you have to fight for it. you have to hold on and keep pushing. you have to control and sometimes fight harder. it is not the easiest thing in the world. we will go down the line with one last inspirational word. >> leap from your values and let passion tried your work. >> i do not usually speak in nuggets. [laughter] i would advise young people, men and women, to recognize that you cannot live your life sequentially. you cannot decide now is when i will concentrate on work and later on concentrate on family and later on, the public good.

what we find is the people who are most content in their lives are the ones that tried to combine it. obviously, these ratios will change over time based upon what you have the capacity to do because of other requirements but to think more broadly about optimizing the drop at one. but make it -- not just about optimizing the job at one point but the more broad experience. >> always remember that you are working for your clients and your shareholders and make good decisions short and long term. >> own your power. understand where your power comes from and who you are. do not give that away. women tend to give that away so easily. >> this is hard for an

economist. we do on one hand and the other. i am speechless. the words that have the most resonance for me our passion and agenda. when i think about my life and what was important, i remember there was a wonderful party senior year in college. we said we would play the role of what we wanted to be 25 years in the future. i wanted to be a professor of economics. that was my agenda. it is very important to find your agenda. even in this very difficult job market, we cannot quite do exactly the first step. you can still have that in mind and that can help you find were trow. >> absolutely. thank you to our wonderful

panel. [applause] >> we go live to the american enterprise institute in washington for a discussion on how conservatism and what is called the new capitalism. irwin stelzer is a senior fellow who will give a talk on how capitalism is changing and what free-market systems have to do to survive in the global economy. this is live coverage. >> consequences of the type of fiscal behavior that we see today. it is depressing sometimes in the movement to see what appears to be a lack of listening to the lessons we were talked -- lessons we talked or maybe people -- lessons we taught. what irwin stelzer says is we

need a new set of arguments. irwin stelzer has had a career that i were to describe his achievements, it would take up all his speaking time. i would just give you a couple highlights. he is the director of the hudson institute economic policy group. he is a columnist for the "sunday times" of london. he has edited many books. he has been on the faculty of several universities including cornell, the university of connecticut and nyu. he is well-known as an intellectual in the advances of free enterprise. we are delighted and honored to have an old friend here to speak to us about conservatism and the new capitalism. irwin stelzer. [applause] >> thank you.

it is nice to be introduced by somebody who is young enough to still be surprised at not being listened to. but approach this assignment with considerable trepidation for a couple of reasons. the distinguished scholars who preceded me or students of the philosophies that animated some of the great economists. that is not what i am. i am merely a practicing economist whose theoretical tools have been dulled and bent out of shape with collision with the real world. i will try to avoid the saw terrific effect of lecture at this hour -- soporific effect

of lecture at this hour hoping that outrage will keep you awake. the collisions i have had with reality make the far less certain than many of the experts who have come before you or whose materials you read. so that those of you who have come to certainty can leave early, i was never certain that it was right. i am not certain that those who are following the master's voice by borrowing and spending have it right now. i am deeply suspicious of people who profess to know what cure for our current predicament is ever pragmatic. i cannot imagine a brilliant investor survey impossibility of an america headed toward a debt

gdp ratio of 100% and recommending spending as a reaction to that circumstance. i do not know. i am not certain that free trade, which appeals to so many of my conservative friends, is unambiguously a good idea. i'd rather think adam smith had it right when he said a with of protectionism is a good idea if in the interest of national security or retaliation which he thought was a nice virtue. he was less interested in expanding the division of labor's efficiently to the world then he was of increasing the wealth of nations which is a different thing. i think there is a lot of wisdom and the emphasis on the role of creative destruction but

i am not certain how to treat the externalities' and social costs of that special form of creativity. i am not certain that monetar ism is the right one. i remember going to lunch with market thatcher -- margaret thatcher. she asked about money supply before anything else. i am not certain that we can ignore monetary measures. i am not sure that second-best should cause their kids to -- cause them to pack their kids and go.

the attempt to realize the unrealizable is tending to be pernicious. the best may be indicated of the worst. the second-best is messy but attainable. most of all, i suspect most troubling to the audience, i am not certain that a fear of unintended consequences is a reason to leave market power and market imperfections free from market intervention -- free from government intervention. nothing has had unintended consequences like the recent turmoil shows. adam smith's invisible hand had unintended consequences. we love those consequences. not all consequences are

undesirable. i do not think we have to fear them as long as we have modest goals so that if we are wrong, we can fix them. one economist pointed out that the utopian fantasy to think that we can eliminate all of capitalism's costs of preserving benefits i do not worry as much about consequences as other people do. i was encouraged in this conversation i had iirving in which he said that he read an essay in which the concept of unintended consequences was described but he said -- . he said he was going on to

change the world and this changes it. i said that you went on and changed the world. you were not paralyzed by the fear of unintended consequences. you knew about them. if he decided to stop and just yell unintended consequences, we would not have the public interest. that is something that conservatives should think about. that is only one reason why i did not live in fear of government action. another is, when i came to washington, i was a blank slate. i came here because i wanted to do some thinking. one professor had a profound effect on me. he talked about the role of government and legitimizing and delegitimizing behavior. successful bidders legitimize

the macho behavior that we saw on wall street in overreaching and it is to president barack obama's credit that he is dealing with this sort of behavior although his motive for doing so is not a careful reading of the professor's works. the power he has to do so is more than just chat. there is a bank in britain that it not take any the government money to the fury of the shareholders. their leading executives have given up large portions of their bonuses. another leading banker in america who was entitled to $70 million because of the performance of his investment bank, and i will not name goldman sacks, decided to take it in deferred stock. there is something to be said

for the role of government in legitimizing behavior but it apparently works. now that i told you why you should leave, this is in favor of an outline of principles which might guide government action that conservatives can support. two final thoughts, i am here to open discussion and stimulate thought. this is a thought experiment. that means i do not mean it and if i am wrong, i can retreat from it pretty quickly because it was only a thought experiment. that is really true. james buchanan wrote in a brief treatment it is helpful to make old charges about positions taken by leading figures. i mean no disrespect for the

great proponents of limited action and the economic sphere. but they lived in a society that no longer exists. adam smith wrote at a time when shame was a economic behavior. transactions often occurred for parties to reputation of capital. that was their most important asset. that was then, this is now. we cannot waive our copies of "the wealth of nations" in except -- and expect that to have an effect. he could rely on markets of the sort that we no longer have. nor can we rely on the religious supply which was one thing being tossed around a while ago.

goldman sacks argues he is doing god's work which is the first merger of god and man. those of us that admire adam smith and others should feel comfortable and relying on something more down-to-earth than the religious revival. i would like to call it creating a neo-orthodoxy. a new capitalism rooted in old verities adapted to now. it is absolutely imperative that we take that at a time when capitalism is under such severe attack and strain as was mentioned when its very legitimacy is under attack. that is not to say that i'm

insensitive to milton friedman's warning that the bulk of the community automatically favors any expansion of government powers as long as it protects individuals from big bad corporations, reduce poverty, protect the environment, or promotes equality. i will try to avoid that trap. but the start with a fact. capitalism has been on arrival in its ability to produce material well-being and to distribute those goods and services more widely than any other system with which scientists have experimented. karl marx knew this. max ankle during the rule of 100 years, capitalism was more profound than all the other proceeding generations.

that was true. not how would results and how it was just to did was wrong. the port live better in capitalist economies than most of the battle class and socialist economies and better than those in the copter credit -- kleptocratic societies. there is a long and arduous path to duplicate the living standards produced by capitalist economies and prove that the limits to growth in centrally managed economies like russia and china or bureaucrat have the and -- governments like india can show the american economy as maximizing individual freedom. those economies can accomplish what dynamic capitalism has

accomplished in america. what do i think the role of government is? but may try a few suggestions -- let me try a few suggestions. they are and mounting offensiveness for conservatives. the first one will be easy and it gets harder and harder. i actually mention the word taxes somewhere. government has an obligation to force and preserve competition. competition performs an economic and social function. i have argued that the american enterprise forces firms to fight for consumer to buy better products at lower prices. incumbents are prevented from blocking the entrance of

newcomers thereby contributing to social mobility. this means in practice preventing all sorts of exclusionary behavior. and the whole panoply of what the antitrust laws or all about. i recognize the argument i have gotten from conservative friends is it is difficult to tell the difference between good old competition and predatory behavior. i think that exists in the minds of academic critics but those who have worked this area know how to distinguish those things. i could give you a lecture on that but the six people remaining would be bored. the obama administration has criticized its predecessors. that is not news.

the news is that he is probably right. i am somewhat chagrined that conservatives did not halt on this bandwagon for not only consumer interests but for two other reasons. oene is if you replace the invisible hand, you will get regulation. that is the only alternative. the only alternative to a return to competition is the control of monopolies by the state. we should keep that in mind when we get annoyed by some antitrust case that we think is picking on some great big efficient company. i think this is probably more important as said it into my social sciences as opposed to

economist mode, it is very important not to foreclose opportunities for newcomers. we are a socially mobile society which prevents the kind of class warfare you see in other more rigidly constructed societies. go try to start a business in france. believe me, it is very difficult. it is even difficult and britain which is supposed to be a more open society. i opened an office in washington and london the same week. hear, i found a piece of space and light, signed the lease, painted my name on the door, and i was in business. in britain, 40,000 pounds later, i was in business.

i am not arguing that these laws are easy to enforce but i do think that they can be done and it has been done historically. i think conservatives would do well to rally around that flag because it means less government, not more. if you keep competition moving, you did not have to have a regulatory structure. that is one thing i think conservatives can do. kiddie picture some of the conservatives we know testifying for an extended budget for the antitrust division? where effective competition is

impossible, we need regulation. you cannot a kid out of that. there are and there remains something that we called natural monopolies. there are not as many as we used to think. not telecommunications or airlines but the transmission of electric power over long distances, the distribution of natural gas under the streets of this city, those are bound to be monopolies. at least for very protracted periods during which price gouging is possible and entry is impossible for very long amounts of time. they need the government control. sorry about that but you need it and you have to do with the best to can. thank you to technology because it is -- we used to think the airlines cannot tolerate competition. we know that because we have had

to buy new luggage when hours got lost. sooner or later, monopolies attract regulation. if you do not believe that, as the insurance companies who spent decades sheltered by laws that prevent interstate competition and exemption from the antitrust laws. lookit to where they got. if they have their premiums regulated as if there were public utilities. there would have been better off and bracing competitive structures. there are grey areas, no question. regulation might enhance monopoly power. regulators may see the people they see as clients to be prd from competition. there might even be some corruption. i have not seen, i would not say any but i have not seen significantly large number of cases of corruption. i have not seen a kind of

corruption that other countries see when they have direct regulation. the closest i ever came was in new york city, the taxicab fares are regulated and mayor koch asked me to head a commission to redo taxing regulation. i had several bright ideas about how to do this like charging more during peak periods. what i did not realize this they had total income goals. the higher the fair, the quicker they went off the street. i did not realize when you start fooling with this, you better stay as far away from staten island as you possibly can because there are people living there who did not appreciate interference with their income levels.

we do create a government which can have problems because there are regulations that are tough to review. i think that is the worst the eagles. i suggest that this sort of neo- orthodoxy that i am suggesting is preferable to the new conservative orthodoxy of just saying no when any regulation of economic activity is suggested. third, i think government has an obligation to see to it that the social costs of private production and consumption that those decisions are internalized. that is, if gasoline costs $3 per gallon but does not include

the cost of global warming or the health consequences of these emissions, those costs should be internalized. the consumer bears the full cost and less this audience which is increasingly selling begins moving its lips to chant "no new taxes," let me make two points. if you have regulation, you give permanent self sustaining bureaucracies which is what would happen and is happening when we try to control emissions through epa regulations. unless you're a lawyer or a consultant, that is a nightmare. taxes, on the other hand, you do

them and leave. it is not as onerous as would be. compare fuel efficiency standards with the tax on gasoline. fuel efficiency standards are set by charles schumer who lives in new york and nancy pelosi. they hate cars. these people hate cars. come out west. we drive 40 miles to get a pizza. the notion, you would be better off paying a gasoline tax and everybody would pay the same. the president's card gets about 10 miles per gallon. -- president's car gets about 10

miles per gallon. we should have taxes that incorporate the social cost of externality and the product -- in the products that consumers buy. consumers passing their private costs on to society as a whole. the question of identifying externalities is no easy thing. you can do it with as much accuracy as kent carroll browner identified the admissions from your lawn mower. here is the hard part. what you do with those externalities' are positive which gets you to the housing market.