someone, within 60 days, they get the job. more action and forcing time of mechanisms would be good ones with congress and other governments in united states. in nominal sum the connection between governments and civility? -- in an an elvis on the connection between governments and civility? >> they will get what they ask for. that is what i think. >> i just want to think i'd be -- i just want to say that i do not think everyone is uncivil. >> which people are people, too. we should remember that. thank you for that.

[applause] >> thank you so much. we will see you across the hall. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> next, a form on the impact of economic growth and the foundation of freedom. after that, a look at the role of 89 to 29 year-old son in the election. been at another viewing of the discussion on civility in politics. tomorrow, foreign policies of presidential candidates that ronnie and president obama. our guest talks about the current doctor shortage and the impact the affordable care act will have on the.

and another guest looks at the types of programs offered. that is live at 7:00 a.m. eastern on c-span. >> at the foot of that bridge, i was beaten. i thought i was going to die. i thought i saw death. >> in 1965, a 25-year-old john lewis took part in the voting rights march. >> we came within hearing distance of the state troopers. a man identified himself and said "in major john flowers." one of the and people walking beside me ask for a moment, and the major said the troopers

should go to their house. >> sunday at 8:00 p.m. on c- span. >> mathematician and economist steven landsburg at the cato institute's economic summit. he talked about the innovation and economic growth during the industrial revolution. this is an hour and 15 minutes. -- an hour and 20 minutes. >> good morning. i've promised we would begin on time and we are nearly 23 seconds early. so we are off to the right start. a couple of quick points. we will have presentations, presenters will be up here or some place around here. for the discussion, we have to microphones and so if you want to pose a question, come on

down here. if anyone had limited mobility, we want to make sure everybody can be included in the conversation. i recommend sitting nearby these microphones if that is an issue for if there are serious problems, we will make sure someone can bring a microphone to you. but i would rather not make that the standard. but again, if you have limited problem. our first presenter to get us off to the proper start is prof. steven landsburg. he is a mathematician by training but an economist by profession and passion. he is a great teacher and explainer of economics. in addition to his bio, he has a new edition of his wonderful book "the armchair economist" fully updated for the 21st

century with data and update in contemporary examples. he blogs daily at thebigquestions.com. and he is nearly finished with another book, part of his wide- ranging interests, on the theory of relativity. steven landsburg. [applause] >> thank you. is the microphone working? good. i want to talk to you about economic growth. the story of economic growth begins about 100,000 years ago when modern humans first emerged. then we have the time line here. for the next 99,800 years or so, nothing happened. [laughter] there were some wars, some political intrigues, the invention of agriculture, the

renaissance. but none of that mattered. none of that mattered in the sense that none of it had any appreciable effect on the quality of life for any substantial number of people. on the dawn of history, up until about 200 years ago, nearly everybody who ever lived right around the subsistence level. the modern equivalent of maybe $600 a year. there were times and places where it was better than that. even some extremely fortunate times and places where people aren't me be the equivalent of $1,000 a year per day -- $1,000 a year in today's terms. of course there were always tiny nobility's, kings and queens and dukes and princes who lived much better but they were numerically insignificant. if you had been born anytime

prior to the industrial revolution, the odds are astronomical that he would have lived on the modern equivalent of $400, $600 or if you were extremely lucky, $1,000 a year, just like your parents, just like your grandparents, just like your children and just like your grandchildren. then a couple hundred years ago, something happened. incomes, and lease in the west, started to rise. by the year 1800, incomes were rising at about three-quarters of a percent per year. a couple decades later, that happened around the world. then it got better. just 20 years later, income or rising at 1.5% 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 corrected for inflation has grown at about

2.3% a year. 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. at that 2.3% growth rate, if we continue at that rate, then in 25 years, your children will be earning the inflation adjusted equivalent of $89,000 a year. if we continue that growth -- growth rate, their children 25 years after that, will be earning the equivalent of $158,000 a year. that is the power of economic growth. if you extrapolated that out a little bit further, let's say

another 400 years at 2.3% growth per year, then your descendants will be earning approximately $1 million per day, unless of course they rise above mediocrity and live a little better. i want to stress that these are not some future inflation ravaged dollars we're talking about. this is after corrections for inflation the equivalent of 1 million of today's dollars. i do not know if we will ever reach that 0.400 years from now but i do know that conservative extrapolation from a sentry's old trend, it is conservative because it assumes we are going to continue that 2.3% growth rate for the next 400 years

whereas in fact what has happened is the growth rate itself has continually risen if you find this an impossible number, you might pause and reflect for a moment on how implausible your lifestyle would have sounded if i had tried to explain it to somebody 40 years ago. you might also meditate on the history of skepticism. in 100 a.d., he suggested there was no hope for future development. this is the history of per- capita income in the united states. united states is the medium growth country. our growth compared to other countries has been steadier and it has started earlier than most. on average, we are a pretty average country in terms of level of growth. this is all corrected for inflation. this is all to thousand $5. you can see that incredible

market prosperity over the years. we have had some rocky years. this only goes up to 2010. that is the kind of thing that happens from time to time. it happens most spectacularly in the 1930's here we have the great depression. here is what happened -- incomes fell back to where they had been about 25 years before. people found it intolerable. they had to live the way their parents lived and they found it intolerable. they had to live at the level which there great-grandparents' would have thought -- thought on a manageable -- thought unimaginable luxury and they found it intolerable. that is a new idea. nobody before the industrial revolution thought that. today, we expect our cars and entertainment systems and our computers to keep dazzling us

with something new every year. we expect that but the underlying expectation is new. here is 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 did not just income. let's look at what has happened to our leisure time. 100 years ago, the average work week was 65 hours. today, it is 33 to read 100 years ago, 6% of manufacturing workers took vacations. today, it is virtually 100%. in 1910, 26% of 65-year-old men were retired and that is at a time when most men did not make to 65. of those who made it, they were really old. three-quarters of them were

still working. today, 90% of 65 year old men are retired. tell labor was common in 1910 -- child labor was common in 1910. today in this country, it is practically unheard of. we are working less per week in fewer hours per year. the average housekeeper in 1910 spent 12 hours a day on laundry, cooking, sweeping, cleaning. today, it is about 1.5 hours. here is the typical housewife's laundry day in the year 1910. first, sheep took water to the stove -- she took water to the stove, moves on to the task of ironing using a heavy flat iron

continuously heating it over the required 8.5 hours and miles of walking. by 1940, our heroine has a washing machine and her lawn today is down to 2.5 hours as she walked 665 feet. today, nobody spends 2.5 hours on the launch. you throw the laundry in.

if you have a fancy machine, it e-mails you to let you know when it is done. [laughter] in 1900, most houses the not have central heat, did not have plumbing. though other routine tasks including lugging lumber around. the average american has gained six hours a week of leisure. that is the amount of time we spent in the office are commuting is down by six hours a week. that is the equivalent of getting seven extra vacation weeks per year. that is over the last 40, 50 years or so. so we are getting richer, we are 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 and

ask yourself if there's anything in there you want to buy. here are a couple of pages from a 40-year-old catalog. you can get this am radio. it weighs 2.9 pounds. one transistor comes with the battery. you could get this black and white camera which takes up to eight pictures. then he replaced the film pack which probably costs about -- about as much as the camera. you buy the separate flashbulbs. they come in packs of 12. when you run out of those, you have to replace those. the only thing is these pictures are misleading because you are seeing at the 40-year- old prices on there. we ought to correct those for inflation. those are what the prices are corrected for inflation. $128 for that transistor radio, $210 for that eight picture

camera. i guarantee you it takes worst pictures them when you get off your iphone. it is not as electronics. it is products like health care. here is 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, there is an argument for doing this and not doing it, but if you say aids is a special one time thing, this is not part of the general trend of health care, so i will take the effects of that out. then the health care outcomes we are seeing in the poorest parts of africa today measured by infrared mortality, life expectancy, anything you want to measure, are almost exactly the same as what we were seeing in the united states in 1975. 1975 in the united states, you

were getting the same quality of health care that the poorest african art getting today. now i want to ask you, which would you rather pay 1975 prices for 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. that has to tell you that for all the problems with our system and 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 phenomenal increases we have seen, grossly understates the story of how rapidly the world is getting better. henry viii had a much higher measured income than anyone in this room. he will have of england but i beg you he would get treated

half as well for modern plumbing, a lifetime supply of antibiotics and access to the internet. along with all of that wealth we have generated, has come another brand new phenomenon -- wealth inequality. per-capita income in the united states is 70 times what it is in the poorest parts of africa. the world has never seen in equality on the level before. that is brand new. do you know why the phenomenon is new? because wealth is new. the reason we have all this inequality for the first time is that we have well for the first time and if you think inequality is a problem, it is worth reflecting that it is it leased a tremendously that this problem to have. it is the problem of how to divide up all this amazing

wealth that nobody would ever predicted we would be able to generate in the first place. if you want to think about inequality, i want to keep -- mention a couple of things you want to keep in mind. nobody in the world today is poorer than they would have been before the industrial revolution. i know that because if you were poorer than he would have been before the industrial revolution, you would have starved to death by now. another thing to keep in mind is that economic growth is new. it is only a couple hundred years old. this process is just getting started. it started some places later than others and in some places, it has had fits and starts. but we have not begun to see the power of what economic growth can do on the world wide basis.

and we should remember that in the long run, a rising tide lifts all boats. here is what economic growth has done for the poorest americans. but look at household below the poverty level. 98% have refrigerators. 67% have washers and dryers. 96% have color tvs. 75% of those have over 300 channels. i grew up with three black and white channels. 68% have air conditioning. many live in clients where air- conditioning is superfluous. 63% have internet access at home. these are households below the poverty level when you serve a people at that level and you ask them to you have enough food, 93% answer yes. do you have any smoke or boulders that bother you? 93% say no. medical needs? 86% say no.

it is more difficult to lead the life of it for american then of most people in this room but it is the difference between that life and the like that everybody took for granted 200 years ago. beyond that, you remember those letter games i mentioned a little earlier. i said the average american has gained the equivalent of seven vacation weeks per year in the last 40 years. that has been distributed very unequally. the poorest americans have gained twice as much, the equivalent of 14 weeks of leisure. nobody would want to claim that these great increases in leisure fully compensate for the differences in income but it is also true that big increases

in leisure are not nothing. we do not lose -- live by bread alone. our happiness comes not just from our income but are free time and the time we have to spend with our friends and our favorite tv shows. so let's -- it is worth keeping in mind that over the last 40 years, if you're worried about inequality, you might keep in mind that the big relative wearers -- winners in the incomy derby had been in the leisure derby and vice versa. one might also point out that the quality of the leisure is -- has been improving. 50 years ago, the rich man and

the poor man spent their leisure time in different ways. now, the rich man and four men are surfing the same internet and watching the same 500 cable channels. so there has been a great equalization there. when we turn to asia and africa, they are the we did the poor there are considerably worse off than the united states but we are seeing in many places the same pattern as we saw in the west said back by 150 years or so. take a 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 at just about the same rates that americans did in the year 1840. moreover, we know historically that patterns in the west of how people pulled their kids out

of the work force as their incomes rose above certain threshold levels. we are seeing the same patterns in africa and asia. you might have heard that child labor in the third world is caused by big multinational corporations doing their influence around and convincing people to send their kids to work against their own interests. if that is your theory, then you have 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 multinational corporations around. poverty is a terrible thing it means facing terrible choices, like should i send my kid to work or to bed hungry? poor people in various cultures at various times have faced

those questions and have all settle them in the same ways. at certain levels of income, you send them to work, at higher levels, you take them out. it is the height of arrogance for those of gotten past that stage to look at other people who are now facing that and saying you ought to do it very different -- differently than we did. but a lot of americans take that you -- take that view. this is a 10-year old girl from bangladesh. it was taken in 1992. she lost her job as a result of legislation sponsored by senator tom harkin's that closed down factories in bangladesh that were not up to the standards that american lawmakers thought day off -- ought to be up to. about 50,000 children lost their jobs as a result.

she was interviewed by an anti- poverty activist in bangladesh at that time. this was her take on this situation. we are poor and not well educated so they despise us. that is what they shut the factories down. there is one difference, though, between us and 1840 and the third world today. the differences that we were poor, there was nobody was which. there was nobody we could turn to for help. the poorest people today are turning to the relatively rich and asking for help. that raises the question of what ought we do about that? a hard question with a lot of aspects. i will not settle it for you today. i do want to say a few things you might want to keep in mind when you think about that kind of question. it is remarkable to me the extent to which arguments for income redistribution, either

across the world or with in a country, are literary arguments. that is not a criticism. but they tend to be arguments based on literary anthologies, 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 because society is like an insurance. i like metaphors. i also like taking seriously. let's look at those metaphors and see where they lead us. let's start with the family metaphor. here is 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 is almost a direct quote from the governor in new york. families cannot allow one member to struggle while another prospers. the problem with that metaphor is that families do allow one member to struggle while and other prosperous. they do it all the time. we know that from the data. in families where -- with our great income disparities, more often than not, parents divide equally. it is the final opportunity to redistribute income among the people you love the best. most people look at that opportunity and say i do not want to do that. i do not want to redistribute among those people. so if your goal is to make society more like a family to reflect the values that we observe, then your metaphor

tells you that 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 before we were born, any one of us could the been born into any circumstances at all. we could of been born smart, stupid, ambitious or lazy, with great opportunities or with no opportunity to read if we had had the opportunity prior to being born, we would have entered into an insurance contract that said those of us who get lucky will take care of those who do not get lucky. the argument is made that we did not actually enter into that insurance contact because before your board, even the insurance salesman cannot figure out how to reach you.

-- before you are born, even the insurance salesman cannot figure out how to reach you. that is my reading of the argument that is often made. we all know we would have signed the contract if we could have and therefore we are morally bound by it. that kind of argument was the basis for the monumental book on the theory of justice. john rawles was an influential philosopher at harvard. i do not understand large parts of it. on those occasions when in the past whenever i quoted it, i would always get a hand written note from him reminding me that i did not understand it. [laughter] he was right about that. but this insurance metaphor,

and i think most people reading of it is that it is a big part of what underlies the full story. he was a philosopher. i am an economist. since i am an economist, i would like to think about this matter for a little more deeply. i would like to take that metaphor seriously and see where it leads us. the problem with an insurance contract within -- with enforcing one that nobody ever signed is that you have to figure out what the terms of the contract was. how much insurance would we have bought before we were born? we cannot look at documents to find the answer to that. but we can make estimates which is the kind of thing he and his

followers seem never to do. you ask how much risk will we be facing back there? you can estimate the rest by looking at the range of ability that living people have. we know how smart the smartest people are we know how many opportunities the lucky attach. we know how many opportunities the least fortunate have. we know the variants of outcomes and that is a measure of how much risk people were facing before they were born. want to have measures that, you can ask when people face commensurate levels of risk in other areas, when looking at the possibility of a fire or a burglary, when they face risk in similar levels of variants, how much to the actually buy?

you can back out how much people would have paid to avoid that risk. so you can do a quick back of the envelope calculation of all that and ask yourself what would the terms of that insurance contract have been? how many people would be have agreed, -- agreed to support? what fraction would be say you are not earning much anyway, you might as well stay home and we will take care of you? do that on the back of the envelope. my former colleague did that and i did it 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 insurance metaphor -- 23%. bigger than any social insurance program that anybody has ever remotely contemplated

in this country. 22% of the population should be on welfare permanently and never asked to work. that is pretty amazing. on the other hand, i said this was a quick back of the envelope calculation. one thing left out was the fact that in a world like that, there would be tremendous disincentive of fact. the will in this world would be if you are among the 23%, you do not have to work. the effect of that which our calculations did not affect for is that everybody is going to play dumb. [laughter] if you re-do that calculation, making the sort of worst case possible assumptions about how those effects will play out, you get a different answer --

.3% of the population should be unemployed and on welfare. a much smaller program that anybody has ever contemplated. so if you ignore the disincentive affects completely, 23%. if you assume they are as bad as they can possibly be, .3%. we're in there like the truth, i do not know the answer to that? -- wherein that lies the truth, i do not know the answer to that. if anybody is arguing for redistribution based on an insurance metaphor, they better be doing the kind of calculation and be able to show you their numbers and how they got their numbers. and what assumptions they made. this is the kind of thing that goes into translating a metaphor like that into an actual policy proposals.

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 as it is used is that the social insurance program that we have in this program -- in this country does not actually ensure you against any of the really bad things that could happen to you. things like being born a in cuba or albania or mali as opposed to canada, 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 are supposed to be insuring people against the really bad things that can happen to you when you are born. being born into that, that is 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, your conclusion would have to be that every single penny we make in welfare payments should be going not to east los angeles but to ease the more -- east timor. another disconcerting thing about this insurance metaphor -- by conservative extrapolation, our ancestors was making $1 million per day. -- will be making $1 million per day. it is striking that we have these conservationists arguing that people like what you and i

living the lives we lead off 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 ballot to the poor, namely us, -- from the namely poor to the newly rich. often these are the same people who are always arguing that we need to redistribute more from the rich to the poor. i have not pointed to a flaw in either arguments separately but it seems to me these arguments are so much in conflict that when you hit the same person making both of them, you have to wonder whether they have really thought things through. those are all philosophical

observations about the issue of income redistribution. i want to put the philosophy aside and talk about the main practical issue within income redistribution. here is the issue -- that it never works. it never works. nowhere in history, no where in the world at no time in history has any program of income redistribution as far as i am aware, lifted substantial 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 poverty through income redistribution. the only force we know of that has done that is economic growth.

so if you want to solve the problem of poverty, what you have to do is ask yourself where the growth is coming from and what do we do to nourish it? here's a start -- these numbers are at least 10 years old. if i craft them today, the overall picture will look the same. this is income per worker. that is capital parker, the value of the machinery -- that is capital per worker, the value of the machinery workers are working on. the physical plant that the workers have to work with. what you see there is a very clear picture. the numbers confirm it. the more capital workers have to work with, the more they earn. you look at that and you say

that solves the problem. all we need is for capital. it is 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 was building the assembly plant is not simultaneously building and ipod for you. the people who are constructing the capital and the resources that go into that have to be diverted from consumption. so we only get this stuff that people consume less, say people are consuming less is saying they are saving more. to get more capital, you have to get people to save more. unfortunately, just sitting more is not enough. here is why -- the more we save, the more capital we bills. the more capital the have, the more resources we have to put

into maintaining it. capital needs maintenance. the more capital we built, the more we put into maintaining it and the society that relies on saving investments for its growth is going to find -- the move of this letter a little bit but then you are putting so much effort into maintaining that extra capital that it is hard to move up any further. you need something else to push you up that ladder. it is crystal clear what that one something else is -- the engine of growth is innovation. i recently had a historian tell me 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 they should put a little effort into figuring out how to improve the way you did things was the least according to this historian, the key driving fact of the industrial revolution. innovation is the only thing we know that can drive growth. yes, you need savings but saving alone, theory and evidence tells you, cannot do the trick. what this innovation mean? people always think of these wonderful electronic devices. they look at the iphone they are carrying. there is an addition 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 invests a system like inventory management. an idea that has done more to alleviate the difficulties of poverty in this country than any idea i know of that has ever come from the united

states congressman. 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 ensure it. you need both kind of innovation. you have a computer on your desk or the because somebody said hey, i wonder if we can make computers -- computer chips out of silicon but also partly because somebody else said i wonder if we can fund start up companies with junk fund. take away either of those in the computer relution goes away. if you want to know which is more important, follow where the money went. go back to the early days of the computer revolution. in the early 1980's, microsoft's annual profits were about $600 million a year the was also the annual profit of

michael milken. they were about equally important. innovation drives growth. that raises the current -- question of what drives innovation. one is education. the other is economic freedom. let me tell you a couple of words about education. the great experts i always go to for information on this is at stanford. he has done all the research on the relationship between education and economic growth. he estimates if you could improve mexican schools to u.s. quality, you would add to% a year to their growth rate. that is phenomenal. think about what to pointed% has done for the united states. -- think about what 2.3% has done for the united states. i want to take a minute to say

something about how we figured that out. you can look at different countries and notice the ones with good education have higher growth rates. that does not prove anything. because we all know that correlation does not prove causation. you have to do something trickier. i am pulling up numbers that are for illustration only. these numbers are 20 years old and would have changed by now. but here is what these numbers mean -- a haitian -- i will say it wrong then i will say it right. for a haitian, an extra year of education as 2% to wages. for a mexican, an extra year of education at 2.03%. that is a measure of the quality of education in those

areas. how much it adds to your wages, how much it is giving you in terms of practical skills. that is still the wrong way to do it because the haitian working -- is working in haiti. the japanese is working in japan. some differences in those labor market. the right way to do this and what these numbers really mean, these are boom -- measures of people who have immigrated to the united states and work in the labor market. a jamaican working in the u.s. labor market with an extra year of jamaican education earns an extra 3.5% in wages. if you are working in the u.s. labor market and a dicks -- an extra year of japanese education, you have an extra 8.2% in wages. measuring the quality of education in that way in the correlating it with economic

growth is how he gets a lot of these numbers. how do we do better? how do we improve our education? to me the obvious first answer is that the government out of it. short of being able to do that, if you look at evidence on what has actually worked in various experiments and school districts around the country, something like reducing class size is remarkably ineffective. linking teacher pay to test scores is remarkably effective. the really big one is firing bad teachers. if we got rid of the bottom 10% of teachers -- that does not mean every year you do 10%. once only, you take out the bottom 10%, replace them with average teacher's. then within 10 years, you will have added three-quarters of a

percent to the united states growth rate. that is gigantic. coming back to my earlier slide on what drives innovation, isaac education and economic freedom. we talk a little about education. let's talk about economic freedom. what does that mean? it means small government, party rights, sound money, -- property right, sound money, freedom to fail. freedom to fail means being able to start a business that other people think are crazy and knowing that you are not going to be bailed out at the end if it does fail. if people are offered to billion out, they will tell you how to run your business. -- if people offer to bail you out, they will tell you how to run your business. if you do not have the freedom to fail, you do not have the freedom to succeed. it everybody fails gets paid

out -- gets bailed out, the people who succeed pay you out. you need the freedom to do something other people think is crazy and to fail if necessary. let me say a few words about that. low-margin tax rates. all -- we all understand that some taxes are necessary to run a policy. we also all understand that all taxes have disincentive effects and that is bad. we also understand that some taxes have worst affected than others. a tax on wages discourages work. that is bad. a tax on capital income also discourages work.

because part of the reason people work is to accumulate savings so they can invest. but that tax on capital income in addition to discouraging work also discourages savings. that is a double whammy. to some extent capital gains, state taxes, this discourages both work and savings which is doubly bad. that insight pervades the public finance literature of the last 25 years. one thing not by the general public is remarkably unaware of these days -- one thing i find

the general public is remarkably unaware of these days is that capital tax rates in the long run ought to be zero. capital taxes do so much more harm than wage taxes that you always improve the world even for the poorest will need to replace the capital tax or wage tax. if you have a choice between evils, the capital taxes are almost always the worst. there is a great deal of disagreement among economists about what the transition to a book like. how quickly should be go to that 0% capital tax rate. there is another big issue -- the reason you want to set the capital tax rate to zero is that people will invest more. they will not invest more unless they believe he will keep it at 0. there are a substantial number of economists who say you will

never get people to believe that he will keep it at zero city might as well not try. there are a substantial number who say no matter what you commit yourself to, people will know that 10 years down the line, you might change your mind and because of that, it will have that disincentive affect any way. those people have an argument. other economists are not commenced by that argument and say that we would get very far -- are not convinced by that argument and say that we would get very far. but where the consensus lies 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 will be richer and the poor would be richer. in another -- not just the long

term but the median term. those are the aspects of economic freedom that i claimed drive innovation and growth. how do i know that? for starters, here is a graph of economic freedom. the fraser institute in canada rates countries on economic freedom. what do they mean by economic freedom? this was not a random list. this was a list of criteria the institute uses. this is the measure of economic freedom. this is per-capita income in various countries. there is a general upward trend. as economic freedom goes up, so does per-capita income. that chart proves causation and correlation are two different things. that is still only the beginning of an end -- of an investigation. you have to look at the data

more carefully, controlling for variables to review and discovering economic freedom is really important. the ideal way to determine something like that is with a controlled experiment. that is always the gold standard in science. we have exactly to controlled experiments on this. one is called korea, what is called germany. split the country in half, one goes one way, the other goes the other way. in both cases, the results were definitive. the problem is that n=2. an experiment with two observations is never as convincing as one with more. an economist at mit and harvard had a very clever idea for how to find other controlled experiments.

he said let's look at the countries that were colonies of england. the english set up a very different political and economic regimes in different countries. let's see whether the ones that have more economic freedom prospered more. that is not really a controlled experiment because somebody could always argue maybe the british chose the prosperous places to give the freedom to. but his idea was that is not actually what happened. if you look historically, what they did was they looked around at where are the places that have a lot of bad diseases? like malaria and yellow fever. these diseases did not affect the natives because they were immune the but the affected the colonists. the british said, the places

that have malaria and yellow fever, we will not settle there. so we do not care how bad things are there. let's give them a tyrannical regime and the non-free regime. the places that are free of malaria and yellow fever, those are places we might want to settle some day. so let's make things there as free and democratic as the place where we might want to live. that is kind of a controlled experiment. it is kind of random which places are subject to malaria and which are subject to yellow fever. that is not the british going in and saying who is prosperous and who is not. if you look at that and ask about specific countries, i do not have country by country data at hand. i should have put it up here but if you look overall, you find considerable evidence that

freedom actually causes prosperity. freedom causes prosperity, economic freedom cause prosperity. what about other kinds of freedom? other kinds of freedom did not seem to matter very much. if you look at political freedom, these are all things i think most of us would agree are good, free and fair elections, the right to organize, no dominant military or religion, open transparent government, rights to minorities -- none of that correlates with prosperity. civil liberties, freedom of expression, religion, absence of terror, gender equality. none of that plot -- correlates with prosperity. freedom house makes -- is an organization. in this case, it is not like the other craft.

1 is the freest -- the freest countries. it does not continue as the go down. if you look deeper into that data, there is no serious correlation there. what matters for prosperity is economic freedom, not the religious freedom, not the political freedom, not the civil liberties. so i will summarize again. i will point out of his intellect. education -- people who are educated save more, and a bit more. the data shows that if you improve education at the higher levels, you get more innovation. if you improve education at the

lower levels, innovations tend to get adopted more quickly. education at the higher and lower levels both improve innovation. freedom leads to more innovation. people have the rights to their discoveries. it leads to more savings because people will say more when they believe their savings will not be confiscated. i will stop there. i went longer than i planned to. and i will take questions. [applause] >> the back to the first part of your presentation. from your perspective, you have a very optimistic long-term view

for the world. i am wondering -- i know this is a big subjects. if you take the european debt crisis situation. put that into perspective. are you still optimistic about europe, japan? >> just about all of them have positive growth. if you look at the balance sheet and draw a conclusion to this format about the end -- the economic health of the country -- it affects each one of us on average something like $50,000 worth. that is in federal debt obligations.

and that is certainly affecting our individual well-being. it is also true we are all richer than we were 15 years ago. could things take a much worse turn? we have an example from the west and most of the western world. then we have seen the world come crashing down. we have even spiralled into negative growth. yes, there is no limit to the damage governments can do. but also, there is the amount of good that free people can do.

we are not broke. but the government has spent a lot of money. we are poor for that. we are about as poor for that if we had paid for it all along. they could have taken a promise in the past. they are going to take it promised in the future. yes, they have done a lot of damage. i wish they would do less damage. but i do not see dundee's government's crashing down. >> i wonder about the claim of education causing growth or maybe it is the other way

around. did you look at how gdp rose and how college education rose? both are exponential curves. it seems like gdp rose first and people did not start going to college until the early 1900's when gdp growth took off in the late 1800's. >> and yes, another -- 200 years ago, you saw people with increases in the not of education. individual choice is to become educated definitely started. more recently, much of the

evidence on education and growth is international evidence. i do not have the data. i wish i did. there's a lot better in from -- international evidence. the point i would point to the next time you're in front of a group, there is a lot of statistical work on this. yes? >> well, do you agree with your conclusion that economic freedom is conducive to growth, but i would question whether -- you point out the various english colonies. this is really random. if someone were in a country with malaria or yellow fever. that could be indicative of

other problems that would hamper growth. >> the reasons are the negatives are largely immune to that malaria and yellow fever. -- the natives are largely immune to that malaria and yellow fever. >> given that if congress takes no action the increase in our tax on capital gains is going to be 6% january 1, 2013, and the increase on the tax on dividends is going to triple -- to you have any forecast for us on what the impact will be on america if

there are no changes to congress? >> i think it will be disastrous. if you are asking for numerical predictions, i am absolutely not going to do that. as i said, all capital income should be taxed. originally, in 1980's there was a switch for current. that showed only it would improve posterity -- prosperity for the average american. that prosperity would pervade every income class. it does not work if people do not believe, and that is

exactly what we need. people are not responding to the current rates. look, if you polled the economists, there is a lot of stuff we disagree on, but we pretty much all agreed, for example, that free trade is almost always a good thing. we all agree that if you can commit yourself to a low capital gains, you ought to do it that. >> i was not trying to ask you for an exact percentage. pardon me for giving you that impression. the thing we will still have growth in 2013.

>> the answer depends so much not on what the tax rate was, but i cannot begin to touch that question. i have no idea. >> you implied the answer to this. any time you have redistribution, whether it is from americans or two americans, the effect on killing the goose that lays the golden egg and for any capital that might have been exported to other countries, what do you have to say about the fact that even if welfare were to help the poor, how much would it help them if we just let people keep their money? >> if you make the worst possible case scenario

assumptions, you still end up with a great deal. if you take your issues seriously and to make the absolute most worst-case scenario, you should still have, according to that metaphor, a small welfare cap, much smaller than we currently have. if you make more monolithic assumptions about the fairfax, you would probably end up arguing for 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 anyone who is arguing has the obligation to tell you what their calculations were and how

they arrived at that number. >> i just have one question for clarification. if there is no correlation between civil liberties and economic growth -- are you saying there is no correlation with freedom on the one hand and on the other economic freedom? >> good question. let me try and remember. i think what you will find -- there are very high levels of political freedom and civil

liberties. we have the moderately free and the not free at all. the interaction between those political terms and economic terms is exactly the question to be asking. i wish i could remember the answer for sure. i will look good up and i will tell you tomorrow. >> i wanted to ask you to clarify a little bit about the freedom and prosperity. visit also reduce poverty -- does it also reduce poverty. -- does it also reduced poverty?

let me say it this way -- is this some fact that i can rely on to tell 90% of my friends that their poverty is being reduced by freedom? >> you are right. empirically those things go hand in hand. if you look at the united states, again, that improvement in the quality of life for the port has moved right along with growth -- for the poor has move right along with growth in the united states, along with china. 1 billion people have been lifted out of poverty. i don't know offhand of any substantial example we're a society has had sustainability

that has not brought the lower end along with the. you can see that those things go hand in hand. >> and wondered if you had any comments about the low hanging fruit metaphors and the possibilities for growth in the future? >> i knew you would comment on that. [laughter] >> if i can figure out how to use the -- >> here is my comment. [laughter] >> you have some very positive statistics, but one could

possibly argue that is not just the effect of economic growth. it is a testament to the success of the redistribution of the welfare state. have you thought about a way to filter out more with an example of how the rising tide lifts all boats? i think the best way i can think of to address that -- >> i think the best way i can think of to address that of hand, the correlation we see everywhere between capital growth and work on the other. industrial activities -- approximately two-thirds of revenue is paid out to workers.

that is a good empirical rule of thumb. workers get about two-thirds of the output. that is as much of the output as workers are going to get. what really affects quality for the poor, i think, is wages, and wages are tied to the amount of capital. you see that not just over time. >> the only comment that i heard about population we saw on the graphs, and of course they were done on a per-capita basis. i wonder if there are any comments you can do on population with regard to the population with your own studies. >> i do not want to give away my

punchline. [laughter] >> thank you very much. >> i wonder if you think micro lending -- [unintelligible] >> i love the idea on this. it makes me feel good. other than that, can it work? i have no idea. i hope it does. >> i wanted to ask about two things. it seems to have a different effect. that is the impact of corruption and the property rights of the rule of law. >> that effect is seen most dramatically in africa. again, the country started on that growth path. they have all kind of rewritten

that have. you see in africa, they are able to take this away completely. turn it around. it is huge. is a huge break on economic growth. there's all kinds of arguments about what this is, but they think there is a good case to be made that the absence of legal force and a greater respect for property rights was a prerequisite for the industrial revolution. i am not prepared to really get into that. i had a colleague in england. so -- >> you answered my question. i wondered if you have thoughts

on why the industrial revolution happened when it did and only in the west? >> everyone has thought about why the industrial revolution happened when it did, and no one has an answer. it is a good idea to think about how to do things better. but then you think about why was this the case at that particular time? these things happen randomly. there certainly were big political changes in 1988. speaking as a non-historian, we created a much bigger climate, a much safer climate. so, i am not telling you we should not care about our politics.

we should be particularly concerned. >> [unintelligible] >> uh-huh. >> next, a look at the role of 18 to 29 year-old in the 2012 election. and after that, another chance to see the form on the impact for economic growth and freedom. >> on ms. makers, the texas senator john cornyn outlines the key republican campaign strategy to win a senate majority in this year's election. add to an onion and 6:00 p.m. eastern on c-span. >> in the weeks ahead, the political parties are holding their platform hearings be in

the democrat's vote next weekend on final platform recommendations in detroit. following that, the republicans address their platform process. we have coverage followed by live gavel-to-gavel coverage of the republican national convention in tampa and the democratic national convention live from charlotte, n.c.. >> now a discussion on the will of 18 to 29-year-old voters in the 2012 election. this is just under 30 minutes. >> what is generation opportunity.

>> we are an organization. >> and you are charged with getting these kids out to vote. getting them charged up. how is that different? >> our aim is long-term education. people and know about their respective political party. their demographic, things like that. we will focus on our three principles. the defense of individual freedom. smaller government. where we get a lot of focus on that -- they have kind of not mine -- made up their minds yet. >> what is a millennial voter and where they stand in 2012?

guest: they are generally the 18 to 29 year-old. they are folks who have been there for awhile. they are college-educated, and non-college-educated. in large part, these were the folks who were very active in 2008 for obama. host: we were talking about the unemployment numbers. in terms of a millennial who is unemployed, we have members from the department of labor. the unemployment rate was 8.3% nationally. formalin meals, it is 12.7%. -- for millennials, it is 12.7%. >> it is a substantial impact.

you have one place seven young americans -- 1.7 young americans. you have a national unemployment rate of 16 -- of the population of adults that is 16.7 million. if you take that and they may not know someone directly. they may be experiencing it themselves. will have a national issue that is focused on this at the individual level, that will be a common issue in the election. host: we are talking about the millennial vote with paul conway. if he would like to get involved in the conversation --

we have a special line for millenials. can sign it regarding the discussion on the unemployment situation, in what you are dealing with, the research and everything, these folks came out in large numbers for president obama who was the candidate in 2008. of the disappointed by the fact that so many of their rank and file are unemployed in 2012? >> there is a tremendous amount of -- guest: there is a tremendous amount of frustration. they reached out very actively.

many of them are quite frustrated. they do not believe that president obama has done a good job on youth unemployment. they may have delayed a major life decision because of the economy such as purchasing a home, having kids. they switch cities, get new skills, new opportunities. they are not doing that. >> and to bring up the major life changes have been delayed. we have another guest on this show. you mentioned buying a home. folks reports they have delayed buying a home -- 44% sun. saving for retirement, 28%. palin office to the mon, 27%.

change in jobs and cities, starting a family -- 23%. getting married, 18%. is having a significant effect on these folks from 18 to 29. guest: absolutely. to really understand the impact this impacts a huge number of industries. the phases of life that young people often go through are really being impacted. it is in terms of individuals. we are encouraging people to talk about their situations. host: you have served four u.s. presidents. the first call comes from

houston, tx. you are on "washington journal." caller: thank you for having me. host: what is your question and your comment? caller: i was speaking of the members, the unemployment numbers. is this something that you -- host: we lost mark. is this something that is going to be a long-term concern? guest: i think it will be. in order to get out of this slump, we need job creation levels at 12.7. this will be a generational issue. no doubt about it. in terms of the job skills, the ability to accumulate wealth. host: next call on our line for

democrats, calling from albuquerque. caller: good morning. thank you to c-span. i wanted your opinion -- during 2009, we voted president obama in to the white house. it seems young people, all of us, we kind of gave up. we would have been out of this recession now if we had not shut down. president is trying to do it all by himself. we need to blame ourselves for this. host: before you hang up, you said we young people. how old are you? caller: i am 24. guest: regardless of what your political party is, we strongly believe people must stay

involved in the process. if you feel strongly about president obama, you have a duty to stay involved. however, if you are disaffected , and you also have an obligation to articulate this. he self-identified that. you have to stay involved in the process. what we are seeing is this. we see a lot of folks who originally said, i will support you and react to president obama. there are changes occurring. host: caller from phoenix, ariz. on the independent line. caller: good morning. i heard that unemployment rates for college graduates were somewhere around 50% and that was affecting their decisions on

what they're doing and a high percentage of recent graduates had to go back home and for not able to branch out on their own. have you done research on that? guest: as a matter of fact, we have a study from rutgers university. what it indicated was college graduates in america, the under- employment rate, about 50% of them are in that situation. if you have taken on debt, taken on student loans to go to college and only 50% actually get into the workforce and the rest are unemployed or under- employed, what does that say? we do not think that is a good thing actually. we do not think it is good for the country long term. they are going home without jobs.

they have to pay their loans. we firmly believe things need to change. >> -- host: we have a tweaked from dan -- young people have seen the failure of the welfare slash welfare state and have embraced libertarianism. guest: you can see some candidates have surged strongly. ron paul has a strong following. " we are talking about here is a great administration and the role of the federal government's. there is frustration with political parties. but still, the political parties have contributed to some extent -- people are absolutely correct about that. will need to hold political parties accountable. i should also say this. in addition to ron paul, you had

strong candidates like rick santorum. i think women have candidates that are very strong, -- when you have candidates that are very strong, they can articulate that. host: you were previously chief of staff under secretary lane ch -- elaine chow. did the republican labor department prepare kids for 20th-century jobs? guest: we have an office on the twentieth century workforce. one of the things is not -- that is not talked about about secretary chow is that she is concerned and dedicated about -- to the work force. she made it a priority as a cabinet officer. we focus on what the emerging

elements of the economy would be. host: our next call comes from tennessee. bill is on the line for democrats. caller: i was on the university of tennessee campus ward. what we found is that early vote is good to have turned out. if you put an early vote ward on campus for the neighborhood, not only do the students vote on campus and in the neighborhood, but they are in pockets all around the city. that enables students to vote early while they are on campus. it is good for student voting

and a good thing to do and something i would encourage all campus wards to do, set up an early voted location. guest: that is something that, when i was young in my career, i was the state chairman for college republicans. we were able to turn out so much vote for the state of maine that we were able to defeat an incumbent senator. the caller is pointing out an important issue, which is early vote. that is true if you are in local level -- local communities and at the campus level. the more you can reach out to folks and encourage them to vote and remind them of their responsibility to vote, it is a good thing.

host: regarding targeted out to reach of young americans and this is to colleges and high schools. this is based on the obama administration's official travel numbers. the states that are in blue is where the president has visited three or more times between 2011 and july 2012. the states with the red dots are states that have been a single visit. this is not lost on the ministration, that they need to target young people if they want to -- lost on the administration, that they need to target young people if they want to be reelected. guest: we have social media platforms and an aggressive grass-roots team. they are talking to folks and they were noticing the number of people talking about official visits at the taxpayer

expense of president obama and his cabinet and subcabinet officials. it is clear that when you look at young adult unemployment levels, this has impacted their enthusiasm for the president. the white house knows it. based on an analysis of their travel, they have done over 400 targeted visits to college campuses across the country in swing states were young adults hang out in where they have a population center. host: we are talking to paul conway, president of the generation opportunity. you can go to their website. we will leave that up for a couple of seconds while we take this next call from green hill, north carolina. james is a millennial. caller: how are you doing today? i want to tell you that there is a huge disconnect on what -- in what you see on tv and what people say about unemployment.

i work in the home health industry and i am on a grass roots level every day to see how regular americans -- my company bills medicaid and medicare. i have two youngsters. one is a graduate with an engineering degree. i see my young people telling me all the time. most of them do not know what is going on in politics. they have no clue. the most frustrating thing for me is that people, politicians will say unemployment and this and that. it has gotten to the point where he and they tell me, we do not know what is going on. they do not know anything about politics because they do not watch it or understand it. then you see people who are frustrated. every day i see this, every single day.

people are getting afdc say, it is easier for me to get food stamps and to find a job. they cannot get jobs because they are under qualified or over qualified for they give up looking. that is the real meat and potatoes going on in this country. we have gotten to the point where everybody has given up. host: paul conway, before you answer that, i want to throw this up. it is a tweet. it says, why is paul conway leading an effort to bring in 18-year old voters? guest: the caller brought up the issue of disconnectedness among young people. we designed the organization to

reach out on social media because that is where young people are getting their information. we have had 750 million views on our pages. we source everything we put up on facebook because we have actually become an information hub for millions of americans across the country. the caller is absolutely right. people are disconnected from the events going on in the news and you will get a great deal of frustration. people are frustrated with the lack of opportunity and they earned dropping out of the process. we are trying to change that -- and they are dropping out of the process. we are trying to change that. to the second caller, it is a great question. i had been opportunity to pull together a group of folks who are all land deals.

i worked closely with them -- who are all millenials. we have a blend of talent. folks who are my age and the majority of my staff are millenials. we have over 900 campaigns under our belts, political campaigns. when it comes to leading an organization, sometimes talent and experience is helpful. they thought so. i have had the pleasure and the opportunity to serve them. the community. they are masters of the universe in terms of technology. i am fairly good at identifying and building teams. we wanted to make sure we had a team that was world class. we have a vice president that is an expert in running

organizations and tying policy and tactics. our vice-president of communication is another talent. he is a young man who started a business in his house on social media and did quite well. we are lucky to have him. what our national field organizers -- these folks are overwhelmingly in the demographic and they do a great job at what they do. host: would you say that for campaigns around the country, regardless of what the level is, that they can use generation opportunity as a resource for how to better communicate with that millenial voting blocked? guest: we do not -- coordinate with campaigns at all. we have a number of tools

available about how to be effective on talk radio and television. we also see a lot of folks that are mimicking what we do on facebook, copying things. it is the sincerest form of flattery in some ways. we have also seen an uptick of organizations trying to address millenials. this demographic is wide open. if anyone feels they have a lock on this demographic, they do not. this is a discerning generation. you need to go out and tell them what the solutions are. they will hold you accountable and they are looking for results. they are living with the problem every day. they want results. host: let's go back to the phones and our conversation with paul conway, the president of opportunity -- operation opportunity. caller: i wanted to expand a

little bit on a couple of calls ago saying they supported obama and after that everybody went home. the point is, we have to realize the that that one person, even the president, does not to say this is what i want to happen. there are 535 other people who are important. what we have seen happen with this gridlock situation that we have is we have a party that is actually decided that since they did not win the white house, the way of eventually winning the white house is to make sure the person in there was not successful at anything they attempted to do. i am saying, that is our biggest problem right now. we have to realize that falling victim to that kind of trick is

not going to work. even if the other side wins this time, it will be a close election. now the democrats get to do everything they can do to stop whenever ms. romney tries to do to actually fix our situation -- mitt romney tries to do to actually six our situation. so that the next election, the economy will still be bad and everybody will blame that one person. host: we will leave it there. guest: the caller is from new orleans. new orleans is a place that is near and dear to my heart. i participate in rebuilding after hurricane katrina. -- participate in rebuilding after hurricane katrina. some folks would like to say there is block and tackle going on. i think it is more complex.

when you have a congress that is elected by the people and some of those representative take a look at things based on principle. some of the disagreements with present -- with president obama are bipartisan concerns. it is interesting that the caller is calling from new orleans. take a look at the city of new orleans and around the gulf coast. there was a moratorium on oil and gas exploration in the gulf of mexico. the mouth of flowback on that was led by mary landrieu, -- blowback was led by mary landrieu. we are talking about jobs on the gulf coast. these are good, hard-working folks who are trying to get their boat mortgages paid off, get to rebuild. when you have a shutdown of a major element of america's hinchey independence and the

acceptance of that was based on principle -- america's energy independence had and the exceptions -- acceptance of that was based on principle. when we take a look at that issue alone, we see that a lot of the frustration and the push back on administration issues is bipartisan. same thing with coal. i representative -- a governor, joe manchin, has taken at a stand and said that we put out a coal mine, you are putting a community out of work. sometimes when you take a look at what is: on on the hill, it is a matter of principle, not just politics. host: we have an e-mail that --

>> tomorrow, a discussion of the foriegn policy is of mitt romney and president obama. and then a discussion on the doctor shortage and the impact of the affordable care act will have on that. and then for american technical education situation, a discussion on the programs offered by trade schools. that is live at 5:00 p.m. eastern on c-span. next, a discussion on civility in politics. after that, the impact of economic growth on the foundation of freedom. then another look at the role of 18 to 29-year-old son in the 2012 election. >> sunday, live on both tv. she will take your phone calls,

e-mail, and tweets. >> what i tried to do is take a look of this and go back and see how did we get to where we are today? are there any trends or themes? with the old timothy dolan of trying to write an objective account of what transpired. . .

>> this is an hour and 10 minutes. >> i am the president of cal humanities and we support increate humanities programs across california like this one tonight. this event is part of a larger initiative would call searching for democracy. we have about 600 events taking place across california and a lot of them are coming up and said francisco. if you want to find out more, go to our facebook page or sign up on our website. i wanted to thinks -- thank our

board member who is here in the audience with us. thanks for being here. all will pass it over to gregory. >> thank you to the cal inanities for supporting and basically paying for this event. we are happy that c-span is here tonight. zocalo public square is a small nonprofit. our mission is to connect people to ideas and each other. we do this by partnering with organizations like cal humanities. after tonight's event, we invite you to speak further with tonight's guests and with each other. "is diversity bad for democracy?" that discussion will be in san diego.

"what does vigilance mean now?" we will close out the series in bakersfield on october 18 by asking, "how much does it cost to become president?" [laughter] thanks. for quicker updates, follow us on facebook or twitter. please shut off all of your phones or anything that might cause noise. i am pleased to introduce tonight's moderator, joe mathews. he is a co-author of a novel, and author of "the people's machine: arnold schwarzenegger and the rise of blockbuster

democracy." he is a contributing writer for "the los angeles times" and a lead blogger. please give a warm welcome to joe mathews. [applause] >> thank you. i am surprised to be here. i am a resident of los angeles. but my whole career in the media -- you can understand that when i found out we were doing a forum on civility, i asked, what is that? i have been reading about it. it is an interesting concept. you might think about trying it. [laughter] is incivility overrated? we have a variety of people here. we have an artist, an anthropologist. they have traveled here from

three great american cities. one is from san diego. one is from an exotic country. civility has been an american conception from the earliest times. the rules of civility and rules of behavior in a conversation. put not off your clothes in the presence of others, nor go out of the chamber half dressed. give way for a man to pass in the doorway. the first rule of civility is one we agreed upon definition -- every action done in company showing some sign of respect to

those that are present. the research on civility, there are a bunch of unknowns and disagreements. defining this is not enough. there is a big question -- how important is civility in american democracy? we have never been a particularly civil people. we have been a great success as a country. we need civility. is it helpful to us? we have four panelists. i will introduce them. i will start to my right with cassandra dahnke, co-founder of the institute for civility in government, based in houston, texas.

ten rules that work, which is a great improvement over 110 rules. she has spoken all over the country. she is very good at bringing people together for several dialogues, especially political parties. i was struck by your book. it has a great narrative about people in washington. there are politicians who are playing a political game. they are quite civil to each other. they know how to do it, even if they cannot seem to get things done. what is the problem? if they know how to do it, why can they not all do it? is it overrated?

>> what we have found is that there is a hunger on the hill for civility, not just among the selected leaders, but also among that staff. they are starving for civility. it seems to work against them in many ways. they find themselves caught between a rock and a hard place. i will leave it at that. >> tell me about the goal. you said you are trying to develop a national movement for civility. how do you do that? where is the end zone? how do you know you have won and you can do the touchdown dance? >> how do we do that? let me back up a little bit.

as you mentioned, we used to do back in the 1990's in working with diverse political groups in washington, d.c. to learn a little bit about the citizens of rule. we had folks all the way from the left and right to in between. they chose five issues they care about. they all got along great. they enjoy sightseeing and enjoyed meals. until they found out that they fundamentally disagreed on specific bills and issues. and these are specific pieces of legislation. then they did not get ugly, but the conversation stopped. it just stopped. even when you wanted to talk with one another, they did not know how to do it. we became aware that we lack a basic skills that for how to stay present with one another in a respectful way when we fundamentally disagree.

that is why we felt that be needed to start a movement. the only way we will see a change in washington is if we communicate how important that change is. in order to do that, you have to have numbers. >> what would you get if you have more civility? >> we would see more creative problem-solving. people would hear ideas that right now they are not listening to. you have a more collegial this sort of air on the hill that would lend itself to cooperation. we are not that is a did for consensus in the government. it is not that we want everyone to agree all the time. that is a given. but instead of saying it has to be this way or that way, if you get into a conversation, you might find there is a third or fourth view.

>> there is this ideal of speaking out, the truth of power. isiah, chapter 58 -- god's instructions are to cry out with no restraint. that sounds very american. >> what this has to be a piece of who we are. if we cannot talk with one another in a civil way, then we cannot accomplish anything else. that is a pretty good indication of that. i feel like i am speaking the truth of power. i am not working against the

culture. i am leading the way for what is to come. >> thank you. i want to bring in the henry brady, the dean of american political science association. he has got a new book out. let me put the quote up on the wall. you said in an e-mail -- civility is a product of the polarization. in your book, for the rank and

file of both parties, polarization has increased substantially among those on the highest income percentile than those lower on the income ladder, especially those at the bottom. is this a rich people problem? >> it is everyone's problem. but people have a lot of influence in american politics, especially if money is important in politics. it becomes everyone's problem. the root of the problem is that we need to talk to one another. compromise is not a dirty word. one of the real problematic things is that people say compromise is a bad thing. it is not a bad thing. it is what politics is about. we ultimately have to realize that we live in a civil society back together. that means compromise has to be

essential for us to get things done. we seem to have lost sight about that. >> is civility and polarization linked? >> no question about it. the impacts of the civil rights movement and changes in southern politics led basically to the rise of social issues. the trouble with social issues is that abortion is a really tough issue. it is hard to have a middle decision. roe versus wade has a middle decision, but it makes people crazy. it is neither pro-choice or

pro-life. it is somewhere in the middle. this is hard for people. it is easier to go to a corner of pro-choice or pro-life. those issues have become very important. >> it is all moralized. >> is it -- i am not from san francisco. i look at san francisco politics from afar and wonder, what the heck? san francisco politics look like a very narrow ideological spectrum. is it more than just two parties getting further away from each other? >> let's talk about what is really going on.

in america, american public is not more divided than it was 30 or 40 years ago. what we have happened is the sorting of parties. moderate republicans used to be conservative democrats. but there are not as around any more in the two parties. the parties are becoming quite rambunctious and fighting a lot. you are going to their respective corners. that is what we are seeing in american politics. that is the nature of politics. there is always a little bit polarization. but gosh, you might learn from someone who has a different perspective from you. i can talk to people of all sorts of opinions. i am amazed at what i can learn from people have different political views from i do.

let me follow up. there is a lot of research that says polarization has a positive aspect been that many people worry about, which is engagement. is it not a good thing? is their way to take the measure? does the biggest we get from engagement from colorization outweigh the polarization? >> it certainly animates people. anger animates people. but it turns people off and turns some away from the polls. i think attenuates it on balance. >> thank you.

i want to bring in meenakshi chakraverti, who is a founding director. he works on the public conversation project in san diego. she started a very important conversation on child welfare and used. she has initiated conversations in san diego. she has taught at universities all over the country. before entering this field, she was in economic development. she has a doctorate in social anthropology. she has done a lot of different things in a lot of different contexts. let me ask you this question as

someone who engages in all kinds of issues -- can civility be a way of avoiding a difficult subject? does it always get us to a deeper conversation? >> i think, joe, you hit on the reason why there is a vote yes or no. is civility overrated? i found myself saying no. civility has risks and adverse effects. civility, when we use that one word, it is often read and heard in a very simplistic way. when you use civility as avoidance, many people worry that it does mean avoidance. it means just politeness. for example, you mentioned that quotation from isaiah, "raise

your voice." i did nothing that was a call for incivility. i do not think raising your voice and expression your passion is necessarily uncivil. by civility and using a narrow understanding of it can often suggest that what you are talking about is merely politeness and avoidance. the most significant dialogues like henry was saying is when people really listen. one of the things of the public conversations project did was get the leaders together. there were very simple conversations. >> this is in the boston area in the mid-1990's.

he shot people on a plan -- planned parenthood, right? >> that is right. most of the pro-choice movements from this were afraid, but they came together and had a very significant dialogue. they did not compromise. they were talking about things that were very hard. it is not an easy topic. it is not easy to talk about. passionately raising your voice is not necessarily incivility. civility is not necessarily avoidance.

>> are there some topics -- you mentioned abortion -- are there some things that are so outrageous that a civil response is not the right response? can you be civil when there is an unconstitutional thing that happens? >> that is completely unwarranted in some cases. there is a boundary for civility. >> when does it become a dangerous?

>> one is the obscure, where the issues are. to give a simple example, when you call someone in contemporary politics "fascist," it obscures. your listener does not necessarily know what criteria you are using. it may be not the same criteria they use. or they could dismiss you. obscure is what the real kind of critique is when you get uncivil. the other thing that is dangerous that triggers often

creates a cycle. when i get angry, it will trigger you enter responded with stress hormones. you respond in a way that then triggers the same response back at me. this goes back and forth. this is a mirror. it really is something that your biological self creates responses that do not make for the complex thinking or the most wise decision making. the kinds of conversations that would be learning conversations.

>> interesting. thank you very much. i want to bring in jennifer linde, who is a senior lecturer at the far right. she works at the arizona state university in communications. she participated in the design development of civil dialogue at that university. it is a very formal format. it is performance studies classes. both public and in the classroom. i wonder if you can explain this to mean? civility is a performance. we are asking people to perform

a little bit. what is the nature of that? is this about blocking and smiling when someone yells at you? >> it does not hurt, i guess. i would be cautious to call it a performance. it gets to the idea that civility can be about manners. it is intended to produce knowledge, and to produce something. the point of the dialogue of civility is not necessarily to compromise, but what do we come away with from this? we have designed a format. two people who have strong disagreements about a topic and there is an interesting central chair that may be dead and at some of the ideas we're talking about. the central chair is about, am

i undecided or neutral about this statement? we hold dialogues about a very controversial topics. we do not shy away from water boarding. we talk about torture. we talk about immigration. we bring up their controversial topics. the volunteers that sit in the circle speak from their own experiences and feelings and their own emotions. because the format we are asking for civility and because people have different positions, that central chair becomes interesting. >> i see as he puzzled looks from the audience. if the five of us were the actors in this, and you two agreed and i disagreed and another was neutral, we are following civility in a

structured conversation. >> we encourage passion. if you want to sit in a chair that strongly disagrees with a provocative statement, you will be called upon to talk about that. the dialogue has a format in which we invite the audience to become part of the conversation. no one is left out. everyone is performing. at some point, it may be that a lot of the dialogue has really generated support for this side, but then the audience comes in and it balances out.

what is interesting about the middle chair is that people at the end, they come back to being able to state where the position is. they say that i think i am over here. i understand. i have an opinion. it is productive and people find out things about what they think as they are participating in the dialogue. >> is the audience in a semicircle? >> in circles around. it is important that we are all looking at each other. >> why? >> it is about performance. it is coming to understand speech. it is a communication department. our bodies within proximity of each other make as more responsible for what we say. i will look into your eyes.

we encourage people not to engage in fake listening, but to really look at you and listen. for the eight years and have done this dialogue, people have come away saying, i have not changed what i think, but i understand what you think. that is huge. >> i apologize for not rearranging the chairs. [laughter] i found a study from a researcher from the university of pennsylvania. they staged four different exchanges, political exchanges. in one version of each exchange, they were civil and the other was not civil. they showed it from different camera angles. from one angle, it was a turn

off. the other, it was not. >> remember, we're having a physical experience. we feel that small spaces and small groups are more productive. we will sit in a closed area. you can feel your emotions. we had a dialogue about immigration were a young woman who was undocumented broke down. her body was part of the dialogue serious she began to be very emotional. it had an interesting aspect

been on the audience and members of the dialogue. they have felt it. proximity is huge. >> actors would notice. i come from a city of thousands of active members. we put them to work. teaching them civility. [laughter] thank you. i want to mix it up amongst the group. in some of the more recent conversations on civility, the shooting of the gabby giffords conference held in tucson. i read a rhetoric study that said conservatives used outrage language more than liberals. >> it grew into something that

people were discouraging. it was quite a conversation on the hill and in other places. it is more this party that more that party who is guilty? i mean, the last two years, it has been interesting to watch. from my experience, there is plenty of guilt all over the place. i hear people on the left. i hear people on the right. i hear people in between. that is where i leave it.

there are surveys where that just came out last year. they showed where republicans think democrats are responsible for the lack of civility. democrats think republicans are responsible. everyone believes it is someone else's fault. i think we are all part of the problem. or the solution. >> on the same question of partisanship and polarization, what do we know about what reverses' polarization to reach civility? we just tried an experiment in california. we will have a new election system that would empower people in the middle, moderates, independents.

no one showed up. lowest turn out. only 6% of independents showed up to use their new power. >> the problems that helps. you have to think about structural changes in our government institutions. not a big ones. it is a shame that you can force a filibuster and go home. you do not do what you see in the movies of filibustering and staying up all night. you can go home and say i will not vote for anything. we will continue to filibuster. and do you want to stop discussion and compromise? there is the costs imposed. we can watch it on c-span. we can watch and see what people are doing in trying to make their cases of why filibuster is a good idea. that is why been we have less filibustering.

we used to have 10 or 15, now we have 100 filibusters per session. >> 34 are challenges. we do not do those as much anymore. there is no question that there is less violence in the world. >> i think violence is a different thing. we are talking about its political civility. there are areas where polarization issues are hurting. each side has something to worry about. republicans do not want to lose that tax breaks, which are

helpful to them. democrats don't not want to lose spending from the government, which is helpful to them. there is tremendous polarization on these issues. those kinds of things cause a failure to be civil to one another and have compromises. >> here is a question. civility -- george washington wrote 110 rules. it can be a tool, a weapon to say that these people with their new way of talking -- i remember from my youth, rappers talk about inner-city violence before the rest of the world did. how do you negotiate civility that leaves room for any other

person? >> i think that is a huge question. there are critics of dialogues as a process that pacifies, so to speak. the idea of civility could be one that silences, especially if you consider civility in a cultural format. we will silence a lot of people. if we do not want to have that silencing understanding of what civility needs to expand. it needs to be looked at more closely in a cultural format.

in cross-cultural formats. and not simply cross-cultural where it is, say, european american and a tribal community sitting together. but also a cultural format where we think of as homogenous, as a middle class, educated americans -- there is a lot of language difference there. because on the surface we look similar, there again calls for a simple civility. it is tricky. it is a very important question. >> what is the answer? if you are going to be uncivil

you should have an important point to make it? >> no. areet's not call people who protesters uncivil. protest can be very simple. you have signs. you complain. you might make noise. but it is not incivility. it is a right to assemble. it is part of our constitution. >> i grew up in a country where we are you a lot. for many americans -- i am now american -- people who have grown up here say that americans are the most argumentative. yet not seen others argue. [laughter] but many of those arguments --

there is a real engagement. there has been a cultural assorting that does follow the political sortiing. i think you were referring to that, henry. the rule of thumb is that you look at whether that conversation is working for the purposes of the conversation. i think that would be my rule of thumb. what are the purposes of the conversation? >> as a recovering newspaper reporter, when i was a reporter, the idea of civility was that it was so gosh darn boring.

jennifer, incivility is often more interesting. it can be news. how do you make civility interesting? >> i think civility is interesting. i think what we do is that we do not give people space when we do not agree. we need people to be able to speak to one another. can we get people agreeing that it is hurtful, we are trying to talk? bodies in a space talking can be very powerful for people to experience. >> i want to get to questions in a sort of lightning round.

this is a free society. we have all kinds of sanctions and rules that controls speech, even in public forums. we have a long history of libel and deformation and fighting and threats. you cannot be publicly nude in most places. there is broadcast indecency rules against certain types of pornography. what rules do we not have? you have to behave in court as well. what rules and we need that are not covered by these existing structures? >> i do not know if it is a rule. as a kid, i have met a lot of different people. people are different. i wish we had in our interest in why that person has an opinion that is different from

mine. can i understand how they got to that? usually there is an interesting story. people are not stupid. they do not have an opinion for no reason. >> anyone else on this question? is there a regime or rule regulation that we do not have? >> we do not need more liberals. we need more skills. we need -- we do not need more rules. we need more skills. we have to really listen. it is not rules. it is the heart and opportunities. >> of does that mean a state- mandated curriculum? [laughter] >> there are more schools developing civility programs and looking at this as part of their mandate to help students in civic responsibilities and

not is none in the form of government, but knowing how to interact with each other in a civil way. >> i was going to agree. the answer is engaging. we need to engage more. there is a young man here from an organization. they have a festival were they brought together young people across the spectrum. they had people talking, occupy people talking. people held fairly different political positions. people are coming together to have those conversations. what does it mean to talk across differences. they do not necessarily agree on a compromise, but they are curious.

>> go meet some completely different than you are. it will be interesting. >> if you disagree with them, it is even better. we are starting is a dividend in civil communication as part of our department. my colleague uses civil dialogue in his argumentation class. there was a letter that stated that attending civil dialogue with us and during the course work, he was better able to handle the disagreements he had in eight women cost studies class, both with professors and others in the classroom. he said, i have come to understand how to listen to people who do not think the same way i do. >> last question before we go to the audience. since there is more room for people for civility, how do we

get to that balance? my boss has been showing off a book. he is reading serious philosophy in the opposite. there is a newer book out where there is this concept of humans are 90% chimp. it wants to do what it wants to do. the 10% is the bee that needs to serve a higher purpose. where is the balance?

a civil norm for outsiders? >> democracy is about the balance. the rules or building that recipe to get to the balance -- i think the word that you are doing and learning with public conversations gets the pieces. people will figure out the balance. that would be my answer. >> ok. thank you. >> we are moving on to the question portion of the evening. thank you for joining us on this monday.

if you would raise your hand, we will take your questions. you appear in c-span sometime in august. please state your name into the microphone. >> ellen. what i am not hearing much about is the presence of online discourse. i was hearing a lot about the face to face contact. i am curious to hear about your reaction. >> that idea of being anonymous is troubling. when you have that, you can say what you want without someone acknowledging who you are. it is troubling. i think more productive behavior in learning how to be civil.

>> the question over here. >> hi. i am from the league of women voters in california. i was very taken with your five ideas. i was having a conversation with the tea party person and and occupy person. a good conclusion from that kind of work is not so much that people change their minds, but that they begin to respect the other. >> and i think when that happens, they are willing to compromise. they know it is not the end of the world if the other side gets their way. there is this notion that we would get something incredibly extreme if the other side wins. that is not true, especially in

america. >> a question on your left. >> michael. i almost find politics kind of boring next to, i guess, i like england. they have the house of commons. people cheer and get up. historically, the lectern between the two parties, it was a two sword lengths so when i could not slice the other. anyway, you said something about south east asia. i wonder if there is an international sort of difference from one nation to the next, or are we all centered on america? >> i think there are definitely international differences. the little bit i have heard and seen is not terribly civil most of the time.

what makes a difference is that politicians behave badly, and sometimes they do. in families, you live together with people that you dramatically disagree with. they are part of your extended family, part of your community. you live with that. even the politicians are fighting, you continue to have engagements that i have found a little bit in the u.s. recently. i think that is going back to an old point. >> question time. the prime minister goes and they scream. there are insults.

there seems to be a conflict and resolution. issues get out. isn't that kind of what democracies are supposed to be about? civility is a silencer? >> in those situations, people lose focus on the problems. they are trying to come up with facts and information on those problems. maybe if the president went to congress on c-span, that would be useful for america to see that kind of dialogue. >> in our dialogue, we talk explicitly to audiences about passion. passion is very important, but that does not mean that you

demonize others. i conceal passion. some people do not limit how much they expressed passion. >> one of the things that we do that brings together key members of congress, one democrat and one republican on a university campus, to discuss problems, side by side. they were able to do that with fashion and civility. it is productive. it is interesting when it happens. >> question right over here in the front. >> thank you. my name is robert. i wonder if you might take a view historically. our nation has survived 235 years. we have had a civil war.

to go back to the election of 1800, the election between john adams and thomas jefferson was equally as better or even more bitter than the fights we are seeing today. we have survived all of this. maybe this pendulum will swing back. >> we have had periods of incivility and polarization. we're not in a time that is that paul rise. we have just come out of an era in the 1950's and 1960's were there was a lot of civility after world war ii. after a circumstance like that where you work together to solve problems. >> there is this ideal of we did not talk to each other so we cannot get things done.

looking back to the civil war in the u.s., the is a tuition where you worked is the product of the transcontinental railroad. we're literally fighting, but able to do big things. what is different? >> i think -- that is a good question. the institutions are a little bit complicated there was certainly one party that's controlled everything. it was not like they had a hard time getting legislation through. [laughter] it was only after the civil war that we it's a really hard times. that is one answer to your

question. again, it is partly the institutions that we have. i wonder if the america we lost is that we can do anything -- asking each other to pay a price when we try to do something big. one of the things that was a shame about george w. bush and the draft going away was a bad idea. wars,'re going to have everyone should have a chance to be in the military. >> question to the left. >> a question about the media specifically as it pertained to post-political careers. it can be galvanizing and polarizing. these people are making substantial careers by flash in the pan political appearances. does that move against this movement? >> who wants to tackle that?

>> i did not hear the last part of the question. >> and you think the financial gains that seem to happen for the politically polarizing undermines the pushed towards civility? >> technical, making money. >> i've is thinking this when you're talking a manner to the about that it may not be that civility, but incivility has a certain quality. some people are drawn to that. i have been taught politeness, but look at what they are doing. that is when we add doubt may be something that we privately admire.

>> it is true in some of the debates on cable channels. >> the most polarized people are moving further away as your book documented. the richest republicans -- is this another problem of affluence? >> i think there is a problem with money becoming important in american politics. when you are giving time to politics, your real engage and involved. you have to talk with people and go out and maybe try to recruit. but with money, people can use the money to vilify the opponent. i'd like to see time more

involved in politics. [applause] >> why are rich people nasty? why to the one and do such nasty measures? how do we reach them? >> i know it is only the wealthy who are being rude. i would say that it does capture our attention when there is a real performance of incivlity. that works against us as a nation. many people are turned off by it. we are losing some of our best and brightest. they do not want to be involved in that kind of thing. they do not want to subject their family to the kind of thing. every time i find someone who is

willing to run for office, my first game and is, thank you. you are willing to put yourself out there in this mess that we have. i am not willing to do that. i did not want to listen to that all the time. there are public officials i do not know. but i have said thank you. i had to embrace them in tears. no one ever says, thank you. what does that say about us? our ability to govern. we have to be willing to put ourselves out there. if i am going to be called a game every other day, i am not very interested. >> young people are turned off by that style of politics. it is a problem. >> it is. >> we have time for three more quick questions. >> my nam jeffe is ernie.

-- name is ernie. i wonder if any of you have been involved in any kind of initiatives to address what joe was talking about. media organizations need to make civility issues more interesting. the sound bite nature of the need is a challenge. because of the challenge, it would help for their to be some effort to think about how to do that. >> well, one of the things the public conversations project is doing is working with elected officials. there is a program where they get exposed to a number of different skill sets that they need. one of the things is also how to engage across profound

difference. again, not necessarily coming up right away with the compromise, but at least have to do it without necessarily falling into polarization. one of the things we have noticed is that people coming into public office often do not really have all of the skills that they need for public office. that is not because they're not accomplish people. they are very accomplished people, but not necessarily as public officials. that one piece of that is how to negotiate, dialogue, and so on. that is one of the things we have been doing. >> question on your left. >> hello. i am a journalist. if you months ago, pretty much every state in the country and had an occupied protest everywhere. in some states, particularly in oakland and new york, it became more aggressive than others.

do you find that the ones in wisconsin or in new orleans or even san francisco -- those were more subdued. is it because of the economics of those other cities or the lack of education and our resources? where do you think the problem lies? >> that is a tough question. i am not sure i know the answer to that. i have not done a steudy. it could be that certain things went awry or another. i am not sure. i not sure i necessarily agree with that promise. >> i am thinking about my colleague. he was the original architect of the symbol dialogue. idea was that civil dialogue needed to be mobile. we had a fairly pretentious

situation in arizona. there were often protest at our capital. we want to take get there. take it outside. i am not sure about your premises as well, but the idea that there is different level of passion in different cities tell you who those people are, i guess. >> there are many barriers to reach powerful people. even to oppose them a question. did not have to sort of -- in my profession to cover politics, there are more barriers between you as a reporter and a presidential candidate. not the need do screaming questions, but you have to play cat and mouse.

you cannot do that job if you will be civil. you have to be obnoxious this to get a question to someone. [laughter] isn't a problem with a barrier with the powerful people walled off? you kind of have to climb their barricade so that they see us. >> we need to make sure that we have always that everyone can have a chance to talk with public officials. public officials to engage with everyday people. i worry that with more money in politics, most politicians speak to folks who are very well off and very simple people, but not necessarily ordinary citizens. >> i worry that as town hall meetings become more and more uncivil and those elected feel threatened, the dialogue is

unproductive. they are less likely to have those kinds of citizens for citizens to come together and have a conversation. i agree that we need to be able to come together and talk to one another, not based on how much money i am giving you or what my title is, but because i am a citizen and this is my concern. >> we have monthly dialogue at my campus. we have had a senator wander in one day. he is a conservative republican. he brings in that voice. it was a very brave thing for him to do to come into that area and talk about bills that are not very popular. he comes in. >> it is time for our last question of the evening. we have run out of time. you can join us across the hall and be civil to each other.

our guests will be there. you can ask the more questions. thank you to c-span for joining us tonight. the cal humanities are based in san francisco. please check them out online or on facebook or twitter. now for our last question. >> i have noticed something important are relevant. the conversation i have learned is that they cannot reach a compromise. democracy is supposed to fix that with a congress that works. representatives are supposed to reach a compromise. we have a problem with this

function, especially with filibusters. looking beyond civility, democracy can help out as well. involvement of the public will solve the part of the problem. right now, it is key that filibuster's take place. that will make a congress move a little bit better. they would have no choice. there are situations where you do not have a choice. you need to reach a compromise. >> does anyone want to respond to that? >> i think you are aiming for a

role. >> exactly. filibusters' would be key. >> there are a bunch of rules like that. right now it is very hard for administrations to get their appointees actually appointed. congress basically waits and waits and does not hold hearings. and often never really gets to appoint someone. we need to have a mechanism say, the president appointed someone. in 60 days, the person gets the job if congress does not acted. time mechanisms would be good ones in congress and other governments in the u.s. >> anyone else on this connection? >> go ahead. >> only to get together and ask for civility. that is what it will take. >> i was going to say that not all rich people are uncivil.

it is not like the other people aren't necessarily civil. >> rich people are people as well. remember that. [laughter] on that note, please join me in saying thank you to the panel. [applause] >> thank you. we will see you across all. -- the hall. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] crack's a form on the impact of economic growth as a foundation of freedom -- >> a forum on the impact of economic growth as a foundation of freedom. after that, 18 to 29-year-old

and the 2012 election. >> at the foot of the bridge, i was beatten. i thought i was going to die. >> in 1965, down the list of part in the voting rights mark to montgomery, alabama. it would take them across the bridge. >> but we became within hearing distance of the po po. -- of the police. he said this was an unlawful march. one of the people beside me said, give us a moment to pray. the major said, troops, advance. >> "across that bridge" by john

lewis. on sunday at 8:00 p.m. on "q and a." >> mathematician and economist steven landsburg at the cato institute's economic summit. he talked about the innovation and economic growth during the industrial revolution. this is an hour and 15 minutes. -- 20 minutes. >> good morning. i've promised we would begin on time and we are nearly 23 seconds early. so we are off to the right start. a couple of quick points. we will have presentations, presenters will be up here or some place around here. for the discussion, we have to microphones and so if you want to pose a question, come on down here. if anyone had limited mobility, we want to make sure everybody

can be included in the conversation. i recommend sitting nearby these microphones if that is an issue for if there are serious problems, we will make sure someone can bring a microphone to you. but i would rather not make that the standard. but again, if you have limited mobility problems, that is not a problem. our first presenter to get us off to the proper start is prof. steven landsburg. he is a mathematician by training but an economist by profession and passion. he is a great teacher and explainer of economics. in addition to his bio, he has a new edition of his wonderful book "the armchair economist" fully updated for the 21st century with data and update in contemporary examples. he blogs daily at

thebigquestions.com. and he is nearly finished with another book, part of his wide- ranging interests, on the theory of relativity. steven landsburg. [applause] >> thank you. is the microphone working? good. i want to talk to you about economic growth. the story of economic growth begins about 100,000 years ago when modern humans first emerged. then we have the time line here. for the next 99,800 years or so, nothing happened. [laughter] there were some wars, some political intrigues, the invention of agriculture, the renaissance. but none of that mattered. none of that mattered in the sense that none of it had any

appreciable effect on the quality of life for any substantial number of people. on the dawn of history, up until about 200 years ago, nearly everybody who ever lived right around the subsistence level. the modern equivalent of maybe $600 a year. there were times and places where it was better than that. even some extremely fortunate times and places where people aren't me be the equivalent of $1,000 a year per day -- $1,000 a year in today's terms. of course there were always tiny nobility's, kings and queens and dukes and princes who lived much better but they were numerically insignificant. if you had been born anytime prior to the industrial revolution, the odds are astronomical that he would have lived on the modern equivalent

of $400, $600 or if you were extremely lucky, $1,000 a year, just like your parents, just like your grandparents, just like your children and just like your grandchildren. then a couple hundred years ago, something happened. incomes, and lease in the west, started to rise. by the year 1800, incomes were rising at about three-quarters of a percent per year. a couple decades later, that happened around the world. then it got better. just 20 years later, income or rising at 1.5% 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 corrected for inflation has grown at about 2.3% a year. 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. at that 2.3% growth rate, if we continue at that rate, then in 25 years, your children will be earning the inflation adjusted equivalent of $89,000 a year. if we continue that growth -- growth rate, their children 25 years after that, will be earning the equivalent of $158,000 a year. that is the power of economic growth. if you extrapolated that out a little bit further, let's say

another 400 years at 2.3% growth per year, then your descendants will be earning approximately $1 million per day, unless of course they rise above mediocrity and live a little better. i want to stress that these are not some future inflation ravaged dollars we're talking about. this is after corrections for inflation the equivalent of 1 million of today's dollars. i do not know if we will ever reach that 0.400 years from now but i do know that conservative extrapolation from a sentry's old trend, it is conservative because it assumes we are going to continue that 2.3% growth rate for the next 400 years whereas in fact what has happened is the growth rate itself has continually risen if you find this an impossible number, you might pause and

reflect for a moment on how implausible your lifestyle would have sounded if i had tried to explain it to somebody 40 years ago. you might also meditate on the history of skepticism. in 100 a.d., he suggested there was no hope for future development. this is the history of per- capita income in the united states. united states is the medium growth country. our growth compared to other countries has been steadier and it has started earlier than most.

on average, we are a pretty average country in terms of level of growth. this is all corrected for inflation. that is the kind of thing that happens from time to time. this is all to thousand $5. you can see that incredible market prosperity over the years. we have had some rocky years. this only goes up to 2010. that is the kind of thing that happens from time to time. it happens most spectacularly in the 1930's here we have the great depression. here is what happened -- incomes fell back to where they had been about 25 years before. people found it intolerable. they had to live the way their parents lived and they found it intolerable. they had to live at the level which there great-grandparents' would have thought -- thought on a manageable -- thought unimaginable luxury and they found it intolerable. that is a new idea. things are supposed to get better. nobody before the industrial revolution thought that. today, we expect our cars and entertainment systems and our computers to keep dazzling us with something new every year. we expect that but the underlying expectation is new.

here is 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 did not just income. let's look at what has happened to our leisure time. 100 years ago, the average work week was 65 hours. today, it is 33 to read 100 years ago, 6% of manufacturing workers took vacations. today, it is virtually 100%. in 1910, 26% of 65-year-old men were retired and that is at a time when most men did not make to 65. of those who made it, they were really old. three-quarters of them were still working. today, 90% of 65 year old men are retired.

tell labor was common in 1910 -- child labor was common in 1910. boys enter the workforce in the early teens. practically unheard of. fewer hours per year. the average housekeeper in 1910 spent 12 hours a day on laundry, cooking, sweeping, cleaning. today, it is about 1.5 hours. here is the typical housewife's laundry day in the year 1910. first, sheep took water to the stove -- she took water to the stove, moves on to the task of ironing using a heavy flat iron continuously heating it over the hot stove. the entire process takes about 8.5 hours.

she walked 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. we know from the research studies that doing the laundry required 8.5 hours and miles of walking. by 1940, our heroine has a washing machine and her lawn today is down to 2.5 hours as she walked 665 feet. today, nobody spends 2.5 hours on the launch. -- laundry. you throw the laundry in. if you have a fancy machine, it e-mails you to let you know when it is done. [laughter] it is not just laundry, cooking, and sewing.

in 1900, most houses the not have central heat, did not have plumbing. though other routine tasks including lugging lumber around. and water every year. since 1965,the average american has gained six hours a week of leisure. that is the amount of time we spent in the office are commuting is down by six hours a week. that is the equivalent of getting seven extra vacation weeks per year. that is over the last 40, 50 years or so. so we are getting richer, we are 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 and ask yourself if there's anything in there you want to buy. here are a couple of pages from a 40-year-old catalog.

you can get this am radio. it weighs 2.9 pounds. one transistor comes with the battery. you could get this black and white camera which takes up to eight pictures. then he replaced the film pack which probably costs about -- about as much as the camera. you buy the separate flashbulbs. they come in packs of 12. when you run out of those, you have to replace those. the only thing is these pictures are misleading because you are seeing at the 40-year- old prices on there. we ought to correct those for inflation. those are what the prices are corrected for inflation. $128 for that transistor radio, $210 for that eight picture camera. i guarantee you it takes worst pictures them when you get off your iphone.

it is not as electronics. it is products like health care. here is 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, there is an argument for doing this and not doing it, but if you say aids is a special one time thing, this is not part of the general trend of health care, so i will take the effects of that out. then the health care outcomes we are seeing in the poorest parts of africa today measured by infrared mortality, life expectancy, anything you want to measure, are almost exactly the same as what we were seeing in the united states in 1975. 1975 in the united states, you were getting the same quality of health care that the poorest african art getting today. -- are getting today.

now i want to ask you, which would you rather pay 1975 prices for 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. that has to tell you that for all the problems with our system and 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 phenomenal increases we have seen, grossly understates the story of how rapidly the world is getting better. henry viii had a much higher measured income than anyone in this room. he will have of england but i -- ruled half of england, but i

beg you he would get treated half as well for modern umbing, a lifetime supply of antibiotics and access to the internet. along with all of that wealth we have generated, has come another brand new phenomenon -- wealth inequality. per-capita income in the united states is 70 times what it is in the poorest parts of africa. the world has never seen in equality on the level before. that is brand new. do you know why the phenomenon is new? because wealth is new. the reason we have all this inequality for the first time is that we have well for the first time and if you think inequality is a problem, it is worth reflecting that it is it leased a tremendously that this problem to have. it is the problem of how to divide up all this amazing wealth that nobody would ever predicted we would be able to generate in the first place. if you want to think about

inequality, i want to keep -- mention a couple of things you want to keep in mind. nobody in the world today is poorer than they would have been before the industrial revolution. i know that because if you were poorer than he would have been before the industrial revolution, you would have starved to death by now. another thing to keep in mind is that economic growth is new. it is only a couple hundred years old. this process is just getting started. it started some places later than others and in some places, it has had fits and starts. but we have not begun to see the power of what economic growth can do on the world wide basis. and we should remember that in the long run, a rising tide lifts all boats.

here is what economic growth has done for the poorest americans. but look at household below the poverty level. 98% have refrigerators. 67% have washers and dryers. 96% have color tvs. 75% of those have over 300 channels. i grew up with three black and white channels. 68% have air conditioning. many live in clients where air- conditioning is superfluous. 63% have internet access at home. these are households below the poverty level when you serve a --survey people at that level and you ask them to you have enough food, 93% answer yes. do you have any smoke or boulders that bother you? 93% say no. medical needs? 86% say no. it is more difficult to lead the life of it for american then of most people in this room but

it is the difference between that life and the like that everybody took for granted 200 years ago. beyond that, you remember those letter games i mentioned a little earer. i said the average american has gained the equivalent of seven vacation weeks per year in the last 40 years. that has been distributed very unequally. the poorest americans have gained twice as much, the equivalent of 14 weeks of leisure. nobody would want to claim that these great increases in leisure fully compensate for the differences in income but it is also true that big increases in leisure are not nothing. we do not lose -- live by bread alone. our happiness comes not just

from our income but are free time and the time we have to spend with our friends and our favorite tv shows. so let's -- it is worth keeping in mind that over the last 40 years, if you're worried about inequality, you might keep in mind that the big relative wearers -- winners in the incomy derby had been in the leisure derby and vice versa. one might also point out that the quality of the leisure is -- has been improving. 50 years ago, the rich man and the poor man spent their leisure time in different ways. now, the rich man and four men are surfing the same internet -- the sameme are surfing

internet and watching the same 500 cable channels. so there has been a great equalization there. when we turn to asia and africa, they are the we did the poor there are considerably worse off than the united states but we are seeing in many places the same pattern as we saw in the west said back by 150 years or so. take a 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 at just about the same rates that americans did in the year 1840. moreover, we know historically that patterns in the west of how people pulled their kids out of the work force as their incomes rose above certain threshold levels. we are seeing the same patterns

in africa and asia. you might have heard that child labor in the third world is caused by big multinational corporations doing their influence around and convincing people to send their kids to work against their own interests. if that is your theory, then you have 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 multinational corporations around. poverty is a terrible thing it means facing terrible choices, like should i send my kid to work or to bed hungry? poor people in various cultures at various times have faced those questions and have all settle them in the same ways. at certain levels of income, you send them to work, at higher levels, you take them out.

it is the height of arrogance for those of gotten past that stage to look at other people who are now facing that and saying you ought to do it very different -- differently than we did. but a lot of americans take that you -- take that view. this is a 10-year old girl from bangladesh. it was taken in 1992. she lost her job as a result of legislation sponsored by senator tom harkin's that closed down factories in bangladesh that were not up to the standards that american lawmakers thought day off -- ought to be up to. about 50,000 children lost their jobs as a result. she was interviewed by an anti- poverty activist in bangladesh at that time. this was her take on this situation. "we are poor and not well

educated so they despise us. that is what they shut the factories down. there is one difference, though, between us and 1840 and the third world today. the differences that we were poor, there was nobody was which. -- 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. that raises the question of what ought we do about that? a hard question with a lot of aspects. i will not settle it for you today. i do want to say a few things you might want to keep in mind when you think about that kind of question. it is remarkable to me the extent to which arguments for income redistribution, either across the world or with in a country, are literary arguments.

that is not a criticism. but they tend to be arguments based on literary anthologies, 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 because society is like an insurance. i like metaphors. i also like taking seriously. let's look at those metaphors and see where they lead us. let's start with the family metaphor. here is 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 is almost a direct quote from the governor in new york. families cannot allow one member to struggle while another prospers.

the problem with that metaphor is that families do allow one member to struggle while and other prosperous. they do it all the time. we know that from the data. in families where -- with our great income disparities, more often than not, parents divide equally. it is the final opportunity to redistribute income among the people you love the best. most people look at that opportunity and say i do not want to do that. i do not want to redistribute among those people. so if your goal is to make society more like a family to reflect the values that we observe, then your metaphor tells you that 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 before we were born, any one of us could the been born into any circumstances at all. we could of been born smart, stupid, ambitious or lazy, with great opportunities or with no opportunity to read if we had had the opportunity prior to being born, we would have entered into an insurance contract that said those of us who get lucky will take care of those who do not get lucky. the argument is made that we did not actually enter into that insurance contact because before your board, even the insurance -- you are born, even the insurance salesman cannot figure out how to reach you.

-- before you are born, even the insurance salesm that is my reading of the argument that is often made. we all know we would have signed the contract if we could have and therefore we are morally bound by it. that kind of argument was the basis for the monumental book on the theory of justice. john rawles was an influential philosopher at harvard. i do not understand large parts of it. on those occasions when in the past whenever i quoted it, i would always get a hand written note from him reminding me that i did not understand it. [laughter] he was right about that. but this insurance metaphor, and i think most people reading of it is that it is a big part of what underlies the full

story. he was a philosopher. i am an economist. since i am an economist, i would like to think about this matter for a little more deeply. i would like to take that metaphor seriously and see where it leads us. the problem with an insurance contract within -- with enforcing one that nobody ever signed is that you have to figure out what the terms of the contract was. how much insurance would we have bought before we were born? we cannot look at documents to find the answer to that. but we can make estimates which is the kind of thing he and his followers seem never to do. you ask how much risk will we be facing back there?

you can estimate the rest by looking at the range of ability that living people have. we know how smart the smartest people are we know how many opportunities the lucky attach. -- luckiest have. we know how many opportunities the least fortunate have. we know the variants of outcomes and that is a measure of how much risk people were facing before they were born. want to have measures that, you can ask when people face commensurate levels of risk in other areas, when looking at the possibility of a fire or a burglary, when they face risk in similar levels of variants, how much to the actually buy? -- how munch insurance would

you -- how much insurance would you actually buy? you can back out how much people would have paid to avoid that risk. so you can do a quick back of the envelope calculation of all that and ask yourself what would the terms of that insurance contract have been? how many people would be have agreed, -- agreed to support? what fraction would be say you are not earning much anyway, you might as well stay home and we will take care of you? do that on the back of the envelope. my former colleague did that and i did it 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 insurance metaphor -- 23%. bigger than any social insurance program that anybody has ever remotely contemplated in this country. 22% of the population should be on welfare permanently and

never asked to work. that is pretty amazing. on the other hand, i said this was a quick back of the envelope calculation. one thing left out was the fact that in a world like that, there would be tremendous disincentive of fact. the will in this world would be if you are among the 23%, you do not have to work. the effect of that which our calculations did not affect for is that everybody is going to play dumb. [laughter] if you re-do that calculation, making the sort of worst case possible assumptions about how those effects will play out, you get a different answer -- .3% of the population should be unemployed and on welfare. a much smaller program that

anybody has ever contemplated. so if you ignore the disincentive affects completely, 23%. if you assume they are as bad as they can possibly be, .3%. we're in there like the truth, i do not know the answer to that? -- wherein that lies the truth, i do not know the answer to that. i ran out of envelopes. if anybody is arguing for redistribution based on an insurance metaphor, they better be doing the kind of calculation and be able to show you their numbers and how they got their numbers. and what assumptions they made. this is the kind of thing that goes into translating a metaphor like that into an actual policy proposals. 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 as it is used is that the social insurance program that we have in this program -- in this country does not actually ensure you against any of the really bad things that could happen to you. things like being born a in cuba or albania or mali as opposed to canada, 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 are supposed to be insuring people against the

really bad things that can happen to you when you are born. being born into that, that is 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, your conclusion would have to be that every single penny we make in welfare payments should be going not to east los angeles but to ease the more -- east timor. another disconcerting thing about this insurance metaphor -- by conservative extrapolation, our ancestors was making $1 million per day. -- will be making $1 million per day. it is striking that we have these conservationists arguing that people like what you and i living the lives we lead off 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 ballot to the poor, namely us, -- from the namely poor to the newly rich. that is what they want us to do. often these are the same people who are always arguing that we need to redistribute more from the rich to the poor. i have not pointed to a flaw in either arguments separately but it seems to me these arguments are so much in conflict that when you hit the same person making both of them, you have to wonder whether they have really thought things through. those are all philosophical observations about the issue of

income redistribution. i want to put the philosophy aside and talk about the main practical issue within income redistribution. here is the issue -- that it never works. it never works. nowhere in history, no where in the world at no time in history has any program of income redistribution as far as i am aware, lifted substantial 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 poverty through income redistribution. the only force we know of that has done that is economic growth. so if you want to solve the problem of poverty, what you have to do is ask yourself where

the growth is coming from and what do we do to nourish it? here's a start -- these numbers are at least 10 years old. if i craft them today, the overall picture will look the same. this is income per worker. that is capital parker, the value of the machinery -- that is capital per worker, the value of the machinery workers are working on. the physical plant that the workers have to work with. what you see there is a very clear picture. the numbers confirm it. the more capital workers have to work with, the more they earn. you look at that and you say that solves the problem. all we need is for capital. it is 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 was building the assembly plant is not simultaneously building and ipod for you. the people who are constructing the capital and the resources that go into that have to be diverted from consumption. so we only get this stuff that people consume less, say people are consuming less is saying they are saving more. to get more capital, you have to get people to save more. unfortunately, just sitting more is not enough. here is why -- the more we save, the more capital we bills. -- we build. the more capital the have, the more resources we have to put into maintaining it. capital needs maintenance. the more capital we built, the more we put into maintaining it and the society that relies on

saving investments for its growth is going to find -- the move of this letter a little bit but then you are putting so much effort into maintaining that extra capital that it is hard to move up any further. you need something else to push you up that ladder. it is crystal clear what that one something else is -- the engine of growth is innovation. i recently had a historian tell me 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 they should put a

little effort into figuring out how to improve the way you did things was the least according to this historian, the key driving fact of the industrial revolution. innovation is the only thing we know that can drive growth. yes, you need savings but saving alone, theory and evidence tells you, cannot do the trick. what this innovation mean? people always think of these wonderful electronic devices. they look at the iphone they are carrying. there is an addition 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 invests a system like inventory management. an idea that has done more to alleviate the difficulties of poverty in this country than any idea i know of that has ever come from the united states congressman.

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 ensure it. you need both kind of innovation. you have a computer on your desk or the because somebody said hey, i wonder if we can make computers -- computer chips out of silicon but also partly because somebody else said i wonder if we can fund start up companies with junk fund. take away either of those in the computer revolution goes away. if you want to know which is more important, follow where the money went. go back to the early days of the computer revolution. in the early 1980's, microsoft's annual profits were about $600 million a year the was also the annual profit of michael milken. they were about equally important.

innovation drives growth. that raises the current -- question of what drives innovation. one is education. the other is economic freedom. let me tell you a couple of words about education. the great experts i always go to for information on this is at stanford. he has done all the research on the relationship between education and economic growth. he estimates if you could improve mexican schools to u.s. quality, you would add to% a -- 2% a year to their growth rate. that is phenomenal. think about what to pointed% has done for the united states. -- think about what 2.3% has done for the united states. i want to take a minute to say something about how we figured that out.

you can look at different countries and notice the ones with good education have higher growth rates. that does not prove anything. because we all know that correlation does not prove causation. you have to do something trickier. i am pulling up numbers that are for illustration only. these numbers are 20 years old and would have changed by now. but here is what these numbers mean -- a haitian -- i will say it wrong then i will say it right. for a haitian, an extra year of education as 2% to wages. --adds 2% to wages. for a mexican, an extra year of education at 2.03%. that is a measure of the quality of education in those areas. how much it adds to your wages,

how much it is giving you in terms of practical skills. that is still the wrong way to do it because the haitian working -- is working in haiti. the japanese is working in japan. some differences in those labor market. we like to control for that. the right way to do this and what these numbers really mean, these are boom -- measures of people who have immigrated to the united states and work in the labor market. a jamaican working in the u.s. labor market with an extra year of jamaican education earns an extra 3.5% in wages. if you are working in the u.s. labor market and a dicks -- an japanese f education, you have an extra 8.2% in wages. measuring the quality of education in that way in the correlating it with economic growth is how he gets a lot of these numbers.

how do we do better? how do we improve our education? to me the obvious first answer is that the government out of it. short of being able to do that, if you look at evidence on what has actually worked in various experiments and school districts around the country, something like reducing class size is remarkably ineffective. linking teacher pay to test scores is remarkably effective. the really big one is firing bad teachers. if we got rid of the bottom 10% of teachers -- that does not mean every year you do 10%. once only, you take out the bottom 10%, replace them with average teacher's. then within 10 years, you will have added three-quarters of a percent to the united states growth rate. that is gigantic.

coming back to my earlier slide on what drives innovation, isaac education and economic freedom. we talk a little about education. let's talk about economic freedom. what does that mean? it means small government, party rights, sound money, -- property right, sound money, freedom to fail. freedom to fail means being able to start a business that other people think are crazy and knowing that you are not going to be bailed out at the end if it does fail. if people are offered to billion out, they will tell you how to run your business. -- if people offer to bail you out, they will tell you how to run your business. if you do not have the freedom to fail, you do not have the freedom to succeed.

it everybody fails gets paid out -- gets bailed out, the people who succeed pay you out. you need the freedom to do something other people think is crazy and to fail if necessary. let me say a few words about that. low-margin tax rates. all -- we all understand that some taxes are necessary to run a policy. we also all understand that all taxes have disincentive effects and that is bad. we also understand that some taxes have worst affected than others. a tax on wages discourages work. that is bad. a tax on capital income also discourages work. because part of the reason people work is to accumulate savings so they can invest. but that tax on capital income

in addition to discouraging work also discourages savings. that is a double whammy. to some extent capital gains, state taxes, this discourages both work and savings which is doubly bad. that insight pervades the public finance literature of the last 25 years. one thing not by the general public is remarkably unaware of these days -- one thing i find the general public is remarkably unaware of these days is that capital tax rates in the long run ought to be zero. capital taxes do so much more harm than wage taxes that you always improve the world even

for the poorest will need to replace the capital tax or wage tax. if you have a choice between evils, the capital taxes are almost always the worst. there is a great deal of disagreement among economists about what the transition to a book like. how quickly should be go to that 0% capital tax rate. there is another big issue -- the reason you want to set the capital tax rate to zero is that people will invest more. they will not invest more unless they believe he will keep it at 0. there are a substantial number of economists who say you will never get people to believe that he will keep it at zero city might as well not try. there are a substantial number

who say no matter what you commit yourself to, people will know that 10 years down the line, you might change your mind and because of that, it will have that disincentive affect any way. those people have an argument. other economists are not commenced by that argument and say that we would get very far -- are not convinced by that argument and say that we would get very far. but where the consensus lies 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 will be richer and the poor would be richer. in another -- not just the long term but the median term. those are the aspects of economic freedom that i claimed drive innovation and growth. how do i know that? for starters, here is a graph of economic freedom.

the fraser institute in canada rates countries on economic freedom. what do they mean by economic freedom? this was not a random list. this was a list of criteria the institute uses. this was not a random list. this was a list of criteria the institute uses. this is the measure of economic freedom. this is per-capita income in various countries. there is a general upward trend. as economic freedom goes up, so does per-capita income. that chart proves causation and correlation are two different things. that is still only the beginning of an end -- of an investigation. you have to look at the data more carefully, controlling for variables to review and

discovering economic freedom is really important. the ideal way to determine something like that is with a controlled experiment. that is always the gold standard in science. we have exactly to controlled experiments on this. one is called korea, what is called germany. split the country in half, one goes one way, the other goes the other way. in both cases, the results were definitive. the problem is that n=2. an experiment with two observations is never as convincing as one with more. an economist at mit and harvard had a very clever idea for how to find other controlled experiments. he said let's look at the countries that were colonies of england.

the english set up a very different political and economic regimes in different countries. let's see whether the ones that have more economic freedom prospered more. that is not really a controlled experiment because somebody could always argue maybe the british chose the prosperous places to give the freedom to. but his idea was that is not actually what happened. if you look historically, what they did was they looked around at where are the places that have a lot of bad diseases? like malaria and yellow fever. these diseases did not affect the natives because they were immune the but the affected the colonists. the british said, the places that have malaria and yellow fever, we will not settle there. so we do not care how bad things are there.

let's give them a tyrannical regime and the non-free regime. the places that are free of malaria and yellow fever, those are places we might want to settle some day. so let's make things there as free and democratic as the place where we might want to live. that is kind of a controlled experiment. it is kind of random which places are subject to malaria and which are subject to yellow fever. that is not the british going in and saying who is prosperous and who is not. if you look at that and ask about specific countries, i do not have country by country data at hand. i should have put it up here but if you look overall, you find considerable evidence that freedom actually causes prosperity.

freedom causes prosperity, economic freedom cause prosperity. what about other kinds of freedom? other kinds of freedom did not seem to matter very much. if you look at political freedom, these are all things i think most of us would agree are good, free and fair elections, the right to organize, no dominant military or religion, open transparent government, rights to minorities -- none of that correlates with prosperity. civil liberties, freedom of expression, religion, absence of terror, gender equality. none of that plot -- correlates with prosperity. freedom house makes -- is an organization. in this case, it is not like the other craft. 1 is the freest -- the freest

countries. it does not continue as the go down. if you look deeper into that data, there is no serious correlation there. what matters for prosperity is economic freedom, not the religious freedom, not the political freedom, not the civil liberties. so i will summarize again. i will point out of his intellect. education -- people who are educated save more, and a bit more. the data shows that if you improve education at the higher levels, you get more innovation. if you improve education at the lower levels, innovations tend to get adopted more quickly. education at the higher and

lower levels both improve innovation. freedom leads to more innovation. people have the rights to their discoveries. it leads to more savings because people will say more when they believe their savings will not be confiscated. i will stop there. i went longer than i planned to. and i will take questions. [applause] >> the back to the first part of your presentation. from your perspective, you have a very optimistic long-term view for the world. i am wondering -- i know this is a big subjects.

if you take the european debt crisis situation. put that into perspective. are you still optimistic about europe, japan? >> just about all of them have positive growth. if you look at the balance sheet and draw a conclusion to this format about the end -- the economic health of the country -- it affects each one of us on average something like $50,000 worth. that is in federal debt obligations. and that is certainly affecting

our individual well-being. it is also true we are all richer than we were 15 years ago. could things take a much worse turn? we have an example from the west and most of the western world. then we have seen the world come crashing down. we have even spiralled into negative growth. yes, there is no limit to the damage governments can do. but also, there is the amount of good that free people can do. we are not broke.

but the government has spent a lot of money. we are poor for that. we are about as poor for that if we had paid for it all along. they could have taken a promise in the past. they are going to take it promised in the future. yes, they have done a lot of damage. i wish they would do less damage. but i do not see dundee's government's crashing down. >> i wonder about the claim of education causing growth or maybe it is the other way around. did you look at how gdp rose and

how college education rose? both are exponential curves. it seems like gdp rose first and people did not start going to college until the early 1900's when gdp growth took off in the late 1800's. >> and yes, another -- 200 years ago, you saw people with increases in the not of education. individual choice is to become educated definitely started. more recently, much of the evidence on education and growth

is international evidence. i do not have the data. i wish i did. there's a lot better in from -- international evidence. the point i would point to the next time you're in front of a group, there is a lot of statistical work on this. yes? >> well, do you agree with your conclusion that economic freedom is conducive to growth, but i would question whether -- you point out the various english colonies. this is really random. if someone were in a country with malaria or yellow fever. that could be indicative of other problems that would hamper growth. >> the reasons are the

negatives are largely immune to that malaria and yellow fever. -- the natives are largely immune to that malaria and yellow fever. >> given that if congress takes no action the increase in our tax on capital gains is going to be 6% january 1, 2013, and the increase on the tax on dividends is going to triple -- to you have any forecast for us on what the impact will be on america if there are no changes to congress? >> i think it will be disastrous.

if you are asking for numerical predictions, i am absolutely not going to do that. as i said, all capital income should be taxed. originally, in 1980's there was a switch for current. that showed only it would improve posterity -- prosperity for the average american. that prosperity would pervade every income class. it does not work if people do not believe, and that is exactly what we need. people are not responding to the

current rates. look, if you polled the economists, there is a lot of stuff we disagree on, but we pretty much all agreed, for example, that free trade is almost always a good thing. we all agree that if you can commit yourself to a low capital gains, you ought to do it that. >> i was not trying to ask you for an exact percentage. pardon me for giving you that impression. the thing we will still have growth in 2013. >> the answer depends so much not on what the tax rate was,

but i cannot begin to touch that question. i have no idea. >> you implied the answer to this. any time you have redistribution, whether it is from americans or two americans, the effect on killing the goose that lays the golden egg and for any capital that might have been exported to other countries, what do you have to say about the fact that even if welfare were to help the poor, how much would it help them if we just let people keep their money? >> if you make the worst possible case scenario assumptions, you still end up with a great deal.

if you take your issues seriously and to make the absolute most worst-case scenario, you should still have, according to that metaphor, a small welfare cap, much smaller than we currently have. if you make more monolithic assumptions about the fairfax, you would probably end up arguing for 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 anyone who is arguing has the obligation to tell you what their calculations were and how they arrived at that number. >> i just have one question for

clarification. if there is no correlation between civil liberties and economic growth -- are you saying there is no correlation with freedom on the one hand and on the other economic freedom? >> good question. let me try and remember. i think what you will find -- there are very high levels of political freedom and civil liberties. we have the moderately free and

the not free at all. the interaction between those political terms and economic terms is exactly the question to be asking. i wish i could remember the answer for sure. i will look good up and i will tell you tomorrow. >> i wanted to ask you to clarify a little bit about the freedom and prosperity. visit also reduce poverty -- does it also reduce poverty. -- does it also reduced poverty? let me say it this way -- is

this some fact that i can rely on to tell 90% of my friends that their poverty is being reduced by freedom? >> you are right. empirically those things go hand in hand. if you look at the united states, again, that improvement in the quality of life for the port has moved right along with growth -- for the poor has move right along with growth in the united states, along with china. 1 billion people have been lifted out of poverty. i don't know offhand of any substantial example we're a society has had sustainability that has not brought the lower end along with the.

you can see that those things go hand in hand. >> and wondered if you had any comments about the low hanging fruit metaphors and the possibilities for growth in the future? >> i knew you would comment on that. [laughter] >> if i can figure out how to use the -- >> here is my comment. [laughter] >> you have some very positive statistics, but one could possibly argue that is not just the effect of economic growth.

it is a testament to the success of the redistribution of the welfare state. have you thought about a way to filter out more with an example of how the rising tide lifts all boats? i think the best way i can think of to address that -- >> i think the best way i can think of to address that of hand, the correlation we see everywhere between capital growth and work on the other. industrial activities -- approximately two-thirds of revenue is paid out to workers. that is a good empirical rule of thumb.

workers get about two-thirds of the output. that is as much of the output as workers are going to get. what really affects quality for the poor, i think, is wages, and wages are tied to the amount of capital. you see that not just over time. >> the only comment that i heard about population we saw on the graphs, and of course they were done on a per-capita basis. i wonder if there are any comments you can do on population with regard to the population with your own studies. >> i do not want to give away my punchline. [laughter] >> thank you very much.

>> i wonder if you think micro lending -- [unintelligible] >> i love the idea on this. it makes me feel good. other than that, can it work? i have no idea. i hope it does. >> i wanted to ask about two things. it seems to have a different effect. that is the impact of corruption and the property rights of the rule of law. >> that effect is seen most dramatically in africa. again, the country started on that growth path. they have all kind of rewritten that have. you see in africa, they are able

to take this away completely. turn it around. it is huge. is a huge break on economic growth. there's all kinds of arguments about what this is, but they think there is a good case to be made that the absence of legal force and a greater respect for property rights was a prerequisite for the industrial revolution. i am not prepared to really get into that. i had a colleague in england. so -- >> you answered my question. i wondered if you have thoughts on why the industrial