V-50 Session 5

Good evening ladies and gentlemen.  Welcome to the fifth session of the V-50 Lectures.  The solutions part of this course will be in Sessions 9, 10, 11 and 12.  Now this is only Session 5.  However, for those of you who just can’t wait for solutions, I have some very good news.  For example, if the First Corollary is true, that all individuals, all volitional beings, live to acquire one thing, property, and property, of course, involves, essentially, primary property: actions, thoughts, beliefs, ideas, opinions, and the tangible derivatives of life: food, clothing, shelter, and so forth, if all individuals live to acquire primary and secondary property, then what do you do when somebody acquires too much property?  And how do you define too much?

Now, if somebody acquires more property than you think he ought to have, then there’s only one way to deal with the problem.  If the owner won’t give up his property, then what must you do?  Steal it.  And, of course, stealing involves the taking of another individual’s property without his permission.  Well now, if the solution is, indeed, to steal it, then the question does arise who should do the stealing and how much should be stolen?

Let’s assume a man morally acquires a billion dollars’ worth of property, property that he produced, property that wouldn’t even exist had he not produced it in the first place.  How much of that billion dollars would you steal?  Would you steal it yourself or would you appoint someone else to steal it for you?  Alright, how many of you would steal it yourself?  Let me see a show of hands.  Okay, four, five people.  Thank you.  How many of you would prefer to appoint a representative to steal it for you?  Well, now if you steal it yourself, society will call you a bad man.  On the other hand, if you appoint a representative to steal it for you, society will call you a good man.  Is that correct?  Hm-mm.  Out of those two categories, good men versus bad men, who steals the most, good men or bad men?  Good men.  Why?  Well, this is because good men are always in the majority and they will not tolerate the bad men stealing more than they do.  And we’re right back to the question I asked you earlier, how many of you would rather have your property stolen by a bad man?  How many would rather have it stolen by a good man?

Alright, in Session 5, we’re still discussing the problem, but I will offer a number of important solutions.  For example, I will answer these questions:

  1. Can we be certain that all prices are fair prices without any price controls?
  2. If you do not have at least some controls on business, what is going to prevent the big corporation from gobbling up all of the little ones?
  3. How can you protect the consumer from the giant monopolies?

These are three questions we will answer this evening, among others.  The entire lecture tonight will be on the subject of democracy.  Now, I presume that all of you in this room are in support of democracy, all of you endorse our democratic institutions.  Well, maybe I should ask you.  Does anyone here have the courage to raise his hand in opposition to democracy?  Anyone?  Alright, a number of people.  Thank you.  Does anyone have the courage to raise his hand in favor of democracy?  A number of people.  Thank you.  What about the rest of you?  You say, “Oh, I know, I’m not raising my hand.  It’s a trick, isn’t it”?  Of course, now, you recognize that, if you raise your hand in favor of democracy, I might stop the lecture, ask you to stand up and define democracy, define what you are for.  And if you raise your hand in opposition to democracy, I might ask you to stand up and define what you’re opposed to.

Well now, if anyone does endorse our democratic institutions, what is democracy?  What are you supporting?  Some of you recall the slogan that was popularized in World War II (sic) by the late president, Woodrow Wilson, who said, “The world must be made safe for democracy”.  Alright, if we must make the world safe for democracy, then what is democracy?  What must we make this world safe for?  If our sons died in World War I to make the world safe for democracy, if they died in World War II for the same objective, in Korea, or recently in Southeast Asia, then what is democracy?  If you send someone out to die, or risk his life, to make the world safe for democracy, you’d think a fair question is what is democracy?  If the fellow’s going to give up his primordial property for the achievement of this goal, is it fair that he understand the goal, at least clearly understand why he is going to do this, risk his life, if not lose it?  Or would it be better to keep him in the dark?

In his book called The Road to Reaction, Dr. Herman Finer makes the following comment: “In a democracy, right is what the majority makes it to be”.  That’s pretty much the standard attitude in the United States on rightness.  Well, ladies and gentlemen, we are going to examine the rightness of majority rule.  What does rightness mean as far as this theory is concerned?  As far as the science of volition is concerned, that is right which is both rational and moral.  When I say right, as far as volition is concerned, I mean that which is rational and moral.  If we’re talking about physics, I mean that which is true and valid.

Alright, we will examine the rightness of majority rule, political democracy.  We’ll also connect it up with the four steps of the scientific method.  Alright.  What kind of results would we get in the science of physics if we use majority rule as a test for rightness?  Do you think we could have made any progress in physics if, every time a new hypothesis is developed, it’s put before all of the people and they can go to the polls and vote on whether the hypothesis is right or not?  Would that be a good standard of rightness?  Could we have made any progress in physics if that was the standard?  Would it make any difference if the vote was taken openly or in secret?  Would that have anything to do with it?  Can you do a better job of establishing rightness if all the voting is in secret or if all the voting is open?

You say, “Well, of course, that wouldn’t work.  I mean, first of all, what does the man on the street know about physics?  Why, the only people who should be allowed to vote on whether the hypothesis or the theory, or whatever it is, is right or not are qualified physicists”.  Alright.  Do you think we would have made any progress in physics if that was the standard of rightness?  We only let a qualified physicist vote?  Maybe that’s defined as anyone who has a Ph.D. in physics can vote on this.  Would we make any progress in physics this way?  How many of you recognize we would not?  There’s no possible way.  If you study the history of the physical sciences, you will quickly discover that the more profound the innovation and the discovery, the more significant, the more right the innovation, the larger, the grander, the more significant, the more likely the majority of people in science opposed it or thought it was wrong or even called it quackery.  So that wouldn’t work.

Well, let me ask you this.  Is a theory in physics said to be right if it works a majority of the time?  No, it has to work all of the time.  For a hypothesis to be called right, it must work all of the time; 99% of the time is not even good enough.  It must work 100% of the time.  No exception.  No compromise.  Is there anyone in this room who would cross the Golden Gate Bridge if you knew it was constructed upon a concept that worked a majority of the time?  Would you cross the Golden Gate Bridge if it were based on a concept that worked 99% of the time?  Only one out of  a hundred bridges based on this concept fall down while you’re crossing it.  If I cross a bridge, I want it to be constructed upon a principle that works all of the time, zero exception, zero failure.

Now, to be sure, you can have a bridge that is solidly constructed and, if it’s not properly maintained, it could fall down.  But that does not mean that the principles upon which it was constructed have fallen to the ground.  It means it simply was not properly maintained.  You can also have a faulty application of a correct or right principle.  That doesn’t mean that the principle has failed.  It means the person applying the principle has failed.

Well, if we would have applied majority rule as the standard of rightness in physics, we would have made no progress whatsoever.  There would not even be a science of physics.  There would be no physical sciences whatsoever if this had been the standard.  Alright, if all of you can see that under no circumstances can you accomplish anything in science using any basis of majority, any standard based on majority concepts, as a means of determining what is right, if that will produce total, complete, consistent failure, then I have this question for you.  If it won’t work in physics, then on what basis do we think it will work in volition or outside of physics?  Just what results do you think we get when we apply majority rule, for  example, as the standard of rightness in the social domain?

First of all, majority rule is simply a relative standard of rightness.  Rightness is relative to the whim of the majority, as Dr. Finer said.  Right is what the majority makes it to be.  Well, that’s nothing more than might makes right.  The stronger plunder the weaker. For example, what if the majority of people suddenly agree all people with red hair are dangerous?  These red-haired people are preventing the people with dark hair from taking their rightful place in society.  And in the interest of the general welfare, it will be necessary to liquidate all people with red hair.  A vote is taken and the people with red hair are the minority.  And the people with red hair are liquidated.

You say, “Well, that’s a ridiculous illustration.  Why, the majority of people would never take such a foolish action, would they”?  Oh, you’re not so sure.  Well, in our lifetime, we’ve seen the majority of people agree that all Semites, called Jews, are dangerous.  That these Jews are preventing the Nordic people from taking their rightful place in society.  That in the interest of the general welfare, the common good, the community good, it will be necessary to liquidate all people called Jews.  A vote is taken.  Jews are outnumbered.  And the Jews are liquidated.

Which is more ridiculous, liquidating redheads or liquidating Jews?  Liquidate, of course, a euphemistic term for murder.

As many of you know, the Nationalist Socialist German Workers’ Party,  generally called the Nazi Party, came to power in Germany after the free elections of March, 1933.  The Nazis led the polling by over 17 million votes.  The second largest party, the Social Democrats, polled only a little over 7 million votes.  And so, it was 17 million votes for the Nazis, 7 million for the next largest party.  We see in our lifetime the failure of political democracy to maintain freedom.  Let me ask you this question.  What if there had been, let’s say, free elections in Germany in 1936, 1940, let’s say, and there would have been no reprisals if you vote for some other candidate or campaign for some other candidate than Adolf Hitler.  Do you think Adolf Hitler would have been elected in a completely free election in Germany in 1936?  1940?  How many think he might have been elected?  How many think he might have been defeated?

If there had been free elections at this time, ladies and gentlemen, Adolf Hitler would have achieved the most overwhelming victory probably of any politician in the history of democracy.  And that would have been with zero intimidation on the part of the Gestapo or anyone else.  That would have been a landslide that would have eclipsed anything that any president in our history has ever accomplished at the polls.  To be sure, if there had been an election in 1945, Hitler might not have done so well but that was because he was blamed by the German people for being principally responsible for losing the war.  The principal disenchantment with Hitler was that he was blamed for being responsible for losing the war.  And that is still true today.  In other words, Hitler is blamed for Germany having lost the war.

Political democracy, or majority rule, is a relative standard of rightness.  Rightness is determined by the majority and under such a system, stealing, torture, murder, all of this is justified if the majority supports the system.  In fact, it’s almost universally accepted in the United States today, if you can elect your leader, you will be free.  Most people believe this.  Is this consistent with observation?  Let’s assume that all of us are inmates at the penitentiary at San Quintin.  Alright.  Are we free if, every four years, we have an opportunity of electing a new warden?  I’m for Warden Smith.  I think we ought to vote for Warden Johnson.

Are we any freer if the election were held, let’s say, every year instead of every four years?  Or how about every month?  Would you prefer a new election every month?  Would you rather have the election for the warden openly or in secret?  What’s the problem here?  Freedom does not stem from the ability of the individual to choose his own ruler because, when there’s a ruler, that means someone’s being ruled.  And when you’re ruled, you clearly do not have liberty.

As some of you may remember from your study of history of the ancient world, the Athenians practiced this concept of political democracy.  All of the free citizens would gather at some meeting place.  They would decide by majority vote how the city state would operate.  They decided what laws would exist, how they would be interpreted, how they would be enforced.  And the assumption, of course, was that the minority position had been taken care of.  They had been consulted.  The minority had had their chance to be in the majority but they failed.  Perhaps all that is necessary is they work harder next time and the minority can become the majority.

Well, if you study American history, you’ll find that the founding fathers of this country had a greater fear of political democracy than they feared even monarchy.  They feared political democracy as potentially a more catastrophic concept than anything else.  And because of this, they went to great lengths to limit the power of the people to rule.  I’d like to read you a quotation from James Madison, the man, more than any other individual, who is said to be certainly the father of the Constitution of the United States, former president Madison writing to another president, James Monroe, October 5, 1786.  Madison states his position on the concept of majority rule, political democracy.  He says:

“There is no maxim, in my opinion, which is more liable to be misapplied than the current one, that the interests of the majority as the political standard of right and wrong. Nothing can be more false.  In fact, it is only reestablishing under another name in a more specious form, force as the measure of right”.

Force as the measure of right.  So writes James Madison in 1786.  There were attempts to eliminate the abuses of direct democracy in the early days.  For example, the Electoral College was set up so the President could not be elected by a direct vote of the people.  It was believed if ever we reach a time where the people can vote directly for the president, then the president who will get the most votes is the president who will offer the greatest number of giveaways.  And this will result in a total catastrophe and ultimately destroy the nation.  And so, they set up the Electoral College.  And the number of electoral votes was not directly related to the population of the state but the number of electors of the state, of course, was determined by the number of congressmen and senators in a state.

Also, originally, the United States senators were not elected by a direct vote of the people in the various states.  Do you remember how the United States senators came into office, from your study of American history?  It was not by a direct vote of the people.  They were simply elected by the various state legislatures, originally.  And then, subsequentally, all of this was subsequently changed, I believe, by, I think, it was the17th Amendment to the Constitution changed all of this and said that the senators will be elected by a direct vote of the people.  And so, all of this, originally, was designed to reduce the potential danger of direct democracy.  As a matter of fact, John Adams, the second president of the United States, I think he summarized his position on democracy quite clearly when he said, “There never was a democracy that did not commit suicide”.

Would you say the position of President Adams is quite clear as to what he thinks of the concept of democracy?  Is there any question in your mind as to what he thinks of it?  There never was one that didn’t commit suicide.  And so, there were early attempts to reduce the dangers of direct democracy.  The problem, of course, is they were inadequate.  Now, to be sure, we still have an indirect democracy.  You don’t have 200 million people who get together in some public meeting place and decide on how the country will be run.  Instead, what do we do?  What we do, instead of getting together 200 million people at some public meeting place, instead, in secret, we elect legislators who do meet at the capitol and they vote on how the country will be run.  However, what does that mean?  They run the country.  What does that mean?  How do you run a country?  Does that mean you run the valleys and the lakes and the forests and the mountains and the meadows?  Is that what running the country means?  No.

What that means is, ladies and gentlemen, you do not run a country.  What you do run is the lives of the people who live in a country.  And of course, that can only be done in one way.  What is the problem you must solve?  I’ve been discussing this since Session 1, the problem you have to solve in order to run somebody else’s life. How can I gain control of the derivatives of that fellow’s life without his permission?  That’s the problem you’ve got to solve because there’s no other way to do it. If you can’t solve that problem, you can’t enslave the other fellow.  So you got to solve it to be a slave master.

And so, is political democracy right?  Is it rational?  For example, can you determine which is the right ruler by majority vote?  Well, whomever the majority chooses is the wrong ruler because all rulers are immoral when they rule.  The whole concept of rulership is an immoral concept.  And it’s simply the case, an illustration I’ve given you many times, a very simple concept: B, in secret, behind C’s back, in secret, appoints A to plunder C.  That’s the concept of political democracy.  And so, all rulership is coercive and therefore is immoral by definition.

Now if the goal of rulership is to benefit the people, to help the individual, the question then does arise, how can you help a man by stealing his property?  And would you help him the most when you steal all of it?  And, of course, how do we react to this?  I can’t thank you enough for what you’re doing for us.  Is that how we react to the public servant?  No?  Are not these people always referring to themselves as public servants, serving the people?  And what greater service could they do for you than to steal all of your property?  On the other hand, if the goal of rulership is to help and benefit the ruler, then what’s in it for the people?

Was all of this explained to you in school?  They didn’t explain it?  Well, if you’ve come to the conclusion that I’m not for majority rule, then, since there’s only one other possibility, I must be for minority rule.  Well, somebody’s got to rule, don’t they?  Of course, you can tell from that tongue in cheek delivery, that maybe there’s something else involved here.  There is.  It’s important to understand that majority rule and minority rule are not opposites.  They both involve a ruler and those who are being ruled.  It makes little difference if you’re ruled by the  majority or the minority because, either case, you’re still ruled.  Someone is telling you how to run your life.  Somebody’s telling you how to best allocate your property.  Again we’re offered what is called a false alternative.  Would you rather have a broken arm or a broken leg?  Make your choice – in secret of course.  Minority rule versus majority rule.

Well, it just so happens there’s a third alternative that involves neither majority rule or minority rule.  This third alternative is called individual rule or self-rule.  This brings us to the inference of a rational and moral concept of democracy called economic democracy.  You will find that it is only within the framework of an economic democracy that you can actually vote for what you want and get it.  In the marketplace, you can vote for and obtain whatever products happen to be available.  If enough people want a product that is not available, then somebody seeking a profit will likely make it available.  You’ll find that every retail outlet, it can be a giant department store, it can be a one man fish cart going around the neighborhood, and everything in between, can be looked upon as a democratic voting booth.  In fact, the root meaning of democracy, in the Greek, is “thing of the people”.  The economic market is the thing of the people.  This is the democracy of the people.  It’s open to the use of all people without respect to their sex, age, religion, ethnic origin. In the democracy of the market, and only in this democracy, is there a concept called universal suffrage.  In other words, anyone can vote in the marketplace. When a six-year-old kid buys a popsicle or, you name it, a Duncan yo-yo, he’s voting for the candidate of his choice.

He’s saying, “Mr. Duncan, you’re doing a great job.  I’m voting for you”.  And does his vote count just as much as anyone else’s?  If a six-year-old kid buys this Duncan yo-yo, or a sixty-year-old kid buys it, does not one vote count as much as the other?  Certainly.  Incidentally, some of you may know this, especially if you have children, does anyone know if they still make the Duncan yo-yo?  Do they still make it?  They do?  I’m glad to hear that.  I used to have a Duncan yo-yo.  Several of them.  The Duncan yo-yo was a really great yo-yo.  As a matter of fact, if you didn’t have a Duncan yo-yo, you didn’t have a yo-yo.  How many of you have owned Duncan yo-yos, just out of curiosity? Practically the entire class.  See what I mean?  They’re really great yo-yos.  Anyhow.

Each dollar, or portion thereof, can be looked upon as an economic ballot.  Those proprietors who receive the most votes in the form of purchases, in general, will be rewarded with the highest profits.  Anyone who serves the voters will be successful.  Those who best serve their fellow man, in general, will be the most successful. Anyone who thinks that he can serve is free to put his product up, or his service up, for a vote.    In general, you will find there is little social discrimination on the part of the economic voter.

I’ll illustrate this point.  Is there anyone in the room who does not own or at least have access to one or more can openers?  All of you own a can opener or have access to one?  Alright.  That appears to be all of you.  Let me ask you this question.  I’d like to see a show of hands of those of you who can tell me the brand name of your can opener?  Let me see a show of hands.  I want to take a sample of the class.  You know the brand name.  Hold them up so I can get a rough estimate of the people present.  The brand name.  That’s all?  That’s not even 25% of the class.  Alright.  How many of you, offhand, can’t think of the brand name?  Well, there’s the other three-quarters or so.  Alright.  I will now direct the question towards those of you who know the brand name.  If you don’t know the brand name, you cannot answer this question.  Those of you who know the brand name, can you tell me the religious preference or non-preference of the manufacturer?  Needless to say, if you don’t even know the brand name, that will be even more difficult, wouldn’t it?  You don’t know who the manufacturer is.

Alright.  Did I make a point?  When most people enter the marketplace to purchase a can opener, or any other product, they are not concerned with the theological beliefs or the ethnic origin of the people who manufactured the can opener.  In general, you are looking for the best can opener at what price?  The lowest price.  And you don’t even stop to consider if the can opener is made by, maybe, Negroes or Quakers  or Catholics or Jews or atheists or what have you.  If the best can opener at the lowest price is manufactured by Negroes, then, in general, that is the can opener that will be victorious in an economic market, in an economic democracy.  And, as a matter of fact, you will find that even if there are people, let’s say, who know the can opener is manufactured by Negroes, and maybe, for whatever reason, they don’t like Negroes, they still might buy it.  Why?  Their attitude might very well be, “Well, after all, it is the best can opener at the lowest price”.  Might they buy it anyhow?  And do you realize what a research project it is to try to find out the ethnic origin or religious preference of the people who manufacture every product you purchase?

Let me ask you this question.  How are the people who best serve humanity, in an economic democracy, how are they rewarded?  Those who best serve receive the most votes, in general.  sAnd those who receive the most votes can look forward, perhaps, to the highest profits.  What’s wrong with that?  Why is that so vicious?  Who’s harmed by that?

Well, in contrast, how are the people who best serve humanity rewarded by the political democracy, if in an economic democracy they can look forward to, in general, the most votes and the highest profits because they do the best job of providing the best service and the best products, in contrast, how are these same people rewarded by the political democracy?  Those who best serve are the most viciously attacked.  And the better they serve, the more viciously they will be attacked.  Those who do, for example, an outstanding job of serving their fellow man by providing products of exceptional quality with exceptional service, exceptional guarantees, they will have a great portion of their property seized through, for example, corporation taxes, where all you have to do, I believe, is, I think, earn as little, some of you who are accountants or CPAs may corroborate this one way or the other, but I believe, I think, all you need is about $50,000 profit and you’re already up to, by the time you pay federal and state corporation taxes, you’re already up to something like 53% confiscation of your profits.  And do you know how little a profit $50,000 is for a corporation?  Do you realize what a little amount of profit that is?  And you’re already up to over half confiscation.

And then, if you, let’s say, own a corporation, you decide to pay yourself something for your efforts, you can look forward to as much as 70% of what’s left being confiscated through the progressive income tax.  And then, finally, if you do such an outstanding job of serving your fellow man, your product is so superior, it is so outstanding, that all of the people of the market say, “Hey, you’re so great, why we don’t even want to vote for anybody else.  We’re just going to vote for you”.  Now you did it.  Do you know what you just did?  Do you realize what a criminal you are?  If all of the people say they only want to vote for you and nobody else, do you realize what a vicious person you are?  You know what you are, don’t you?  Exactly.  You, sir or mam, are a monopolist.  And we know there is nothing more vicious than a monopolist, right?  Well, that’s what they say.

Finally, if those who make it their activity to confiscate your property without your permission, of course telling you that they’re doing you a favor, that this is in your interest, finally, if, while you are alive and producing property, if those who confiscate property fail to get all of the property, while you are alive, as soon as you make the mistake of dying, guess what happens?  The inheritance tax is imposed. And that’s in case anything was overlooked while you were alive and producing.  And up to 77% of the property that remains can be confiscated through inheritance tax.

Of course, there are many other forms of theft of property.  There are property taxes that you have to pay and so forth.  And the end result of that, if it continues, is, of course, no one will be able to afford to own his own home.  That’s the direction it’s going.  And you are aware of the fact that property taxes go up and not down.  Have you noticed that?  As a matter of fact, you can generalize on that.  All taxes go up and not down.  There’s a reason for this.  The only direction taxes can go is up.  There’s a reason for this and I’ll come to it later.

However, there is good news because the most amount of property that can be confiscated from you is the total amount that you possess.  The amount of property that can be confiscated from you is finite.  It is not possible to confiscate more than you have.  So that’s something, isn’t it?  See, things are not as bad as you thought really.  They can’t take any more than I have.  You have something to be happy about, don’t you?

Well now, what about the fate of those who totally fail to serve humanity, those who offer such a poor, rotten service, lousy product in the market, they fail to serve humanity and their fellow man, nobody wants to buy or vote for the product because it’s worthless or of such low quality they don’t want it.  Are the people who fail to serve, are they attacked?  Is their property seized?  No, it’s not because, since they did not serve, they were not rewarded with profits.  And since they did not make profits, they were not taxed.  Their property is not seized.  As a matter of fact, they are not even enslaved.

But if that were not enough, those who fail to serve are rewarded by the political democracy with guess what?  A subsidy.  And that is their greater reward for totally failing to please the voters of the economic democracy.  And who do you think gets to pay for the subsidy?  Congratulations.  The property of those who best serve their fellow man is then plundered, stolen and given to those who fail to serve as a handout, or a subsidy, which is the same thing.  In other words, those who are, in the beginning, rewarded by the people’s democracy in the marketplace are subsequently attacked by the political democracy.  This, of course, is called the best of all possible worlds, the ultimate system.  Hm-mm.  All of this takes place, of course, in the land of the free and the home of the brave.

Of course the argument for all of this, you know what it is?  Well, how else are you going to do it?  Haven’t we always done it this way?  A brilliant argument.  The answer to the question, of course, how else are you going to do it is in this course, among many other answers.

Now who are the real humanitarians in our society?  Let me give you a little story that I think illustrates this quite well.  A wealthy industrialist, upon his death, leaves his two sons $100 million each.  And the older son decides that he is going to use this money to help those needy people in the community who are less fortunate than he is.  And so, he places a series of advertisements in the newspaper and he states that he’s going to give away the entire $100 million to the 100,000 most needy persons in the nation, each needy person to get a $1000 gift.

And so, after he and his staff carefully determine who these 100,000 needy people are, checks are issued paying out $1000 to each of the 100,000 needy.

Now, of course, these 100,000 people, they are delighted at this windfall gain.  “Hey Ma, we got the check for $1000.  Whoopee”.  Or “I say Margaret, the check has arrived.  Let us celebrate tonight, you know”?  Or whatever.  In any event, they’re all delighted.  Would you concur they’re all pretty happy with the check for $1000?

For what purpose do these so-called needy people use the money that they have unexpectedly received?  Some of them use it to pay their bills.  Others, perhaps, to take a vacation.  Others spend it maybe on tobacco or booze, better booze or whatever, medical expense.  In any event, it isn’t too long before most of the people have spent, if not even squandered, the $1000 gifts and now there’s little left to show for the money.  To be sure, the money might have brought some temporary happiness.  But, nevertheless, the $100 million is now gone and they must look to other sources now to satisfy their so-called need.  In short, the $1000 gift did not solve any of their problems, did it?  And I might further point out, if they have not been able to solve their problems up to this point in time, how will the $1000 gift teach them how to do this?  As a matter of fact, please note it only postpones the time where they have to come to grips with the problem and find out what am I doing wrong?

Now what is it that they’re doing wrong?  Well, the only thing is they’re producing little property.  You see, poverty, again, as I’ve probably already said, is nothing more than little property.  If it’s secondary property poverty, it means they have little secondary property.  And there’s only one single solution and you all know what it is?  Produce more secondary property.  Now why is that so difficult?  If you require more property, the moral way to acquire it?  Produce it.  That’s what any moral, rational person would do.  Generate it. And if you have few skills and are not efficient at generating property, acquire some.  Get better at producing property.  Why is that so difficult?  And who can do this?  Anyone.  Of course I realize everyone is worried about, “Yes, but what about the fellow who’s lame or the one who’s blind”?  We’ll come to this.

Well, the goal of this oldest son of the industrialist, his intention, was to help the most needy people in the nation.  He gave everything.  What more could we ask?  And what is the probability that this man will be hailed as a great humanitarian?  Might you expect to see his picture in the paper giving some poor needy person here, some indigent fellow, a check for the $1000?  And they’re shaking hands and the poor man, the needy fellow, has got a big smile on his face.  And will this man be applauded as a great man, a generous man, as a humanitarian?  How many think, in general, he will be?  Certainly.  And it will only be the exceptional person that would look upon him as a colossal jerk and jackass.  Am I right?  Yes.  Only an occasional crank would disapprove of this.  Am I right?  After all, he did give everything.  He gave the entire $100 million away.  A very generous man.

However, I might point out something.  He is generous with whose property?  He is very generous with his father’s property.  It is always easier to be generous with somebody else’s property.  Why do you think the politicians are so generous?  It’s not their property. “Here, help yourself.  It’s not mine.  I didn’t earn it”.  Of course that would be the honest statement but we can’t expect that much honesty.  “Help yourself.  It’s not mine”.  But that’s true, isn’t it?  And remember, theft does not transfer ownership.  If the thief steals your automobile, he does not own it.  He controls it but he does not own it. Theft does not transfer ownership.

Alright, what about the younger brother?  Well, his ambition is to serve his fellow man but he intends to not give any of the money away.  As a matter of fact, he announces he’s going to take the $100 million and use that to finance and build a $1 billion industry.  He’s going to go into the production of heat resistant plastics, plastic packaging products. He finances the construction of a new saline water converter to provide fresh water to desert areas, invests in and takes an active interest in the management of a company that produces low cost synthetic fabrics.  He generates directly, indirectly a quarter of a million opportunities for people to be productive and generate more property than they could have otherwise.

And he’s raised the standard of living.  How has he done this?  There’s only one way to raise the standard of living.  Generate more property per capita.  And there is no other way to do it.  And that’s because of the first law of thermodynamics: you cannot get something for nothing.  And it will always be that way.  And there never was an exception and there never will be.  You want to raise the standard of living?  Produce more property.  What is the difference between those nations where they have a high standard of living and a low standard of living?  One difference.  With a high standard of living, there’s a greater amount of property per capita.  In a low standard of living, there’s a little amount of property per capita. As simple as that.

Incidentally, well this younger brother, when he announces that he’s going to take the $100 million and turn it into a billion dollar industry, will he be applauded as a great man, a great humanitarian, a man of generosity?  No.  He will more likely be denounced as a selfish, greedy businessman who only wants to make profit.  Isn’t that more likely what will be said about him?  Yes.

Alright.  Webster defines humanitarianism as “regard for the interests of mankind”.  Alright, I have this question for you.  Which brother was the humanitarian?  Which brother did the most to raise the standard of living of his fellow man?  Please note, the first one, did essentially nothing to raise the standard of living because he didn’t generate property.  As a matter of fact, he contributed to the squandering and dissipation of property.  Which brother was the humanitarian?  Well I hope the question answers itself.

I’d like to identify the three classes of people who add to progress.  There are three and only three.  This concept was first explained by Professor von Mises, who I will introduce later in the course.  And he’s certainly the greatest economist of the 20th century.  And he says there are three classes of people who add to progress.  Using Galambos’ semantics, they are: first, the innovator.  He discovers a new heat resistant plastic, the new saline water converter, the new synthetic fabric.  In other words, he contributes to primary property.  Second, the proprietor or entrepreneur.  He contributes to primary property in the form of what is generally called business know-how.  In other words, he takes the innovator’s idea and puts it into the market.  The third progressive member of society is the investor.  He puts up the financial capital to make the business venture possible. In other words, it’s the investor who pays for the all-important tools.

Capital means tools. More and better tools means an individual can then produce more because he’s got more leverage.  You can only produce more when you have greater leverage in the form of tools.  And you can only command, or earn, a higher compensation in property when you generate more property.  If you want more, produce more.  If you want to share in more property, then produce more property.  Then you get a greater share of that which you produce.

Alright, to reiterate again what I said earlier.  A political democracy is simply a concept where you have a relative standard of rightness, a coercive mechanism where B, in secret, by secret ballot, appoints A as his representative to attack C.  And so, B could be a voter.  A can be a politician or bureaucrat.  C can be a taxpayer or other voter or non-voter.  B, in secret, appoints A to plunder C.  That is a free translation of political democracy, majority rule.

I would like to see a show of hands if this was explained to you clearly in what is called school.  Anyone.  I see no hands.  How many of you….raise your hands if this was not the version you got in school.  It was not the version I got either.  Oh, I’m quite proud of the fact that the version that I did get in school, I got an A in that course.  How well did you do?  Of course A is the highest grade you can get, you know.

And so, the more an individual serves his fellow man, the more he achieves for mankind, the more he is plundered.  The entire social technology is built upon political coercion.  The political state launches a major attack upon primordial, primary and secondary property.  This is called the best of all possible words, echoing the words of Dr. Pangloss in Voltaire’s somewhat well-known Candide, “the best of all possible worlds”.

Who believes this?  Almost everyone.  And the few who don’t, don’t know what to do about it.  And, in general, if they do anything about it, it’s the wrong thing.  They march.  They demonstrate.  Etcetera.  I’ll cover this later.  All people who demonstrate have one thing in common.  They do not know what they’re doing and there is zero exception because, if you know what you’re doing, you don’t waste your time demonstrating.  You don’t make a jackass out of yourself.  I’m sorry if that’s offensive but I will demonstrate the rightness of that statement.  That includes marching and what have you.  If you can’t think, march.  On the subject of military marching, that’s another subject.  I’ll cover that in the lecture on defense.  How do you defend the nation from external aggression?

The real humanitarians are the innovators who bring us the new knowledge, the cosmological innovators who discover the nature of the universe, the principles of nature, the laws of nature, the major theories of science.  These are the most important people and they do the most for their fellow man.  And then you have, and of course I’m referring to such major cosmological innovators as Isaac Newton, Galileo, Archimedes, Einstein, Michael Faraday, Benjamin Franklin and so forth.

And then you have the technological innovators whose understanding of the discoveries of the cosmological innovators is great enough to enable them to build inventions based upon these discovered principles and people such as Edison, George Westinghouse, George Eastman, Elias Howe, the Wright Brothers.  And is it only the rich, in terms of secondary property, who benefit from these cosmological and technological innovators?  Or would you say that the lives of every man, woman and child, regardless of their secondary property position, is immensely enriched due to these intellectual primary achievements?  Do you think so? Hm-mm.

Well, these great innovators, however, they almost all have one thing in common.  They are notoriously incompetent businessmen.  They’ve had little success in getting their own innovations into the market.  There’s only an occasional exception.  Edward Land would be one.  George Westinghouse would be another.  But these are rare exceptions.  Therefore, someone must play a role of organizing the factors of productions: acquire a factory, select the right management, the right individual to accomplish the right job of getting that product into the market.  This is the role of the proprietor or the entrepreneur.  In other words, he puts the whole show together.  Essentially, you might refer to him as a business impresario.  In other words, he puts the show on the road that results in what is called production, the business impresario. Of course, all of this requires capital, money.  And where does the money come from?  If everyone consumes everything he produces, most people, as a matter of fact, it’s worse than that, they consume it faster than they produce it, then there will be no saved capital.  No capital means no production.  No production means a general scarcity of everything.  When you have a general scarcity of everything, that’s called starvation, destitution, poverty, famine.  You can only have famine, I’ll come to this later, where you have wall to wall incompetence. Wherever you hear of a place where they’re having a famine, you will find they got wall to wall blockheadism.  I’ll justify that later.

What is famine?  Famine is nothing more than little food per mouth.  That’s all it is: little food per mouth.  LFPM.  Well, the investor comes to the rescue.  He hasn’t consumed everything.  His philosophy is not “live for today” which is one of the highest achievements of cultural degeneracy.  And that is the common posture today in this country – live for today.  If everybody lived for today, the species would perish.  And those who do live for today, they only exist because of the people who don’t and don’t squander everything.  An investor, then, hasn’t consumed everything.  He puts up the capital that makes the production possible.  And so, it’s the innovators, the entrepreneurs, and the investors who are the real unsung heroes of society.  And please note, they serve the non-progressive people.  The progressive people serve the non-progressive people.  These are the real humanitarians.

We live, therefore, in an anti-humanitarian society.  It’s worse than that.  In other words, the more an individual does to achieve and add to progress, the more he’s attacked.  If he’s an innovator, the more he innovates, the more his primary property will be stolen.  It doesn’t matter what kind of property he generates.  Primary property or secondary property, he will be plundered.  And the more he generates, the more he will be plundered.  All volitional beings live to acquire one thing, primary and secondary property.  That is your nature and everyone else’s nature.  We live in an anti-property society; anti-profit, anti-rational, anti-intellectual, anti-moral, anti-right, anti-liberal, anti-humanitarian society called the land of the free and the home of the brave.  The best of all possible worlds.  And who believes this?  The two classes – those who went to school and those who didn’t.  Do they believe this?  With few exceptions.  Well, it’s what they say.

Let us turn to a new concept of democracy, called economic democracy.  This is a right concept of democracy.  It’s the concept of self-rule.  The individual determines what will happen to him and to his property and not what will happen to the other fellow and the other fellow’s property.  When you walk into a drugstore, you’ve exercised a choice.  You did not have to enter the store.  You have ruled yourself.  Two, you purchase a tube of toothpaste.  You made a second choice.  You didn’t have to buy toothpaste.  You ruled yourself.  Third, you selected the toothpaste from among many other items that were there for sale.  You could have bought shoe polish.  Four, you selected the brand.  Among a dozen different brands of toothpaste, you, again, ruled yourself.

Your decision to purchase Pepsodent toothpaste, is this decision binding upon somebody else?  If the majority of Americans purchase Pepsodent, does that mean everyone else must buy Pepsodent?  You know, if you applied political democracy to the market, that’s what you would get.  They count up all the votes.  Pepsodent is leading in sales.  Pepsodent is victorious at the polls.  Everybody gets to buy and use Pepsodent.  Brush your teeth. It’s good for you.  And you’ll wind up getting Pepsodent crammed down your throat.   Eat it.  It’s good for you, you’re told.  That’s what would happen if you applied political democracy to the market.  Well, it’s just as ludicrous to apply it in one domain as another.

And so, we have the concept of self-rule.  You rule your own actions.  You rule the derivatives of your life, namely, your property.  As soon as you rule somebody else’s property, you’re a ruler.  You’re a coercer.  You’re a slave master.  And like it or not, you’re a criminal.  A crime is defined as a successful act of coercion.  Coercion is any attempt at intentional interference with property.  A criminal is one who perpetrates a crime.

The fact that crime is the custom does not make it right.  The fact that you were taught in school that criminal behavior is proper, under the proper circumstances, that does not make it right.  The fact that we have been indoctrinated to believe that we can only solve problems through crime and stealing, that does not make it true and it does not make it right.  The concept of laissez-faire simply means please leave the other fellow alone.  Mind your own damn business. Butt out.  Now why is that so difficult?  Hell, the other guy doesn’t know how.  He doesn’t know what to do for himself.  He’s too stupid to know how to use his own property so I’ve got to help him out.  I’ll take it from him.  The best thing I can do for him is take all of it.

They’re working on that now.  I hope you’re beginning to see the absurdity of it although it will take some more sessions because, you see, the thing I have to convince you of, and I will in this course, you see, if you have the courage and the stamina and the willingness to continue looking through the tube, what I will use is the scientific method, truth and validity, to convince you, not only is stealing always immoral, but it is always irrational.  And as I promised you earlier, I will reduce every single argument that advocates stealing in any form, I will reduce that argument to a hopeless absurdity, an untenable absurdity.  Every single argument.  We’ll have more to say on the subject as we continue.

And to be sure, as soon as you advocate laissez-faire, let people alone, someone will most certainly say immediately, “Well, of course, that sounds alright in theory but it won’t work in practice”.  I did bring up that cliché, didn’t I, earlier?  I pointed out that all theories work.  All theories are pragmatic or they’re not theories.  Ladies and gentlemen, as soon as you take this position, number two, stealing is always  wrong, when you take that position, that seizing another man’s property is always wrong, that coercive interference with another’s property is always wrong, no exception, there will be a great outcry.  There will be a gnashing of teeth, a giant protest on the part of whom?  Three classes: one, those who steal; two, those who accept stolen property; three, those who condone the stealing of property.  And if you maintain your position that stealing is always wrong, if you do not back down, if you refuse to compromise, you’ll be greeted with an avalanche of what we call lifeboat cases.

Now this brings me to a discussion of the lifeboat case.  First of all, how many of you have ever been in a lifeboat for the purpose of saving your life?  Let me see a show of hands.  You have been in a lifeboat for the purpose of saving your life.  No one?  I see zero hands.  Alright.  Let me ask you this then.  How many of you personally know somebody who had to climb into a lifeboat to save his life?  One, two, three.  Three people.  Four.  Five.  Alright, say roughly half a dozen.  Not yourself but you know somebody.  I’ve been in a lifeboat but it wasn’t to save my life.  I was just looking at the lifeboat.  I was on a bigger boat but I wanted to look at the lifeboat, see what kind of shape it was in, in case I had to use it, before I sailed off in the big boat.  Anyhow.

Well, how do you get….first of all, is it possible, at some time in your life, you will find yourself in a lifeboat for the purpose of saving your life?  Could this happen?  Yes.  Well, how do you get in the lifeboat in the first place?  Well, that implies that earlier you were in some kind of a presumably larger boat.  It could have been an ocean liner or maybe an airplane which got into trouble and you had to get out of the airplane or the ship and get into a smaller boat called a lifeboat for the purpose of saving your life.

What is the probability that you will be in a lifeboat tomorrow?  How many of you say that there is a fairly good probability you might be in a lifeboat tomorrow?  First of all, what is the probability you will be in any kind of a boat tomorrow?  Alright.  The classic lifeboat case is what happens if you’re out in a lifeboat and there’s only enough food and water for one person but there’s two of you sitting there.  And your only chance to survive is if you’ve got all the food and all the water.  And there’s a loaded 45 on the seat between you.  And not only that, a monsoon has just sprung up on the horizon and, worse than that, the boat has just sprung a leak.  And would you believe, ladies and gentlemen, a German U-boat has just surfaced and they’re about to commence gunnery practice on your boat and they’re twelve yards away.

Alright, let me ask you something.  Is it possible that all these contingencies could occur to one single person?  Could all of this happen to one person?  Yes.  It could.  However, the probability that all of these things will happen to one person, would you say it’s large or small?  Very small.  In principle, possible, but very small.  And each time you add a contingency, you drastically diminish the probability that all of these things are going to occur to one person, am I right?

Alright, translating this into a social lifeboat case, what about the ten year old kid who was born deaf and, therefore, he is dumb.  He cannot speak.  His father is an alcoholic.  His mother is a prostitute.  And he has a lame foot and, worse than this, he’s contracted pneumonia and has a bad case of halitosis.    Alright, could all these contingencies occur to one ten-year-old person?  Yes.

Well, what happens is people lay awake nights dreaming up lifeboat cases:

Well, what about the guy who…

Well, I just read the other day…

When I was in college they pointed out…

Do you realize….

You’ve probably overlooked the fact….

Have you stopped to consider….

Well, what are you going to do?  Let them starve?

As soon as you take a position of zero compromise, stealing is always wrong, you will be inundated with a lifeboat case.  But, but, but….

This will happen.  How do you explain this?  The first thing you have to understand is the lifeboat case is the exceptional occurrence.  The problem with the socialist posture is he would like to structure the entire society to fit the lifeboat case on the assumption that’s all there is, instead of recognizing that the lifeboat case, although existing, is a very rare exception.  Ladies and gentlemen, you cannot design a rational social structure on the assumption that everybody’s a lifeboat case.  This cannot be done.

The structure of society must be capable of taking care of all possible problems, including the lifeboat case, but the lifeboat case is only one small problem.  And so, laissez-faire is a total concept of economics, leave people alone, and the economic system will take care of itself.  Do not interfere with the production, distribution, and consumption of property.

Well, the welfare state, socialist planner, whatever you want to call him, he will immediately jump up with another lifeboat case and say, “Wait a minute.  What happens when there’s a proprietor who produces a product and then he raises the price to some exorbitant level and thereby deprives this poor fellow of what he wants to buy.  He can’t buy the product because the price is too high.  What are you going to do about that”?  Or “What happens, what will protect, the little fellow from the greedy industrialist, selfish business man?

Well, first of all, all businessmen are selfish.  You knew that, didn’t you?  Every single businessman is selfish.  And every single non-businessman is selfish.  Everyone is either a businessman or a non-businessman.  It covers all possibilities.  In either case they’re all selfish because everyone is selfish.  Man is selfish by nature.  You can’t escape that.  That’s your nature.  However, to be selfish does not mean that you must be an immoral criminal.  Every selfish act is not immoral.  As a matter of fact, every selfish act is either moral or immoral.  That covers all possibilities.  The morally acting man seeks what?  Remember the corollary?  The morally acting man seeks what?  Profit.  And the immorally acting man seeks what?  Plunder.  That covers all possibilities.

Nevertheless, the lifeboat cases pour forth.  Well, what happens if there is only one producer of a given product?  Then what are you going to do?  The producer, clearly he has a monopolistic position.  He can force you to pay any price he wants.  We’ll deal with this in the second half of this lecture, the problem of monopoly.  In any event, the exceptions pour forth.

What happens if a man becomes old and he can’t find work?  What happens if he becomes unemployed?  What happens if he’s sick or injured?  What happens if he’s feeble-minded or crippled?  On and on and on.  Ladies and gentlemen, every single one of these problems, without exception, has a rational and a moral, hence a right, solution.  We will deal with many of these in the sessions ahead.  I won’t take the time to discuss them now but you’ll understand how to morally deal with the problem of the man who’s born blind, the person who’s born an imbecile.  You do not have to let these unfortunate people die of exposure and starvation in the streets.  I can assure you, in case there’s any question in your mind, it does not make my day to learn that some unfortunate indigent fellow has just starved to death in the street.  This does not make my day.  This is no source of happiness for me.  The point is you cannot design a rational social structure on the assumption that everyone is an imbecile, everyone is paralyzed and everyone is blind, recognizing that, to a few people, these unfortunate catastrophes do occur.  There’s no question, if one loses his sight, that is indeed a large personal catastrophe as well as these other contingencies that might occur.

If there is going to be any progress, it must be recognized that you cannot have consumption until you first have what?  Production.  Now why is that so difficult?  That’s one of the most difficult concepts that people have to understand.  A simple thing like that.  You cannot have consumption until you first have production.  You cannot help the consumer by destroying the producer.  And this, of course, is one of the basic fallacies of the political leaders.  They try to gain the favor of all by catering to the needs of a few and then they claim they’re acting in the interest of everyone.  By hampering the producer, you also punish the consumer.  You cannot punish producers without punishing consumers without punishing everyone.

Well, the socialists or collectivists or anti-individualists or anti-liberals are all one and the same.  Socialists, collectivists, anti-individualists, anti-liberals, they’re all the same.  They like to take humanitarian arguments to justify their position.  The collectivists’ position is the individual must always yield to the interests of that of society as a whole.  He must  never place his own selfish interests above those of society or the collective.  And so they use humanitarian arguments in terms of short term benefits.  If somebody is out of a job, they will say, “Well, we must provide this fellow with an income while he’s out of work”.  What is the solution?  Theft. If he’s ill and therefore he’s unable to work, what is the solution?  More theft.  If he is old and cannot afford a doctor, what is the solution?  More theft.  On and on and on.  They always propose the same solution: we’ll steal more property.  We’ll get it solved.  And they seek to solve some specific need or problem on a short term basis with some theft of property as a means to the solution.

And of course, this will be justified on the grounds that, well, you know, after all, someday I might need these things myself.  Perhaps someday, I will be unemployed.  Perhaps someday, I will be old.  Hey, you know, that’s not even perhaps.  You see, in the long run, ladies and gentlemen, either you are dead or you are old.  You see, if someone is young now, there are two possibilities.  Either you die when you are young or you become old.  Is this observable?  Contrary to the collectivists’ point of view, no one has ever become old by surprise.  Everyone has had ample opportunity to prepare for this eventuality.  How long have you had to prepare for this?  All your life?  Yes.  Even when you were a child of five or so, did you notice that there were old people around?

Of course, the way the collectivist approaches the problem of old age, he says, “Oh my goodness.  Look at the catastrophe that has befallen this poor man.  He’s old.  We’ve got to take care of him.”  Well, the individualist point of view, the liberal point of view is he can take care of himself.  He can provide for his own future, knowing in advance, if he survives, then he will become old.  The collectivist assumption, of course, is every human being is not capable of taking care of his own needs.  And this brings us to another lifeboat problem.

Well, what about the fellow who can’t think in advance or who won’t think in advance or who prefers to spend his money in his youth, rather than to prepare for his old age?  How do you solve that one?  Very simple.  What could be simpler?  He works in his old age.  That’s his reward for having lack of foresight.  Of course, the collectivist position is, “Why that’s terrible.  That’s cruel.  That’s vicious.  That’s harsh.  You would make this poor old man work?  There ought to be a law”.

And the first thing you know, there is.  Somebody passes a law to steal our property so that the old guy doesn’t have to work.  Well, first of all, ladies and gentlemen, there are many totally fluky concepts on the subject of retirement.  I imagine a guy, his posture is, “Boy, I can’t wait until I’m 65.  I’ll retire.  Boy, can’t wait to get out there with my fly rod.  I’ll go up in the high Sierras and I’ll fish the little fishies out of the stream.  And I’ll go to my retirement community and play shuffleboard by the pool”.

Well, ladies and gentlemen, if I were to live to be 500 years of age, I couldn’t begin to accomplish the things I would like to accomplish.  And even if I did live that long and accomplish the things that I wanted to accomplish, long before I got those accomplished, there would be other things I would want to accomplish that I hadn’t thought of yet.  And once you retire from production of property, you might as well be dead.  And please note how commonly people drop dead shortly after they retire anyhow.  Have you noticed?  They stop producing and they commonly drop dead shortly thereafter.  It’s not an accident.  I won’t take the time to discuss it now.  That is more than just an accident.  Man, you know, is goal oriented.  If you don’t have any goals to seek, and the means to seek them, and a measurement of your success, you’ll be a very miserable, unhappy person.  And when you stop producing, you might as well be dead.

That doesn’t mean you can’t acquire wealth to the point where, maybe, you don’t want to do, all of your life, the thing that you have chosen to do in terms of production.  You might want to go on to some other type of production.  Maybe this production you want to go into may not be so lucrative but it doesn’t matter because you’ve acquired enough property you can afford to do it.  There’s nothing wrong with that.  But the main thing is that you keep in mind the importance of production.

And this is not cruel, the attitude that, if you don’t provide for yourself, well, it’s not proper that somebody else should.  This will eliminate destitution and old age when people come to realize in advance that you do not have a Santa Claus, that Santa Claus does not exist, that there is a mechanism, there is an alternative to Santa Claus that will take care of him, will take care of you.  When this is understood, the problem will not arise.  First of all, in order for Santa to be so generous, where does he get the property?  There are only three places that Santa can get property.  One, he can produce it.  Two, he can steal it.  Three, he can mooch it.  That applies to everyone, doesn’t it?  Alright, if Santa Claus produces the property and then gives it away, what’s in it for him?  If he steals it, then he’s a thief.  If he mooches it, then he’s a moocher.  What’s wrong with this concept?  No one stops to consider where does Santa Claus get the property?

I…what is this, Lecture 5?  I was going to talk about the concept of Santa Claus.  But I do this with a little hesitation. You know why?  Because almost everybody has a favorable image of Santa Claus.  Is that right?  If I were to tell you Santa Claus is a bad guy, and if I were to tell you that when you promulgate and foist this concept of Santa Claus upon your children, if I were to tell you that not only are you not doing them a favor but you are contributing to their self-destruction, and contributing to the probability that they will grow up to be non-producers, bums, people who seek something for nothing, if I were to tell you all of these things, you might get mad at me.  So I’m not going to tell you that.

What is the main thing that’s wrong with this concept of Santa Claus?  What are you teaching your children, first of all, when you introduce this concept?  You’re teaching them, among other things, that there’s no such thing as the first law of thermodynamics which, applied to volition, says you cannot get something for nothing.  Ladies and gentlemen, if you have children, the sooner your children understand the first law of thermodynamics, you cannot get something for nothing, that property does not exist in nature, that every single piece of property has an origin in the form of production which requires a producer, and, furthermore, the sooner your children learn to produce property, the better off they will be.  There is no age that is too young to learn how to produce property.  There is no age that is too soon to learn you cannot get something for nothing.  This is very important.  I realize that Santa Claus is a pleasant, nice old man.  Everybody has a positive image of him.  The concept is very destructive.  And later on, when they find out the whole thing was a fraud and myth anyhow…did I define fraud?  Yes I did.  The deliberate use of untrue premises and invalid thought processes.  And Santa Claus will become, in time, Uncle Sam.

Uncle Sam will take care of me.  We just had one of these national, I don’t know what you want to call it, remember, we just had Halloween.  What’s wrong with that concept?  Another one that you should be very careful to make certain your children do not become victim to this swindle and fraud.  What’s wrong with the concept of Halloween?  What’s wrong with trick or treat?  You send your children out to be beggars, begging for alms.  Trick or Treat.  If you do not give me a treat, I will trick you.  If you don’t give me a treat, look out.  I might throw a firecracker in your mailbox, soap your windows, damage your property in some other way.  So you better give me a treat.  In other words, we send our children out to be beggars and extortionists.  I know.  That’s not the version you  have gotten, is it?  And, at the very least, do you recognize it is something for nothing?  That is a form of beggary.

Now the difficulty we have, of course, as parents is, well, what am I going to say to my kid?  And the kid’s going to say, “I can’t go trick or treat?  Dad, I thought you loved me.  What are you saying, Mommy?  I can’t go trick or treat”?  And then the classic, so-called argument, will be put forth by your child.  “Well, George is going out and Frank gets to go trick and treat and Mary and Helen.  How come I can’t do it”?

And dear Mom and Dad, when your kid brings up that argument, you better be prepared to squelch that immediately and bury that argument once and for all time because, if you don’t do it, the result of this can lead to the destruction of your children.  As a classic argument,  brought up by children, well, So and So gets to do it, why can’t I?  Sound familiar?  We’ll come to parents and children later.  I didn’t really mean to get into this digression now.  But it’s not really a digression.  It’s part of the theory.  But the main point is everyone must understand you cannot get something for nothing, regardless of what your age may be.  It would be a violation of the laws of nature.

The second half of this lecture, don’t get sick during the break or don’t get sick in the second half either, because I’m going to take this concept that almost everyone is for and advocates and sanctions and I did myself until I understood it.  I will take the concept of anti-trust legislation. I will do to the concept of anti-trust law what we did earlier to Aristotle’s law of falling bodies.  Namely, heavy objects fall faster than light objects.  We will do to this concept of anti-trust law what we did to Aristotle’s law of falling bodies.  Namely we will reduce it to a hopeless absurdity in the second half of this lecture.  I will discuss price control.

 

Continuing now with the second part of Session #5, I’m going to discuss the nature of what are called price controls.  The opposite of laissez-faire is, in fact, price control.  Dean Russell, who translated Bastiat’s great work, The Law, which we will make available later, says that the term price control is actually a misnomer.  Price controls are more accurately people controls because it’s not the prices that are controlled but the people.  The price doesn’t care.  A can of beans does not become upset when the state tells the owner of the can how much to sell the can for.

The word price is commonly used to mean a numerical value in terms of some monetary amount.  If you purchase, for example, a can of beans for 40¢, that’s called the price.  However, in a broader sense, price refers to more than just the monetary exchange value.  For example, you may enter into a direct exchange called barter.  Or you might exchange, let’s say, three pigs for one cow.  In any exchange, all of the contractual terms are a part of the price.  For example, you may contract with me with me to purchase, let’s say, a given product.  As a part of the contract.  I agree to, one, make delivery on or before the first of the year.  Two, I agree to absorb all of the shipping costs.  Three, I agree to replace all defective parts without charge, let’s say, within a period of one year.  These are all terms of the contract and therefore are part of the price.  So the monetary consideration is just one aspect of the price.  The totality of a price, then, includes all of the terms of a contract that are in writing or are orally given.

Therefore, keeping this broader aspect of price in mind, we can say that all interferences with exchanges in the marketplace are, in effect, price controls, more accurately, people controls.  All interferences with exchanges in the marketplace are a tax upon property and are, therefore, immoral.  For a contract to be moral, all of the parties to the contract must be in agreement with all of the terms of the contract.  And the agreement must be unanimous and voluntary.  Then, and only then, do you have a contract.

If anyone other than the parties to the contract, or their agents, dictate the terms of the contract, that, of course, represents coercion.  And so all interferences with property are essentially price controls since the controls dictate the terms of the transactions.  What is called a price control is essentially a bureaucratic, or what you might call, a legislative ukase, simply an imperial edict, an imperial decree handed down from Mount Olympus to the poor slobs who live below.  You know, the gods live on Mount Olympus and everyone below is inferior.  Of course in this country, we have Mount Washington.  Anyhow.

The ukase, when they say that the price of a given product must sell above such and such a price or it must not sell below such and such a price or that it must sell at some specific price.  And it doesn’t make any difference whether the price control is a maximum price or a minimum price or a specific price.  The results of such interference will always be disastrous.  A price control is always justified in terms of some specific excuse, usually a short term, so-called humanitarian, argument.  For example, the first price control that was ever legislated in this country occurred during the Revolutionary War.  As a result of the war, a – that is the so-called Revolutionary War, there is no such thing as a revolutionary war – do you know why?  Because there’s nothing revolutionary about war.  Think about it.  Anyhow.  As a result of the war – I’ll come to the subject of what revolution means later – as a result of the war, a scarcity of salt developed.  And therefore the price of salt continued to rise.  Well, members of the Continental Congress thought they could improve the situation.  They placed a maximum price ceiling on the price of salt.  And this, as a matter of fact, was the first experiment with price control in the new American Republic.

A man named Thomas Paine happened to hear about this.  He attempted to put an end to this nonsense and issued a letter that said, in effect, the price control will produce a disastrous consequence.  It will produce, as a matter of fact, the exact opposite of what is intended.  Alright, what was intended here?  Simple.  A group of well-intentioned legislators simply wanted to place a ceiling on the price of salt in order that the poor people would not be priced out of the market.  In other words, they wanted to keep the price of salt low enough that the poor people could afford it.  Well, Paine said, if you put a ceiling on the price of salt, the people who own salt, in general, they will withdraw their salt from the market, they will hide what they have, and the immediate result will be available salt will disappear.  And then a short time later, it will begin to reappear gradually on the black market but at a much higher price.

Do you think that Congress followed Thomas Paine’s rational advice?  Of course not.  A Congress does not follow rational advice.  Committees do not follow rational advice.  The Congress is just a giant committee.  I’ll come to the subject of committees later.  Anyhow.

What do you think happened?  Exactly what Thomas Paine predicted would happen.  The first thing that happened, salt disappeared.  You couldn’t find salt anywhere.  And then it gradually reappeared, on the black market, but at a much higher price.  Well now, was this really want the Congress wanted?  No.  What happened was a rare event in history.  The price control was repealed.  In other words, the bureaucracy abdicated.  Now I would like to point out that the people who passed this price control, these people, they were not pirates or lunatics.  They did not do this out of malice or out of a desire to become dictators.  They simply thought they were doing what was right.  They made a mistake.  They didn’t listen to the one who predicted the whole thing would be a fiasco from the beginning.  But they recognized their blunder and they were intellectually honest.  They rectified the error.  They repealed the political law.

Now the same general result will occur when you attempt to control the price of any product, not just salt.  Whenever a price control, in terms of a maximum or ceiling price, is placed on a product to make it more available, the exact opposite will occur.  The product will become less available.

I’ll give you an example of this.  A ceiling price would be rent control.  How do we get something like rent control?  What is this rent control all about?  This is really simple to explain.  Somebody says, “Boy, look at poor D over there in his apartment.  And Landlord C is charging $150 a month for that lousy apartment.  That’s outrageous.  There ought to be a law”.  B say, “I appoint you A.  If C charges anything over $100 a month, shoot him”.

Is that an exaggeration? No.  Have I discussed this?  Behind every political law is a gun.  Did I mention this?  Have I discussed it?  If anyone questions this, incidentally, see me at the end of the session.  I’ll tell you how to test this out if you question it.  I’ll show you how to be legally shot and killed.  And it’s all legal.  Anyhow.

I’m going to allude to an illustration first put forth by Frederick Bastiat and I’ll make a book available to you later that has this illustration in it.  It’s called “That Which is Seen and That Which is not Seen”.  And in all these illustrations, we’re going to look at two things: one, that which is seen and that which is not seen.  And when I go through the not seen part of the illustration, in every instance, practically no one will be able to see the “not seen” part of it because in order to see the “not seen” part of every one of these illustrations, you must be rational which means practically no one will be able to see it.  All of you will be able to see it.  I give all of you the benefit of the doubt that you can think rationally, but, in general, the general public, the masses in general, will not be able to see the not seen part.

Alright, in the case of rent control, what is seen in this illustration?  Why, what a tremendous thing A, the politician, the bureaucrat, what a great humanitarian, look what he’s done for D.  Why, just the other day, D was paying $150 a month for this rotten apartment.  Now he only has to pay $100 a month.  That is seen.  In other words, A is hailed as a great humanitarian.  Look what he’s done for D.  He only has to pay $100.  Will D be happy about this?  “Yeah, wow, that’s great.  I only have to pay $100 a month now, instead of $150”.

Alright.  What is not seen?  This part you have to be rational to see.  What is the enthusiasm of those people who are just about to put their capital into apartments for profit?  Has it been somewhat dampened and diminished, this enthusiasm?  Especially when they learn, now that we have rent control, there’s no way we can make a profit by going into the rental business. Might it occur to someone that maybe he ought to put his capital someplace else, now that the potential profit is removed?  Might that occur to him?  Does he have to be a graduate of the Harvard Business School to figure this out?  No.  Will he do this?  Yes.

And so, that means all these apartment houses are not being built.  In the meantime, maybe the population is expanding.  In the meantime, what if you already own an apartment house and now you’re suddenly subjected to rent control?  And you discover that, well, if I paint the outside of this place, the cost of painting it will result in a situation now with rent control, I will lose money on the rentals.  Is there a good probability you will consider not painting the exterior and the interior, even though it may need it?  Yes?  Especially if the additional outlay of expense is going to put you down the old profit.  Or maybe you’re already at break even.  And you won’t have as much enthusiasm about maintenance in general will you if the cost of the maintenance now causes you to lose money.

Well, the rent control is the principal promulgator of what is called a slum.  Do you know where the worst slums are in the United States?  In New York City which is the only city that has had a long history of rent control.  You want to see some real slums?  Go to Paris.  I’m not telling you about where the American tourist goes, strolling along the Champs-Elysees or going by the Louvre or the Eiffel Tower.  I mean go out where the people live and you’ll want to see some real frightening slums.  That’s rent control.

In the meantime, perhaps, the population is expanding.  There’s more and more demand for rentals and fewer of them being built, maybe none.  In the end, what you wind up with, is, instead of an apartment at $150 a month, he now has no apartment at $100 a month.  “Yeah, but if I had an apartment, I’d only have to pay $100 a month”.  Yeah, but you’re on a sidewalk.  You don’t have one because it didn’t get built. This part is not seen.  You see, you don’t see the apartment or house that didn’t get built.  Only someone who’s a sensitive observer will see it and that means practically nobody will see it.

I’d like to generalize this more.  This is a universal law of nature.  In general, whenever you have any bureaucrat issuing any ukase to accomplish a specific objective, in the end, the exact opposite will occur from that which was intended.  We call this the law of bureaucracy.  Whenever coercion is employed to accomplish a specific objective, in the end, the exact opposite will occur from that which is intended.  The law of bureaucracy.

Now, let me ask you something.  What if I can demonstrate consistently that the law of bureaucracy, time after time, example after example, it applies? In the end you get the exact opposite of what was intended.  If I can demonstrate that, would any of you come to the conclusion that, perhaps, maybe, the entire concept of bureaucracy, if all it accomplishes is the exact opposite of what they’re trying to do, is it possible, perhaps, this is not the most efficient mechanism?  Is it possible that the whole concept could have even limited utility?  If I could show that it always applies, might you come to that conclusion?  You might.  I’ll demonstrate it throughout this course, the law of bureaucracy.

The same thing applies with minimum price controls.  When a price is established by ukase, any price below the established price is illegal, punishable by fine or imprisonment.  Again, you get the exact opposite of what is intended.  An example of this would be minimum wage laws.  Alright, how do we get minimum wage laws?  B says, “That is outrageous. C is only paying his employees $1.25 an hour.  That’s outrageous.  Nobody can live on a $1.25 an hour.  There ought to be a law”.  And the first thing you know, there is, a law.  And so B, behind employer C’s back, in secret, says, “A, I appoint you.  If C pays anything less than $2 an hour…” [or whatever it is.  Now it’s what ….it’s going up in January to $2.65?  Yeah.  Anyhow] B says, “I appoint you A.  If C pays anything less than $2 an hour, shoot him”.

Alright, let’s look at what is seen.  Now Bureaucrat A is hailed as a great humanitarian.  Why, look at what he’s done, especially with the poor people.  Why, these poor folk were only getting a buck and a quarter an hour.  Now they’re getting $2 an hour.  What a great thing we’ve done for the people.  And will this man be hailed as a great benefactor, a great humanitarian?  Yes.  Only an occasional crank will recognize him for what he is – a criminal.  You’d have to be very sensitive to see that.  And it’s also helpful if you are resentful of criminals and criminal action rather than being one who condones it and applauds it.

Alright, what is not seen?  Well, there might be a fellow who’s been offering, let’s say, $1.25 an hour for somebody who wants to pick grapefruits or what have you.  Let’s say I’m doing this.  Is it moral for me to say, “I will pay $1.25 an hour to anyone who wants to pick grapefruits from my grapefruit orchard”.  Is that a moral offer?  Certainly.  If I can make a profit doing this, is that rational?  Of course.  Therefore, it’s the right thing to do.

Is it moral for someone to accept my offer of $1.25 an hour doing that versus either doing nothing or something else?  Is that moral?  Yes.  If he or she can better himself by accepting my offer as profitable to them, is it right for them to do this?  Yes. It’s right for me. It’s right for them.  Why is it wrong?  On the other hand, if they can do better working for somebody else, fine.  I don’t force them there with a gun.  What’s wrong with this?  Alright.

Let’s say I’ve got five hundred people picking grapefruit.  I say, “Well, folks, I’m sorry I have to tell you this.  I know you want to work for me and I want you to work here.  And you’re not holding a gun on me and I’m not holding one on you.  You don’t have to be here unless you want to be here.  You know that.  I’ve just been informed that, if I don’t pay you $2 an hour, I will be shot.  Obviously, I don’t want to get shot and the sad fact is I cannot make a profit in the grapefruit business while paying you $2 an hour”.  [Actually, what he’s really saying is you’re not worth $2 an hour.  Saying I can’t make a profit paying you $2 an hour is another way of saying you’re not worth $2 an hour to me.  I cannot make a profit.]  “So all five hundred of you, I’ll have to lay off and the orchards, we’ll just have to let them go to ruin”.

Do we not have a lower standard of living because there are fewer grapefruits per mouth?  Yeah.  I have to lay you off.  I can’t make a profit.  Essentially what happens is, with the minimum wage law, you put the marginal producers out of business.  In other words, those who are just barely making profits, barely getting by, they then become sub-marginal and they go out of business.  This is a major cause of unemployment, minimum wage laws.

The second major cause of unemployment, coercive labor unions.  They are the second major cause of unemployment because, through coercion, they also coercively bid up the price of wages, causing unemployment.  The main class of people who are harmed by this are teenagers because most of the jobs and opportunities for teenagers to be productive are eliminated through minimum wage laws and coercive unions.  And one of the best things for any teenager anywhere at any time is to learn how to be productive, the sooner the better, and there’s no exception.  And we just wipe out all of the opportunities for teenagers, most of them, to be productive.  The jobs are eliminated.

When I was in my kidhood days, I remember a popular job for teenagers was a box boy in a market.  Do you notice that practically the job of box boy has been eliminated?  And even that is an opportunity for a young person to learn some responsibility.  You have to be there at a certain time.  You have to have a certain standard of performance.  You are expected to do certain things which require individual responsibility.  And you can earn your own money and begin to learn the value of money.  Is this not a step in the right direction in the process of growing up?

And then when I go to market, I got to stand in line longer because the checker is doing the boxing.  If there is anything I resent, it’s standing in line.  I won’t do it.  I go to market, I got to stand in line.  I cannot tell you the number of times I put the packages back on the shelf and I walk out.  I don’t when you go to the market.  When I go, you know, they have this 10 items or 7 items or less with the flashing light.  When I go to the market, they never seem to have this line going.  I don’t if it’s going when you go there but hardly ever.  Or when it is, a few times, there’s twenty people, a slight exaggeration, but anyhow.  And so, I could get out of there sooner if they had the box boys back.  Anyhow.

So, essentially, what you wind up with is this.  Instead of a job at $1.25 an hour, you wind up with no job at $2 an hour or now $2.65 or whatever it is.  And that will just cause more unemployment.  What do you get?  The exact opposite of what was intended.  Ladies and gentlemen, you cannot solve problems with guns.  It won’t work.  It never did work.  This theory obsoletes the gun.  We are reducing all guns to the scrap heap.  The role of gunmen will be obsoleted by this theory.  In the future there will no longer be any gunmen.  A gunman is one who wears a gun and tries to solve problems with guns.  It is a primitive concept.  It is caveman technology.  And we’re offering a superior alternative.

Well, the maximum price forces the price below the free market level.  The minimum price forces the price above the free market level.  The free market price of a given product is that price that would exist if all coercion were removed from the market.  Price then is determined by voluntary conditions of supply and demand.  Now what happens if the state freezes the price at the free market level?  Why not do that?  What happens to prices in the free market?  Are they static or do they fluctuate?  Prices are always fluctuating up, down, some direction, various trends over a period of time perhaps.  They’re never static, are they?  Alright.

If you freeze the price at the free market level, all that means is whatever direction the price would have gone, either up or down, it becomes either a minimum or a maximum price control.  So you get the same thing.

Now if all of the prices are controlled, in other words, all of the people are controlled, then you have a slave state.  But what happens if only one price is controlled?  Let’s assume we have a laissez-faire economy with the exception of one product.  For some lifeboat reason, it’s decided that the price of tomatoes should be controlled.  Alright.  If nothing else is controlled, in a short while, the people in the tomato business are going to find they can no longer realize the profits that they’ve been making, at least prior to the price control.  It will naturally occur to these people, who are growing tomatoes for a profit, that maybe they ought to get out of the tomato growing business and look for a greater opportunity for greater profit. They might go into the artichoke business, limestone lettuce business, or you name it.  They might go out of the farming business altogether.  In any event, they will seek a business where there are fewer controls, hence greater potential for profit.  And the price control will eventually result in the entire destruction of the tomato growing business.

Well, at this point, the bureaucrat discovers that instead of making tomatoes more available, which was his intention, he has now made them less available.  You can’t find tomatoes hardly anywhere, except maybe those people who want to grow them in their own back yard.  But most of us don’t really have the time to grow our own tomatoes.  I know I don’t.  And therefore, if it were on that basis, I wouldn’t have any tomatoes at all because I don’t have time to grow them at home.

Well, then what happens?  The bureaucrat is faced with one of two choices.  He can abdicate or he can extend the control.  Well, since his plans never work out right, there are only two things he can do: abdicate or extend the control.  And so he says, “Well, I guess my plan didn’t work out.  I’m going to get out of this control racket”.  That rarely happens.  More likely he will say, “The reason that it didn’t work is because there aren’t enough things being controlled. Somebody has escaped through a loophole”.  And guess what?  That’s exactly what has happened.  The tomato growers have escaped through a loophole.  In other words, they quit.  And so the bureaucrat says, “We’re going to pass another law [that being the universal panacea for all problems – there ought to be a law].  These scoundrels in the tomato growing business are not cooperating.  We are going to make it illegal to leave the tomato growing business.  You will grow tomatoes”.  This, of course, is the tribal chief method of solving a problem.

Now there’s a much more subtle way of dealing with the problem.  These people, of course, are leaving the tomato growing business because they’re not making enough profits or any at all.  The people are going to have to have some incentive, they have to make a profit, we will subsidize them so they can stay in business.  And where does the subsidy come from?  Seizing from everyone or from some special group.

Now there’s an even more subtle way of dealing with the problem.  This is the real witchdoctor technology.  And that is what?  The bureaucrat says, “Well, it’s clear to me the reason the tomato growers can’t make a profit is because these people in the trucking industry are charging outrageous prices to haul these tomatoes into the market.  So we’re going to regulate and control the trucking industry.   And then what happens, the first thing you know, they destroy the entire trucking industry.  What’s the result?  Well, we got lots and lots of tomatoes, wall to wall tomatoes, but they’re all rotten in the field because there’s no way we can get them into the market because the trucking industry’s been wiped out.  That isn’t what they wanted.

And so the bureaucrat says, “Well, it’s clear to us, the reason the trucking industry cannot make a profit is because the people in the oil industry are charging outrageous prices for gasoline and oil. We’re going to have to control the oil industry.  As a matter of fact, we knew it was the oil people all along and we’re going to nail them”.

There are three coercive means that the bureaucrat can employ to keep the tomato grower in business after taking an action to put him out of the business:

  1. Force him to stay in business and operate at a loss.
  2. Steal property from others to subsidize him.
  3. Extend the control to somebody else.

All of these measures may appear to work in the short run.  In the long run, they will end in failure.  But the bureaucrat will continue to correct his blunder by what?  Making other blunders.  You might as well know the worst now.  A bureaucrat is capable of two things:

  1. Plunder
  2. Blunder

That’s it.  It’s a beautiful mechanism.  They blunder and they plunder and they plunder and they blunder.  And the beautiful thing is they convince us all that they’re really doing a great job.  And they’re sacrificing for us.  After all, they are public servants.  And they’re very generous with your property.  It’s easy to be generous with the other guy’s property. Help yourself. It’s not mine.  As I said.

Well, this discussion of prices leads to a discussion of the most destructive and pernicious and outrageous mechanism to control prices and control people ever conceived by the human mind. This concept is called anti-trust legislation, the anti-trust laws.

The anti-trust laws represent the so-called cure for monopoly.  The reason we have such things as anti-trust laws is due to the fact most people have been taught to believe that the monopoly creates a danger to the individual consumer.  I, myself, was taught this in school.  I got an A in the course that taught this.  What was your grade?  I got an A.

As a result of this, laws have come into existence of the most irrational nature, not to mention the most immoral, which interfere with the production of property on a grander scale than any other set of laws ever put forth in history.  And in this connection, I would like to compliment those people who have produced the anti-trust laws, those who support them, which includes every major politician, I would say, of both major parties, including the independents.  I would like to compliment these people as being the most immoral and irrational politicians in history because they have produced the most dangerous set of laws in existence, even more dangerous than the income tax law.  And that’s an impressive bit of one-upmanship certainly.  It is more dangerous than the income tax law, the basis of which is the more you serve your fellow man, the more you will be plundered.  That’s the free translation of income tax law.  That was explained to school, wasn’t it?

Well, first of all, we might ask this question.  Is it just my relative opinion that anti-trust is wrong or can we arrive at an absolute conclusion?  As I discuss anti-trust, I will answer four question:

  1. Is anti-trust moral?
  2. Is anti-trust rational?
  3. Is anti-trust right?
  4. Is anti-trust constructive?

Now, if I can prove that anti-trust legislation is, one, always immoral, two, always irrational, three, always wrong, four, always destructive, if I can prove that, would any of you still give it your support?  I would hope not.  I will demonstrate those four.  Other than that, it’s okay.

Anti-trust represents a total breakdown of two things: rationality and morality.  Before I go into specifics, I’d like to point out that the anti-trust laws have as one of their effects a creation of a criminal class in this country which includes how many people?  Well, the anti-trust laws have made every man, woman, and child in the nation a criminal without exception.   If you think about it, that’s quite an achievement.  In this course, I defined a criminal as one who perpetrates a crime.  A crime is a successful act of coercion.  Coercion is any attempt at an intentional interference with property.  Now this is not the way that the bureaucrats define crime.  Crime is defined by the legal profession as any act which violates a political law.  A political law is a rule passed by a state, a rule you must obey or be shot.  If you violate the law, that is called a crime.  The violator of the law is called a criminal. By the state’s definition of crime, anti-trust laws have rendered everyone in the nation, in one fell swoop, a criminal.  Brilliant.

You say, “Well, wait a minute.  Wait a minute.  How can this be?  I’ve never gone to jail for one of these crimes”.  Well of course you haven’t.  How would that work?  Think about it?  How could everybody be in jail at the same time?  If everybody’s in jail, who’s going to grow the food?  Who’s growing tomatoes when everybody’s in jail?  What, then, is the real intention of anti-trust?  Is it to send everybody to jail?  Of course not?  Is it to call everyone a criminal?  No.  The purpose of this is to render everyone vulnerable to the potential charge of being called a criminal and then making the charge stick.  You see, if everyone, at some time in his life, has violated an existing law, then if and when it becomes desirable to put that fellow away, who is a so-called troublemaker, then there is the prevailing mechanism to accomplish this.  “Oh, you’re a troublemaker, huh?  Well, we got places for people like you called jails.  Open up in the name of the law.  It’s an eastern policeman. Open up in the name of the law”.

The anti-trust laws have made everyone a criminal by the following procedure.  They have made every single price illegal.  As I said at the beginning of this second half, every transaction takes place at some price.  The prices are determined by the parties making the exchanges.  All of these prices have been rendered illegal. There are only four possibilities:

  1. An individual sells a product at a price lower than his competition.
  2. He sells a product at a price higher than his competition.
  3. He sells a product at a price equal to his competition.
  4. He has no competition.

All four are illegal.  If the price is lower than your competition, that’s called cut-throat competition.  You’re accused of restraint of trade by eliminating your competition and thus intending to create a monopoly.  That is illegal.

On the other hand, if the price is higher than your competition, that’s called profiteering or price gouging.  That, too, is illegal.  You say, “Well, I think I’m beginning to understand how this works.  I’m going to play it safe.  You see, I’m not going to charge a price lower than my competitors.  I don’t want to charge a price higher than my competitors.  I’ll charge the same as my competitors.  I’ll go along with the crowd”.  Congratulations.  That’s the worst crime of all.  That’s called collusion and you’re charged with a crime called conspiracy.

You say, “Well, I think I really understand it now.  The only safe thing to do is….I will go into a business where there is no competition”.  Congratulations.  That happens to be the very thing that the anti-trust laws were designed for in the first place, to prevent monopoly.  And you, sir, are a monopolist.  In other words, no matter what you do, it’s illegal.

The anti-trust department is in a position to hold a sword over everyone’s head.  If anyone steps out of line, he gets chopped down.  The anti-trust legislation is simply a tool to keep people in line.  Who has been fooled by this?  Both classes.  If it will make you feel any better, I, too, was fooled by this in school.

Well, one of the questions that has to be answered is how can such an incredible fraud be perpetrated?  Why do people in general accept the concept of anti-trust legislation?  For example, when I was in school, and by the time I got out of school, I went to school for, I don’t know, 17, 18 years so, formal school.  Some of you went longer than that, I’m sure.  When I got out of school, one of my favorite all-time presidents, I would have put him in the top three, was Teddy Roosevelt.  What a man of strength.  Towering figure of strength in American history.  Certainly one of the great presidents, Teddy Roosevelt.  I remember his slogan.  Remember what he said when he was dealing with these corporations and his attitude was, his slogan was, dealing with these trusts and these big, giant monopolies, his whole attitude was “Walk softly and carry a big stick”.  If anybody steps out of line, smash them to the ground.  That was the implication of that: walk softly and carry a big stick.  What a tower of strength.

I hope it comes as no rude shock to you.  Teddy Roosevelt, who I thought was certainly one of the top three presidents, is at least, now that I have greater knowledge, one of the three most destructive presidents in American history.  Through the work of Teddy Roosevelt, we got, principally through his efforts, we got the progressive income tax, coming into fruition in 1913.  We got the strengthening of the anti-trust legislation by 1913.  And we got the Federal Reserve System by 1913, the subsequent implementation of which resulted in things like America’s Great Depression, such things as inflation and so forth.  As a matter of fact, 1913 was probably one of the worst years for liberty and freedom in American history.  I’m sure some of you are wondering, who are the other two?  We don’t want to go into that.

The vast majority of people, ladies and gentlemen, give their wholehearted, enthusiastic endorsement to the concept of anti-trust legislation.  They endorse all the politicians who are for it.  It is almost political suicide for a politician to say that he’s opposed to anti-trust legislation.  Why?  Because the witchdoctors have successfully sold the people on the idea that, well, all that the anti-trust laws are designed for is to protect the little fellow from the big fellow.  If I can demonstrate that the businessman, that the community as a whole, have nothing to fear from the large corporation, then I can demonstrate the anti-trust division is a total fraud, which it is.

Now before I plunge into the monopoly question, I would like to make two preliminary observations.  One is largeness on the one hand is not equivalent to monopoly on the other.  This is the first misconception.  Most people identify these as equivalent.  They’re not.  Monopoly refers to a single source of supply of a product, of a service.  Now General Motors is a very large company but are they a monopoly?  Of course not.  They have to compete with the Ford Motor Corporation, the Chrysler Corporation, American Motors, a seemingly endless number of foreign competitors.  One of these Japanese imports is one of the top sellers here, at least in California.  I forget which one.  Datsun or one of those.  Toyota?  And they’re really selling exceptionally large numbers.  And so, General Motors, who is still the number one seller of automobiles, they don’t have anything like a monopoly.  And even if they did, they couldn’t harm you.  Even if there is only one producer of automobiles, that cannot harm anyone as long as it’s not a coercive monopoly.  And so, bigness and monopoly are not synonymous.  That is the first misconception – that they are.

The second observation I’d like to make is a belief that monopoly implies coercion.  That if there is only supplier of a product, most people say, “Well, that’s coercive”.  That’s ridiculous.  Coercion involves an attempted attack upon someone else’s…an intentional attack upon someone else’s property.  Well, how does it interfere with somebody else’s property to be the sole producer of a product?  What’s coercive about that?

Well, the argument is, well, monopoly, they can charge any price they want.  Can they?  In a laissez-faire economy, would there be any political law to prevent the monopoly from charging any price they want?  No, there wouldn’t be.  Alright.  So they charge any price they want.  What’s coercive about that?  Whose property is the monopoly selling?  Property they produced or property someone else produced?  If it’s property they produced, please note, property does not exist in nature.  Therefore, the property would not even exist if they had not produced it.

Well, what price can they charge for the product?  What price can anyone charge for any product?  Well, it will cover all the bases, pardon the expression.  That’s one of my subtle jokes.  The possibilities include zero to infinity.  Alright.  Is any price from zero to infinity fair?  Is it moral?  Sure.  I’ll offer my tape recorder for sale all the way from zero to infinity.  That’s just an offer?  Do you have to accept it?  No.  Did I force you to accept it?  Force you to?  No.  You either accept the offer or reject it, which is moral on your part.  If we agree upon a price, then that’s the fair price.  A fair price is whatever two people agree upon, assuming there is no fraud on either side and no coercion of any form.  That’s fair.

What if somebody offers a can opener for sale for $99?  How many would say that’s an outrageous price for a can opener, $99?  Well, do you have to buy the can opener?  No.  What is an outrageous price anyhow?  Any price you’re unwilling to pay.  The value is in the eye of the beholder.  Might you pay $99 for a can opener and look upon it even as a bargain?  I would.  If I could find a can opener, for example, that would lift off the lid without leaving metallic debris in the food, I would look upon that as a bargain.  As a matter of fact, that’s how you can test the quality of your can opener, is take a can of peaches or something that’s got a liquid surface, and open up the can and take it under a very strong light and see how much metallic debris is down in the food.  And the less the metallic debris, the higher the quality of the can opener.  That’s how I would rate the can opener.  There is some indication that the collection of this debris in your innards ain’t too good for you in the long term.  I don’t know if that is true or not but it probably won’t help your innards.  How many of you have ever tested the quality of your can opener this way?  Just a couple of you.  Why see, you get all kinds of spin-off derivatives from this theory.  Anyhow.

The only time coercion would be involved is if somebody said, “$90 for the can opener.  If you don’t buy it, I’ll shoot you”.  In which case, it’s not the $90 that’s coercive, it’s the threat you will be shot if you don’t buy.

Finally comes the major argument for anti-trust.  What happens when there is a product that you absolutely have to have but the seller of the product is so obnoxious, why he sells at a price that is outrageous.  This problem can be easily handled.  Question: what product is there that you really need?  What product can you identify that is essential to your survival; without this product you would die?  Can you think of any homogeneous product that would fall under this category, relatively homogenous product?  Do we have any product that is essential for survival?  Anyone taking this course for the first time?  Water is one.  There is no single food that is essential to survival.  Air is the second.  That’s it.  Air and water.  Those two are essential to survival.  As I said, there is no single food that is essential to survival.

Now, air cannot be controlled by man.  Therefore, the prospect of any one company controlling all of the air is not a problem.  Air, essentially, is what’s called a free good. It’s available in abundance everywhere.  You just breathe.  Now clean air, that’s a different matter but we’ll cover that later.  Water is also essential to survival but it presents a somewhat different problem because, unlike air, it’s not readily available for consumption on all parts of the planet.  Most people do not have a fresh, babbling brook running through their backyard.  And the early civilizations were established around the great sources of water.  Why?  Well, when you have low technology, you have to go where the water already is.  It’s only when you have high technology, you can afford to move away from the source of the water.  It’s only with high technology, you can have seven million people living in the LA Basin.  Do you think seven million people in the LA Basin could live off the Los Angeles River or the San Gabriel River?  I think most of the people from Los Angeles, you probably don’t even know where the Los Angeles River is.  If you look at a map, maybe.  It’s not too all impressive, is it?  And so, when you have a primitive society, the problem of anyone getting a monopoly to water, if you live in the Nile Valley, just go down and drink the water out of the river.  And you can’t get too far away from the river.

Alright. So let’s assume that we’re dealing with a high technology.  We have a private enterprise company.  The business is selling water to its customers.  And we’ll assume we have a laissez-faire market economy.  Question.  Why is it you’re not at the mercy of the water seller?  If I can demonstrate you’re not at the mercy of the water seller, and water is a product that is essential to survival, then I think we can easily handle any problem that might result from, let’s say, a monopolistic control of such things as gasoline, steel, automobiles, Saran Wrap, or you name it.

Alright, let’s assume, you live in an area that receives its water from a single company, one water company.  They can charge any price they want for the water.  If you don’t like the price, what else can you do?  Well, first of all, if you didn’t like the price before you moved there, would you have moved there in the first place?  If water is selling for $1 a gallon some place, where you’re thinking of moving, would your enthusiasm for moving there be somewhat, pardon the pun, dampened?  I think so.  And so, you don’t move there in the first place.  Could that be a solution?  Of course.

On the other hand, let’s assume, once you moved there, the water seller gets obnoxious which, incidentally is irrational but they raise the price.  This makes you unhappy.  What course of action do you have?  Well, you could move away.  Could that be a solution for somebody?  Sure.  People move from neighborhoods for any number of reasons.  The crime is increasing so let’s get out of here before we’re the next victim or what have you.  Well, moving away could be a great inconvenience.  So what else can you do?  Well, you could squawk.  You neighbors have ears.  You’ve got a big mouth.  Maybe people are also dissatisfied.  You might get together and negotiate with the water company to obtain a lower price.  Could this be a solution?  Yes.  But this could fail.  After all, they’ve got all the water.

Well now, your objection might be so loud and noisy that some other company in the water business might decide they can beat the present water company’s price and make a profit.  You would invite competition.  Could that be a solution?  Yes.

You could even have water on your land.  You could dig a well.  That’s not unknown.  Could that be a solution?  Certainly.  There’s plenty of water in the Pacific Ocean.  Through higher technology, more efficient saline water conversion technology, you can get saline water converted to fresh water at inexpensive prices.  The same principle can be applied to cleaning up polluted water.  Could all of these be solutions?  Yes.

But let’s eliminate from the argument all the solutions I’ve just given:  moving away, innovation, competition from other supplier, dig a well.  I’ll intentionally create a lifeboat case.  Why is the water company in business?  Give me one reason they are in business.  What’s that?  To make a profit.  And that is the beauty of the free market system.  It’s so simple.  There’s no hidden motives.  There’s no clandestine, conspiratorial activities beneath the surface.  Nobody’s trying to put something over on you.  It’s all out in the open.  There’s only one reason for the water company to be in business and that’s to make a profit.  Now ladies and gentlemen, you tell me this.  How does the water company make a profit when they don’t sell any water?

You say, “Wait a minute Snelson.  You just got through saying water was the one product I had to buy.  Water is essential to survival.   They’ve got me.  I’ve got to pay the price”.  Alright, let’s analyze this argument.  Just how much water do you need to survive?  Do you think you could survive on three of four glasses of water a day in the winter and, let’s say, a gallon of water in the summer?  Could you live on this consumption?  How many say yes?  Sure.  Now, to be sure, occasionally you might want to take a bath once in a while, but even bathing is not essential to survival as many people seem to be willing to prove these days.  The point is that it’s the water that you drink that is essential to survival.  Now, ladies and gentlemen, just what water company do you think could maintain a highly capitalized aqueduct system selling you on the average two quarts of water a day?  Do you realize how little is this amount of consumption?  What water company could stay in business on this low volume of consumption?

And so, the fact of the matter is, the only way in which a water company can stay in business is if they induce you to purchase water for some other purpose than drinking.  Like, for example, taking a bath daily instead of, perhaps, semiannually.  I’m having my semiannual bath.  Or maybe affording the luxury of a twenty minute shower when, in fact, five minutes is all that’s really necessary.  Have you ever taken a twenty minute shower?  I have.  It’s fun. It’s when I do some of my best singing and some of my best thinking.  Of course, I’m immediately accused of being a wastrel, wasting energy, an unpatriotic fellow.  That’s part of the fraud, too. Let’s all think small, be small, each day use less energy, turn off your electric clock unless you want to see what time it is.  And I didn’t make that up.

Ladies and gentlemen, you could be persuaded, if the price of water was low enough, to have a green lawn.  Otherwise, you might replace it with concrete or gravel.  And you might even be persuaded to put in a swimming pool full of water.  And this is what the water company wants to sell you, ladies and gentlemen.  What they want to sell you is not a quart of water.  They’d like to sell you a swimming pool full of water.  Well, if water is selling for $1 a gallon, are you enthusiastic about putting in a swimming pool?  What does the average swimming pool have, what, 20,000, 25,000 gallons of water?  Is that about what they have?  Somewhere in this range?  How many of you know?  Is that about right, 20-25,000 gallons?  I think so.

What does it cost to put in a pool these days?  Can you get a pool for 10 Grand?  7 to 15 Grand?  Does anybody know?  Is that a ballpark figure?  Alright.  Well, do you realize, at $1 a gallon, it’s going to cost you $20,000-$25,000 just to fill the damn pool?  And who’s going to do this?  And even if you get it filled, don’t splash!  Don’t make waves!  No diving!  And you cover the pool so the sun doesn’t evaporate it.

The water company wants to sell you water for industrial use.  This is where they make the profit, on the large sale.  The amount of water that’s required for survival is so small, you couldn’t justify a single aqueduct.  And so, if the water company is going to survive, they have to sell you, not gallons of water, but billions of gallons of water.  And that’s where they make the profit.  You can generalize from this.  This applies to any potential monopoly.  And furthermore, you know, how many of you have seen, for example, in the front of supermarkets, they sell distilled water, spring water for like, I’ve seen, 10¢ for a half gallon.  I mean, really ladies and gentlemen, just go down there and spend 20¢.  You get a gallon of distilled water or spring water.  You can get a bottle of soda water for 30¢ or whatever it costs these days.  Soda water will keep you alive.

In general, when will a natural monopoly occur?  When it is more efficient to have one producer instead of many producers in a given area.  In a free market, for example, it’s quite likely you will only have one telephone company servicing a given area.  The reason, however, for the single telephone company would not be the same as it is today because, today, in order for a telephone company to provide a service, they have to obtain a legal, which means coercive, monopoly.  In other words, the company has to obtain a state franchise in order to operate.  Other telephone companies will be excluded.  In the security of this knowledge, they can afford even certain inefficiencies, lack of customer satisfaction.  In other words, where there’s state monopoly position, they don’t have any direct competition.

However, in a free market, even though there might only be one company servicing a given area, the situation would be different because, in principle, they would still have to contend with other companies.  In a free market, there might be several telephone companies servicing a given area, but, in the long run, there would probably only be one company.  Quite likely, the various competing companies would divide up their territories, they would reduce their overhead, decrease their rates.  That would be a rational and moral reason, rather than a compulsory reason, for only having one company. Today it’s done by a gun.  If you and I try to go into the telephone business out here in Orange County, we would eventually get shot.  That’s a good incentive not to do it.  Who wants to get shot?  Of course, someone will say, “Wait a minute.  If there’s only one company, and therefore no competition, what’s to prevent the telephone company from raising its rates to some exorbitant level”?

Alright, let me ask you this question.  Are telephone calls essential to survival?  Desirable, yes; essential, no.  Is it only through a telephone that you can communicate?  No.  There are many alternative means of communication.  You can have communication through electromagnetic waves.   Let’s say a company develops a new telephone technology where you carry around a little telephone transmitter and receiver, about the size of a package of cigarettes.  You carry this in your shirt pocket.  And you can punch in a bunch of buttons, or a number of buttons, in a certain sequence and you can reach anyone else on the planet who has one of these devices, directly, without the use of wires.  If you drop it and break it or lose it, you can replace the unit, let’s say, for $15.

Alright, let’s say that AT&T does not know how to do this.  They don’t know how to do this.  Can AT&T compete with this?  No possible way.  They would be out of business overnight.  So innovation could put a company like AT&T out of business.  They have to put their capital somewhere else.  You could have visible light transmitters and receivers as a means of communication.  Many potential alternatives.  In fact, whenever you have a sole producer of a product, this offers great incentive to innovators to put out superior products.  And so, the monopoly produces a threat to no one.

The only thing that does produce a threat is coercion.  Is AT&T coercive?  Does GM hold a gun on you so you got to buy one of their products?  Have you ever had a General Motors salesman point a gun at you and say you’re going to have to buy this Chevy or this Pontiac or this Cadillac or what have you?  Has this ever happened to you?  I’m sure if it ever did, that man would be fired.  Do you think he would be fired?  You’re darn right he would.  And if the agency condoned it, then General Motors would see that agency would be fired and they would not be allowed to sell their products.

The one thing that is dangerous, ladies and gentlemen, is a monopoly of coercion.  And who has this monopoly?  Is it the producer of any product or any service you know of?  Is it General Motors?  Is it AT&T?  Is it DuPont?  Who has this monopoly of coercion?  I presume you know the answer. That’s right.  The state has a monopoly of coercion.  And ironically, it is ironic, ladies and gentlemen, that it’s the state that most people look to, to protect them from the moral economic monopoly.  An economic monopoly exists when there is a single producer of a product.  And so, what do we do?  We ask the coercive, criminal state, the mechanism that has a monopoly of coercion, to protect us from a moral monopoly.  Not any different than the sheep going to the wolf for protection.  Good luck.

But let’s take a moment to look at how a telephone company, the sole producer of a telephone service, might operate in a laissez-faire market.  Remember there would be no Public Utilities Commission telling the telephone company how to run their business, what price to charge for their service.  Alright, assuming that there would be no PUC, that’s what we call puke, assuming there’s no puke – although I was corrected once by an English teacher who wrote me a note saying, “Mr. Snelson, that should be pronounced puck”.  In any event, assuming there’s not puke telling them how to run their business or no interstate commerce commission, ICC, or ick, telling them how to run their business, assuming there’s no regulation, no interference from any of these alphabet soup agencies, what would be the price that the telephone company would charge for its service?  Let’s assume the telephone company is charging, let’s say, a nickel a message unit.

What is to prevent the company, in a laissez-faire market, from charging something other than a nickel?  What’s to prevent them from raising it to 10¢?  50¢? $10? $50? $500?  $5000?  What political law would prevent them from charging $50,000 a message unit?  Or $50,000 for a three minute call to, let’s say, from LA to New York?  50 Grand.  And only 10 Grand to make a local call.  Would there be any political law to prevent this?  Of course not.  Why shouldn’t they charge $50,000 a call?  Can you think of a reason for the telephone company to be in business?  Same reason the water company’s in business – to make a profit, ladies and gentlemen.  And how can they make a profit when they don’t make any sales?

Now, to be sure, somebody will say, “Wait a minute.  Wait a minute.  That’s a ridiculous illustration.  Of course, the telephone company isn’t going to charge $50,000 a message unit.  My question, sir, is what is to prevent the telephone company from just becoming  a little bit abusive?  First thing you know, they raise it from 5¢ to 6¢.  And then, before you know it, it’s 7¢ and then 10¢.  They’re very sneaky about it.  Slowly they raise it.  First thing we know it, it’s 12¢, then a quarter, and half a buck.  Slowly, sneakily, they raise the price so that nobody notices it.  First thing you know, it’s $5”.

Well, is there any political law to prevent this?  No.  However, there’s a law of nature to prevent it.  And you know what that law is.  You’ve heard it before.  It’s called the law of supply and demand.  And it works this way.  Each time the telephone company raises the price of the service, they augment the price, that diminishes your incentive to make telephone calls.  Now, if they do raise the price, and therefore increase the profit, what does that mean?  The price was too low.  Now they’re doing the right thing.  If they raise the price again, and therefore increase the profit, that’s fine.  But eventually, as they keep raising the price, this is reducing the volume.  And they will reach a point of diminishing returns where suddenly the volume is so low the profit starts to go down which means they must do what?  Lower the price now to get the volume back up in order to get the profit back up.

On the other hand, if they lower the price, this increases the volume and therefore the profit goes up, that means the price was too high.  And they lower it again, the volume goes up and the profit goes up, that’s what they should be doing.  But, again, what will happen?  In the other direction, a point of diminishing returns where the unit price is so low, now the profits start to go down and they must do what?  Raise the price back up in order to get the profits back up.

In all of this, the optimum price per unit is what they’re looking for that will result in the maximization of profits.  Now this optimum price per unit is determined by everybody, all the factors of supply and demand.  And I’d like to point out you cannot maximize profits, ladies and gentlemen, by maximizing prices.  It won’t work.  If you try to maximize profits by maximizing prices, you will maximize yourself out of existence.  In spite of what the bureaucrats have told us, ladies and gentlemen, companies do not exist for the purpose of punishing their customers.  Companies exist for the purpose of making a profit and you do not make a profit when you raise the price to the point where the customer won’t buy the product.  To be sure, somebody will introduce all kinds of lifeboat cases.  Well, what if it’s a matter of life or death?  I need the telephone call.  My little girl is suffering from an emergency.  I have to call a doctor, to make a telephone call to save my little girl’s life and they want five bucks for the call.  What am I going to do?

Well, you have to make a decision, dear dad and mom.  Is your little kid worth the five bucks or not?  And either she is or she isn’t.  Of course, if you look at the real world, telephone rates have continually done down.  Compare telephone rates with postal rates.

And so, somebody else says, “I have to use the telephone in my business”.   Fine.  Limit your telephoning to business and cut out all the social niceties.  Any of you could easily reduce your telephone bill by 20%, no great strain.  What if the telephone company suddenly experiences a 20% loss in gross revenue?  Ouch.  The fact of the matter is, you could afford to reduce your usage by 20% more than they could afford to have a 20% drop in gross revenue.  And when you cut down on usage, you’re not attempting to punish the telephone company any more than they’re attempting to punish you when they raise the rate.  They’re just trying to maximize their profits and you’re trying to do the same thing.

Ladies and gentlemen, the customer is not at the telephone company.  On the contrary, it’s the other way around.  Every producer is at the mercy of the customer.  If the customer doesn’t buy, he’s had it.  The customer needs absolutely no other protection than the freedom to abstain from buying in the marketplace.  The idea that the consumer needs protection from the coercive state is an absurdity.

A monopoly, then, in the free market is not free of competition.  It has to face competition from many different sources.  One, it’s got new competitors coming into the field.  Two, innovation that obsoletes the whole product.  Every product has competitors.  As a matter of fact, every seller is in competition with every other seller.  Tomato sellers are in competition with steel sellers.  How do you know?  Every buyer has a finite amount of resources to purchase any product.  Every seller is in competition with every other seller for your finite resources.  Think about it.  It’s observable.

And almost every economic fallacy today involves the erroneous belief that you can, in some way, improve the economy through some type of price control.  This is one of the last things I want to mention in this lecture, just briefly about economics in what are called colleges and universities.  Economic control means control of property without permission of the owner.  Control of property means control of the owner of the property.  Every piece of property has an owner.  The erroneous assumption is that you can increase production of property through the coercive control of property or you can increase economic stability through the coercive control of property.  This is what is taught in colleges and universities in the subject that is called economics.  There is only one problem.  As the coercive control of property goes up, the production of property per producer goes down.  As the production of property per producer goes down, the standard of living goes down – the law of bureaucracy.  And so, what is called university economics will do this.  It will justify, abdicate or condone, if not one form of economic interventionism than another.  For example, economics will sanction the state coercive monopoly of the money system.  It is a state coercive monopoly of the money system that ultimately produces what is called inflation.  Inflation is just another form of a tax swindle.

It is common for economists to advocate protective tariffs, just another form of theft.  It is commonplace for economists to advocate taxes in general.  Once you elect or condone stealing, you have to make the following decision:  One, who is going to do the stealing?  Either you must do the stealing personally or you appoint somebody else to do it for you.  If you do the stealing, you’re the thief.  If you appoint somebody else, the somebody else is a thief and you’re only an accessory to the crime.

Essentially, what is called economics, but hardly an exception today in the college or university, will advocate coercion, stealing, coercive controls, price controls in one form or another on the grounds this will improve production, improve stability, etcetera, etcetera.  And the result is always the law of bureaucracy – the exact opposite of what is intended.  In other words, the whole subject today as it is taught, with few exceptions, is total witchcraft.  If you have a degree in economics today, I’m sorry.  You have a degree in witchcraft and superstition and a total fraud.  Ditto political science.  Ditto what’s called sociology and any number of other subjects in what’s called a college or university.

As far as the formal lecture is concerned, it’s complete. There’s one thing for those who wish to remain.  I’d like to just take just about three, four minutes here to read you something.  Since you probably don’t have any idea how bad this concept of anti-trust really is, I just would like to read you something from a book called Ten Thousand Commandments, a story of the anti-trust legislation by Harold Flemming.  I just want to read one thing, what happened to one company, Alcoa.  The whole book is filled with this.  I’m not even picking out the worst example.  But this is something worth tuning in on, but if you have babysitters to rescue or the hardness of the seat, if you wish to leave without hearing this, you may do so.  I won’t even look.  But just leave quietly.  I just want to show you how vicious this concept is.  And this is just one company.  The whole book is filled with this stupidity.

“In 1888, a half dozen men, after raising $20,000, started commercial production of aluminum in a corrugated iron shed with a dirt floor in Pittsburgh.  Aluminum was then selling for $8 a pound.  [Alright, you can make a note of this.  It is 1888.  Aluminum is selling for $8 a pound].  The midget Alcoa, Aluminum Company of America, produced its first specimens in the fall.  Output averaged less than ten pounds a day at the start.  [So they’re putting out 3650 pounds a year or so].

The hardworking founders locked up the product each night for safety in the office safe.  [It was worth $8 a pound.  So they locked it up].  The gist of the Alcoa idea was innovation.  [Now innovation I called earlier, in Lecture 4, the constructive aspect of the principle of least action].  The idea was to develop something new.  And as it developed, keep it always new, cheap, desirable and ahead of competitor producers.  Both these ideas were typically American and still are.

By the late 1930s, the founders of the Aluminum Company of America had cut the price of aluminum to 20¢ a pound.  [So by the late 1930s, they got it down to 20¢ a pound.  And earlier, when they started, it was $8 a pound.]  Production was increased to over 300 million pounds a year from 3650 pounds.  They worked at it so hard that, for fifty years, Alcoa was the only maker of aluminum in the United States.  [Uh-oh.  One producer of aluminum?  They must be criminals.]

In 1937, the anti-trust division of the Department of Justice sued the Aluminum Company of America for violation of Section 2 of the Sherman Antitrust Act.  Or, in other words, for being a monopoly in the aluminum business.  The trial started on June 1, 1938 and ended August 14, 1940.  It is said to have been the longest trial up to then in the history of the world.  Testimony and argument took 364 court days.  The court record reached more than 40,000 pages plus nearly ten-thousand pages of exhibits.  The transcript weighed 325 pounds.  The final record was printed in 480 volumes, containing an estimated fifteen million words or more than thirty times as many as Gone With the Wind”.

There were 140 charges against Alcoa.  Alcoa won all of the 140 charges, one of which was excessive prices, for example, to give you the absurdity of it.  The owner reduced it from $8 a pound to 20¢ a pound.  That was excessive prices.

But anti-trust appealed.  Of course, they have an endless amount of tax money that they can bring it back into court.  In the second trial, they reversed the decision of the first trial.  Anti-trust won in the second trial on one of the 140 charges, that they had monopolized the market for virgin aluminum ingots.  In other words, they had excluded competitors.

Now listen carefully.  I want to read you a brief statement from the court.  Listen very carefully.  Said the court, and this is the court’s justification for the plunder and attack upon Alcoa.  This is their justification.  Listen carefully:  “Alcoa insists that it never excluded competitors.  We can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, to face every newcomer with a new capacity already geared into a great organization, having the advantage of experience, trade connections, and the elite of personnel”.

Would you like a free translation of what I just read?  I’ll give it to you anyhow.  The court said, ladies and gentlemen, it is a crime to embrace new opportunity.  It is a crime to have a great organization and to build on it out of nothing.  It is a crime to have the advantage of experience.  It is a crime to have trade connections.  In other words, to find out who are the people that it’s most profitable to deal with.  It is a crime to have elite personnel or, to put it crudely, somebody who knows what the hell he is doing and he’s competent.  These are all crimes.  And then, the Department of Justice says, “Efficiency is no defense”.  In other words, ladies and gentlemen, efficiency is a crime.   That will give you some indication of the viciousness of this.

As I said, the whole book is full of this.  DuPont, let’s take a brief second.  DuPont, for example, developed cellophane.  They were the only producers of cellophane.  They spent millions developing this.  Nobody else knew how to do it.  Finally, they were forced at gunpoint to turn all of their trade secrets over to Olin Mathieson and teach them how to make cellophane.  But Olin Mathieson couldn’t make cellophane anyhow because they didn’t have enough capital to go into the production even with DuPont showing them how to do it.  And so, guess what?  DuPont has to loan them the money to go into production of cellophane so that DuPont can have a competitor.  And things are even worse since these early cases.  That gives you some idea of the viciousness of this.

Next week, don’t get sick.  A major lecture on intellectual integration.  I bid you good evening.


© Sustainable Civilization Institute 2010