airplane, if they could bring an airplane, if they happen to be able to invented, for and power will be able to take that airplane and come right over to my drop something on your country, at least in theory, and there is nothing you can do about it. therefore we had to be proactive. you can't wait for the market. the idea is markets may work better than subsidize investors, but we cannot wait for the market because it may be too slow. by the time it gets into deep -- in to give the europeans may already have the airplane, and it may be too late for us. the idea is to subsidize your best bet for honorary degrees from oxford and cambridge, harvard, yale, has written a book on aerodynamics, and he has found a small model airplane over the potomac. so going from there to doing in an aircraft seems to be the logical thing.

so we find him to give him two shots over the potomac. the first one, a glorious time at first. it goes up and then it just goes right into the potomac. a couple months later they do the second flight, and it goes right up, and the same thing. according to many sources it did not fly and all. it just went right into the air, and a power that pushed it into the air because he believed he to have a catapult the launcher airplane -- publicist the reef. he had of those in the potomac, and it was like a slingshot. it just went crashing in because that was his theory of aerodynamics. and so the right brothers were -- have their own theory. they were testing gliders because it was zero when the area and there were not many people around. so they would go out on the gliders and develop wind currents and have a fly, how to turn and all of this. the try to deal with all of that

and eventually put an engine on a device. nine days after langley with his second subsidize fair the wright brothers, $2,000 of their own money successfully in vent the airplane. they are the ones to do it. it is a classic example of government stepping in him a creating the wrong incentives, funding the wrong person, and somebody else who you would never suspect comes in and gets the job done. >> particularly fascinating about the story, the wright brothers had come up through their experiments with gliders and such, largely worked out the engineering challenges of it, of making this work. what they did not have was an engine. what they needed was an engine that was at least 8-horsepower and had to weigh less than 200 pounds. so they go to the shop mechanic and say, we needed engine that meets these specs. can you do it? and he builds a 12-horsepower

engine, he does it all with parts that are basically available within walking distance of their shop there, and this is an ohio, not kittyhawk. >> guest: did not al. >> host: dayton ohio. as someone u.s. followed a federal contract in from time to time, i mean, specs' matter, of course, but this is a remarkable thing to of accomplished. >> guest: it is. it is. it was so startling that the u.s. government then proceeded to make another bad decision after the wright brothers succeeded. it was so unbelievable that the wright brothers had been successful while langley, the scientific genius, and failed, that their attempts to get langley and other subsidy bass said, langley really has the right path toward a successful aerodynamics. so the right brothers or having to deal with that issue. when they finally have their plan up and ready to fly, they

offered it to the u.s. government for military purposes . after all, the purpose of funding mainly to prevent the airplane in the first place was so that we would have the airplane before the europeans. so of the wright brothers' offer to sell their rights fire to the u.s. government, and they turn them down. instead they by balloon, helium balloon because that looks like it might be really the wave of the future in the air. and finally, and frustration the wright brothers to these international tests. they have -- weber goes to finance and flies to show the french region do. or fall is in the united states military bases in virginia. he doesn't like tests. we are now going to start selling, whoever wants to buy. we are loyal americans. we want to sell, but it has been five years since we invented this airplane, and we are ready for some buyers and to get into

the commercial side. finally the u.s. government stepped up about the airplane. >> host: i particularly enjoyed your telling a wilbur's trip to france. the french are very skeptical and described. of course five minutes later they have demonstrated something else. mr. langley, of course, the langley fridge ahead, his name off, the town that among other things house the cia. in terms of overly fond of boondoggles associated with the word langley, we are still very much in the same time, but i note that there rhetoric that accompanied the airplane project very watch brings to mind sputnik a generation later and the missile gap. you know, we can't have an airplane gap. i'm sure at some point we can have a stone axe happen some point in prehistoric government.

>> that is a problem. that becomes -- once you accept this idea that you have a gap, in this plant -- this case an airplane got famously cited in the 1960 debates. it is the idea when the government step in. private enterprise will be unable to respond. but we have seen time and again, these inventions are far above and beyond we just would not imagine as we would all be using iphones. if it's not because we said we want an iphone i think that if we can produce this the market will be there. henry ford was the same way. horses and buggies or satisfactorily given the job done for most people. he had that vision. had to cut the cost, deal with roads. that was properly done and so

those kinds of issues, the idea of an entrepreneur that has the imagination to think of what you would want before you even know the two wanted. >> host: and that is a sort of thing you have to think about. alexander ran bill could not have imagined what telephone was going to look like in 2014. we expect essentially that andrew jackson could answer have the government direct these kinds of investments. langley was working on basically a political problems. solving engineering problem is something that has a definite at the end of the day right or wrong answer. i think there's a great deal of deflation. essentially engineering and technological problems and politics and policy problems.

and the granddaddy of all subsidy boondoggles in the modern era which is, of course, the finance corporation which was brought to us by an engineer, herbert hoover. of course hoover has a mixed record on matters of economic. in many ways he was an admirable character. like a lot of people during that time he responded poorly. he believed that government intervention was the way to deal with the depression and all the stuff always happens in response to some real or perceived emergency, whether it's the germans are going to get an airplane with the russians have a satellite and sure you're familiar with the work of robert higgs. you can always find an emergency if you're looking for one. the difference here is, of course, the depression really was a emergency and to be

charitable toward not only hoover, but later fdr, they were trying things that were not yet discredited we have modern economic theory that explains why these things don't work. again, it may be not a terrible idea in my view the point at which the united states stops really having a government and now has a bank with the navy. so tell us about how the heck out started and what did. >> guest: it's true. the great depression is the key event, and that is where the reconstruction finance corporation comes into existence . a landmark event in the development of subsidy. hoover did to a lot of other thanks up or problems. it was under hoovers of ministration the income tax bill be roughly 25% to 63 percent, and that's on to choke off

investment. a lot of things were not so good. reconstruction finance corporation is a thing he did that have the worst permanent effect. the idea here was banks are in trouble and corporations are in trouble. instead of having congress vote in a subsidy, let's create groups, the reconstruction finance corporation, that has the power and funds to throw subsidies and to various corporations. that will help us get out of the great depression. we gonna have subsidies funded by the federal government congress in particular. somebody who is very strictly accountable, presidency, presidential and administration, congress. when steam ship subsidies did not work and the transition and lorillard subsidies did not work , then we have a political party and is accountable and weekend collected somewhat for congress. the reconstruction finance

corporation set up in 1942 under ever changes the game because now you have a large amount of money that will be ever increasing. congress will vote on increasing appropriations. they can pick and choose who they want to subsidize and him not to. now, part of the problem is the subsidies have not work thus far in u.s. history up to the economic development subsidies, up to the repression non-partisan decisions. immediately the become partisan. one of the biggest ghost of charles ross, former vice president of the united states and the coolidge and head of the reconstruction finance corporation who resigns one week later to receive a large subsidy for is bank of chicago which failed anyway. we have the politics of the are of see, the reconstruction finance corporation become quite intense and the secretary of the

interior gets a loan for his bank, that of the republican national committee you have a very partisan distribution of the funds with the reconstruction finance corporation. well, when hoover is out of office roosevelt comes in and it becomes a partisan distribution of funds during world war ii, forming a lot of the enterprises, and perhaps at the end of the war would be the time the emergency would be declared to be over. it goes into the 1950's, and this is the problem. once you set up the federal organization it is hard ever to get rid of it, including a funding organization set up to get us out of the depression. now we are out.

this is the problem republicans had to be finally when eisenhower gets in, you abolish the reconstruction finance corporation and set up the small business administration which is activated to give subsidies to small business republicans, and it becomes a republican tool. so both political parties offer overt roosevelt and truman and eisenhower, have a stake in this chapter we call the deasy subsidy machine. the d.c. subsidy machine was set up a massive subsidies. the function and the purpose and the effects of these subsidies affect his disastrous. >> host: attempt to use the subsidized loans to bribe is bibber editors to write nice things. >> guest: correct. >> host: and sarin is say, i have never been offered any such thing. i might have been tempted by it.

the other active -- >> guest: lebanon 1930's and 40's. >> host: more scope around particular challenge uphill. in the purchase of a $10,000 bank note, 2014, that's pretty expensive. in 1913 and, that's got to be, what, two or three times the average household income, for. >> guest: absolutely. you're talking something in the range of a hundred thousand dollars or close to it. >> host: just remarkable. when the rnc is created, hoover says col well, we probably won't have to use it very often, and it will probably only need to be around for two years of almost. ronald reagan would later say there is nothing that will closely approach immortality of a government program. as you point out, the rnc is still with us the small business administration which is not the

most corrupt and self-serving organization in the united states government, certainly on the top-10 list. >> guest: sure. >> host: but, you know, we have seen it was only meant to last for a couple of years. this is often the case of general motors in which the united states government was a large cheryl -- shareholder during a time of what appears to be negligent malfeasance that has left at least 13 people that as a consequence of faulty ignition switches in gm products. there will be that question about maybe that was not investigated as aggressively as we should have. so the case of the rfc, later the sba, what hope is there really for getting the people

who establish and manage these programs and, of course, benefit from them to see the error of their ways. >> guest: it is difficult and often why we often get a new generation of thinking in there. president reagan did this to some extent in the 1980's. one thing is that if you have agencies that have to be -- if you have major subsidies like this which are gadgets to begin with, funded by congress, more accountability. funded by something like the rnc , the after the diminish accountability. the subsidizes to not have to run for reelection. the rnc became kind of a hydra-headed monster. fannie mae comes out of the construction finance zero. that problem can be traced back to the rfc command the export import bank which also belongs on a list of those that are

politicize heavily and subsidies they give him be in the federal loans that have been granted -- general electric has also been adversely rewarded by the export import bank the obama administration, so the politics become very unfortunate. starting with hoover, continuing through roosevelt. the many you see these subsidies come into play in a big way the political aspect of this becomes absolutely all-important. the politicians on top of it. very rarely can you cite one of these programs that successfully benefited the united states economic development. >> host: you look at ge specifically. a look at their corporate income statements coming is a difficult to think of them as private

companies when you look at where their revenue actually comes from, what the profit centers are what they remind me of, mussolini economic model. firms that are nominally private . but subsidize / controlled by the government any idea of doing so can add to the public interest. even of the public did a bad joke in the airplane off the ground essentially to this day it's an extension of what we used to call the war department the department of defense and homeland security and all arrest of it. so -- doesn't even make sense to

talk let these companies as though they are normal, private firms? >> guest: increasingly know. in the case of profits they have the schedule of their latest plans backlogged until a 2019 according to their president. they're hardly needed subsidies if they have a backlog ebros not far. when anita and i wrote the book, and san can't count, we were concerned drop the sole element of corporatism like that of our corporation, highly regulated country a link between business and government. where that occurs you do not see consumers winning. consumers are often the big losers. prices are high, stabilized. innovation comes to a virtual halt. a lot of money is wasted. innovations are two chief. thinking back to henry ford, if you have the not horse and buggy

era well, look at all these potential accidents with these cars going this fast and we don't even have the roads to accommodate them. no, we should not allow them on the road. a free economy gives up as a chance to test works and does not work in gets us away from this idea of corporations and federal subsidies being linked. and the big way you just described in your last question, kevin, the stars with the reconstruction finance corporation. we have not backed away from that since then. we need it changed almost in the american ideal of what free enterprise is all about, what federal intervention is valid and what is not. part of the purpose of the book is to show when the federal government gets involved trying to spark economic development that is when the disaster occurs, the federal government

enters into something it is not capable of mastering. sp1 an expert on corporate when seeking regulatory captured. and that sort of thing. he also runs a small investment fund, and the companies he invests in are the villains of the story. he is always telling me, did boeing, lockheed martin. no matter what happens in the marketplace the margins are fairly well protected, not going away. the day boeing goes out of business, it is is not on our horizon. and depressing to me about this whole and that touched on this a little earlier, but it's a lesson that we keep beating to learn. the wilson administration, or socialism and regiments in the national economy.

and after the war the faction wants to keep these institution practices around. blessedly the incoming congress and subsequent presidential of ministrations saw that this was not a very good. they said it to one side. these ideas sit there and fermenta until the persian hamel were too. then there's a confusing event in american history witches, the economy sort of miraculous, and that emerges right after go first world war. and it happens to parses because the united states has almost all of the world's surviving on military manufacturing capacity. the united kingdom, all the sophisticated economies of pretty well destroyed. the last player standing are basically india and the united states. the only ones, the big countries

that emerged from this war unscathed free when people look back at those years then drop precisely the wrong lesson. we set up this, that, and the other. during the war we had a great deal of federal involvement in the economy. and in the eisenhower years combined 91% tax rate. maybe that's why we have some lunch program and not the fact that essentially are major investor a pattern clear from the world stage and predictably by 1973 the rest of the world has begun to recover. japan is a thriving economy of the squad. most of russia rebuild spirit u.s. is troubling because it is taking the wrong lessons from the war. we start to have this great economic stagnation in the 1970's. men's income in the united states in real terms peaked in 1973 which is rare on the thomas was born.

yet we continue to try to 70 1870's from all of korea, where. the protection, particularly in the field of agriculture, but you have the other makers. can't possibly be expected to compete. a lot of the same rhetoric. today about china. porat collectivist and don't have our standard of living. of course that tokyo held much higher standards of living in detroit did. and yet we still say, well, the wave of the future, windmills and solar energy and green energy, but the market is just not moving that way. will we need is the white house and the congress and the commerce department or the department of energy in all these geniuses to push the right direction. what we did is solyndra.

talk to me a little bit about windmills and unicorn flatulence and whenever a new trend is in green energy are. you know, you go out to the texas panhandle, where i am from, there is a valero while refinery that runs on wind power. it is like kittyhawk, no people, lots of wind. western pennsylvania, the gas wells pumping natural gas out of the wells out there brought on solar power. there are good applications for these things, but maybe not necessarily what we are thinking. maybe talk about the little bit in the case of the law must who is kind of a genius when it comes to this some b-2 yes, the last segment of our book is the modern subsidies, the modern political entrepreneur, seeking the subsidy. what you say is true with world war one and two. we certainly learned a lesson. one thing to remember from world

war one and world war ii is the federal budget declined in both cases. in world war one the tax rate was cut, the top level from 73% to 2 to 5%. all of a sudden investment capitol began highly available. we see a massive recovery by the diocese of. corrected recovery, private directed recover it really, what the wrong lessons and then we get into the 70's and have this energy crisis. a market system would say, through the prices of these various products, whether at the mall, solar energy, wind energy, the prices of these products, as well rises, they become little bit more competitive. we thought ethanol would be of possibility. he builds gas tanks to tank ethanol as well as gasoline. the idea was that heat of the ethanol would eventually prevail, but it did not.

something about the economics of putting gas in there is more efficient then all you have to do with corn, crop, and others to process it and the costs of those in the panetta in gas tank richard nixon and some of these, and jimmy carter, that that time was at an end. that is when we began to get the solar energy beginnings. of course, the ethanol subsidies in a big way, and. becoming the ethanol. and so i'm out of fuel, the amount of potential while for gasoline fell, the crops are renewable. silver and energy, it's all real life. west texas, there are areas where experiments can be done

and they may be competitive. this is good. with the amount of fuel when need to shift over. government doing this, and it's of a in a way if we have these places for a while. splinter dwindled down to nothing anyway which will keep the dwindling from being so dramatic. the shift over into these alternate fuels, green energy. carter sold that bill of goods, and we bought it, except for president reagan. his famous line was, there is more oil in alaska and there is in saudi arabia. his starting point is we need to decontrol all the plastic -- price-fixing that's going on, free it up and see what happens. people were saying, this terrible. what we discovered is in the early 1980's the development of fracking occurred. george mitchell develops a, perfects it in the 1980's right about the time that the oil bill

was under way and the markets were being allowed to produce more. we see a dramatic decline under reagan and oil prices, and then receive the development of fracking. of course, fracking needs to be improved and the needs to be environmental improvements, but what possibilities for the future. they show that although oil may, indeed, be finite it has a much larger base, we thought, maybe lusting for hundreds or more years just with the supplies of we have in the united states texas and pennsylvania. fracking, decades and decades in the future. and a foil to keep this country going so that this changes things. we have been paying higher oil prices for 30 years, perhaps. much of the time markets are beginning to settle the problem. get the subsidies for solyndra, the subsidies for various clean energy in the panel continue unabated.

so when $500 million subsidies for solar energy. the solar power was just completely inefficient. but none have much of a chance. as people who are in charge of solyndra and. what we have are the political connections that seem to be running through this. andrea's contributed to the nixon campaign and brought in secretly and $1,100 bills to give secret to president nixon in 1972. low and behold that is the administration where we begin to get a lot of serious work for up all subsidy it be that political connection, in that case government making the decision, the political connections are there and in this energy case we may well be in good shape with the oil production and not have to deal with a lot of these

alternate fuels that are still competitive in some ways, may still be able to be developed under certain circumstances and as entrepreneurs improved and we get better and better technology , who knows. in 100 years there may be ways to make wind power and solar power work better. windmills have been terrible, people get subsidies to put them on the property, they kill birds , a destroyer acres and acres of land because you cannot farm in those areas. negligible benefit. and so this has been an ongoing tragedy. >> host: yes, i remember, i think it was oval its wagon plant in tennessee which has one of the largest solar arrays in the united states. and when the plan is actually producing this gigantic, record-setting solar ray of much of a half percent of the energy that is necessary. again, there are times when this sort of thing makes sense to be

one of the problems, i think, with these programs is that they do their creation and keep us for having an honest discussion. in the case of fracking there are some real and arnold concerns, particularly waste water. it is good that we talk about those and then try to deal with this problem. there are enormous environmental issues with at all when you look at its consumption of water, the weight of these crops. of course the shortage of water is a real problem, particularly with the overall order of four. a thermal plants consume tremendous, tremendous amounts of water. but in every discussion in terms of one verses the other, and there is no, so far as we know, enormously pure way to produce energy. even the production of solar power, ala of highly toxic chemicals to make those things

were. we never have a real and honest discussion about. as we are getting close to one appeared to five and i have enjoyed these specific historical examples very much, but in the middle of the 20th century we get the great austrian economist making his argument about what becomes known as the social percolation problem. essentially what he argues in subsequent experience confirms is that in the absence of markets there is no way to make intelligent and rational decisions about the allocation of resources. in recent years we've also seen some real breakthroughs in study of what goes under the general heading of complexity of trying to understand very complicated systems. and with the complexity is, predicting an understanding and explaining and pre-empting the

action of the market's not only is difficult which is why we have not managed to do, but something that is not possible, even in principle because of the complexity of the underlying information and the way it is distributed throughout the marketplace. so where science is is fairly far ahead of where politics is. we have our current administration that likes to go on and on about its commitment to science as long as that science is in economic science and the need to put this sort of informed scholarly opinion at the center of our public debate which creates an irony because a lot of these things, like the rf c and related programs are predicated on the idea that we get a panel of experts who are not elected officials and dug up to run for reelection and can be a wise man. what our best wiseman are telling us right now is that

they don't do the things you wanted to do. so one hopes that this might be an opportunity for as these ideas gain public currency, to challenge the sort of thinking, not just in terms of application about whether we did a good job but of weather doing a good job is even possible. so in closing, may be a pop song that. >> right. as you were working through your questionnaire i thought there was a good parallel in some ways between president hoover and obama, which i don't always think of was to as being like. there is that sense and both of their presidencies that we can scientifically work through problems that by appointing groups of experts. the problem is that the groups of experts, of course, come in with incredible biases on what can and cannot be done. frequently they are wrong, and if we go by these experts then we are going down the wrong

path. i would put the energy crisis as being a classic example. when richard nixon and jimmy carter both said the energy crisis is here to stay, the foremost problem on our generation, caused by the declining oil supplies, the experts wind up and said, yes, they can give you often a calculation. what they could not count on was the entrepreneur should of the 1980's by george mitchell and others that developed fracking, and thereby we are able to reach sources of moral that we did not know could be reached in the 1970's. once those sources are reachable, then once we developer ways to remove the environmental problems, then we have the opportunity to increase our energy supply by 100 years. it is no longer an energy crisis . the experts are virtually unanimous. markets and entrepreneurs say, though, it is not. when we realize -- that is why i

say "uncle sam can't count". entrepreneurs often can't or if they can't they are not in business law. the good ones can, and when they do, they change the lives of americans for the better. the late 1800's, the absence of a lot of these subsidies in the late 1800's with the get through the transcontinental railroad subsidies promised another 34 years. we backed off and let rockefeller in oil at carnegie and steel and other major industries developed with of jurors that led the u.s. to dominating the world. immigrants came to the united states. the united states became the place of invention and the entrepreneurship, and i hope we can still maintain that as steve jobs and others give the sense that our current group, of government would get off their backs, can get the job done. >> i think finally what is goes

to is the problem with the idea of expertise. >> guest: no one in the world and more. >> host: developing, marketing, advertising. no one in the world. there were the world's foremost experts. all of the experts agreed. this problem of expertise is not just the public sector. it reminds me of a story about bill gates. the height of microsoft's ascendancies someone asked him about what you worry about in terms of competitors. gates said that he was not worried about big companies like ibm or sunday or the people getting into the market. but he worried about was some kid is draw some are doing what he had done a generation earlier

that is the problem of predictability. all these subsidies, industrial steering projects are forward directed in time. this is the situation where we are, and therefore we can make decisions about the future if. as you point out with george mitchell and the convergence, fracking had been around forever, been around for 100 years by the time mitchell comes around, but as the combination of fracking and horizontal drilling which really produces the result that was not predictable by anybody. exxon did not know that that was going to happen. chevron was not able to predict this, but there's a guy with an idea that turns out to change the world. now, if we had had the government deciding what sort of technology is best for getting whalen the ground, well, we would probably be driving corn fuelled cars to this day. >> guest: i think you are exactly right. horizontal drilling, fracking

would have been diminished. it would have been denigration. well, that does not work. we have to look at reality. reality is the method to try increase it. though we need to do is deal with reality. reality is we need alternate fuels and to subsidize at the law and therefore put up to 40 percent of our corn crop into that to make this thing work its renewal energy, all logical. the experts agree. the experts were wrong. >> host: and a never would have picked the right brothers over langley, mitchell over chevron, never would have picked , well, never would have picked microsoft over ibm back in the day. and we would all be significantly worse off and poorer for it. >> guest: michael author likes to talk about steve jobs working, again, in his garage. what can come of an entrepreneur in that garage. you don't need to have the-corporate office and what

goes with it. you need someone with an idea and the perseverance to make an idea work and dream. the united states has had its share of dreamers, and that has led to the economic growth that we have experienced in this country. >> host: i think from computers to rock-and-roll, a lot of the best things about our country have come from growers in california. >> guest: short. or in lubbock, texas. >> host: hammadi holly. so far, funny thing, my home town. maybe you in night together. >> guest: let's try. >> host: thank you so much. i've enjoyed the conversation. >> guest: thank you, kevin.